Statistics of the prices generic

Abstract:
Background: Because of the scarcity of health care resources, governments have large incentives to contain high pharmaceutical expenditure growth rates. Thus, in order to influence pharmaceutical costs, governments must understand the determinants (both economic and regulatory) of competition between pharmaceutical firms, which in turn determines prices and demand for pharmaceuticals.

Researchers often study off-patent drugs because of payors' expectations that once a drug loses patent, competition should ensue and costs should decline. Most studies have focused on competition between pioneers (branded off-patent drugs) and their generic equivalents because often pioneers' prices and market shares remain high after patent expiration. Few studies have modelled the determinants of competition in the generic vs. generic sphere. Moreover, preliminary evidence shows that generic prices are often not as low as expected, and that the lowest price generics often do not achieve the largest market shares.

Aim: Increased price competition amongst generics could offer health systems new opportunity for pharmaceutical savings. Therefore, this study will model determinants of price competition amongst generics to offer a newfound understanding of ways in which pharmaceutical expenditures could be contained more efficiently.

Methodology: This study conducted panel data, multivariate analysis to determine the effect that determinants of competition (market concentration, number of presentations sold, time since generic entry, etc.) have on generic prices.

This study used data from Intercontinental Medical Statistics (IMS) Health. Price and sales data is presented by drug molecule name, country, strength, package size, formulation, company name and generic/brand status. This paper studied omeprazole (a PPI) and paroxetine (a SSRI), both of which treat chronic conditions, are primarily sold through retail/outpatient pharmacies, are primarily sold in tablet/capsule form, and which have large markets that are conducive to significant sample sizes. In addition, both molecules went off patent in most countries during the study period, 2000-2005.

For comparative purposes, this study includes countries that represent different approaches to pharmaceutical regulation: 1) US—free market approach, 2) UK—regulatory approach with free market incentive, 3) Germany—free market and reference pricing, and 4) France—price controls/negotiation and reference pricing.

Findings: This study rejected the null hypothesis of perfect competition. The predicted effect of generic competition—low generic prices—is crowded out by product differentiation and reimbursement schemes. Moreover, the demand side often does not succeed in purchasing the lowest price generics.