However, the high cost of therapeutic drugs remains a barrier to accessibility and improved health for the majority of the population. This relationship is particularly important in South Africa, where concurrent price-fixing legislation is being implemented without monitoring the implications for generic drug prices and use. However, the high cost of therapeutic drugs remains a barrier to accessibility and improved health for the majority of the RSA population (Gray and Matsebula, 2000). The rising cost of pharmaceutical drugs accounts for a significant portion of total healthcare spending, straining the budgets of patients and public/private insurers.
Given the cost of therapeutic drugs, promoting the use of generic drugs could potentially be an important cost-saving mechanism for end consumers, insurers, and the government. The restructuring of the RSA public health sector after 1994 led to the development and implementation of the National Medicines Policy (NDP). The economic objective of the NDP was to reduce the cost of therapeutic drugs in the private and public sectors (Ministry of Health, 1996).
While previous studies found the effect of price reduction of generic competition in relation to the number of sellers in the generic market (Cook, 1998, Fatokun, 2011), very little data is available on this concept within a specific therapeutic class of drugs. , let alone. in RSA, which has the additional SEP policy. The focus of the literature review is on the relevant background and explanation of terms regarding the impact of the implementation of regulated pricing within the pharmaceutical environment in South Africa.
Definition of Concepts .1 Originator brand drug
Section 22F of the Medicines and Related Substances Amendment Act 90 of 1997 refers to "generics" as interchangeable multi-source medicines (“IMSM”). In an effort to reduce drug spending in South Africa, the Control of Medicines and Related Substances Act 101 of 1965 was amended by the Control of Medicines and Related Substances Amendment Act (Act 90 of 1997) under section 22F. Under this law, a pharmacist is required to inform a patient of the benefits of substituting a branded drug for an interchangeable multi-source drug.
A pharmacist may replace the medicine or medicine prescribed by a doctor with a generic alternative medicine or medicine, unless this is expressly prohibited by the patient or is determined by the prescriber as 'no replacement' in addition to the prescribed item (Staatscourant, 2001). After the patent on branded drugs expires, other manufacturing companies can produce the same drug under a different brand name once they apply for registration and receive regulatory approval. Generic drugs bypass major marketing and research and development expenditures and are offered to the market at much lower prices compared to the original drugs, with a cost advantage of as much as 20% to 90% (Brems et al., 2011).
In 2010, the South African Mediscor Medicines Review indicated that 50% of patients insured with medical aids used generic medicines when available, which was a steady increase from previous years (Badenhorst et al., 2011). The growth of the South African generic drug market will rapidly accelerate in the presence of.
Pharmaceutical Policy Implementation in South Africa .1 Single exit pricing
International reference pricing
International reference prices, also called external price references and external price benchmarking, are defined as “the practice of comparing pharmaceutical prices between countries” (OECD, 2008). In South Africa, the DOH is currently seeking to implement legislation that will promote international benchmarking of drug prices, comparing the price of national originator brand medicines with counterparts in Australia, Canada, New Zealand and Spain (Government Gazette , 2010). International reference prices as a method to reduce price distortions are seen as superior to blanket price cuts or price freezes (Government Gazette, 2010).
It is predicted that there will be an immediate 10% cost reduction in the price of generic drugs with a possible further reduction of 9.9% at a later stage (Government Gazette, 2010).
The Benefits of Generic Drugs
This stimulates healthy competition not only between the start-up drug companies and the generic drug companies, but also between the generic drug companies themselves. Increased competition not only means lower costs for patients, but also drives product improvement, delivery efficiency and improved access to all medicines (Sheppard and Principal, 2010). An added benefit of generic drugs is to ensure continuity of supply even after the original drug may have exited the market (Brems et al., 2011).
The production of generic medicines also improves economic development and provides more employment opportunities, especially when produced locally (Sheppard and Principal, 2010).
Other Research into the Impact of Generic Drug Competition
The study further showed that the relative prices of originator drugs had a significant positive relationship with the number of generics available in the market, while at the same time the absolute prices of originator drugs had a significant negative relationship with the number of generics available in the market. the market. In other words, while the relative prices of brand-name drugs rise as more generic drugs enter the market and aim to compete by entering at lower prices, the original manufacturers also lower the absolute prices of their drugs in an apparent effort to compete more effectively. Adriaen et al (2007) in researching the determinants of the pricing strategies of originator and generic drugs after patent expiry in Belgium found that the pricing strategies of originator and generic drugs depend on the drug class, with the price difference between the originator and generic drugs which are higher. for the class of cardiovascular drugs.
The regression analysis revealed that the number of generic drugs in the market decreases the price of generic drugs and increases the price difference between original and generic drugs. Generic drug entry stimulates competition between the different brands of the off-patent product available in the market and helps lower the overall price of the drug product (Cook, 1998). However, this phenomenon is only likely if there is a sufficient number of generic products in the market (King and Kanavos, 2002, Nguyen et al., 2008).
The results of the study supported the hypothesis of the price-lowering effect of generic competition, as evidenced by the decline in the average proportional price as the number of brands of the multisource product increases. However, this generic price-lowering effect, as observed in the study by Fatokun et al (2011), was not observable for all drug brands.
Research into the Impact of Pricing Policies
The majority of previous studies examining the effect of generic entry and the number of firms have focused on small sets of drugs across multiple therapeutic classes. Wiggins and Maness (2004) focused on one segment of the pharmaceutical industry, namely anti-infective pharmaceuticals. An examination of the relationship between the number of generic drugs and prices within a therapeutic class.
This relationship is particularly important in South Africa, where concurrent pricing legislation is being implemented without monitoring the consequences on competition and the use of generic drugs. The high costs of therapeutic drugs, however, remain a barrier to access and improved health for the majority of the South African population [1]. Ethics approval for the study was obtained from the University of KwaZulu-Natal Humanities and Social Sciences Ethics Committee.
Data on private sector prices of original and generic drugs were obtained from the South African Medicines Price Register which is an official website that communicates medicine prices as approved by the Pharmaceutical Economic Evaluation Unit of the Department of Health [7]. The price difference between original and generic medicines was calculated as the difference between the price per standard unit of the original medicine and the median price per standard unit of available generic medicines expressed as a percentage of the price per standard unit of the original medicine. The findings relate to prices of the various available strengths of 23 original medicines and their generic equivalents.
The theory of competition (effect of the number of generic equivalents) was statistically tested between the price of the original drug and generic drugs, between generic drugs and finally between the original drug and the generic version of the drug manufactured by the original company. With the exception of telmisartan, for which no other generics were available (aside from the original generic), the price of the original generic was still higher than the most expensive generic version manufactured by another company. With the exception of diuretics, the other drug classes show a weak correlation between the number of generic drugs and the size of the cost difference.
The introduction of generic drugs stimulates competition between different brands of the off-patent product available in the market and helps to reduce the overall price of the drug product [11]. The results confirmed the price reduction effect of generic competition as shown by the decrease in average price proportional to the increase in the number of product brands. There is a wide variation between the price of the most expensive brands and the most expensive brands.
More work is required to identify the determinants of the price differentials between original and generic drugs in South Africa, particularly in light of the recent proposed restructuring of the healthcare system. General Regulations in terms of the Medicines and Related Substances Act, 1965, as amended, vol 432 No 22235. Further work is therefore needed to identify the determinants of the price differences between original and generic medicines in South Africa, particularly in light of the recent proposed restructuring of the healthcare system.
The impact of the implementation of single exit pricing for pharmaceutical products in South Africa Master of Business Administration, University of the Witwatersrand.
