The Pharmaceutical Price Regulation Scheme - Office of Fair Trading

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The Pharmaceutical Price Regulation Scheme 2.64 More significantly, however, Figures 2.5 and 2.6 do not show significant changes in price or volumes of other on-patent statins when simvastatin and pravastatin lost patent protection. 16 Competition between manufacturers did not lead to significant reductions in the price of substitute products, such as the other statins. Moreover, these substitute products retained significant volume and market shares despite the very significant change in relative price following simvastatin going off-patent. Given the very low prices at which generics are available, sustained prescribing of high-priced brands that may be therapeutic substitutes for many patients, raises potentially very significant concerns about the cost effectiveness of prescribing behaviour. While volumes of some on-patent statins may have fallen somewhat since this analysis was undertaken, the extent of inefficiency remains significant. These concerns are taken up in the concluding section below. Figure 2.5: Dynamic competition in statins: prices 1.8 1.6 1.4 Price (£ per tablet or capsule) 1.2 1.0 0.8 0.6 0.4 0.2 0 1991 Q1 1992 Q1 1993 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 Crestor_Tab 10mg Lescol_Cap 40mg Lipitor_Tab 20mg Lipostat_Tab 40mg Zocor_Tab 20mg Simvastatin_Tab 20mg Pravastatin Sod_Tab 40mg Source: PCA data for England is used. Prices are on a per-unit (tablet, capsule) basis. 16 A partial exception is Lescol, volumes of which fell gradually from 2003. The prices of two other brands fell in 2005 as part of the implementation of the PPRS price cut. However, as noted in Annexe J, these were likely a competitive response, at least in part, to parallel trade. 26
February 2007 Figure 2.6: Dynamic competition in statins: volumes 80000 Quantity (thousands of tablets or caps) 70000 60000 50000 40000 30000 20000 10000 0 1991 Q1 1992 Q1 1993 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 Crestor_Tab 10mg Zocor_Tab 20mg Lescol_Cap 40mg Simvastatin_Tab 20mg Lipostat_Tab 40mg Lipitor_Tab 20mg Pravastatin Sod_Tab 40mg Source: PCA data for England. Volumes are in thousands of units Outcomes 2.65 As noted, the above analysis does not take explicit account of perhaps the most important dimension in competition between pharmaceuticals – that relating to the relative clinical efficacy of the products concerned. In principle, the lack of a price or volume response to a major price change in a substitute product might be understandable if the two products have very different effects. 2.66 However, analysis set out in Annexe M suggests that, under current arrangements, extremely close substitutes have very different prices. Since the products assessed are among the largest selling in the NHS, this has major implications for value for money. We have identified hundreds of millions of pounds of expenditure that could be used more cost effectively – that is, in giving patients access to drugs and other treatments that represent better value for money for the NHS but which are currently rationed. Changes to the pricing regime could help address this. 2.67 Arguments concerning therapeutic equivalence are even stronger in relation to an originator product and a generic that is bioequivalent to it. Although here, as noted, there is a volume response to generic entry (through the practice of prescribing by chemical name) price disparities between generics and originator products are such that we estimate that there is still about £65m a year that could be used more effectively across the NHS through the use of more value-reflective prices for off patent brands. 17 27 17 DH has already issued a consultation document on the reimbursement of ‘standard branded generics’ on 20 January 2005, suggesting that a range of branded generic products should be removed from the PPRS and reimbursed at the lesser of either the Drug Tariff price of the comparable true generic or the list price of the standard branded generic. DH then carried out a further round of consultation on this proposal, which closed on 24 October 2005. The consultation is on hold, pending the outcomes of this study.
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