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Has the increase in the availability of generic drugs lowered the price of cardiovascular drugs in South Africa? The relationship between the median proportional price and the number of brands in the therapeutic class was analysed using correlation analysis. International reference prices were obtained from the Management Sciencesfor Health International Drug Price Indicator Guide edition RESULTS: A weak correlation between originator and generic drug prices and the number of available brands was observed, the exception being diuretic drugs. The median prices per strength of the originator generic were still higher than the most expensive generic version manufactured by any other company, the exception being telmisartan. Comparison of price ratios between the originator drug, lowest priced generic and international reference price values revealed that the originator drug prices had a median price ratio of The study also concludes that the current South African pharmaceutical policies have not yet achieved the lowest prices for drugs when compared internationally. Access to therapeutic drugs forms an integral part of any successful healthcare system Bangalee, The high cost of therapeutic drugs, which has often been cited as a barrier to accessibility to essential medicines, has led to the promotion of generic drug consumption in South Africa. The restructuring of the South African public health sector post led to the development and implementation of the National Drug Policy NDP in The economic objective of the NDP was to decrease the cost of therapeutic drugs in both the private and public sectors Department of Health, It was implemented to allow government to undertake a variety of actions in order to reduce drug prices and improve the affordability of medicines in line with the economic objectives of the NDP. The Act, implemented on 2 May , mandates pharmacists to inform all private patients buying prescribed medicines about the benefits of generic alternatives Deroukakis, The high levels of discounting and payment of incentives within the pharmaceuticals supply chain had raised serious concerns in the Department of Health DOH as these practices did not pass the savings on to the consumer. Retail pharmacies and dispensing doctors on the other hand were able to capitalise on these incentives while consumers continued to pay the official manufacturers' 'listed' price Hawkins, This also countered the effect of generic substitution as evidence revealed that in many cases doctors and pharmacists were not always agreeable to substituting the lower priced generic but would rather dispense the more profitable product Hawkins, This lack of transparency in prices in the supply chain as well as the loss of benefits to consumers led to the prices of pharmaceutical drugs being regulated by the single exit price SEP legislation in This meant that drug manufacturers could only sell their products at one price to all their customers, regardless of the nature of the customer's order size and consumption levels Republic of South Africa, The implementation of SEP in the private sector resulted in a significant shift from a free market to a regulated one in order to ensure transparent pricing practices for the industry. However, there is very little research on whether the implementation of this pricing policy has impacted on the use of generic drugs, and this study attempted to look into this area by selecting a particular group of drugs to investigate. There is currently minimal information on the cost of CVD treatment in South Africa; however, the use of generic drugs could potentially address the need to reduce treatment costs. Furthermore, the growth of the South African generic pharmaceutical market is set to rapidly accelerate owing to the expiry of a number of patents especially in the cardiovascular category Moorad, Aims of the study. The aim of this study was to examine the relationship between originator drug pricing and the number of available generic brands within the cardiovascular drug class in the context of SEP legislation, and to compare South African drug prices with international drug prices. Research method and design. These classes were ACE-inhibitors, beta blockers, calcium channel blockers, diuretics and angiotensin II antagonists. All drugs listed under each class were categorised according to their classification in the South African Medicines Formulary, 10th edition Division of Clinical Pharmacology, Data on South African private sector prices of originator and generic drugs was sourced from the South African Medicine Price Registry which is the official website that communicates drug prices as approved by the Pharmaceutical Economic Evaluation Unit of the Department of Health South African Medicine Price Registry. The number of registered brands as at 10 June for each drug preparation was obtained from the registry. Drugs chosen under each medication were only included if there was a generic drug and originator price available. Combination preparations were excluded as they tend to alter the classification of the drug. Originator pharmaceutical products were those initially registered by the innovator research-based pharmaceutical manufacturer on the basis of the documentation of their efficacy, safety and quality, whereas generic drugs were those usually intended to be interchangeable with the originator brand product, of the same strength and dosage form, registered after patent expiry or as licensed by the patent holder. Originator generic drugs were defined as generic drugs that were manufactured by the company that also manufactured the originator drug. Due to the differences in pack sizes between originator and generic drugs, the SEP, inclusive of the value-added tax per standard unit i. The price differential between originator and generic drugs was calculated as the difference between the price per standard unit of the originator drug and the median price per standard unit of available generic drugs expressed as a percentage of the price per standard unit of the originator drug. The relationship between the median proportional price in percentage and the number of brands was analysed by means of a correlation analysis. It was hypothesised that the price differential would be larger when the number of generic drugs on the market increased. These constitute internationally recognised prices, based on current catalogues and price lists obtained from pharmaceutical suppliers, international development organisations, and government agencies. Price comparisons were made only for the originator drugs and the lowest price generic drugs where the median buyer international reference price IRP values were available. Price summaries were expressed as ratios relative to a standard set of reference prices. The ratio indicates how many times more or less the comparator drug is than the IRP. All data was analysed using Microsoft Excel version The findings