The impact of generic substitution on price competition in Finland
- 383 Downloads
Generic substitution by pharmacists was introduced in April 2003 in Finnish pharmaceutical markets. This article examines the impact of generic substitution on price development. This study examined all of the 2,100 substitutable drugs in Finland. The impact of generic substitution on price competition was significant. The average price of substitutable drugs decreased by more than 10%. However, the price development was uneven; some prices increased whereas others decreased by more than 50%. The most important factors that influenced the price development were the number of competitors, whether the drug was originator or generic and the width of the price band.
KeywordsGeneric substitution Pharmaceutical industry Price competition
JEL codesD43 L65
This study was conducted while the author worked as Head of Research for the National Consumer Research Centre (Finland) and Professor of Pharmacoeconomics at the University of Helsinki (Finland). The research did not receive external funding. The author thanks Alan Lyles and Simon Bell for their helpful comments and Paavo Saarinen for data assistance. The author is grateful to the Association of Finnish Pharmacies and the National Agency of Medicines (Finland) for providing the data sets for the research. The author has no conflicts of interest directly relevant to the content of the study.
- 3.Boersma, C., Klok, R.M., Bos, J.M., Naunton, M., van den Berg, P.B., de Jong-van den Berg, L.T.W., Postma, M.J.: Drug costs developments after patent expiry of Enalapril, Fluoxetine and Ranitidine: a study conducted for the Netherlands. Appl. Health Econ. Health Policy 4(3), 191–196 (2005)CrossRefGoogle Scholar
- 4.Congressional Budget Office. How increased competition from generic drugs has affected prices and returns in the pharmaceutical industry. US Government Printing Office, Washington (DC) (1998)Google Scholar
- 6.de Joncheere, K., Rietveld, A.H., Huttin, C.: Experience with generics. Int. J. Risk Saf. Med. 15, 101–109 (2002)Google Scholar
- 12.Paldan, M., Martikainen, J.: Lääkevaihdon ensimmäinen vuosi tilastoina. In: Riitta, A., Jaana, M. (eds.) Lääkevaihdon ensimmäinen vuosi. Social Insurance Institution, Finland (2005)Google Scholar
- 13.Poutiainen, T., Aalto-Setälä, V.: Demand for substitutable drugs. University of Helsinki, Mimeo (2006)Google Scholar