Cost of drugs keeps growing in spite of generic drugs

at least in USA "According to some measures, such as the share of generics in the sales of molecules that have lost patent protection, this policy has been a great success (see Ellison et al. 1997, Berndt 2002, or Grabowski et al. 2014, who show that the market share of an originator drug typically drops below 20% after one year). Furthermore, the number of molecules facing generic competition has also soared since the early 2000s (Aitken et al. 2013).

And yet, spending on drugs keeps growing. For instance, Conti et al. (2015) report that “total US prescription drug spending rose 13% in 2014 [alone],” with increases reaching 31% in some market segments, e.g. for cancer drugs."

The mechanism seems to be "The mechanism we identify is the relationship between price competition and the amounts invested to promote a molecule. Firms most intensely promote molecules that yield the highest profits. When competition is symmetric, this generally favours the highest quality drugs, which is a desirable feature from the patients’ perspective. Yet, when competition is asymmetric – for example, because one molecule faces generic competition while the other remains patent protected – firms stop promoting their genericised molecule, thus shifting demand away from the cheaper products. Figure 2 depicts this strategic shift very clearly. Firms already start decreasing their promotion 12 quarters before patent expiration, with a marked acceleration right after ‘date 0’."