Price regulation and generic competition in the pharmaceutical market

In March 2003 the Norwegian government implemented yardstick-based price regulation schemes on a selection of drugs subjected to generic competition. The retail price cap, termed the index price, on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998–2004 for the six drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.     

Identifying Demand Responses to Illegal Drug Supply Interdictions

Successful supply‐side interdictions into illegal drug markets are predicated on the responsiveness of drug prices to enforcement and the price elasticity of demand for addictive drugs. We present causal estimates that targeted interventions aimed at methamphetamine input markets (‘precursor control’) can temporarily increase retail street prices, but methamphetamine consumption is weakly responsive to higher drug prices. After the supply interventions, purity‐adjusted prices increased then quickly returned to pre‐treatment levels within 6–12 months, demonstrating the short‐term effects of precursor control. The price elasticity of methamphetamine demand is ?0.13 to ?0.21 for self‐admitted drug treatment admissions and between ?0.24 and ?0.28 for hospital inpatient admissions. We find some evidence of a positive cross‐price effect for cocaine, but we do not find robust evidence that increases in methamphetamine prices increased heroin, alcohol, or marijuana drug use. This study can inform policy discussions regarding other synthesized drugs, including illicit use of pharmaceuticals. Copyright © 2015 John Wiley & Sons, Ltd.     

中欧药品价格构成比较与对策建议

采用WHO/HAI药品价格构成调查方法,调查2017年版《国家基本医疗保险、工伤保险和生育保险药品目录》中所列2 535种药品的实际出厂价格和市场零售价格,分析药品价格各组成部分在零售价格中所占比例。调查结果显示,在政府取消价格管制后,中国药品价格构成仍然不合理。药品实际出厂价格在零售价格中所占比例仅为25%左右,供应链上出厂价格以外的附加费用占零售价的75%左右。本文分析认为,政府管制药品价格主要源于医药市场的信息不对称引发的药品价格扭曲。借鉴发达国家药品价格管制成功经验,建议实行全部处方药价格管制、采用参考定价以及控制流通加价等政策工具,最终将实现全面降低药价的目标。     

The impact of China's retail drug price control policy on hospital expenditures: a case study in two Shandong hospitals

In China, 44.4% of total health expenditures in 2001 were for pharmaceuticals. Containment of pharmaceutical expenditures is a top priority for policy intervention. Control of drug retail prices was adopted by the Chinese government for this purpose. This study aims to examine the impact of this policy on the containment of hospital drug expenditures, and to analyze contributing factors. This is a retrospective pre/post-reform case study in two public hospitals. Financial records were reviewed to analyze changes in drug expenditures for all patients. A tracer condition, cerebral infarction, was selected for in-depth examination of changes in prices, utilization, expenditures and rationality of drugs. In the two hospitals, a total of 104 and 109 cerebral infarction cases, hospitalized respectively before and after the reform, were selected. Prescribed daily dose (PDD) was used for measuring drug utilization, and the contribution of price and utilization to changes in drug expenditures were decomposed. Rationality of drug use post-reform was reviewed based on published literature. Drug expenditures for all patients still increased rapidly in the two hospitals after implementation of the pricing policy. In the provincial hospital, drug expenditures per patient for cerebral infarction cases declined, but not significantly. This was mainly attributable to reduced utilization. In the municipal hospital, drug expenditure per patient increased by 50.1% after the reform, mainly due to greater drug utilization. Three to five fold higher drug expenditure per inpatient day in the provincial hospital was due to use of more expensive drugs. Of the top 15 drugs for treating cerebral infarction cases after the reform, 19.5% and 46.5% of the expenditures, in the provincial and municipal hospitals, respectively, were spent on drugs with prices set by the government. A large proportion of expenditures for the top 15 drugs, at least 65% and 41% in the provincial and municipal hospitals, respectively, was spent on allopathic drugs without an adequate evidence base of safety and efficacy supporting use for cerebral infarction. Control of retail prices, implemented in isolation, was not effective in containing hospital drug expenditures in these two Chinese hospitals. Utilization, more than price, determined drug expenditures. Improvement of rational use of drugs and correcting the present incentive structure for hospitals and drug prescribers may be important additional strategies for achieving containment of drug expenditures.     

