BackgroundPrice capping of generics in relation to the originator (also known as price linkage) has been in use for some time despite studies questioning its efficacy as a cost-containment mechanism. In particular, a 2007 study from Norway—where internal reference and generic price linkage to the originator co-existed for some time—found that both originator and generic prices fell significantly, but the price decline impact was sharper for originator drugs in the reference pricing group than in the price caps group.

ObjectivesThis study seeks to evaluate if price capping remains a policy of choice in the current austerity climate.

MethodsResearch focused on a review of current P&R regulations for generics in EU countries and major markets outside Europe to identify which countries have adopted, or are in the process of adopting, new price caps, or have amended existing price caps for generics versus the originator from the start of 2010 to date.

Results Several countries recently introduced changes to the ceiling price of generics in comparison with the originator’s price:

è France limits the price of generics to 60% of the originator’s price from January 2012, replacing a previous price cap of 55% of the originator’s price.

è Portugal caps the price of the first-to-market generic at 50% of the originator’s price under new legislation published in January 2012.

è Hungary requires new generics to be priced at least 35% below the originator’s price for the first-to-market generic, 45% for the second-to-market generic, and 55% for subsequent-entry generics.

è The Czech Republic allows the use of an “accelerated review procedure” (shortening the pricing and reimbursement review to 50 days) for companies accepting a reduction in the maximum price of 32% below the originator’s price for generics.

è In Slovakia, under 2011 regulations, the price of generics is capped at 30% below the originator’s price level, replacing the previous price limit of 20% below the originator’s price level.

è Under austerity measures in Greece, the price of generics has been capped at 60% of the originator price.

è In Romania, under 2010 regulations, generics have their prices capped at 70% of the price of the originator product, instead of the previously applicable price cap of 65%.

è Under 2010 legislation, Japan caps the price of new oral generics at 60% of the originator’s price in cases where more than 10 versions are seeking price approval, replacing a previous cap of 70% of the originator’s price. Under a separate 2011 rule, generics priced at less than 30% of the price of the originator will all be granted the same National Health Insurance price, which will be set at the weighted-average market price.

è In Canada, Nova Scotia caps the price of generics at no more than 35% of the originator’s price from 1 July 2012, while the Ontario government announced it will cap generic prices at 25% of the originator’s price for medicines reimbursable under the Ontario Drug Benefit scheme. Meanwhile, private payers have reduced generic price caps from 50% of the originator drug price in 2010 to 35% on 1 April 2011 and 25% on 1 April 2012. In Saskatchewan, for existing generics drug, prices have been reduced to 45% of the originator’s price from 1 June 2011 and to 35% of the originator’s price from 1 April 2012, while for new generic drugs, the maximum price is capped at 35% of the originator’s price from April 2012.

ConclusionsFrance, Portugal, Hungary, the Czech Republic, Romania, Slovakia, Greece, Japan, and Canada are among the countries that have recently amended their use of generic price linkage in an attempt to contain pharmaceutical spending. While price caps remain popular, it is rare for countries to use them in isolation. Internal reference pricing is typically also in use. Among countries that have recently made changes to their generic price linkage system, several have also undertaken changes to their internal reference pricing system, as governments attempt to tackle the cost-containment paradigm from all sides.

Generic price caps in relation to the originator clearly remain popular as a cost-containment mechanism. Their impact on the entire pharmaceutical market is magnified through the use of these prices in setting an internal reference price in therapeutic groups, with a positive impact for reimbursement authorities and a negative impact for patients in the form of higher OOP payments.

CountryGeneric price capped in relation to originator's price

Austria √Belgium √Cyprus √Czech Republic √Estonia √Finland √France √Greece √Hungary √Italy √Latvia √Lithuania √Netherlands √Portugal √Romania √Slovakia √Spain √Sweden √United Kingdom √

Generic Price Linkage as a Policy Choice: Review of Recent DevelopmentsIzmirlieva M & Ando G (IHS, London, United Kingdom)

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