Healthcare Policy, Market Access, Pricing and Reimbursement

Generic Drug Price Trends – A Comparison Across France, Germany, Italy, Spain and the UK

Being responsible for a database that provides drug prices in more than 36 countries, I regularly observe price trends and compare prices between countries. Recently I looked at generic prices in the largest European pharmaceutical markets — France, Germany, Italy, Spain and the UK.

Originator — Generic Drug Price Differences
First, I reviewed the price differences between originators and their generic counterparts in each country. I used a pool of 20 genericised active ingredients, and compared the originator drug price with the average price of the different generics of the same presentation on the market. The chart below shows price differences between originators and their generic counterparts.
Chart showing price differences between originators and their generic counterparts

Cross-country Comparison of Generic Drug Prices in France, Germany, Italy, Spain, and the UK
I then compared generic prices between those five countries. Average manufacturer prices per mg or mcg were compared for 10 genericised active ingredients. The infographic below illustrates price differences between the different countries for 10 genericised active ingredients — click on the image to see the full-size version.Price comparison of 10 genericised active ingredients across France, Germany, Italy, Spain and UK
Source: PharmOnline International (POLI)
Methodology: for each active ingredient, the country where the average manufacturer price per mg or mcg is the highest is considered as 100%. Then, the average manufacturer prices per mg or per mcg in the other countries are compared as a percentage of the highest average price.

The data demonstrate the complexity of the generic markets.

France, Italy, and Spain
France, Italy, and Spain are countries where generic pricing follows general rules when generics enter the market, with price differentials between originators and their generic counterparts usually falling within the same range.

In Italy and Spain, maximum levels of reimbursement (reference price) play a significant role:

  • They set the rule for generic pricing:
    In Spain, when generics enter the market, price differential with originator drugs is at least 35%. Prices are eventually brought into line with the maximum level of reimbursement, explaining why, overall, price differential is 13%. The same rule applies in Italy, a country where reference prices are also set, leading both originator drugs and generic prices to drop down to the reference price. As a consequence, the price differential is on average 16%.
  • They significantly drive prices down as Italy and Spain are also the countries where generic prices tend to be the lowest in our sample.


    In France strict rules apply. Off-patent drugs and generic prices are set by law, not only when generics enter the market, but also over the years. Additionally, the government sets the reference price (called TFR in France) for genericised molecules not reaching a certain market share. All prices of drugs included in a TFR in France are in line with the reference price, explaining why the price differential is null in certain cases.

    Nonetheless, despite the strong regulation of the French generic market, generic prices are not necessarily found to be among the lowest. Indeed, the legislation does not leave any room for manoeuvre for pharmaceutical companies, which cannot deviate from the law. As in other countries, notably Germany and the UK, generic prices are left to market forces: pharmaceutical companies implement pricing strategies that dramatically changes price comparison between countries.

    Germany and the UK
    In Germany and the UK, generic pricing strategies are left to market forces and even though generic market entry very likely prompts prices to drop, this is not an absolute certainty.

    Germany in particular displays significant price differences. Price differentials can range from generics being more expensive than their originator counterparts, to generics being more than 80% less expensive. Keep in mind that in Germany there are a large number of generic players, triggering fierce competition, which could explain those large price differentials. This also explains why – depending on the strategies implemented by companies – generic prices are sometimes found to be the lowest or the highest.

    Likewise, in the UK we also see no clear rules. Generic prices are on average 15% below that of off-patents, but unlike Spain or Italy, large price differentials are observed within the sample. However, when UK generic prices are compared with other countries, they are often found to be the highest. Two factors could explain this :

    1. Generic prices at launch in the UK can be high

    2. The governement does not play a significant role in lowering generic prices, despite the fact that reference prices are set. In other countries, reference prices set by the governements determine generic prices. In the UK the situation is somewhat different. The reference price is actually an approximation of the market price, meaning that generic prices — set by generic companies — will actually determine the reference price.

    Conclusion
    I think it’s clear that competition and reference prices strongly contribute to lower prices. Competition however allows companies to set their own strategies and can lead to significant price differentials. Nevertheless, even if prices of certain generics can be relatively “high”, the cheapest alternatives are always available.

    The key point to remember is that that strong legislation doesn’t necessarily allow governments to lower prices to the same extent as with competition only. France is an excellent example of this trend.

    The data from this research was taken from IHS PharmOnline International: a pharmaceutical pricing data and analysis tool providing coverage of all branded and generic drugs in over 36 developed and emerging markets.

 

About Floriane Reinaud

Floriane Reinaud is a principal analyst at IHS Life Sciences Practice. She is responsible for a global pharmaceutical pricing database and has developed in-depth knowledge and experience of P&R policies, market access strategies, and specialist topics, including orphan drugs and biosimilars.

Discussion

11 thoughts on “Generic Drug Price Trends – A Comparison Across France, Germany, Italy, Spain and the UK

  1. Generics and reference prices have driven down pharmaceutical prices in all European countries, but great price differences can be observed among compared countries: Spain and Italy have almost always the lowest average generic prices and UK and Germany the highest ones. This observation is explained by the method to decide reference prices in both groups of countries. In Spain, the reference price is the lowest generic price and it is reviewed periodically, while in UK the reference price is an approximation of the market price, meaning that the generic price set by generic companies determines the reference price. Generics and reference prices are necessary in Spain and Italy to reduce excessive pharmaceutical costs, but reimbursement based on the lowest reference price of available generics, and its periodically revision, could not be always correct. First, brand companies which spent great amounts of resources on the research and development on new products and they could not cover the cost of unsuccessful products with very low prices. Second, pharmaceutical costs in the NHS depends not only on the average price of products, but also on the number of prescriptions and not correct prescriptions. If Spain and Italy have higher (relative) pharmaceutical costs than UK and Germany with much lower prices, the reason can be only an excessive and inadequate prescriptions. And this will not be solved by means of reducing prices.

