In separate reports, both the Competition Bureau of Canada and the Directorate General for Competition for the European Commission have called for increased competition in the pharmaceutical sector.
The report published by the Competition Bureau of Canada entitled, Benefiting from Generic Drug Competition in Canada: The Way Forward (Canadian Report), focused on methods to increase competition between generic drugs, and suggested that changing the way public and private payers pay for generic drugs could save Canadians more than $800 million annually.
Much of the Canadian Report is dedicated to the issue of how public payers can achieve cost savings. While the Government of Ontario’s enactment of the Transparent Drug System for Patients Act (TDSPA) was commended for reducing public plan generic drug prices in Ontario (for a discussion of the TDSPA see E-TIPS®, “Permanent Link: Generic Manufacturers Call for Review of Ontario Regulations Reducing Drug Prices” “Generic Manufacturers Call for Review of Ontario Regulations Reducing Drug Prices” Vol 5, No 9, October 25, 2006), the Canadian Report noted that savings from the TDSPA were only achieved by public payers in Ontario and Quebec (Quebec requires that generic manufacturers provide the province with the lowest price available in other provinces). The Canadian Report estimated that savings of $200 million annually could be made across Canada if the provinces:
- enacted mechanisms to obtain competitive generic drug prices, including;
- competitive tendering;
- competitive price monitoring; and
- sequential formulary listings;
- reimbursed generic drugs separate from pharmacist services (e.g. dispensing and counseling fees);
- provided incentives to pharmacies to dispense lower-priced generic drugs in replacement for their interchangeable brand products; and
- coordinated their actions to avoid unintended anticompetitive effects.
Most of the potential savings predicted by the Canadian Report are attributed to proposed changes to the way in which private payers pay for generic drugs. The Canadian Report estimated that approximately $600 million could be saved if Canadian private payers employed strategies commonly used by private payers in the US to obtain competitive generic drug prices, including the use of preferred pharmacy networks, mail order pharmacies and patient incentives.
A different kind of competitive issue was addressed in a preliminary report (EC Report) published by the Directorate General for Competition for the European Commission (Directorate). The EC Report focused on strategies employed by branded manufacturers to delay the market entry of more affordable generic drugs. Specifically, the EC report noted that branded companies were employing a number of strategies to restrict or distort competition, including the use of “patent clusters”, patent litigation, “reverse payment settlements”, and intervention in national drug approval procedures.
The EC Report concluded that competition in the EU pharmaceutical sector “does not work as well as it should”, and estimated that swifter generic entry would have saved 17 EU Member States â‚¬3 billion between 2000 and 2007 or approximately â‚¬375 million annually. The European Federation of Pharmaceutical Industries and Associations (EFPIA), which represents branded manufacturers, downplayed the significance of these potential savings, noting that significantly greater savings could be obtained through the promotion of active price competition between generics. The EFPIA supports this suggestion that echoes the sentiments of the Canadian Report, with a case study of a single member state, the Netherlands, which saved more than â‚¬400 million yearly through the promotion of competition between generics. The European Generic Medicines Association (EGA) welcomed the EC Report, commenting that it identified key problems in the EU system. Interestingly, while branded and generic manufacturers had divergent opinions on the EC Report, within the industry there seemed to be a desire to reform the EU pharmaceutical regulatory framework, including the creation of a unified and specialized judiciary for patents.
The EC Report was a product of a sector inquiry into EU pharmaceutical markets launched by the Directorate in January 2008. The sector inquiry was kicked off by a number of unannounced inspections of pharmaceutical companies by EC officials. These inspections were unusual because sector inquiries are normally used to evaluate the general practices in an industry sector, not to target any particular company. While not officially part of the sector inquiry, information obtained in the inquiry led to a second round of inspections in the end of November, as part of an investigation of suspected anti-competitive practices.
Commenting on the preliminary findings of the EC Report, Competition Commissioner Neelie Kroes stated that the “Commission will not hesitate to open antitrust cases against companies where there are indications that the antitrust rules may have been breached”.
A final version of the preliminary report is expected to be published in mid-2009.
For the EC Report, visit: http://ec.europa.eu/comm/competition/sectors/pharmaceuticals/inquiry/preliminary_report.pdf
For an overview of the EC pharmaceutical sector inquiry, see:
For press releases announcing the EC raids, see:
For a comment by the EFPIA on the EC Report, see: http://www.efpia.eu/Content/Default.asp?PageID=559&DocID=5933
For a comment by the EGA on the EC Report, see: http://www.egagenerics.com/pr-2008-11-28.htm
Article by: Michael Migus and Cheryl Cheung