Global Pricing and Launching of New Drugs. An Econometric Approach

B or ja G arc ía LorenzoSe r v ic io de Eva luac ión de l Ser v ic io Canar io de Sa ludUnive rs idad de Las Pa lmas de G ran Canar iaE-mai l : bor ja . garc ia lore nzo@s es cs .e s

CONTENTS

I. MOTIVATION

II. OBJECTIVE

III. DATA AND METHODS

IV. RESULTS

V. CONCLUSIONS

MOTIVATION

Drugs are sold in a global marketBargaining procedure: Pharmaceutical firms vs. countries’ health agencies.

Major strategic decisions:Pricing and launching strategies for firmsPricing policies for health agencies

Most countries have used External Reference Pricing (ERP) as pricing policy

MOTIVATION

ERP Price cap Based on prices of comparable products in other countries Formula of foreign prices

Methods: Basket of countries; date of the price; the formula Why using ERP ?

Simplicity at technical level and prices taken as reference are fair Why not using ERP?

Difficult to assess resulting prices Risk of repeating the same mistake

The only pricing strategy

MOTIVATION

Trade-off Health Agencies

Ensuring access to medicines / Expenditure control Incentives for innovations / Expenditure control

Trade-off Industry

High prices / Loss profits from delays Low prices / Spill-over effects

OBJECTIVE

Analysis of the trade-off between drug pricing and launching The impact of the ERP policy on pricing and launching

DATA

IMS Health database Molecules: 69/70 new molecules approved by the EMA (11 Therapeutic Classes) Countries 20 countries (Europe, US, Canada, Australia, Japan) Period: 2004-2010 Relative Price at presentation level Retail and Hospital Market

PREVIOUS LITERATURE

DANZON AND EPSTEIN (2008) Effects of Regulation on Drug Launch and Pricing in Interdependent Markets

1993-2003;15 countries Relation price-launch delay Price affected by previous prices

VERNIERS ET AL. (2011) The Global Entry of New Pharmaceutical: A Joint Investigation of Launch Window and Price

1994-2008; 50 countries Relation price-launch delay No effect of ERP on prices/launch delay

METHODS

Launch Delay equationParametric duration model: Weibull distribution

METHODS

Launch Price equationHeckman model

Selection eq.

RESULTS: Launch Delay Equation

RESULTS: Launch Price Equation

CONCLUSIONS

Pricing and launching seem to be no longer related to each other. Differences in prices across countries but not due to the launch delay. ERP policy seems to not be effective in “pricing terms” but it does so in “launching terms”.

More aggressive firm strategy: not allow countries to pay lower prices in exchange of longer launch delays. Countries probably cannot afford to have the product available, and ultimately not having the product launched.

CONCLUSIONS

Wealthy countries have the products available in shorter-term

Countries that pay higher relative launch prices are those that allocate larger budgets to the public health and the pharmaceutical expenditure. There is no huge differences between the retail and hospital markets

LIMITATIONS

Data availability Launch date of presentation formsLonger time periodMore molecules, countries…

ERP practiceLack of instruments

THANK YOU FOR YOUR ATTENTION!

borja.garcialorenzo@sescs.es