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

06 Jan 2012 Floriane Reinaud

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.

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.

Posted 6 January 2012


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