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EU study shows pharma incentives must strike a balance


The price of originator drugs falls by nearly half in the months leading up to the sale of generics but does not collapse further when generics go on sale, according to an EU study.

The study found that the price of originator products tends to fall on average by 40% during the year and a half prior to the market entry of generics, but, during the 15 months immediately after generics go on sale, there is no "sharp drop in originator prices".

The study (386-page / 5.39MB PDF), carried out by Copenhagen Economics on behalf of the European Commission, involved analysis of data for 558 medicinal products.

Brand loyalty and the cost of switching are among the factors that will influence the pricing strategies for originators and generics, according to the report.

"If there were no brand value/loyalty and patients could immediately switch to the generic medicinal product post generic entry, nobody would buy the originator medicinal product when a cheaper, identical product is available," the report said.

The researchers also suggested that "inertia" in the response to hearing about the availability of generics from doctors and patients could also be influencing prices, particularly where the cost of medicinal products is paid for by the state or health insurers.

"In many cases, neither the person writing the prescription nor the person using it has the same monetary interest in finding the cheapest product available as they would have, had they themselves paid for the treatment," the report said.

Whether a generic rival to an originator is a chemical compound or biological may also be a pricing factor, it said.

"Many biologics are relatively new and hence the body of knowledge surrounding this area is limited," the report said. "Recent studies point to no difference in outcomes for patients switching from an originator biologic to the biosimilar version. However, [one 2017 study] still concludes that switching should remain a 'case-by-case' decision."

The study by Copenhagen Economics, on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe, revealed that the average time it takes to develop a medicinal product from "the first patent filing protecting the molecule to the first marketing authorisation of the final product in the EU" increased from 10 years to 15 years since 1996 to 2016.

The researchers also identified that those products tend to benefit from "effective protection" for a shorter period of time now than they did in 1996.

"The effective protection period for the medicinal products in our dataset has declined from an average of 15 years to 13 years during the period 1996 to 2016," the study said. "We speculate that part of the reason for this decrease may be attributed to the increase in regulatory requirements both at the EU and national level. The decrease in the average effective protection period could also reflect that companies have been taking on more complex and risky research and development projects with longer expected development times."

The 'effective protection period' is the period covering from when a medicinal product obtains a marketing authorisation to when "the last measure of protection on it expires", according to the report. This could be where the original patent or supplementary protection certificate for the product expires, it said.

Charlotte Weekes, an expert in life sciences at Pinsent Masons, the law firm behind Out-Law.com, said: "It is unfortunate that, despite the existence of a variety of incentives and rewards, the data shows there has been a decline in the average effective period of protection in the last 20 years. While regulatory requirements and the complexity and risk associated with developing new products might have increased, the significant majority of the medicinal products in the dataset did enjoy an effective protection period of more than 10 years. It is interesting to note, however, that there is not an immediate sharp drop in originator prices once competing generic products become available."

"The report highlights the need to maintain a balance between protection for originator medicines to encourage investment in research and development into new products and the ability of healthcare providers to access alternative medicines, including cheaper generics and biosimilars once the appropriate monopolies and exclusivities for the originator product expire," she said.

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