Reference pricing with endogenous generic entry

Reference pricing intends to reduce pharmaceutical expenditures by increasing demand elasticity and stimulating generic competition. We develop a novel model where a brand-name producer competes in prices with several generics producers in a market with brand-biased and brand-neutral consumers. Comparing with coinsurance, we show that reference pricing, contrary to policy makers’ intentions, discourages generic entry, as it induces the brand-name producer to price more aggressively. Thus, the net effect of reference pricing on drug prices is ambiguous, implying that reference pricing can be counterproductive in reducing expenditures. However, under price regulation, we show that reference pricing may stimulate generic entry, since a binding price cap weakens the aggressive price response by the brand-name producer. This may explain mixed empirical results on the competitive effects of reference pricing. Finally, we show that reference pricing may be welfare improving when accounting for brand preferences despite its adverse effects on entry and prices.     

Retail prices of essential drugs in Brazil: an international comparison.

OBJECTIVES: Price is a key obstacle for consumer access to essential drugs, especially in developing countries. This study sought to compare the retail prices of essential drugs on the private market in Brazil with that of two international pricing standards. METHODS: The retail price of all drugs on Brazil's Essential Drugs List, July 2000 edition, were compared to the retail price of the same drugs on the Swedish market and on a referential bulk-price indicator from low-cost suppliers on the international market. Ratios of Brazil's prices to Sweden's prices and Brazil's prices to the international bulk mean price-per-unit for each drug were calculated. Using linear regression analysis, the ratios were also studied in relation to the number of manufacturers. RESULTS: For the 132 drugs that were listed on both Brazil's and Sweden's lists, unitary retail prices in Brazil were 1.9 times higher. Of the 94 drugs found on both Brazil's list and the international unit-price indicator, Brazil's national mean unit prices were 13.1 more expensive. No relationship was found between the number of manufacturers for each product and the ratios of prices. CONCLUSIONS: Average retail prices of essential drugs in Brazil are significantly higher than in Sweden. Furthermore, international bulk prices indicate that drugs are brought to market by Brazil's private pharmacies at prices that may be excessively high in relation to production costs, creating high profit margins. The expected price-lowering effects of competition were not identified.     

Endogenous versus exogenous generic reference pricing for pharmaceuticals

In this paper we carry out a vertical differentiation duopoly model applied to pharmaceutical markets to analyze how endogenous and exogenous generic reference pricing influence competition between generic and branded drugs producers. Unlike the literature, we characterize for the exogenous case the equilibrium prices for all feasible relevant reference prices. Competition is enhanced after the introduction of a reference pricing system. We also compare both reference pricing systems on welfare grounds, assuming two different objective functions for health authorities: (i) standard social welfare and (ii) gross consumer surplus net of total pharmaceutical expenditures. We show that regardless of the objective function, health authorities will never choose endogenous reference pricing. When health authorities are paternalistic, the exogenous reference price that maximizes standard social welfare is such that the price of the generic drug is the reference price while the price of the branded drug is higher than the reference price. When health authorities are not paternalistic, the optimal exogenous reference price is such that the price of the branded drug is the reference price while the price of the generic drug is lower than the reference price.     

药品价格问题的研究概述

目的：掌握药品费用的增长情况及价格变化、生产成本及流通环节利润分配等情况，为药品价格管理的改革和完善提供依据。方法：采用回顾性抽样调查的方法，对1995－2002年全国临床使用量大的药品价格进行调查，同时对1999年全国18个省市80个制药厂家的生产经营状况、20个省市48家药品批发企业的利润及相关影响因素等进行了分析。结果：20世纪90年代中国药品费用的增长速度在10％以上，高于GDP的增长速度。药品价格指数平均高于总物价指数，药品生产的完全成本占其零售价格的54％。结论：我国药品价格可以认为是适宜的，但流通环节分占了太多利润，使制药行业缺乏充足的研究开发资金。     

Tiered co-payments,pricing, and demand in reference price markets for pharmaceuticals

Health insurance companies curb price-insensitive behavior and the moral hazard of insureds by means of cost-sharing, such as tiered co-payments or reference pricing in drug markets. This paper evaluates the effect of price limits – below which drugs are exempt from co-payments – on prices and on demand. First, using a difference-in-differences estimation strategy, we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand-name drugs in the German reference price market. Second, estimating a nested-logit demand model, we show that consumers appreciate co-payment exempt drugs and calculate lower price elasticities for brand-name drugs than for generics. This explains the different price responses of brand-name and generic drugs and shows that price-related co-payment tiers are an effective tool to steer demand to low-priced drugs.     

