Abstract
In 2009 and 2010, the Swedish pharmaceuticals market was reformed. One of the stated policy goals was to achieve low costs for pharmaceutical products dispensed in Sweden. We use price and sales data for off-patent brand-name and generic pharmaceuticals to estimate a log-linear regression model, allowing us to assess how the policy changes affected the cost per defined daily dose. The estimated effect is an 18 % cost reduction per defined daily dose at the retail level and a 34 % reduction in the prices at the wholesale level (pharmacies’ purchase prices). The empirical results suggest that the cost reductions were caused by the introduction of a price cap, an obligation to dispense the lowest-cost generic substitute available in the whole Swedish market, and the introduction of well-defined exchange groups. The reforms thus reduced the cost per defined daily dose for consumers while being advantageous also for the pharmacies, who saw their retail margins increase. However, pharmaceutical firms supplying off-patent pharmaceuticals experienced a clear reduction in the price received for their products.
Notes
The prices set by the pharmacies are equal all over Sweden, and the cost of products sold in the pharmacies are equal to the list prices determined in the auction to become product of the month. As such, there is a high degree of equivalence between price and cost in the Swedish pharmaceuticals market.
Wholesale prices of off-patent products are set in the monthly national tender process. Retail prices are regulated at a level determined by the outcome of the tender in combination with the formula regulating the retail margin.
In the Appendix, we show that the estimate of the total reform effect remain stable when using two alternative measures instead of DPS2009.
Excluding observations from February, 2009, when the reform bill was presented to parliament, until July 2009, when the first elements of the reform became effective, resulted in a slightly more negative estimate of the time trend and reduced the absolute value of the point estimates for the reform effect with 1–2 % points for retail prices and with 3–4 % points for wholesale prices. As another sensitivity analysis, we included separate time trends for each exchange group. When estimated on the subsample of exchange groups with positive sales throughout the whole period, results remain stable. For the full sample, the estimated reform effect falls, e.g. from \(-\)0.42 to \(-\)0.34 in the regression on wholesale prices excluding W and MD, but we believe one reason for this is overfitting.
References
Almarsdottir, A. B., Morgall, J. M., & Björnsdottir, I. (2000). A question of emphasis: Efficiency or equality in the provision of pharmaceuticals. The International Journal of Health Planning and Management, 15(2), 149–161.
Almarsdottir, A. B., Morgall, J. M., & Grimsson, A. (2000). Cost containment of pharmaceutical use in Iceland: The impact of liberalization and user charges. Journal of Health Services Research & Policy,. doi:10.1177/135581960000500209.
Andersson, K., Petzold, M., Sonesson, C., Lonnroth, K., & Carlsten, A. (2006). Do policy changes in the pharmaceutical reimbursement schedule affect drug expenditures? Interrupted time-series analysis of cost, volume and cost per volume trends in Sweden 1986–2002. Health Policy, 79, 231–243.
Anell, A., & Hjelmgren, J. (2002). Implementing competition in the pharmacy sector: Lessons from Iceland and Norway. Applied Health Economics and Health Policy, 1, 149–156.
Anell, A. (2004). Nya villkor för apotek och läkemedelsförsäljning - Erfarenheter från Danmark, Island och Norge (in Swedish). IHE Working Paper 2004:2.
Anis, A. H., Guh, D. P., & Woolcott, J. (2003). Lowering generic drug prices: Less regulation equals more competition. Medical Care, 41, 135–141.
Aronsson, T., Bergman, M. A., & Rudholm, N. (2001). The impact of generic drug com-petition on brand name market shares—evidence from micro data. Review of Industrial Organization, 19, 423–433.
Barros, P. P., & Nunes, L. C. (2010). The impact of pharmaceutical policy measures: An endogenous structural-break approach. Social Science and Medicine, 71, 440–450.
Bergman, M. A., & Rudholm, N. (2003). The relative importance of actual and potential competition: Empirical evidence from the pharmaceuticals market. Journal of Industrial Economics, 51, 455–467.
Brekke, K. R., Grasdal, A. L., & Holmås, T. H. (2009). Regulation and pricing of pharmaceuticals: Reference pricing or price cap regulation. European Economic Review, 53, 170–185.
Brekke, K. R., Holmås, T. H., & Straume, O. R. (2011). Reference pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment. Journal of Public Economics, 95, 624–638.
Duso, T., Herr, A., & Suppliet, M. (2014). The welfare impact of parallel imports: A structural approach applied to the German market for oral anti-diabetics. Health Economics, 23, 1036–1057.
Econ. (2004). Evaluering av apotekloven och indexprissystemet (in Norwegian). Report, 2004, 10.
Ganslandt, M., & Maskus, K. (2004). Parallel imports and the pricing of pharmaceutical products: Evidence from the European Union. Journal of Health Economics, 23, 1035–1057.
Ghislandi, S., Patrizio, A., & Caludio, J. (2013). The impact of reference pricing in Italy, a decade on. European Journal of Health Economics, 14, 1–11.
Granlund, D. (2010). Price and welfare effects of a pharmaceutical substitution reform. Journal of Health Economics, 29(6), 856–865.
Granlund, D., & Köksal-Ayhan, M.Y. (2014). Parallel Imports and Mandatory Substitution Reform: A Kick or a Muff for Price Competition? The European Journal of Health Economics, in press.
