Article published in medical journals on 14/09/2010
The aim of the recent working paper by Professor Adrian Hollis ("Generic drug pricing in Canada: components of the value-chain", Working Paper Department of Economics, University of Calgary. 2010; May 16) is to analyze the public policy implications that arise from trying to establish efficient prices related to the costs of generic drugs in Canada.
The paper uses economic concepts and Canadian case studies and experience in other countries to propose efficient alternatives cost charge for litigation, industrial production and distribution to help improve competition in the generics market. The case study illustrates the difficulties amlodipine generic entry through litigation between the brand and the first generic entrant and the brand's efforts to extend the exclusivity period. Calculate the cost of litigation and insurance savings for the public for 12 drugs.
costs of litigation necessary to challenge patents on active ingredients that are no longer valid involve risk and very high costs for the lab to start legal proceedings (up to $ 354 million Canadian case of Lipitor), while if it succeeds, the immediate benefit is not only the litigant but to all other generic competitors (spillover effect). Incentives for extension of patents are very high due to the significant revenue that generates the brand extension. On the other hand, if prices go down very quickly after the entry of generics, the benefits of litigation will stop more payers to laboratories. The costs and benefits of litigation are not aligned.
The rule that the generic price should be 25% (or any other fraction) of the price of the brand before the entry de genéricos no guarda ninguna relación con los costes de producción ya que esto sólo tendría sentido si el precio de las marcas fuera igual al un mismo múltiplo de los costes de producción.
Las farmacias gozan de un cierto poder de mercado y no compiten en precios. Las farmacias han capturado una parte importantes de las rentas de la competencia entre productores genéricos mediante descuentos ofrecidos por estos productores y que no se trasladan ni al tercer pagador ni al consumidor. El sistema de pago a las farmacias no debe basarse en los costes medios observados sino que debería utilizar tarifas prospectivas por servicio limitando el papel de lo descuentos.
Se propone establecer un mecanismo que financie por separado the three components of the generic chain: lawsuits, production and distribution / dispensing. Royalties payable to generic laboratories that achieve an end to patents that are no longer valid because it is inefficient to try to reduce prices without incentives for generic producers to incur high costs and uncertain litigation. The production must be financed through competitive mechanisms (eg through auctions). Governments should establish independent regulatory authorities agreed at rates to reward efficient pharmacy services.
When you end the exclusivity occurs over a monopoly to a competitive market, change that public funders should be adjusted.
An efficient financing of government purchases of generic payment mechanisms should be set different for each of the elements of the value chain. In countries with high legal costs to challenge a patent when the exclusivity period ends must devise ways to reward those laboratories that achieve win lawsuits. The design of this study requires reward: compensation to the laboratory has successfully challenged the patent on the number of starters and the starting price, a period of exclusivity at a price above the cost of production, etc. It required
information and case studies on these costs and legal proceedings in Spain similar to those presented in the text of Hollis. Needless to say, the competition authorities should act quickly and diligently to any suspicion of possible financial arrangements between brand and generic laboratories in order to delay market entry of generic versions of the drug.
Industrial prices should be based on the promotion of industry price competition in public procurement through market based instruments such as competitive auctions. The experience of the measures taken in recent years in Germany, Belgium, Netherlands, Norway and Sweden is a useful reference for countries like Spain, characterized by limited price competition from retail and high discounts to pharmacies.
If the efficiency of the English system of remuneration of pharmacies in Spain is more than questionable, the extension of the generic should accelerate its reform a system that more adequately recompense the costs of service. Reducing the profit margin per container as a result of the diffusion of generics and lower price software has been offset by increases in prescription volume (almost 33% in the last 6 years), the highest price of innovation and appropriation of part of the effect of competition on the wholesale price through discounts offered by laboratories and distributors to pharmacies.
A reward system based on the cost of the service requires, among other things, separate the real remuneration of industrial purchase price compensation for the service provided by the pharmacy to the patient. The copayment also should also separate the part that corresponds to the wholesale price of the remuneration to the pharmacy, may well create competition between pharmacies by allowing them to offer discounts on the patient copayment.
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