Comparing Generic Drug Markets in Europe and the United States: Prices, Volumes, and Spending

Abstract

Policy Points: Our study indicates that there are opportunities for cost savings in generic drug markets in Europe and the United States. Regulators should make it easier for generic drugs to reach the market. Regulators and payers should apply measures to stimulate price competition among generic drugmakers and to increase generic drug use. To meaningfully evaluate policy options, it is important to analyze historical context and understand why similar initiatives failed previously.

Context: Rising drug prices are putting pressure on health care budgets. Policymakers are assessing how they can save money through generic drugs.

Methods: We compared generic drug prices and market shares in 13 European countries, using data from 2013, to assess the amount of variation that exists between countries. To place these results in context, we reviewed evidence from recent studies on the prices and use of generics in Europe and the United States. We also surveyed peer-reviewed studies, gray literature, and books published since 2000 to (1) outline existing generic drug policies in European countries and the United States; (2) identify ways to increase generic drug use and to promote price competition among generic drug companies; and (3) explore barriers to implementing reform of generic drug policies, using a historical example from the United States as a case study.

Findings: The prices and market shares of generics vary widely across Europe. For example, prices charged by manufacturers in Switzerland are, on average, more than 2.5 times those in Germany and more than 6 times those in the United Kingdom, based on the results of a commonly used price index. The proportion of prescriptions filled with generics ranges from 17% in Switzerland to 83% in the United Kingdom. By comparison, the United States has historically had low generic drug prices and high rates of generic drug use (84% in 2013), but has in recent years experienced sharp price increases for some off-patent products. There are policy solutions to address issues in Europe and the United States, such as streamlining the generic drug approval process and requiring generic prescribing and substitution where such policies are not yet in place. The history of substitution laws in the United States provides insights into the economic, political, and cultural issues influencing the adoption of generic drug policies.

Conclusions: Governments should apply coherent supply- and demand-side policies in generic drug markets. An immediate priority is to convince more physicians, pharmacists, and patients that generic drugs are bioequivalent to branded products. Special-interest groups continue to obstruct reform in Europe and the United States.

Keywords: generic drugs; health expenditures; pharmaceutical policies; prices.

Figure 1

Ex‐Manufacturer Prices of Generics (2013)^{a a}Derived from authors’ analysis of data from the Pricing Insights database (IMS Health, 2013).

Figure 2

Retail Prices of Generics (2013)^{a,b a}Retail prices were unavailable for the Netherlands and the United Kingdom. ^bDerived from authors’ analysis of data from the Pricing Insights database (IMS Health, 2013).

Figure 3

Internal Reference Pricing (A), Generic Prescribing (B), Generic Substitution (C), and Tendering (D) in EU and EFTA Countries (2016)^a,b Abbreviations: EFTA, European Free Trade Association; EU, European Union; IRP, internal reference pricing. ^aThese maps show the policies used by the 28 EU member states and the 4 EFTA signatories (Iceland, Lichtenstein, Norway, and Switzerland) for nonhospital pharmacies. We populated the maps based on a 2016 report published by the World Health Organization.64 If information was missing, we used older sources dating as far back as 2009. The policies in some countries may have changed since then. In Spain, only the autonomous community of Andalusia issues tenders. Generic prescribing refers to the prescribing of drugs by their international nonproprietary names. The Danish and Swedish tendering systems operate differently than the others. In each country, the relevant national government agency asks generic manufacturers to offer their best prices. Usually, the least expensive generics become the only ones that pharmacists can dispense; if a patient wants a brand‐name drug, they are required to pay the difference out‐of‐pocket. The bidding process is repeated every 2 weeks in Denmark, and every 4 weeks in Sweden. There are safeguards to reduce the risk of supply disruptions. ^bDerived from authors’ analysis of the data62, 63, 64, 65, 66, 67, 68; the map toolkit is licensed under the Creative Commons Attribution‐NoDerivs 3.0 Unported License.

Figure 4

Generic Drug Substitution Laws in the United States (2010)^{a,b a}States with “patient choice” grant patients the right to refuse generic drug substitution, usually at a higher cost. ^bDerived from authors’ analysis of data64; the map toolkit is licensed under the Creative Commons Attribution‐ShareAlike 3.0 Unported License.

Figure 5

Ex‐Manufacturer Prices (€ per Dose) and Market Shares (%) of Brand Name and Generic Ramipril in 4 Countries (1998‐2010)^{a,b a}The vertical lines show the date of patent expiry (November 2002 in France, Sweden, and the United Kingdom; March 2003 in Spain). The Swedish and British prices were converted to € using official exchange rates. The data correspond to sales in nonhospital pharmacies (except for Sweden, where the data include sales in hospital and nonhospital pharmacies). Data on sales of branded ramipril in France between January 1998 and December 1999 were unavailable. Prices and market shares were measured on a quarterly basis. ^bDerived from authors’ analysis of data from the Midas database (IMS Health, 2010).

Figure 6

Key Events and Milestones for US Drug Substitution^a Abbreviations: APhA, American Pharmacists Association; HMO, health maintenance organization. ^aDerived from authors’ analysis of the data.103, 112