An empirical study of the impact of generic drug competition on drug market prices in China

Abstract

IntroductionGeneric substitution is encouraged to reduce pharmaceutical spending in China, and with incentive policies, the market size of the generic drug continues to rise. To find out how the generic competition affects drug price in this area, this study examines how the quantity of generic drug manufacturers can influence average drug price in the Chinese market.MethodsThis study uses a rigorous selection of drugs from the 2021 China’s National Reimbursement Drug List (NRDL), and uses drug-level fixed effects regressions to estimate the relationship between competition and price within each drug.ResultsWe note that drug prices decline with increasing competition in the Chinese market, but not in a perfectly linear manner, with marginal price declines decreasing after the fourth entrant and “rebounding” at subsequent entrants, especially the sixth.DiscussionThe findings suggest the importance of maintaining effective competition between suppliers to control prices, and that the government needs to further control generic pricing, especially for late entry generics, to ensure effective competition in the Chinese market.

Access to innovative anticancer medicines in China: a national survey on availability, price and affordability

“…37 38 Generic competition is widely acknowledged to be closely related to drug prices. 39 One of the generic drugs investigated in this study, lenvatinib, was launched in China in July 2021. Following its commercial release, the price of the originator product experienced a further decrease in 2022.…”