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The effect of generic competition on the price of brand-name drugs
Health Policy 68 (2004) 47–54
The effect of generic competition on the price of brand-name drugs Joel Lexchin a,b,c,∗ a Emergency Department, University Health Network, Toronto, Ont., Canada School of Health Policy and Management, York University, Toronto, Ont., Canada Department of Family and Community Medicine, University of Toronto, Toronto, Ont., Canada b
c
Received 22 January 2003; accepted 27 July 2003
Abstract Background: Literature from the US has shown that brand-name manufacturers do not compete on price once generic competitors become available. This study was undertaken to investigate if this is also true in Canada. Methods: Editions of the Ontario Drug Benefit Formulary were used to identify brand-name drugs that lacked generic competition in July 1990 but had acquired one or more generic competitors by December 1998. Prices of the brand-name drugs were compared before generic competition, at the point when generic competition started and subsequent to the initiation of competition. Results: Price changes for 81 different products in 144 separate presentations were analysed. There was no statistically significant change in brand-name prices when generic competition started. The movement of brand-name prices was not influenced by whether the generic was made by the company producing the brand-name product or price freezes imposed by the Ontario government. When generics first became available having four or more generics was associated with a rise in the price of the brand-name drugs compared to having one, two or three generic competitor(s). Interpretation: The lack of price competition may lead to increased costs in the private market. Private insurance companies generally do not require generic substitution and some provinces do not require generic substitution for cash-paying customers. Maintaining higher prices on brand-name drugs impacts on the prices of new patented medications coming onto the Canadian market under the current pricing guidelines of the Patented Medicine Prices Review Board. © 2003 Elsevier Ireland Ltd. All rights reserved. Keywords: Brand-name drugs; Drug prices; Generic competition; Prescription drugs; Ontario
1. Introduction Generic drugs enter the Canadian marketplace following the expiration of the 20-year patent period granted to brand-name products. The Therapeutic ∗ Present address: 121 Walmer Road, Toronto, Ont., Canada M5R 2X8. Tel.: +1-416-964-7186; fax: +1-416-923-9515. E-mail address: [email protected] (J. Lexchin).
Products Directorate (TPD) of Health, Canada is charged with approving generics on the basis of bioequivalence and manufacturing quality. The decision to list generics on formularies and to pay for them out of public funds is a provincial matter with each of Canada’s 10 provinces having its own set of rules for listing and negotiating its own prices with pharmaceutical companies. TPD approves approximately 50–70 new generic products per year and over the
0168-8510/$ – see front matter © 2003 Elsevier Ireland Ltd. All rights reserved. doi:10.1016/j.healthpol.2003.07.007
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period 1999–2002 the mean approval time has been between 500–600 days [1]. The time taken to be listed on a provincial formulary varies from an average of 84 days in British Columbia to 466 days in Ontario [2]. In 2001, 39.6% of all prescriptions in Canada were dispensed generically representing 14.6% of retail sales for a value of about Can$ 1.02 billion [3,4]. Apotex and Novopharm are the two largest generic companies in Canada with sales of Can$ 458 million and 248 million in 2000, respectively [5]. Some generics are made by firms controlled by brand-name companies, so-called “pseudogenerics” or “ultragenerics”. Ultragenerics are introduced to pre-empt competition from independent generic companies and are made and marketed by another division of the same company or are distributed by another company under license [6]. When generic drugs enter the market in Ontario, they are priced substantially below brand-name products. In the early 1990s, there was a 25% discount when a single generic competitor was available, rising to a 50% or greater price reduction when there are four to five generic competitors [7]. Since 1999, the initial generic approved for listing on the Ontario Drug Benefit Formulary must be priced at 70% of the comparable brand-name product and subsequent generics must be at least 10% lower than the first [8]. Nearly all Canadian provincial plans have either mandatory generic substitution or only cover the cost of the generic product [9] and very few prescriptions do not allow generic substitution [10], so it is largely irrelevant to provincial payers whether or not brand-name manufacturers lower the prices of their products in response to generic competition. The situation in the private market in Canada may be different. Few private insurance plans require mandatory generic substitution [11], cash-paying customers may not request generic drugs and provincial legislation may not make it mandatory for pharmacists to offer generic equivalents to this group. Therefore, in the private market, drug costs may be substantially affected if brand-name manufacturers decline to compete on the basis of price. Work in the US has tended to show that the entry of generic drugs does not affect the price of brand-name products [12–14] although one study found that generic entry did slow the increase in brand-name prices [15].
In Canada, the public sector controls a much larger segment of the market than in the US, owing to the existence of the provincial drug plans [16]. The loss of the public share of the market when generic competitors are listed on provincial drug formularies may prompt brand-name companies to behave differently in Canada as compared to the US. Therefore, pricing behaviour in Canada cannot be assumed to be the same as in the US. The object of this study is to examine the effects of the entry of generic competitors on the price of brand-name products in the province of Ontario.
2. Methods The Ontario Drug Benefit Plan is a publicly run programme that pays for drugs in the ambulatory care setting for seniors (≥65 years of age) and those on social assistance. Drugs covered by the plan are listed in the Ontario Drug Benefit Formulary. The sample of drugs was derived by comparing formulary no. 29, issued July 1990 [17], and formulary no. 36, issued 31 December 1998 [18]. All drugs in any presentation (tablets, capsules, oral liquids, suppositories, injections, topicals, drops) without generic competitors in formulary no. 29 were identified. Formulary no. 36 was then searched for the same drugs in the same presentations and those that were still listed and had generic competitors were selected. Prices of the drugs in formulary no. 29 were recorded and then all subsequent formularies up to and including no. 36 were searched and the following items were recorded: name of brand-name drug, number of different presentations of brand-name drug, price of brand-name drug, manufacturer of brand-name drug, the formulary edition in which a generic competitor was first listed, price of generic competitor(s), number of generic competitors, manufacturer(s) of generic competitors. Prices in the Drug Benefit Formulary are calculated per gram, millilitre, tablet, capsule or other appropriate unit. Prior to formulary no. 35, prices were for the lowest amount for which the drug could be purchased in Canada minus any price reduction granted by the manufacturer or wholesaler to their representatives in the form of rebates, discounts, refunds, free goods or any other benefits of a like nature. Prices in formularies nos. 35 and 36 are those agreed to by the Ontario Ministry of Health in negotiation with the manufacturer.
