Cross-National Evidence on Generic Pharmaceuticals: Pharmacy vs. Physician-Driven Markets

Abstract

This paper examines the role of regulation and competition in generic markets. Generics offer large potential savings to payers and consumers of pharmaceuticals. Whether the potential savings are realized depends on the extent of generic entry and uptake and the level of generic prices. In the U.S., the regulatory, legal and incentive structures encourage prompt entry, aggressive price competition and patient switching to generics. Key features are that pharmacists are authorized and incentivized to switch patients to cheap generics. By contrast, in many other high and middle income countries, generics traditionally competed on brand rather than price because physicians rather than pharmacies are the decision-makers. Physician-driven generic markets tend to have higher generic prices and may have lower generic uptake, depending on regulations and incentives.Using IMS data to analyze generic markets in the U.S., Canada, France, Germany, U.K., Italy, Spain, Japan, Australia, Mexico, Chile, Brazil over the period 1998-2009, we estimate a three-equation model for number of generic entrants, generic prices and generic volume shares. We find little effect of originator defense strategies, significant differences between unbranded and unbranded generics, variation across countries in volume response to prices. Policy changes adopted to stimulate generic uptake and reduce generic prices have been successful in some E.U. countries.

Evergreening, patent challenges, and effective market life in pharmaceuticals

“…A referee pointed us to a new analysis byDanzon and Furukawa (2011) which confirms, using different data, that market life has remained roughly stable over the past decade.…”

Biobetters

“…Fourth, as has been pointed out convincingly by Danzon and Furukawa ( 2011 ), in the U.S. and in only several European markets, dispensing pharmacies face national healthcare reimbursement policies that direct whether brand-generic decision making is driven largely by pharmacies, by incentivizing patients with lower copayments for generic drugs, mandating generic for brand substitution, and inducing pharmacies to aggressively seek out the lowest-cost generic available among the generic manufacturers. By contrast to these pharmacy driven markets, Danzon and Furukawa describe physician-driven markets as ones in which physicians typically prescribe a specifi c off-patent molecule by brand name or the originator brand name, in which case generic suppliers are incentivized to compete on brand image rather than on price.…”

“…By contrast to these pharmacy driven markets, Danzon and Furukawa describe physician-driven markets as ones in which physicians typically prescribe a specifi c off-patent molecule by brand name or the originator brand name, in which case generic suppliers are incentivized to compete on brand image rather than on price. Although there are differences among them, at the time Danzon and Furukawa ( 2011 ) were writing their article, they characterized the U.S., U.K., Netherlands and Canadian markets as pharmacy driven and Germany as becoming more so over time, whereas most other European markets (including France, Italy and Spain) were characterized by them as physician driven. Danzon-Furukawa document that pharmacy acquisition costs are generally lower in pharmacy driven markets, other things equal.…”

Access to Medicines and European Market Integration

“…7 Several works have systematically investigated the peculiarities of cross-national static di¤erences in drug prices. See for example Danzon and Furukawa (2011) for generic drugs, or Danzon and Chao (2002) for the overall e¤ect of national regulatory regimes. The scope of our contribution is however to look at dynamic price di¤erences.…”