Pharmaceutical pricing: an empirical study of market competition in Chinese hospitals

An empirical study of the impact of generic drug competition on drug market prices in China

Introduction

Generic substitution is encouraged to reduce pharmaceutical spending in China, and with incentive policies, the market size of the generic drug continues to rise. To find out how the generic competition affects drug price in this area, this study examines how the quantity of generic drug manufacturers can influence average drug price in the Chinese market.

Methods

This study uses a rigorous selection of drugs from the 2021 China's National Reimbursement Drug List (NRDL), and uses drug-level fixed effects regressions to estimate the relationship between competition and price within each drug.

Results

We note that drug prices decline with increasing competition in the Chinese market, but not in a perfectly linear manner, with marginal price declines decreasing after the fourth entrant and "rebounding" at subsequent entrants, especially the sixth.

Discussion

The findings suggest the importance of maintaining effective competition between suppliers to control prices, and that the government needs to further control generic pricing, especially for late entry generics, to ensure effective competition in the Chinese market.

Effects of Volume-Price Contracts on Pharmaceutical Prices: A Retrospective Comparative Study of Public Hospitals in Hubei of China

Background: Pharmaceutical expenditure has been increasing worldwide. Many countries have attempted to contain the increase through collective bargaining, including in China. In 2015, the Chinese government introduced a new policy to empower regional governments to reduce pharmaceutical prices through its existing tendering system which enables a lower price for products with higher procurement volumes. Xiangyang municipality in Hubei province took a lead in piloting this initiative. Objectives: This study aimed to evaluate the effects of the volume-price contract initiative on pharmaceutical price procured by the public hospitals in Xiangyang. Methods: A retrospective comparative design was adopted. The price of cardiovascular medicines (349 products under 164 International Nonproprietary Names) procured by the public hospitals in Xiangyang was compared with those procured in Yichang municipality in Hubei. A total of 15,921 procurement records over the period from January 2017 to December 2018 were examined (Xiangyang started the volume-price contract initiative in January 2018). Generalized linear regression models with a difference-in-differences approach which could reflect the differences between the two cities between January 2018 and December 2018 were established to test the effects of the volume-price contract initiative on pharmaceutical prices. Results: On average, the procurement price for cardiovascular medicines adjusted by defined daily dosage in Xiangyang dropped by 41.51%, compared with a 0.22% decrease in Yichang. The difference-in-differences results showed that the volume-price contract initiative resulted in a 36.24% drop (p = 0.006) in the price (30.23% for the original brands, p = 0.008), in addition to the therapeutic competition effect (31.61% reduction in the price, p = 0.002). The top 100 domestic suppliers were highly responsive to the initiative (82.80% drop in the price, p = 0.001). Conclusion: The volume-price contract initiative has the potential to bring down the price of pharmaceutical supplies. Higher responses from the domestic suppliers are evident.

Association between provincial income levels and drug prices in China over the period 2010-2017

In the past decade, the Chinese central government has made sweeping reforms to national pharmaceutical policies. However, provincial authorities have retained control over most drug procurement procedures, potentially leading to cross-province differences in drug prices. The objectives of this study were to (i) examine drug price trends in 31 Chinese provinces and municipalities between 2010 and 2017; (ii) evaluate the association between provincial income levels and drug prices over this period; and (iii) compare the results for Chinese state-owned, Chinese private, and multinational pharmaceutical firms. Using publicly available data on procurement prices of the drugs manufactured by the top 30 pharmaceutical firms in China (in terms of revenues), we ran a generalized country-product-dummy regression to compare drug prices across provinces over the study period. We conducted subgroup analyses to test for differences between types of firms. Between 2010 and 2017, drug prices decreased by an average of 23% across the country. The prices of drugs sold by multinational firms dropped by 32% over this period, while the prices of drugs sold by Chinese private firms declined by 28%. By contrast, the drug prices of state-owned firms went up by 11%. There were statistically significant positive associations between drug prices and provincial income levels for the full sample in 2010, 2011, and 2013. There were no significant associations in other years. Several low-income provinces paid higher procurement prices than some high-income provinces for identical medicines, especially in later study years. The lack of association between income levels and prices poses equity concerns and may place a heavier cost burden on the poor. It also suggests that China's pharmaceutical policies may be failing to balance the dual aims of drug affordability and incentives for innovation.

Pharmaceutical pricing in Japan: market evidence for rheumatoid arthritis treatment

BACKGROUND

Drug price setting is one of the key challenges faced by the Japanese health care system. This study aims to identify the determinants of drug price in Japan using the example of the rheumatoid arthritis (RA) treatment market.

RESEARCH DESIGN AND METHODS

In order to compare prices across different products, we calculated prices per defined daily dose using WHO methodology. Price determinants were calculated both at launch and over time using IMS quarterly data on medicines approved for RA treatment in Japan from 2012 to 2015. Pharmaceutical pricing was modeled as a function of clinical and economic variables using regression analysis.

RESULTS

For prices at the launch we found that differences in efficacy are not reflected in price differentials. We also report that the number of products within a molecule class had a negative effect on prices while originator drugs maintained higher prices.

CONCLUSION

Although the existing pricing rules in Japan are very comprehensive they do not necessarily capture differences in product characteristics. The findings here support the notion that competitive forces are weak in highly regulated markets such as Japan.

Impact of price deregulation policy on the affordability of essential medicines for women's health: a panel data analysis

BACKGROUND

A new policy which required deregulation on prices of off-patent medicines for women's health during procurement was introduced in China in September 2015. The current study examines this policy's impact on the affordability of essential medicines for women's health.

METHODS

Based on product-level panel data, a fixed effect regression model is employed by using procurement records from Hubei Centralist Tender for Drug Purchase platform. In the model, Affordability was measured with prices. The Competition consists of two parts: generic competition and therapeutic class competition which are measured with generic competitors and therapeutic substitutes. Instrument variable is used to deal with endogeneity.

RESULTS

The policy helped control prices of essential medicines for women's health. Generic competition helped control prices, however, therapeutic class competition caused higher prices.

CONCLUSIONS

The new policy helped enhance the affordability of essential medicines for women's health as expected, which provides empirical evidence on price deregulation. Besides, generic competition is important in price control despite strict regulatory system in China.

The impact of research and development and marketing costs on the profitability of pharmaceutical companies of Tehran Stock Exchange using panel data 2001-2013

Purpose

The main aim of this study is to investigate the effects of marketing and costs and research and development (R&D) investments on profitability of pharmaceutical companies of Iran.

Design/methodology/approach

In this study, pharmaceutical companies that have been accepted in Tehran Stock Exchange until March 19, 2013 were investigated. Random-effect panel data estimator was used for this purpose.

Findings

The findings indicate that variables such as company size, capital-to-total asset ratio and debt-to-asset ratio have an effect on profitability. But, company life, advertising cost and R&D investment are ineffective on profitability.

Originality/value

Legal issues like not having patent law and pricing mechanism are reasons for the ineffective relationship between R&D and marketing costs and its effect on profitability of the Iran pharmaceutical industry.