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The price of the brand-name drug in the edition of the formulary immediately prior to the listing of a generic competitor was taken as the base price. Prices in subsequent editions of the formulary were computed as a ratio of this base price. Therefore, if a drug had price of Can$ 1.50 in the edition of the formulary before the introduction of generic competition and a price of Can$ 1.65 when generic competition started its price ratio would be 1.1 (1.65/1.50). All comparisons were made on the basis of price ratios of brand-name drugs. When brand-name drugs face competition only from ultragenerics, pricing behaviour may be different than when competition comes from generics made by independent manufacturers. The Canadian Generic Pharmaceutical Association provided a list of independent generic and ultrageneric companies. Price ratios for brand-name drugs were compared when generic competition was initially only from ultragenerics and only from generics made by independent companies. One American study [15] found an association between the number of generic competitors and subsequent declines over time in the rate of rise of brand-name prices. This question was investigated by looking at price ratios for brand-name drugs as a function of the number of generic competitors both at the time when generic competition began and subsequent to the initiation of generic competition. In 1993, the Ontario government instituted a price freeze for products listed on its formulary. This freeze may have affected brand-name companies’ decisions about whether or not to alter prices when generic competition began. Therefore, price ratios of brand-name drugs with generic competition before 1993 were compared to those with competition that began in 1993 or later. Time periods are reported in terms of editions of the Ontario Drug Benefit Formulary rather than in months or years. The formulary was issued on an irregular basis (Issue 29—July 1990, Issue 30—February 1991, Issue 31—April 1992, Issue 32—July 1992, Issue 33—1993 (no month given), Issue 34—December 1994, Issue 35—May 1996, Issue 36—December 1998) and therefore periods of time, for example, between the edition of the formulary immediately preceding generic competition and the edition when a generic competitor was first available, were not comparable from product to product.
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Results from a study based on the Ontario formulary may not be applicable to other provinces. To overcome this problem, a random subset of 15 brand-name drugs was chosen and prices for these drugs were compared in formularies from Alberta [19], Manitoba [20], Newfoundland and Labrador [21], Ontario [22], Quebec [23], and Saskatchewan [24]. Other provincial formularies do not list prices. Comparisons between brand-name prices were made using Student’s t-test. The effect of the initial number of generic competitors was analysed using analysis of variance and two-factor analysis of variance was used to assess the effect of the number of generics over time. Statistical analysis was done using StatView 5.0.1 for Macintosh [25]. P values of <0.05 were considered statistically significant. All prices are reported in Canadian dollars unadjusted for inflation. Adjusting prices for inflation would have been appropriate had companies been free to either raise or lower prices. However, after 1993, they were unable to increase prices without losing formulary listing and therefore their remaining choice, aside from lowering prices, was to maintain existing prices. In this situation, adjusting for inflation would make it seem that companies were voluntarily lowering prices which was clearly not the case.
3. Results A total of 81 different products, with 144 different presentations (1–4 presentations per drug) were identified that lacked a generic competitor in July 1990 but had acquired one or more by December 1998. For nine products (16 different preparations) companies lowered prices when a generic competitor first appeared with an average price decrease of 30% (S.D. ± 15%); in 12 cases (21 different preparations) prices rose by an average of 9% (S.D. ± 15%). For the remaining 60 drugs (107 preparations) prices did not change. For all 144 presentations, the price ratio of brand-name products at the time of generic competition was 0.98 (S.D. ± 0.128) which was not significantly different from 1 (P > 0.05). Of the 12 cases where prices rose, 11 occurred before the government imposed price freeze in 1993. Conversely, all nine instances where prices dropped occurred after 1993 (Table 1). Prices rose for three
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Table 1 Products with prices raised and lowered upon entry of generic competitors Products with prices raised
Products with prices lowered Therapeutic class
Manufacturer
Date of formulary when first generic competitor appeared
Drug and presentation
Therapeutic class
Manufacturer
Date of formulary when first generic competitor appeared
Betamethasone dipropionate ointment in base containing propylene glycol 0.05% Clonidine tablet 0.1 mg
Topical corticosteroid
Schering
April 1992
Acetaminophen suppository 325 mg
Analgesic
SmithKline Beecham
December 1994
Antihypertensive
February 1991 February 1991
Antiandrogen
SmithKline Beecham Berlex
December 1994
Antihypertensive
Acetaminophen suppository 650 mg Cyproterone tablet 50 mg
Analgesic
Clonidine tablet 0.2 mg
December 1998
Clotrimazole vaginal cream 20 mg/g Flurbiprofen tablet 50 mg
Antifungal
Boehringer Ingelheim Boehringer Ingelheim Miles
Antibacterial
Schering
December 1998
NSAID
Upjohn
April 1992
Analgesic
Knoll
December 1998
Flurbiprofen tablet 100 mg Gemfibrizol capsule 300 mg
NSAID Antilipemic
Upjohn Pfizer
April 1992 February 1991
Antidiarrheal Neuroleptic
May 1996 December 1998
Hydralazine tablet 10 mg
Antihypertensive
Ciba-Geigy
April 1992
Ketoprofen enteric coated tablet 50 mg Ketoprofen enteric coated tablet 100 mg Metronidazole capsule 500 mg
NSAID
Rhone-Poulenc Rorer Rhone-Poulenc Rorer Rhone-Poulenc Rorer Pfizer Pfizer Pfizer Fisons
February 1991
Analgesic
Janssen Rhone-Poulenc Rorer Rhone-Poulenc Rorer Abbott
NSAID
Syntex
December 1994
Neuroleptic
Rhone-Poulenc Rorer
December 1998
Prazosin tablet 1 mg Prazosin tablet 2 mg Prazosin tablet 5 mg Sodium cromoglycate nasal solution 2% Tiaprofenic acid tablet 200 mg Tiaprofenic acid tablet 300 mg Trazodone tablet 50 mg
NSAID Antibacterial/ antiprotozoal Antihypertensive Antihypertensive Antihypertensive Antiallergic NSAID NSAID Antidepressant
Trazodone tablet 100 mg
Antidepressant
Trazodone tablet 150 mg
Antidepressant
Roussel Roussel Bristol-Myers Squibb Bristol-Myers Squibb Bristol-Myers Squibb
February 1991
February 1991 February 1991 February 1991 February 1991 February 1991 December 1994 April 1992 April 1992 May 1996 May 1996 May 1996
Gentamicin otic solution 0.3% Hydromorphone injection 10 mg/ml Loperamide capsule 2 mg Methotrimeprazine tablet 2 mg Methotrimeprazine tablet 5 mg Morphine injection 15 mg/ml Naproxen suppository 500 mg Prochlorperazine injection 10 mg/2 ml
Neuroleptic
May 1996 May 1996
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Drug and presentation
J. Lexchin / Health Policy 68 (2004) 47–54 1.4 *
#
Three generics
**
Two generics
1.2 1 .8 .6 .4 .2
Four or more generics
0 One generic
different nonsteroidal anti-inflammatory agents (flurbiprofen, ketoprofen and tiaprofenic acid) and three antihypertensives (clonidine, hydralazine and prazosin) and dropped in the case of three analgesics (acetaminophen, hydromorphone and morphine). Rhone-Poulenc Rorer (now part of Aventis) raised prices on two products (ketoprofen and metronidazole) and lowered them on two products (methotrimeprazine and prochlorperazine). The only other company to raise or lower prices on more than a single product was Pfizer. There were 94 instances (72 different drugs) where presentations of brand-name products faced competition from generics made only by independent companies (price ratio at the time of generic competition 0.958 ± S.D. 0.128) and 11 instances (nine different drugs) where competition came only from ultragenerics (price ratio 1.017 ± S.D. 0.023). The two price ratios were not statistically different (P > 0.10), indicating that there was no association between who controlled the companies marketing the generics and changes in the price of the brand-name product. The number of generics available when generic competition began did not lead to price reductions in the brand-name drug. Fig. 1 shows the price ratio for brand-name drugs when they first faced generic competition as a function of the number of generic competitors that were initially available. Having four or more generics available was associated with a rise in the price of the brand-name drugs compared to the situation where there was a single (P < 0.0001), two (P = 0.0103) or three (P = 0.0056) generic competitor(s). In cases where generic competitors were listed in six successive formulary editions, brand-name prices were significantly lower than when generic competition had been in place for only three (P = 0.0241) or four (P = 0.0478) formulary editions. However, there was no difference in price between generic competition for six formulary editions and one or two formulary editions (Fig. 2). Brand-name prices were not affected by the interaction between the number of generics and the length of time of generic competition. As Fig. 2 shows, even after there had been generic competitors listed in six subsequent editions of the formulary there was no difference in price ratios if there were 1–3 generics versus 4–6 generics.