relate to prices of the different available strengths of 23 originator medicines and their generic equivalents. Table 1 reflects the private sector prices of originator and generic drugs sourced from the South African Medicine Price Registry on the 10th June As indicated in Table 1 , the largest therapeutic class are the angiotensin-converting enzyme ACE inhibitors with six drug products, followed by beta blockers and angiotensin-receptor blockers ARB with five and four drug products respectively. The total number of brands for the different strengths of the 23 drug products is , of which are ACE inhibitors, 74 beta blockers, 61 calcium channel blockers CCBs , 50 ARBs, 30 diuretics and 11 CCBs non-dihydropyridine. Older generics drugs e. Table 1 reveals considerable variability in the number of drugs under each class as well as in the number of registered brands for each drug preparation. A cursory look at Table 1 also reveals that drug products with higher number of registered brands generally have higher median cost differentials between originator and generic versions compared to drug preparations with lower number of registered brands. Competition theory effect of the number of generic equivalents was tested statistically between the price of the originator drug and generic drugs, between generic drugs, and finally between the originator drug and the generic version of the drug manufactured by the originator firm. It was hypothesised that increased generic entry would result in price competition and a reduction in drug prices suggesting that the calculated price differential would be larger as the number of generic drugs on the market increased. Of the branded drugs, the median cost differential was Of the 23 cardiovascular drugs, four originator companies manufactured a generic version of the drug. Table 2 shows the cost differentials between originator and generic versions manufactured by the originator for each of the available strengths of the drug. The median cost differential between originator and generic versions manufactured by the originator was A weak correlation between the number of generics and the size of the cost differential was apparent correlation coefficient With the exception of telmisartan for which there were no other generic drugs available, the price of the originator generic was still higher than the most expensive generic version manufactured by any other company. There was no price difference between the originator and the originator generic version for bisoprolol. Table 3 presents the results of different classes of cardiovascular drugs and the correlation coefficient for median cost differentials between originator and generic drugs as well as the correlation coefficient for median cost differentials between generic drugs for each drug class. The negative value indicates an inverse relationship which shows that even within the different classes of cardiovascular drugs, an increase in the number of available brands does not result in a reduction in drug prices. With the exception of diuretics, the remaining drug classes display a weak correlation between the number of generics and the size of the cost differential. Reference pricing allows for comparisons to be drawn between South Africa and international countries. Table 4 indicates that in South Africa there are large variations between originator and generic prices and, secondly, that the lowest prices for medications are not always being attained. Of the 20 drugs that were compared, none of originator drugs or lowest priced generics resulted in a ratio of one or less. These results indicate that the SEP policy has not resulted in very competitive prices for drugs. The originator drug prices had a median MPR of Generic drug entry stimulates competition among the various brands of the off-patent product available in the market and assists in reducing the overall price of the drug product Cook, Several international studies have sought to characterise the relationship between the number of brands of a product and the effect on drug pricing. An American study by Wiggins and Maness explored price variation in anti-infective drugs and yielded different results from previous studies conducted on several random drugs. The study indicated that pricing variation may be sensitive to the class of generic drugs. The analysis further showed that increases in the number of competitors significantly reduced prices. Fatokun et al. The results confirmed the price-lowering effect of generic competition as shown by the decrease in the mean proportional price as the number of brands of the product increases. This generic price-lowering effect was, however, not observable across all therapeutic classes. Adriean, De Witte, and Simoens in researching the determinants of pricing strategies of originator and generic drugs following patent expiry in Belgium revealed that pricing strategies of originator and generic drugs are dependent on the therapeutic class, with the price differential between originator and generic drugs being higher for the cardiovascular class of drugs. Pricing strategies were further influenced by regulatory aspects such as successive reductions in reference prices and prescription status of drugs, market incentives in the form of price competition between generic drugs, competition between originator and generic drugs, and the market power of the manufacturer of the originator drug. The results from our analysis did not indicate that there was a price-lowering effect with increased generic competition. When testing the competition hypothesis between originator drugs and generic drugs and between generic drugs themselves, the correlation was found to be very weak in both instances, with the exception of diuretics. A wide variation between the price of the least expensive brands and the most expensive brands was observed. This is supported by the second finding. When the price of the generic drug manufactured by an originator company was compared to the median generic drug price, these drugs were found to be consistently higher, suggesting that originator companies may set the price ceiling for other generic products. The only published pricing study for South Africa was conducted in Gauteng. This was before SEP was implemented. Similarly, our findings revealed high prices for drugs when compared with buyer international prices ranging from 2. These results indicate that current pharmaceutical policies are not optimal in South Africa even though the use of generic drugs is increasing for all classes of drugs in this study; an increase in generic usage has thus not led to lower drug prices. Traditionally these studies have focused on a core list of drugs targeting acute and chronic conditions, as opposed to a defined therapeutic class of drugs. A study conducted by van Mourik et al. The results of the study showed great variability with regard to procurement prices, where some countries were very competitive and others consistently paid