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Are generic medicines in Europe too expensive? Posted 18/06/2010

by Professor Steven Simoens, Research Centre for Pharmaceutical Care and Pharmaco-economics, Katholieke Universiteit Leuven, Leuven, Belgium

Generic medicines in Europe tend to be 20–80% cheaper than originator medicines and thereby generate substantial savings. However, generic medicines are still too expensive and prices may fall in the future as a result of the following trends.

The European generic medicines industry is facing competition from India, which benefits from low labour and production costs, and weaker patent protection laws. As generic medicines are increasingly manufactured in India and exported to European countries, this trend is likely to put downward pressure on European prices of generic (and originator) medicines.

Generic medicine prices tend to vary between European countries. Such variation suggests that prices not only reflect underlying production and distribution costs, but are also set in function of the domestic regulatory environment surrounding registration, pricing, reimbursement and distribution of original and generic medicines. This raises the question of whether healthcare payers and patients in some countries pay too much for generic medicines.

Pricing regulation appears to influence the price level of generic medicines in Europe. Generic medicines tend to be more expensive in countries that adopt a free market approach. Indeed, higher medicine prices in countries that employ free market pricing stimulate market entry of more expensive generic medicines. Conversely, in countries that have pricing regulation, regulation drives down the price of generic medicines over their life cycle. Also, lower prices of generic medicines tend to be observed in countries with a mature generic medicines market. This observation suggests that the generic medicines industry is able to deliver competitive prices if it is ensured a high volume of the pharmaceutical market.

The Norwegian National Audit Office has recently concluded that prices of generic medicines and distribution margins were too high as a result of discounting practices. Also, many European countries have implemented tendering systems because of, amongst other things, high discounts offered by generic medicines companies to the distribution chain. Current pricing policies do not ensure that the savings provided by generic medicines reach public payers and/or patients.

These trends suggest that there may be scope for further reducing prices of generic medicines in a number of European countries.

Reference:

Simoens S. International comparison of generic medicine prices. Curr Med Res Opin. 2007;23(11):2647–54.

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