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Number of generic competitors
Fig. 1. Effect of number of generic competitors on price of brand-name product at time of introduction of generic competition. Price ratio of brand-name products (price in edition of formulary when generic competition starts/price in edition of formulary preceding introduction of generic competition). Analysis of variance. ∗ P < 0.0001 compared to four or more generics; ∗∗ P = 0.0103 compared to four or more generics; # P = 0.0056 compared to four or more generics. Bars represent 95% confidence intervals.
**
1.2
*
1
Number of generic competitors:
.8 One-three
.6
Four or more
.4 .2 0 One
Two
Three
Four
Five
Six
Number of formulary editions since generic competition began
Fig. 2. Effect of time since generic competition began and number of generic competitors on price of brand-name products. Price ratio of brand-name products (price in successive editions of formulary after generic competition started/price in edition of formulary preceding introduction of generic competition). Two factor analysis of variance. ∗ P = 0.037 three editions compared to five and P = 0.0241 compared to six; ∗∗ P = 0.0478 four editions compared to six. Interaction factor not significant. Bars represent 95% confidence intervals.
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Whether generic competition started before 1993 or later made no difference in the price ratio of brand-name drugs, although there was a trend to a lower price ratio for drugs with competition starting in 1993 or later (pre 1993: price ratio of 1.027, S.D. ± 0.022 versus 1993 or later: price ratio of 0.971, S.D. ± 0.137, P = 0.059). All of the 15 drugs in the subsample were available in all five provinces and had generic competition except for Newfoundland and Labrador and Quebec that were each missing three products. Except in one instance where the Ontario price was Can$ 0.0001 higher, the Ontario price was always the lowest.
4. Discussion This study shows that brand-name companies do not compete on price with generic companies in Ontario regardless of who makes the generic product, how long generic competition has been present and whether or not prices are subject to a government imposed freeze. In finding no evidence of price reductions, these results agree with those from most of the American literature [12–14]. If generic drugs were made by the brand-name manufacturers (ultragenerics) themselves they may not have felt it necessary to compete on price since they were getting revenue from sales of their own products. On the other hand, if the generics came from independent companies, the brand-name firms might have had more incentive to lower their prices to retain some market share. However, whether or not competition came from ultragenerics or independent generics did not influence brand-name prices. The price freeze imposed on products listed in the Ontario formulary in 1993 did not affect prices; if anything there was a trend for the average price to be higher before the freeze. Before the price freeze, prices rose for a number of products when generic competition appeared but the numbers are too small to determine if this strategy applied to any particular groups of drugs or was used by certain companies. Price increases may have been an attempt to compensate for anticipated loss of market share. It is unclear why, after the freeze was imposed, companies chose to drop the prices for some products rather than leave them unchanged.
At no point in time, did the number of generic competitors lead to a price decrease for brand-name drugs. When there were four or more generic competitors listed on the Ontario formulary, prices for brand-name products were higher than when there were one to three generics. This finding differs from the one reported by Caves and colleagues. In their study of 30 brand-name drugs that went off patent between 1976 and 1987, they found that after five generic manufacturers had entered the market, the brand-name price was 8.5% lower than it would have been without generic entry [15]. The difference in the time periods may explain the opposite results. In the US market of the 1970s and 1980s, brand-name products may have been able to retain market share by competing on price with generics. The smaller number of drugs in the sample and the limited number of therapeutic classes that Caves et al. analysed may also have accounted for the discrepancy in the results. The finding that brand-name prices decreased with longer periods of generic competition, as measured by the number of formulary editions, may have been a spurious result. If companies do tend to lower prices after prolonged generic competition, then there should have been a difference in brand-name prices after generic competitors had been listed in one or two successive editions compared to six editions, but such a difference did not exist. The percent of the market controlled by provincial drug plans will vary considerably depending on the particular drug. Drugs used predominantly by people 65 and over will be heavily dependent on sales through provincial plans, since virtually everyone this age is eligible for coverage. Other drugs, such as those used by women in their reproductive years or products heavily prescribed to children, will probably have significant sales through the private market. In the latter case, the brand-name drug may retain significant market share and therefore there is no economic rational for companies to lower prices on these drugs. In the US, drug companies have adopted a policy of market segmentation—retaining product loyalty in a price-insensitive group and conceding the market in a price-sensitive group [12]. In Canada, the private market would constitute the group that is relatively price insensitive since private drug plans do not generally require the dispensing of the lowest price generic product. The portion of the market
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controlled by the provincial drug plans would be the price-sensitive group since provincial drug plans only reimburse pharmacists for the least expensive version of the drug included on the formulary. Data on the public/private market sales of generic and brand-name drugs included in this study was not available to test the hypothesis that brand-name companies may retain significant market share in the private market. When most of a drug’s sales is through the provincial drug plan, it is difficult to understand the reasons why companies do not compete on prices. The brand-name industry claims that only 3 in 10 products make back their development costs [26], but if sales have fallen dramatically then maintaining a high price will not increase revenues. By the time generic competition occurs, companies have usually stopped large-scale promotion of products and therefore there is no need to keep prices high to recover marketing expenses. The main limitation of this study is that it only looked at price changes in one of the 10 Canadian provinces. However, the fact that the price in Ontario is almost always lower than that in other provinces lends weight to the assumption that the behaviour of companies in other provinces, when generic competition is introduced, is the same across Canada.
