Dynamics of price competition in Italian pharmaceutical off-patent market

Abstract

Introduction: The aim of the study was to evaluate, in a regulated generics market, the effect of the number of manufacturers of generic drugs on the amplitude of off-patent products price reduction and the price evolution of originators and generics after the patent expiry of pharmaceuticals dispensed by community pharmacies and reimbursed by the Italian National Health Service (INHS).

Methods: The AIFA "transparency list" was utilized to select unbranded and branded off-patent drug dispensed by community pharmacies and reimbursed by the Italian National Health Service between 2012 and 2018. The unbranded drug entry in the transparency list database was considered as a proxy of its patent expiry.

Results: A total of 42 different active ingredients were included in the analysis. The relative price per dose at time t of unbranded and branded drugs, considering as common denominator the price per dose a year before the patent expiry, (t-1) decreased with the increase of unbranded manufacturers. At the time of the patent expiry, the price of unbranded drugs was almost 50% less than that of branded drugs at t-1 and the price of branded drugs started to decrease before the first unbranded entry.

Conclusion: An inverse relation between the number of generic drug entrants and the price of generics and originators was detected. The patent expiry determines a price decline, more concentrated in the first year of patent expiry.

Keywords: drug pricing; generics; off-patent drugs; pricing competition; reference pricing system.

FIGURE 1

(A) Flowchart of selection and inclusion of medicines in the analysis (5th level ATCs); (B) distribution of active ingredients by number of available time point from estimated patent expiration (t = 0); (C) distribution of included active ingredients by first level ATC.

FIGURE 2

Relative price per dose of unbranded and branded off patent drugs at time t (t = 2013, 2018) to branded price a year before the patent expiration, t = –1 (i.e., 12 months before the index date) aggregated by number of unbranded off patent drug manufacturers.

FIGURE 3

Relative price per dose of unbranded and branded drugs at lag time t (t = 0,…,6) to branded price a year before the patent expiration, t = −1 (i.e. 12 months before the index date). See Figure 1b for the number of available ATCs for each time point. *Sample size at each time point: n = 42 (t = 0), n = 34 (t = 1), n = 24 (t = 2), n = 18 (t = 3), n = 11 (t = 4), n = 5 (t = 5).

FIGURE 4

Average ratio (mean and 95 % CI) between the number of unbranded manufacturers over the maximum number observed for each active ingredient (5th level ATC) by time from patent expiration (t = 0−5).

FIGURE 5

Percentage reduction (mean and 95 % CI) between price per dose of unbranded and branded off-patent drugs at lag time t (t = 0) and branded price a year before the patent expiration, t = –1 (i.e., 12 months before the index date) by (A) category of price at time t = –1 and (B) by total sales range at t = 0. *Median values (1,02 € and 19,6 million of €) were considered as cut-off to categorize prices per dose at t = –1 and total sales at t = 0, respectively.