    Posted by Pedro Plans | January 12, 2012, 4:05 am
    • Thanks for your comment Pedro. You indeed raised really good points, notably the fact that even low prices can’t offset the cost of high prescriptions. It is true that decreasing prices or even decreasing reimbursement levels won’t enable governments to make significant savings as long as prescriptions are high. This is another criteria that governments should work on. Our goal in this exercise was to compare generic prices between the largest European markets in a bid to evaluate the countries where conditions are more difficult and where there is still room for maneuver for the industry. It is important to keep in mind that even if competition significantly lowers prices, this still enables pharmaceutical companies to set their own pricing strategy. This is for instance not the case in France where everything is controlled.

      Posted by Floriane Reinaud | January 13, 2012, 11:13 am
  2. Thanks Floraine, for sharing a great piece of infomormation. In Germany and UK, pricing policies are liberal despite of that price covergence could be seen between branded and generics, due to reimbursement ceiling on reference pricing.Hence the competion is driven by regulatory forces, which are imposed indirectly than by market forces.

    Posted by Rahul Verma | March 1, 2012, 7:49 am
    • Hi Rahul, thanks for the comment, and I agree with what you mentioned. It is true that with governments willing to limit healthcare expenditure, regulatory forces are more and more important. Keep reading!

      Posted by Floriane Reinaud | March 5, 2012, 4:28 am
  3. Dear Floriane, many thanks for the article but I am confused as UK has definitely low prices for generics. In these charts, it appears this is a country where prices are almost always higher than the other top 4?!?
    For knowing France and UK particularly well, I would disagree with this, but maybe I’m missing the point? It would be good if you could clarify. Many thanks, kr. Philippe.

    Posted by Philippe Beaupere | November 12, 2012, 10:32 am
    • Thanks for your comment. That is true that within the sample we took into account for this blog, generic prices are the highest in 8 out our 10 case studies. First of all, I would say that the sample we used is not exhaustive as all the genericised molecules in the UK market were not taken into account. Then we took into account average prices of all genericised drugs for one molecule and volumes were not taken into account into our analysis. In the UK I remember that, for each genericised active ingredient, the range of prices was large. Prices of certain generics were significantly lower, not only in comparison with the other generics on the market but also in comparison with other markets. However, there were some instances where generics prices were quite high, sometimes higher than the price of the off-patent drug. As the average price was taken into account, this explain our results. Of course, I’m assuming that generic companies with the lowest prices should get the highest market shares. I hope this helps clarifying and of course let me know if you have any other question.

      Posted by Floriane Reinaud | November 20, 2012, 7:54 am
  4. Your methodology is interesting but one thing that i believe is lacking is time line of price decay from the expiry of an originators patent. From my experience having worked in countries with internal reference pricing and the UK’s unregulated free pricing generic market, i have to say over the long term generic prices decay to prices so low that many generic manufacturers leave the market but 2/3 remain and produce and price very competitively whereas in the long run in a reference pricing system there is no incentive to price the drug lower than the reference price.

    Posted by Caitriona Ni Choitir | October 18, 2013, 7:10 am
    • Thanks a lot for your comments. That is true that while generic price trends in the long run has not been assessed for this particular blog, IHS Global Insight has carried out other studies that assess those trends. And it is true that generic prices in free pricing markets end up at low levels, with a limit number of competitors on the market. This situation is also true in the short term in countries implementing subsequent price cuts linked to generic market entry. This is the case in Austria for instance. It is not rare to have 1 or 2 competitors only on the market with low prices.
      -Floriane

      Posted by Floriane Reinaud | October 22, 2013, 7:01 am
      • Are these ex-factory or wholesale prices net of discount? which market are we looking at – primary or secondary care? it’s difficult really to compare when between countries with different regulation or time policy tools were introduced e.g. outpatient tendering i.e. the Netherlands or IRP or free market. Cost is an important factor here too. It seems that a lot of generic companies are producing in particular in India and batches of drugs are arriving to the UK for example being boxed and sealed for selling. Clearly the future and for generic market survival in the long run has to produce all drugs in developing countries and sell in developed countries. How else can generic companies survive when current market price for bendroflumethiazide – one months supply is 10 pence in the UK. The one big problem the UK faces with its free market is not as safe as people think. I point you to Epanutin capsules which is now being produced by Flynn pharma. It actually would you believe still has Pfizer on the capsules but prices have jumped substantially which is putting significant pressure on the NHS budget. I can throw many more examples – hydrocortisone tablets etc. This is because pharma companies could price their drug as a loss leader or price modulate by altering prices within their product portfolio. The biggest problem is determining what is a fair return and prices for both pharma and third party payers.

        Posted by Caitriona Ni Choitir | October 22, 2013, 8:03 am
      • To answer your first two questions, comparison was made on the basis of ex-factory prices, excluding discounts. In terms of markets, we were looking at primary care. Generic pricing is a hot topic, I agree. Governments are looking at generating savings and in some markets, it leads to fierce competition among players, who implement different strategies, including manufacturing generic drugs abroad. This in turn can lead stakeholders to simply leave the market as return on investment cannot be achieved. I’ve seen many examples of originator drugs being removed from the market following generic market entry. Low prices can also lead to drug shortages. Governments are assessing their generic policies and will probably adjust them if significant issues are foreseen. Still, as much as possible, priority will be given to savings.

        Posted by Floriane Reinaud | October 24, 2013, 2:55 pm

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  1. Pingback: Generic drug prices around Europe. Does competition matter? | Health Economics - January 15, 2013

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