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British Columbia and Quebec do not require pharmacists to substitute generic products for cash-paying customers [29]. Changes in provincial policies about generic substitution should help keep drugs more affordable for cash-paying customers. Finally, maintaining higher prices on brand-name drugs impacts on the prices of new patented medications coming onto the Canadian market. The Patented Medicine Prices Review Board (PMPRB), which limits the maximum introductory price for new patented medicines, currently allows companies to set prices up to the highest amount charged for other medicines in the same therapeutic market [30]. By not lowering prices of brand-name drugs, companies thereby enable new entrants into the same therapeutic market to charge higher prices. Patented drugs now account for 65% of total sales of prescription medications, up from 44% in 1995 [4] and the cost of a prescription for a patented medication has been rising between 50 and 500% more rapidly than the cost of a generic prescription, depending on when the patented medication came onto the market [31]. The prices for new patented medicines is one of the major driving factors in the cost of provincial drug plans [32]. The PMPRB is currently reviewing its policies on introductory prices and should look at the issue of whether to change its rules in the face of the absence of price reductions of brand-name medications.
5. Policy recommendations The report from the Congressional Budget Office in the US notes that the fact that brand-name prices do not decline following generic competition primarily impacts third-party payers that do not manage their outpatient drug benefits and consumers who have no insurance [14]. These same groups may also be affected in the Canadian setting. Benefits packages are as high as 7% of an employee’s total compensation package and companies identify rising drug costs as the number one cost driver in increasing the cost of health benefits [27,28]. The fact that private insurance plans generally do not require mandatory generic substitution may be one of the factors driving up costs. Changing this feature of their drug plans may help employers control costs. Individuals who pay out-of-pocket for prescription drugs are at a disadvantage due to the continuing higher prices of brand-name drugs. Currently, Alberta,
6. Conclusion The lack of price competition by brand-name manufacturers has economic consequences in the private sector and indirectly in the public sector. Drug companies cannot be forced to lower their prices when drugs go off patent and generic competitors appear but both private insurers and government can institute measures to compensate for the effects of these continuing high prices.
Acknowledgements Vernon Chiles, Wayne Critchley and Tanya Potashnik read an earlier version of this manuscript and gave valuable feedback. Julie Tam provided key information about the breakdown of generic drug
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companies and features of different provincial drug plans. References [1] Therapeutic Products Directorate. Annual drug submission performance report, part 1; 2002. Available at http://www.hcsc.gc.ca/hpfb-dgpsa/tpd-dpt/tpd annual02 e.html. Accessed 5 June 2003. [2] Anderson M, Parent K. Timely access to generic drugs: issues for health policy in Canada. A research paper prepared for the Canadian Drug Manufacturers Association. Kingston: Queen’s University; 2001. [3] IMS Health, Canada. Generic’s share of prescriptions and drugstore purchases 1995–2001. Available at http://www. imshealthcanada.com/htmen/3 2 6.htm. Accessed 5 June 2003. [4] Patented Medicine Prices Review Board. Annual report. Ottawa: PMPRB; 2002. [5] IMS Health, Canada. Annual review of prescribing and diagnoses trends. Available at http://www.imshealthcanada. com/htmen/4 2 1 35tables.htm. Accessed 5 June 2003. [6] Hollis A. The anti-competitive effects of brand-controlled “pseudo-generics” in the Canadian pharmaceutical market. Can Public Policy 2003;29:21–32. [7] Lexchin J. The effect of generic competition on the price of prescription drugs in the Province of Ontario. CMAJ 1993;148:35–8. [8] Tenant L. Dear Prescriber letter. Drug Programs Branch, Ministry of Health; 21 December 1998. [9] Currie GR, Nielson NL. Models for funding prescription drug programs. Institute of Health Economics, Working Paper 99-5; 1999. [10] Gorecki PK. Getting it right: an evaluation of alternative systems of the organization on the Ontario prescription drugs distribution system. Prescriptions for health: report of the pharmaceutical inquiry of Ontario. Appendix 3. Toronto; 1990. [11] Taylor CL. The corporate response to rising health care costs. Ottawa: Conference Board of Canada; 1996. [12] Grabowski H, Vernon J. Brand loyalty entry and price competition in pharmaceuticals after the 1984 drug act. J Law Econ 1992;35:331–50. [13] Frank RG, Salkever DS. Generic entry and the pricing of pharmaceuticals. J Econ Manage Strat 1997;6:75–90. [14] Congressional Budget Office. How increased competition from generic drugs has affected prices and returns in the pharmaceutical industry. Washington (DC): US Government Printing Office; July 1998.