How will the reduction of tariffs and taxes on insecticide- treated bednets affect household purchases?

One of the steps called for in the fight against malaria is the removal of tariffs and taxes on insecticide-treated bednets (ITNs), netting materials, and insecticides, with a view to reducing the retail prices of ITNs and thus increasing utilization. In this paper we develop an approach for analysing the extent to which reform of tariff and tax policy can be expected to increase ITN purchases. We consider the following questions: (1). How much does the retail price of ITNs change if tariffs and taxes are reduced or eliminated? (2). How responsive is consumer demand to changes in the retail price of ITNs? Data on the price elasticity of demand for ITNs are very limited. Nevertheless, they suggest that ITN demand is not highly responsive to lower prices if household preferences are held constant. The reduction in retail prices associated with the removal of tariffs and taxes depends on the structure of the market in individual countries. In Nigeria, reducing the tariff on insecticides from 42% to zero and the tariff on netting materials from 40% to 5% is expected to increase ITN purchases by 9-27%, depending on the elasticity used. Country-specific information about market structure and cost conditions is needed if predictions are to be made as to how a specific policy change will affect ITN purchases.     

浅议新医改形势下零售药店的经营策略

随着新医改各项配套文件的逐一发布,零售药店面临的压力越来越大。基本药物配送、基层医疗机构药品"零差率"销售、药品价格等问题,都直接影响着零售药店的发展。本文着重分析新医改方案给零售药店带来的影响,并且针对这些影响为零售药店的发展提出相应的经营策略。     

Entry and price competition in the over‐the‐counter drug market after deregulation: Evidence from Portugal

In the last two decades, many European countries allowed the sale of over‐the‐counter (OTC) drugs outside pharmacies. This was expected to lower retail prices through increased competition. Evidence of such price reductions is scarce. We assess the impact of supermarket and outlet entry in the OTC drug market on OTC prices charged by incumbent pharmacies using a difference‐in‐differences strategy. We use price data on five popular OTC drugs for all retailers located in Lisbon for three distinct points in time (2006, 2010, and 2015). Our results suggest that competitive pressure in the market is mainly exerted by supermarkets, which charge, on average, 20% lower prices than pharmacies. The entry of a supermarket among the main competitors of an incumbent pharmacy is associated with an average 4% to 6% decrease in prices relative to the control group. These price reductions are long‐lasting but fairly localized. We find no evidence of price reductions following OTC outlet entry. Additional results from a reduced‐form entry model and a propensity score matching difference‐in‐differences approach support the view that these effects are causal.     

The effects of drug safety warnings on drug sales and share prices

Current regulations require that when seeking approval for new drugs, pharmaceutical companies must demonstrate their short- but not long-term safety and efficacy. Instead, post-approval, clinicians report adverse reactions to regulators, who may issue additional safety warnings. We investigate the incentives this creates for pharmaceutical companies to seek approval for new drugs with unknown long-term effects. We first construct models predicting that (1) long-run effects can be reasonably approximated from observational follow-up of short-term randomized control trials, and (2) companies will trade-off short-term sales against possible later adverse demand effects. We then test whether regulator warnings over diabetic, analgesic, analeptic, or psychoanaleptic drugs sold in the US and UK hospital and retail sectors affect the sales of individual drugs or the share prices of companies that sell them. With some exceptions, we find that pharmaceutical companies generally face no adverse market reaction in sales or share price from newly issued warnings in these four drug categories.     

医院门诊药房与零售药店药品品种及价格的比较

目的了解医院门诊药房与零售药店药品品种与价格,知晓其差异,提出相关政策建议.方法对4个省的7家药店和8家医院门诊药房的药品品种和价格进行调查和比较分析.结果医院门诊药房和零售药店经营药品的种类差异较大;患者持医院处方到零售药店有60%的可能购不到所开药品;医院门诊药房与零售药店药品的质量、价格管理方式不同;医院门诊药房和零售药店药品同类品种的零售价格水平不同;单独定价药品价格虚高较为严重;医院药剂部门在拥有高中级药学人才方面占有绝对优势,其药事服务能力零售药店难以企及.结论医院门诊药房和零售药店具有较大差异性.目前情况下,出台剥离医院门诊药房,或者鼓励门诊病人到零售药店进行处方调剂的政策性规定,条件尚不成熟.医疗机构要进一步规范药品采购行为;要规范医疗机构医生的处方行为.