OBJECTIVES: It is commonly believed that after the patent expires for a branded pharmaceutical, the average price for the generic compound falls following generic entry into the market.  The objectives of this study were to 1) determine and explain the trend in drug price post-entry, and 2) predict the number of generic-company entrants, one of the most likely factors influencing price; and to accomplish 1) and 2) in a more comprehensive manner than previously in the literature.  METHODS: Quarterly transaction-price data were constructed using the national summary file of Medicaid outpatient drug utilization maintained by the Centers for Medicare and Medicaid Services.  Data from 1991-2008 were extracted for 65 drugs that experienced initial generic entry between 1992 and 2004.  Generic relative price (GRP) was constructed as reimbursement per unit for a specific firm and quarter divided by average reimbursement per unit over the year before entry, not accounting for pharmaceutical manufacturer rebates.  Least-squares regression models were estimated on the panel data to explain GRP, average GRP across firms (AGRP), and number of entrants. RESULTS: The number of firms had a statistically significant (p<0.0001), nonlinear negative effect on GRP and AGRP.  High demand, as indicated by high post-entry expenditures, had a statistically significant (p<0.0001) positive effect on both GRP and AGRP.  Statistically significant (p<0.0001) predictors for number of entrants included pre-entry market size, number of quarters since entry, and administration form (oral, injectable, or topical) of the drug.  Evidence suggests as well that rebranding following generic entry commands a price premium. CONCLUSIONS: This study generally supports the common wisdom, from prior econometric studies, that drug prices fall following generic entry.  However, other factors, such as small market size or rebranding, can mitigate or even reverse the post-entry price drop, reducing the ability of payers to benefit from significant cost savings.