[15] Caves RE, Whinston MD, Hurwitz MA. Patent expiration, entry, and competition in the US pharmaceutical industry. Brookings Papers Econ Act Microecon 1991;1991:1–48. [16] Jacobzone S. Pharmaceutical policies in OECD countries: reconciling social and industrial goals. Labour Market and Social Policy Occasional Papers No. 40. Paris: OECD; 2000. [17] Ministry of Health, Ontario. Drug Benefit Formulary No. 29. Toronto: Queen’s Printer for Ontario; 1990. [18] Ministry of Health, Ontario. Drug Benefit Formulary No. 36. Toronto: Queen’s Printer for Ontario; 1998. [19] Alberta Health and Wellness. Drug benefit list. Edmonton; 1 October 2002. Available at www.health.gov.ab.ca/Drugs/ index.htm. Accessed 25 November 2002. [20] Manitoba Health. Manitoba drug interchangeability formulary. 37th ed. Winnipeg; 22 July 2002. Available at http://www. gov.mb.ca/health/mdbif/. Accessed 25 November 2002. [21] Department of Health and Community Services. Newfoundland and Labrador drug Formulary. St. John’s; 18 October 2002. Available at www.gov.nf.ca/health/nlpdp/FORMLARY. PDF. Accessed 25 November 2002. [22] Ministry of Health and Long-term Care, Ontario. Drug Benefit Formulary No. 37. Toronto; 7 March 2001. Available at http://www.gov.on.ca/health/english/program/drugs/odbf/ odbf mn.html. Accessed 25 November 2002. [23] Régie de l’assurance maladie. Lise de medicaments. Quebec City; October 2002. Available at http://www.ramq.gouv.qc.ca/ crc/pro/listmed/lm tdmf.shtml. Accessed 25 November 2002. [24] Saskatchewan Health Formulary. 52nd ed. Regina; October 2002. Available at http://formulary.drugplan.health.gov.sk.ca. Accessed 25 November 2002. [25] StatView. SAS Institute Inc.; 1999. [26] Grabowski H, Vernon J. A new look at the returns and risks to pharmaceutical R&D. Manage Sci 1990;36:804–21. [27] Fishman R, McLaughlin D. PharmaFocus Canada 1999: looking forward with confidence, Pharma Strategy Group IMS International; 1995. [28] Canadian Life and Health Insurance Association Inc. Submission to the Standing Senate Committee on Social Affairs, Science and Technology regarding the role of supplementary health insurance in Canada’s health system. November 2001. [29] Provincial Drug Benefit Programs. 23rd ed. Ottawa: Canadian Pharmacists Association; December 2001. [30] Patented Medicine Prices Review Board. Compendium of guidelines, policies and procedures. Ottawa: PMPRB; 1994. [31] Green Shield Canada. Analysis of drug claim costs 1993–1997. Toronto; 1998. [32] Federal/Provincial/Territorial Working Group on Drug Prices, Cost driver analysis of provincial drug plans: executive summary. Ottawa; April 2000.
The effect of generic competition on the price of brand-name drugs Joel Lexchin a,b,c,∗ a Emergency Department, University Health Network, Toronto, Ont., Canada School of Health Policy and Management, York University, Toronto, Ont., Canada Department of Family and Community Medicine, University of Toronto, Toronto, Ont., Canada b
c
Received 22 January 2003; accepted 27 July 2003
Abstract Background: Literature from the US has shown that brand-name manufacturers do not compete on price once generic competitors become available. This study was undertaken to investigate if this is also true in Canada. Methods: Editions of the Ontario Drug Benefit Formulary were used to identify brand-name drugs that lacked generic competition in July 1990 but had acquired one or more generic competitors by December 1998. Prices of the brand-name drugs were compared before generic competition, at the point when generic competition started and subsequent to the initiation of competition. Results: Price changes for 81 different products in 144 separate presentations were analysed. There was no statistically significant change in brand-name prices when generic competition started. The movement of brand-name prices was not influenced by whether the generic was made by the company producing the brand-name product or price freezes imposed by the Ontario government. When generics first became available having four or more generics was associated with a rise in the price of the brand-name drugs compared to having one, two or three generic competitor(s). Interpretation: The lack of price competition may lead to increased costs in the private market. Private insurance companies generally do not require generic substitution and some provinces do not require generic substitution for cash-paying customers. Maintaining higher prices on brand-name drugs impacts on the prices of new patented medications coming onto the Canadian market under the current pricing guidelines of the Patented Medicine Prices Review Board. © 2003 Elsevier Ireland Ltd. All rights reserved. Keywords: Brand-name drugs; Drug prices; Generic competition; Prescription drugs; Ontario
1. Introduction Generic drugs enter the Canadian marketplace following the expiration of the 20-year patent period granted to brand-name products. The Therapeutic ∗ Present address: 121 Walmer Road, Toronto, Ont., Canada M5R 2X8. Tel.: +1-416-964-7186; fax: +1-416-923-9515. E-mail address: [email protected] (J. Lexchin).
Products Directorate (TPD) of Health, Canada is charged with approving generics on the basis of bioequivalence and manufacturing quality. The decision to list generics on formularies and to pay for them out of public funds is a provincial matter with each of Canada’s 10 provinces having its own set of rules for listing and negotiating its own prices with pharmaceutical companies. TPD approves approximately 50–70 new generic products per year and over the
0168-8510/$ – see front matter © 2003 Elsevier Ireland Ltd. All rights reserved. doi:10.1016/j.healthpol.2003.07.007
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period 1999–2002 the mean approval time has been between 500–600 days [1]. The time taken to be listed on a provincial formulary varies from an average of 84 days in British Columbia to 466 days in Ontario [2]. In 2001, 39.6% of all prescriptions in Canada were dispensed generically representing 14.6% of retail sales for a value of about Can$ 1.02 billion [3,4]. Apotex and Novopharm are the two largest generic companies in Canada with sales of Can$ 458 million and 248 million in 2000, respectively [5]. Some generics are made by firms controlled by brand-name companies, so-called “pseudogenerics” or “ultragenerics”. Ultragenerics are introduced to pre-empt competition from independent generic companies and are made and marketed by another division of the same company or are distributed by another company under license [6]. When generic drugs enter the market in Ontario, they are priced substantially below brand-name products. In the early 1990s, there was a 25% discount when a single generic competitor was available, rising to a 50% or greater price reduction when there are four to five generic competitors [7]. Since 1999, the initial generic approved for listing on the Ontario Drug Benefit Formulary must be priced at 70% of the comparable brand-name product and subsequent generics must be at least 10% lower than the first [8]. Nearly all Canadian provincial plans have either mandatory generic substitution or only cover the cost of the generic product [9] and very few prescriptions do not allow generic substitution [10], so it is largely irrelevant to provincial payers whether or not brand-name manufacturers lower the prices of their products in response to generic competition. The situation in the private market in Canada may be different. Few private insurance plans require mandatory generic substitution [11], cash-paying customers may not request generic drugs and provincial legislation may not make it mandatory for pharmacists to offer generic equivalents to this group. Therefore, in the private market, drug costs may be substantially affected if brand-name manufacturers decline to compete on the basis of price. Work in the US has tended to show that the entry of generic drugs does not affect the price of brand-name products [12–14] although one study found that generic entry did slow the increase in brand-name prices [15].
In Canada, the public sector controls a much larger segment of the market than in the US, owing to the existence of the provincial drug plans [16]. The loss of the public share of the market when generic competitors are listed on provincial drug formularies may prompt brand-name companies to behave differently in Canada as compared to the US. Therefore, pricing behaviour in Canada cannot be assumed to be the same as in the US. The object of this study is to examine the effects of the entry of generic competitors on the price of brand-name products in the province of Ontario.