Granlund, D., & Rudholm, N. (2011). Consumer Information and Pharmaceutical Prices: Theory and Evidence. Oxford Bulletin of Economics and Statistics, 73, 230–254.
Holmberg, C., Kjellberg, H., Axelsson, B. (2003). Läkemedelsdistributionen i Norden - En komparativ studie av aktörer, resurser och aktiviteter (in Swedish). SSE/EFI Working Paper Series in Business Administration No 2003:10.
Kanavos, P., Costa-Font, J., & Seeley, E. (2008). Competition in off-patent drug markets: Issues, regulation and evidence. Economic Policy, 23, 499–544.
Kaiser, U., Mendez, S. J., Rønde, T., & Ullrich, H. (2014). Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark. Journal of Health Economics, 36, 174–187.
Lee, Y.-C., Yan, M.-C., Huang, Y.-T., Liu, C.-H., & Chen, S.-B. (2006). Impacts of cost-containment strategies on pharmaceutical expenditures of the National Health Insurance in Taiwan, 1996–2003. Pharmacoeconomics, 24, 891–902.
Mian, A., & Sufi, A. (2012). The effects of fiscal stimulus: Evidence from the 2009 cash for clunkers program. Quarterly Journal of Economics, 127, 1107–1142.
Ministry of Health and Social Affairs. (2009a). Regeringens proposition 2008/09:145, Omreglering av apoteksmarknaden [The government’s bill 2008/09:145, reregulation of the pharmacy market (in Swedish). http://www.regeringen.se.
Ministry of Health and Social Affairs (2009b). Lag (2009:373) om ändring i lagen (2002:160) om läkemedelsförmåner m.m. [Law (2009:373) about change in law (2002:160) regarding the pharmaceutical benefit scheme etc.] (in Swedish). http://www.riksdagen.se.
Ong, M., Catalano, R., & Hartig, T. (2003). A time-series analysis of increased copayments on the prescription of antidepressants, anxiolytics, and sedatives in Sweden from 1990 to 1999. Clinical Therapeutics, 25, 1262–1275.
Pavcnik, N. (2002). Do pharmaceutical prices respond to potential patient out-of-pocket expenses? RAND Journal of Economics, 33, 469–487.
Puig-Junoy, J. (2007). The impact of generic reference pricing interventions in the statin market. Health Policy, 84, 14–29.
Puig-Junoy, J. (2010). Impact of European pharmaceutical price regulation on generic price competition: A review. Pharmacoeconomics, 28, 649–663.
Statskontoret. (2013). En omreglerad apoteksmarknad (in Swedish). Final report, 2013, 7.
Tillväxtanalys. (2014). Apoteksmarknadensomreglering - Effekter på följsamhet, priser och kostnader per dagsdos (in Swedish). Working Paper 2012:19.
Vårdanalys. (2014). Låt den rätte komma in (in Swedish). Report, 2014, 3.
Yfantopoulos, J. (2008). Pharmaceutical pricing and reimbursement reforms in Greece. European Journal of Health Economics, 9, 87–97.
Acknowledgments
Financial support from the Swedish Competition Authority is gratefully acknowledged. We are also grateful to IMS Sweden and Tillväxtanalys for supplying the data used in this paper. The authors declare that the founding source had no role in the development of the article.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflicts of Interest
The authors declare that they do not have any conflicts of interest that are relevant to the content of the article.
Appendix
Appendix
The indicator variable DPS2009 is based on the last of the three criteria for the price cap to become effective (see “The reform” section), so that the indicator takes the value 1 six months after patent expiration for the period after July 2009. As a sensitivity analysis, we have also performed estimations with two alternative variables, Generics4_2009 and DPS2009_Binding. Generics4_2009, is based on the second criteria of the price cap and takes the value 1 from July 2009 if there have been positive generic sales for at least 4 months. DPS2009_Binding takes the value 1 if the brand-name drug actually lowered its price in the summer of 2009 and 6 months had passed since patent expiration. DPS2009_Binding is thus intended to indicate if the price cap were binding. Note that both Generics4_2009 and DPS2009_Binding are potentially endogenous; the first since generic entry and exit depends on prices and the second since the price cap can only be binding if the second criteria is fulfilled, if generics are sold at below 30 % of the patent price, and if the brand-name drug had not already reduced its price with more than 65 %.
For the model where MD sales and the vector of potentially endogenous variables, W, are excluded, key results are reported in Table 4. To facilitate comparisons, corresponding results from estimates with DPS2009 are also presented in the table. As can be seen, the estimated total reform effect remains nearly unchanged under the alternative specifications. This is true also for models with MD sales and/or W included. Similarly, individual estimates are not very sensitive to choice between DPS2009 and Generics4_2009. However, the estimates for DPS2009_Binding are significantly different from the other two. Using this variable also reduced the estimates of Oct2009 with nearly one standard error. Yet the estimated total reform effect remains relatively unaffected, since this variable only take the value 1 for about 25 % of the observations after July 2009, while the corresponding figures for DPS2009 and Generics4_2009 are 95–96 %.
Rights and permissions
About this article
Cite this article
Bergman, M.A., Granlund, D. & Rudholm, N. Reforming the Swedish pharmaceuticals market: consequences for costs per defined daily dose. Int J Health Econ Manag. 16, 201–214 (2016). https://doi.org/10.1007/s10754-016-9186-4
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10754-016-9186-4