high prices. In addition, patient prices were generally substantially higher than international references prices in some of the countries that were surveyed. An interesting finding from the study was that chronic treatment with anti-hypertensive medicines became unaffordable when monotherapy was insufficient. Ideally further research should be undertaken to identify the success behind lower prices obtained in these surveyed countries, and to determine whether these polices could not be implemented in South Africa to obtain similar results. Limitations of the study. The main limitation noted was the lack of information on international prices for all drugs used in the study in order to make informed conclusive judgements on price comparisons. Moreover, the study reflects results from one therapeutic class only. It is recommended that a study be undertaken which examines the market trends and the effects of SEP on generic drug competition across all therapeutic classes, with particular emphasis on diseases that rank as high priority in South Africa. Results from such a study would aid policy-makers in selectively tailoring policies to address the current high costs of healthcare. While the pro-generic legislation may seek to increase accessibility to medicines and improved healthcare, the implementation of SEP may result in unintended long-term effects by interfering with the normal market processes. Alternative price regulations may promote active competition among generic drug producers thus avoiding the observed behaviour of drug prices clumping together. The marked differences between the high South African medicine prices and international prices warrant the implementation of future policy evaluations as well as possible pricing interventions such as benchmarking and reference pricing in an effort to lower drug prices. More work is required to identify the determinants of the price differentials between originator and generic drugs in South Africa, particularly in light of the newly proposed healthcare restructuring. Both authors agreed on the version of the manuscript that was submitted and the final revised and edited version. Generic competition may be affected by other pricing policies and requires careful monitoring within countries. Pricing studies for medicines within therapeutic classes are required to determine if there is competition within therapeutic classes where generic medicines are available. The statements, findings, conclusions, views, and opinions contained herein are not necessarily those of IMS Health Incorporated or any of its affiliated or subsidiary entities. Adriean, M. Pricing strategies of originator and generic medicines following patent expiry in Belgium. Bangalee, V. South African patient's acceptance of generic drugs. African Health Sciences, 15 1 , Bresnahan, T. Entry and competition in concentrated markets. Journal of Political Economy, 99, Cameron, A. Medicine prices, availability, and affordability in 36 developing and middle-income countries: a secondary analysis. The Lancet, , Cook, A. How increased competition from generic drugs has affected prices and returns in the pharmaceutical industry. Washington, D. C:: Congressional Budget Office. Deroukakis, M. Mandatory substitution successful: original article. South African Medical Journal, 97 1 , Division Of Clinical Pharmacology. South African medicines formulary. Fatokun, O. Generic competition and drug prices in the Malaysian off-patent pharmaceutical market. Journal ofApplied Pharmaceutical Science, 1, Frye, J. International drug price indicator guide - edition. Hawkins, L. Review series on pharmaceutical pricing policies and interventions: Working paper 4: Competition policy. Kanavos, P. Determinants of branded prescription medicine prices in OECD countries. Health Economics Policy and Law, 6, King, D. Encouraging the use of generic medicines: implications for transition economies. Croatian Medical Journal, 43, Lopez, A. Global and regional burden of disease and risk factors, systematic analysis of population health data. Moorad, Z. Generic pharmaceutical market set for bumper year. BMC Cardiovascular Disorders, 10 Nicolosi, E. Potential cost savings from generic medicines - protecting the prescribed minimum benefits. South African Family Practice, 51, Republic of South Africa. Seedat, Y. South African hypertension guideline The South African Medical Journal, , South African Medicine Price Registry. Database of medicine prices 10 June Steyn, K. Heart disease in South Africa. Wiggins, S. Price competition in pharmaceuticals: the case of anti-infectives. Economic Inquiry, 42, Medicine prices survey in the Gauteng province in South Africa. Received 6 February Accepted 13 October E-mail addresses: bangalee ukzn. Bangalee , sulemanf ukzn. All the contents of this journal, except where otherwise noted, is licensed under a Creative Commons Attribution License. Services on Demand Article. English pdf Article in xml format Article references How to cite this article Automatic translation. Access statistics. Cited by Google Similars in Google. The study also concludes that the current South African pharmaceutical policies have not yet achieved the lowest prices for drugs when compared internationally Keywords: Medicine pricing, South Africa, Generic drugs, Single exit price, Price competition 1. Introduction Access to therapeutic drugs forms an integral part of any successful healthcare system Bangalee, Aims of the study The aim of this study was to examine the relationship between originator drug pricing and the number of available generic brands within the cardiovascular drug class in the context of SEP legislation, and to compare South African drug prices with international drug prices. Results The findings relate to prices of the different available strengths of 23 originator medicines and their generic equivalents. Discussion Generic drug entry stimulates competition among the various brands of the off-patent product available in the market and assists in reducing the overall price of the drug product Cook, Limitations of the study The main limitation noted was the lack of information on international prices for all drugs used in the study in order to make informed conclusive judgements on price comparisons. Recommendations It is recommended that a study be undertaken which examines the market trends and the effects of SEP on generic drug competition across all therapeutic classes, with particular emphasis on diseases that rank as high priority in South Africa. Conclusion While the pro-generic legislation may seek to increase accessibility to medicines and improved healthcare, the implementation of SEP may result in unintended long-term effects by interfering with the normal market processes. Author contribution F. Research significance Generic competition may be affected by other pricing policies and requires careful monitoring within countries. How to cite this article.

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