2. Methods The Ontario Drug Benefit Plan is a publicly run programme that pays for drugs in the ambulatory care setting for seniors (≥65 years of age) and those on social assistance. Drugs covered by the plan are listed in the Ontario Drug Benefit Formulary. The sample of drugs was derived by comparing formulary no. 29, issued July 1990 [17], and formulary no. 36, issued 31 December 1998 [18]. All drugs in any presentation (tablets, capsules, oral liquids, suppositories, injections, topicals, drops) without generic competitors in formulary no. 29 were identified. Formulary no. 36 was then searched for the same drugs in the same presentations and those that were still listed and had generic competitors were selected. Prices of the drugs in formulary no. 29 were recorded and then all subsequent formularies up to and including no. 36 were searched and the following items were recorded: name of brand-name drug, number of different presentations of brand-name drug, price of brand-name drug, manufacturer of brand-name drug, the formulary edition in which a generic competitor was first listed, price of generic competitor(s), number of generic competitors, manufacturer(s) of generic competitors. Prices in the Drug Benefit Formulary are calculated per gram, millilitre, tablet, capsule or other appropriate unit. Prior to formulary no. 35, prices were for the lowest amount for which the drug could be purchased in Canada minus any price reduction granted by the manufacturer or wholesaler to their representatives in the form of rebates, discounts, refunds, free goods or any other benefits of a like nature. Prices in formularies nos. 35 and 36 are those agreed to by the Ontario Ministry of Health in negotiation with the manufacturer.
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The price of the brand-name drug in the edition of the formulary immediately prior to the listing of a generic competitor was taken as the base price. Prices in subsequent editions of the formulary were computed as a ratio of this base price. Therefore, if a drug had price of Can$ 1.50 in the edition of the formulary before the introduction of generic competition and a price of Can$ 1.65 when generic competition started its price ratio would be 1.1 (1.65/1.50). All comparisons were made on the basis of price ratios of brand-name drugs. When brand-name drugs face competition only from ultragenerics, pricing behaviour may be different than when competition comes from generics made by independent manufacturers. The Canadian Generic Pharmaceutical Association provided a list of independent generic and ultrageneric companies. Price ratios for brand-name drugs were compared when generic competition was initially only from ultragenerics and only from generics made by independent companies. One American study [15] found an association between the number of generic competitors and subsequent declines over time in the rate of rise of brand-name prices. This question was investigated by looking at price ratios for brand-name drugs as a function of the number of generic competitors both at the time when generic competition began and subsequent to the initiation of generic competition. In 1993, the Ontario government instituted a price freeze for products listed on its formulary. This freeze may have affected brand-name companies’ decisions about whether or not to alter prices when generic competition began. Therefore, price ratios of brand-name drugs with generic competition before 1993 were compared to those with competition that began in 1993 or later. Time periods are reported in terms of editions of the Ontario Drug Benefit Formulary rather than in months or years. The formulary was issued on an irregular basis (Issue 29—July 1990, Issue 30—February 1991, Issue 31—April 1992, Issue 32—July 1992, Issue 33—1993 (no month given), Issue 34—December 1994, Issue 35—May 1996, Issue 36—December 1998) and therefore periods of time, for example, between the edition of the formulary immediately preceding generic competition and the edition when a generic competitor was first available, were not comparable from product to product.
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Results from a study based on the Ontario formulary may not be applicable to other provinces. To overcome this problem, a random subset of 15 brand-name drugs was chosen and prices for these drugs were compared in formularies from Alberta [19], Manitoba [20], Newfoundland and Labrador [21], Ontario [22], Quebec [23], and Saskatchewan [24]. Other provincial formularies do not list prices. Comparisons between brand-name prices were made using Student’s t-test. The effect of the initial number of generic competitors was analysed using analysis of variance and two-factor analysis of variance was used to assess the effect of the number of generics over time. Statistical analysis was done using StatView 5.0.1 for Macintosh [25]. P values of <0.05 were considered statistically significant. All prices are reported in Canadian dollars unadjusted for inflation. Adjusting prices for inflation would have been appropriate had companies been free to either raise or lower prices. However, after 1993, they were unable to increase prices without losing formulary listing and therefore their remaining choice, aside from lowering prices, was to maintain existing prices. In this situation, adjusting for inflation would make it seem that companies were voluntarily lowering prices which was clearly not the case.
3. Results A total of 81 different products, with 144 different presentations (1–4 presentations per drug) were identified that lacked a generic competitor in July 1990 but had acquired one or more by December 1998. For nine products (16 different preparations) companies lowered prices when a generic competitor first appeared with an average price decrease of 30% (S.D. ± 15%); in 12 cases (21 different preparations) prices rose by an average of 9% (S.D. ± 15%). For the remaining 60 drugs (107 preparations) prices did not change. For all 144 presentations, the price ratio of brand-name products at the time of generic competition was 0.98 (S.D. ± 0.128) which was not significantly different from 1 (P > 0.05). Of the 12 cases where prices rose, 11 occurred before the government imposed price freeze in 1993. Conversely, all nine instances where prices dropped occurred after 1993 (Table 1). Prices rose for three
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Table 1 Products with prices raised and lowered upon entry of generic competitors Products with prices raised
Products with prices lowered Therapeutic class
Manufacturer
Date of formulary when first generic competitor appeared
Drug and presentation
Therapeutic class
Manufacturer
Date of formulary when first generic competitor appeared
Betamethasone dipropionate ointment in base containing propylene glycol 0.05% Clonidine tablet 0.1 mg
Topical corticosteroid
Schering
April 1992
Acetaminophen suppository 325 mg
Analgesic
SmithKline Beecham
December 1994
Antihypertensive
February 1991 February 1991
Antiandrogen
SmithKline Beecham Berlex
December 1994
Antihypertensive
Acetaminophen suppository 650 mg Cyproterone tablet 50 mg
Analgesic
Clonidine tablet 0.2 mg
December 1998
Clotrimazole vaginal cream 20 mg/g Flurbiprofen tablet 50 mg
Antifungal
Boehringer Ingelheim Boehringer Ingelheim Miles
Antibacterial
Schering
December 1998
NSAID
Upjohn
April 1992
Analgesic
Knoll
December 1998
Flurbiprofen tablet 100 mg Gemfibrizol capsule 300 mg
