Pharmaceutical Generics, Vertical Product Differentiation, and Public Policy

This paper studies oligopolistic competition in off-patent pharmaceutical markets using a vertical product differentiation model. This model can explain the observation that countries with stronger regulations have smaller generic market shares. It can also explain the differences in observed regulatory regimes. Stronger regulation may be due to a higher proportion of production that is done by foreign firms. Finally, a closely related model can account for the observed increase in prices by patent owners after entry of generic producers.

Pharmaceutical generics, vertical product differentiation and public policy

This paper studies oligopolistic competition in off-patent pharmaceuticalmarkets using a vertical product differentiation model. This model canexplain the observation that countries with stronger regulations havesmaller generic market shares. It can also explain the differences inobserved regulatory regimes. Stronger regulation may be due to a higherproportion of production that is done by foreign firms. Finally, a closelyrelated model can account for the observed increase in prices by patentowners after entry of generic producers.

Generic drugs in Spain: price competition vs. moral hazard

This paper examines competition between generic and brand-name drugs in the regulated Spanish pharmaceutical market. A nested logit demand model is specified for the three most consumed therapeutic subgroups in Spain: statins (anticholesterol), selective serotonin reuptake inhibitors (antidepressants) and proton pump inhibitors (antiulcers). The model is estimated with instrumental variables from a panel of monthly prescription data from 1999 to 2005. The dataset distinguishes between three different levels of patients’ copayments within the prescriptions and the results show that the greater the level of insurance that the patient has (and therefore the lower the patient’s copayment), the lower the proportion of generic prescriptions made by physicians. It seems that the low level of copayment has delayed the penetration of generics into the Spanish market. Additionally, the estimation of the demand model suggests that the substitution rules and promotional efforts associated with the reference pricing system have increased generic market share, and that being among the first generic entrants has an additional positive effect.

Review of the literature on reference pricing

This paper reviews the literature on reference pricing (RP) in pharmaceutical markets. The RP strategy for cost containment of expenditure on drugs is analyzed as part of the procurement mechanism. We review the existing literature and the state-of-the-art regarding RP by focusing on its economic effects. In particular, we consider: (1) the institutional context and problem-related factors which appear to underline the need to implement an RP strategy; i.e., its nature, characteristics and the sort of health care problems commonly addressed; (2) how RP operates in practice; that is, how third party-payers (the insurers/buyers) have established the RP systems existing on the international scene (i.e., information methods, monitoring procedures and legislative provisions); (3)the range of effects resulting from particular RP strategies (including effects on choice of appropriate pharmaceuticals, insurer savings, total drug expenditures, prices of referenced and non-referenced products and dynamic efficiency; (4) the market failures which an RP policy is supposed to address and the main advantages and drawbacks which emerge from an analysis of its effects. Results suggest that RP systems achieve better their postulated goals (1) if cost inflation in pharmaceuticals is due to high prices rather than to the excess of prescription rates, (2) when the larger is the existing difference in prices among equivalent drugs, and (3) more important is the actual market for generics.

Comparison of the consumption of antidepressants in the immigrant and native populations in a Spanish health region: an observational study

BACKGROUND: Health professionals and organizations in developed countries adapt slowly to the increase of ethnically diverse populations attending health care centres. Several studies report that attention to immigrant mental health comes up with barriers in access, diagnosis and therapeutics, threatening equity. This study analyzes differences in exposure to antidepressant drugs between the immigrant and the native population of a Spanish health region. METHODS: Cross-sectional study of the dispensation of antidepressant drugs to the population aged 15 years or older attending the public primary health centres of a health region, 232,717 autochthonous and 33,361 immigrants, during 2008. Data were obtained from computerized medical records and pharmaceutical records of medications dispensed in pharmacies. Age, sex, country of origin, visits, date of entry in the regional health system, generic drugs and active ingredients were considered. Statistical analysis expressed the percentage of persons exposed to antidepressants stratified by age, gender, and country of origin and prevalence ratios of antidepressant exposition were calculated. RESULTS: Antidepressants were dispensed to 11% of native population and 2.6% of immigrants. Depending on age, native women were prescribed antidepressants between 1.9 and 2.7 times more than immigrant women, and native men 2.5 and 3.1 times more than their immigrant counterparts. Among immigrant females, the highest rate was found in the Latin Americans (6.6%) and the lowest in the sub-Saharans (1.4%). Among males, the highest use was also found in the Latin Americans (1.6%) and the lowest in the sub-Saharans (0.7%). The percentage of immigrants prescribed antidepressants increased significantly in relation to the number of years registered with the local health system. Significant differences were found for the new antidepressants, prescribed 8% more in the native population than in immigrants, both in men and in women. CONCLUSIONS: All the immigrants, regardless of the country of origin, had lower antidepressant consumption than the native population of the same age and sex. Latin American women presented the highest levels of consumption, and the sub-Saharan men the lowest. The prescription profiles also differed, since immigrants consumed more generics and fewer recently commercialized active ingredients.