Drugmakers Hike Prices of Meds Facing Generic Competition

Brand-name drugs typically receive between 12 and 20 years of patent protection. When this expires, lower-cost generic versions that have been approved by the Food and Drug Administration as having the same medical effectiveness are allowed on the market. Their use has saved the U.S. health care system $824 billion over the past decade, and nearly $140 billion in 2009 alone, according to IMS Health, a company that tracks drug industry trends.

Using generics instead of brand names also saves consumers money, because insurers charge significantly lower copays for them. Medicare Part D enrollees often find that switching to generics helps them avoid the doughnut hole.

Brand-name manufacturers usually do not lower their prices when they start facing generic competition, but instead continue to raise them, the Price Watch analysis found. "Thus, consumers that choose to continue taking a brand name product are not likely to experience any price relief at patent expiration," the report says.

Patricia Barry is a senior editor at the AARP Bulletin.