NSAID Antilipemic
Upjohn Pfizer
April 1992 February 1991
Antidiarrheal Neuroleptic
May 1996 December 1998
Hydralazine tablet 10 mg
Antihypertensive
Ciba-Geigy
April 1992
Ketoprofen enteric coated tablet 50 mg Ketoprofen enteric coated tablet 100 mg Metronidazole capsule 500 mg
NSAID
Rhone-Poulenc Rorer Rhone-Poulenc Rorer Rhone-Poulenc Rorer Pfizer Pfizer Pfizer Fisons
February 1991
Analgesic
Janssen Rhone-Poulenc Rorer Rhone-Poulenc Rorer Abbott
NSAID
Syntex
December 1994
Neuroleptic
Rhone-Poulenc Rorer
December 1998
Prazosin tablet 1 mg Prazosin tablet 2 mg Prazosin tablet 5 mg Sodium cromoglycate nasal solution 2% Tiaprofenic acid tablet 200 mg Tiaprofenic acid tablet 300 mg Trazodone tablet 50 mg
NSAID Antibacterial/ antiprotozoal Antihypertensive Antihypertensive Antihypertensive Antiallergic NSAID NSAID Antidepressant
Trazodone tablet 100 mg
Antidepressant
Trazodone tablet 150 mg
Antidepressant
Roussel Roussel Bristol-Myers Squibb Bristol-Myers Squibb Bristol-Myers Squibb
February 1991
February 1991 February 1991 February 1991 February 1991 February 1991 December 1994 April 1992 April 1992 May 1996 May 1996 May 1996
Gentamicin otic solution 0.3% Hydromorphone injection 10 mg/ml Loperamide capsule 2 mg Methotrimeprazine tablet 2 mg Methotrimeprazine tablet 5 mg Morphine injection 15 mg/ml Naproxen suppository 500 mg Prochlorperazine injection 10 mg/2 ml
Neuroleptic
May 1996 May 1996
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Drug and presentation
J. Lexchin / Health Policy 68 (2004) 47–54 1.4 *
#
Three generics
**
Two generics
1.2 1 .8 .6 .4 .2
Four or more generics
0 One generic
different nonsteroidal anti-inflammatory agents (flurbiprofen, ketoprofen and tiaprofenic acid) and three antihypertensives (clonidine, hydralazine and prazosin) and dropped in the case of three analgesics (acetaminophen, hydromorphone and morphine). Rhone-Poulenc Rorer (now part of Aventis) raised prices on two products (ketoprofen and metronidazole) and lowered them on two products (methotrimeprazine and prochlorperazine). The only other company to raise or lower prices on more than a single product was Pfizer. There were 94 instances (72 different drugs) where presentations of brand-name products faced competition from generics made only by independent companies (price ratio at the time of generic competition 0.958 ± S.D. 0.128) and 11 instances (nine different drugs) where competition came only from ultragenerics (price ratio 1.017 ± S.D. 0.023). The two price ratios were not statistically different (P > 0.10), indicating that there was no association between who controlled the companies marketing the generics and changes in the price of the brand-name product. The number of generics available when generic competition began did not lead to price reductions in the brand-name drug. Fig. 1 shows the price ratio for brand-name drugs when they first faced generic competition as a function of the number of generic competitors that were initially available. Having four or more generics available was associated with a rise in the price of the brand-name drugs compared to the situation where there was a single (P < 0.0001), two (P = 0.0103) or three (P = 0.0056) generic competitor(s). In cases where generic competitors were listed in six successive formulary editions, brand-name prices were significantly lower than when generic competition had been in place for only three (P = 0.0241) or four (P = 0.0478) formulary editions. However, there was no difference in price between generic competition for six formulary editions and one or two formulary editions (Fig. 2). Brand-name prices were not affected by the interaction between the number of generics and the length of time of generic competition. As Fig. 2 shows, even after there had been generic competitors listed in six subsequent editions of the formulary there was no difference in price ratios if there were 1–3 generics versus 4–6 generics.
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Number of generic competitors
Fig. 1. Effect of number of generic competitors on price of brand-name product at time of introduction of generic competition. Price ratio of brand-name products (price in edition of formulary when generic competition starts/price in edition of formulary preceding introduction of generic competition). Analysis of variance. ∗ P < 0.0001 compared to four or more generics; ∗∗ P = 0.0103 compared to four or more generics; # P = 0.0056 compared to four or more generics. Bars represent 95% confidence intervals.
**
1.2
*
1
Number of generic competitors:
.8 One-three
.6
Four or more
.4 .2 0 One
Two
Three
Four
Five
Six
Number of formulary editions since generic competition began
Fig. 2. Effect of time since generic competition began and number of generic competitors on price of brand-name products. Price ratio of brand-name products (price in successive editions of formulary after generic competition started/price in edition of formulary preceding introduction of generic competition). Two factor analysis of variance. ∗ P = 0.037 three editions compared to five and P = 0.0241 compared to six; ∗∗ P = 0.0478 four editions compared to six. Interaction factor not significant. Bars represent 95% confidence intervals.
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Whether generic competition started before 1993 or later made no difference in the price ratio of brand-name drugs, although there was a trend to a lower price ratio for drugs with competition starting in 1993 or later (pre 1993: price ratio of 1.027, S.D. ± 0.022 versus 1993 or later: price ratio of 0.971, S.D. ± 0.137, P = 0.059). All of the 15 drugs in the subsample were available in all five provinces and had generic competition except for Newfoundland and Labrador and Quebec that were each missing three products. Except in one instance where the Ontario price was Can$ 0.0001 higher, the Ontario price was always the lowest.
4. Discussion This study shows that brand-name companies do not compete on price with generic companies in Ontario regardless of who makes the generic product, how long generic competition has been present and whether or not prices are subject to a government imposed freeze. In finding no evidence of price reductions, these results agree with those from most of the American literature [12–14]. If generic drugs were made by the brand-name manufacturers (ultragenerics) themselves they may not have felt it necessary to compete on price since they were getting revenue from sales of their own products. On the other hand, if the generics came from independent companies, the brand-name firms might have had more incentive to lower their prices to retain some market share. However, whether or not competition came from ultragenerics or independent generics did not influence brand-name prices. The price freeze imposed on products listed in the Ontario formulary in 1993 did not affect prices; if anything there was a trend for the average price to be higher before the freeze. Before the price freeze, prices rose for a number of products when generic competition appeared but the numbers are too small to determine if this strategy applied to any particular groups of drugs or was used by certain companies. Price increases may have been an attempt to compensate for anticipated loss of market share. It is unclear why, after the freeze was imposed, companies chose to drop the prices for some products rather than leave them unchanged.
At no point in time, did the number of generic competitors lead to a price decrease for brand-name drugs. When there were four or more generic competitors listed on the Ontario formulary, prices for brand-name products were higher than when there were one to three generics. This finding differs from the one reported by Caves and colleagues. In their study of 30 brand-name drugs that went off patent between 1976 and 1987, they found that after five generic manufacturers had entered the market, the brand-name price was 8.5% lower than it would have been without generic entry [15]. The difference in the time periods may explain the opposite results. In the US market of the 1970s and 1980s, brand-name products may have been able to retain market share by competing on price with generics. The smaller number of drugs in the sample and the limited number of therapeutic classes that Caves et al. analysed may also have accounted for the discrepancy in the results. The finding that brand-name prices decreased with longer periods of generic competition, as measured by the number of formulary editions, may have been a spurious result. If companies do tend to lower prices after prolonged generic competition, then there should have been a difference in brand-name prices after generic competitors had been listed in one or two successive editions compared to six editions, but such a difference did not exist. The percent of the market controlled by provincial drug plans will vary considerably depending on the particular drug. Drugs used predominantly by people 65 and over will be heavily dependent on sales through provincial plans, since virtually everyone this age is eligible for coverage. Other drugs, such as those used by women in their reproductive years or products heavily prescribed to children, will probably have significant sales through the private market. In the latter case, the brand-name drug may retain significant market share and therefore there is no economic rational for companies to lower prices on these drugs. In the US, drug companies have adopted a policy of market segmentation—retaining product loyalty in a price-insensitive group and conceding the market in a price-sensitive group [12]. In Canada, the private market would constitute the group that is relatively price insensitive since private drug plans do not generally require the dispensing of the lowest price generic product. The portion of the market
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controlled by the provincial drug plans would be the price-sensitive group since provincial drug plans only reimburse pharmacists for the least expensive version of the drug included on the formulary. Data on the public/private market sales of generic and brand-name drugs included in this study was not available to test the hypothesis that brand-name companies may retain significant market share in the private market. When most of a drug’s sales is through the provincial drug plan, it is difficult to understand the reasons why companies do not compete on prices. The brand-name industry claims that only 3 in 10 products make back their development costs [26], but if sales have fallen dramatically then maintaining a high price will not increase revenues. By the time generic competition occurs, companies have usually stopped large-scale promotion of products and therefore there is no need to keep prices high to recover marketing expenses. The main limitation of this study is that it only looked at price changes in one of the 10 Canadian provinces. However, the fact that the price in Ontario is almost always lower than that in other provinces lends weight to the assumption that the behaviour of companies in other provinces, when generic competition is introduced, is the same across Canada.
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British Columbia and Quebec do not require pharmacists to substitute generic products for cash-paying customers [29]. Changes in provincial policies about generic substitution should help keep drugs more affordable for cash-paying customers. Finally, maintaining higher prices on brand-name drugs impacts on the prices of new patented medications coming onto the Canadian market. The Patented Medicine Prices Review Board (PMPRB), which limits the maximum introductory price for new patented medicines, currently allows companies to set prices up to the highest amount charged for other medicines in the same therapeutic market [30]. By not lowering prices of brand-name drugs, companies thereby enable new entrants into the same therapeutic market to charge higher prices. Patented drugs now account for 65% of total sales of prescription medications, up from 44% in 1995 [4] and the cost of a prescription for a patented medication has been rising between 50 and 500% more rapidly than the cost of a generic prescription, depending on when the patented medication came onto the market [31]. The prices for new patented medicines is one of the major driving factors in the cost of provincial drug plans [32]. The PMPRB is currently reviewing its policies on introductory prices and should look at the issue of whether to change its rules in the face of the absence of price reductions of brand-name medications.
5. Policy recommendations The report from the Congressional Budget Office in the US notes that the fact that brand-name prices do not decline following generic competition primarily impacts third-party payers that do not manage their outpatient drug benefits and consumers who have no insurance [14]. These same groups may also be affected in the Canadian setting. Benefits packages are as high as 7% of an employee’s total compensation package and companies identify rising drug costs as the number one cost driver in increasing the cost of health benefits [27,28]. The fact that private insurance plans generally do not require mandatory generic substitution may be one of the factors driving up costs. Changing this feature of their drug plans may help employers control costs. Individuals who pay out-of-pocket for prescription drugs are at a disadvantage due to the continuing higher prices of brand-name drugs. Currently, Alberta,
6. Conclusion The lack of price competition by brand-name manufacturers has economic consequences in the private sector and indirectly in the public sector. Drug companies cannot be forced to lower their prices when drugs go off patent and generic competitors appear but both private insurers and government can institute measures to compensate for the effects of these continuing high prices.
Acknowledgements Vernon Chiles, Wayne Critchley and Tanya Potashnik read an earlier version of this manuscript and gave valuable feedback. Julie Tam provided key information about the breakdown of generic drug
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companies and features of different provincial drug plans. References [1] Therapeutic Products Directorate. Annual drug submission performance report, part 1; 2002. Available at http://www.hcsc.gc.ca/hpfb-dgpsa/tpd-dpt/tpd annual02 e.html. Accessed 5 June 2003. [2] Anderson M, Parent K. Timely access to generic drugs: issues for health policy in Canada. A research paper prepared for the Canadian Drug Manufacturers Association. Kingston: Queen’s University; 2001. [3] IMS Health, Canada. Generic’s share of prescriptions and drugstore purchases 1995–2001. Available at http://www. imshealthcanada.com/htmen/3 2 6.htm. Accessed 5 June 2003. [4] Patented Medicine Prices Review Board. Annual report. Ottawa: PMPRB; 2002. [5] IMS Health, Canada. Annual review of prescribing and diagnoses trends. Available at http://www.imshealthcanada. com/htmen/4 2 1 35tables.htm. Accessed 5 June 2003. [6] Hollis A. The anti-competitive effects of brand-controlled “pseudo-generics” in the Canadian pharmaceutical market. Can Public Policy 2003;29:21–32. [7] Lexchin J. The effect of generic competition on the price of prescription drugs in the Province of Ontario. CMAJ 1993;148:35–8. [8] Tenant L. Dear Prescriber letter. Drug Programs Branch, Ministry of Health; 21 December 1998. [9] Currie GR, Nielson NL. Models for funding prescription drug programs. Institute of Health Economics, Working Paper 99-5; 1999. [10] Gorecki PK. Getting it right: an evaluation of alternative systems of the organization on the Ontario prescription drugs distribution system. Prescriptions for health: report of the pharmaceutical inquiry of Ontario. Appendix 3. Toronto; 1990. [11] Taylor CL. The corporate response to rising health care costs. Ottawa: Conference Board of Canada; 1996. [12] Grabowski H, Vernon J. Brand loyalty entry and price competition in pharmaceuticals after the 1984 drug act. J Law Econ 1992;35:331–50. [13] Frank RG, Salkever DS. Generic entry and the pricing of pharmaceuticals. J Econ Manage Strat 1997;6:75–90. [14] Congressional Budget Office. How increased competition from generic drugs has affected prices and returns in the pharmaceutical industry. Washington (DC): US Government Printing Office; July 1998.
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