Alex Tabarrok points today to an interesting RAND study of prescription drug prices. It turns out that we pay much higher prices than other countries for new, branded drugs, but other countries pay much higher prices for older generics:
But I found this even more interesting:
U.S. prices for brand-name originator drugs were 422 percent of prices in comparison countries, while U.S. unbranded generics, which we found account for 90 percent of U.S. prescription volume, were on average cheaper at 67 percent of prices in comparison countries, where on average only 41 percent of prescription volume is for unbranded generics.
Why do other countries use so few generics? Obviously they have less price pressure to do so since brand-name drugs are relatively cheap compared to the US. But is there more to it? National health care systems could nevertheless reduce drug spending if they pushed generics harder, and it would be low hanging fruit for health systems that are always under budgetary pressure. So why not? Are Europeans just more suspicious of generics than Americans?
What's the price difference between the brand and generic drug in the european countries?
(Also, what's up with Canada?)
Yeah, I think this is the key. If their name brands are cheaper and their generics are more expensive, then the price difference is necessarily smaller. If on net the generics are only nominally cheaper, there simply isn't a strong incentive to try something that may or may not behave bioidentically.
Are there volume commitments on the branded drugs in Europe?
We have either insurance rules or state regulations that say pharmacies can fill scrips with generic equivalents unless the brand name is specifically prescribed, and I think pharmacies are happy to go along because they make at least as much on generics even though they're often a lot cheaper. Unless Europeans have rules like that, the generics will be at a disadvantage. And as you say, there may not be that much of a price difference after agency negotiation.
Also, generics don't have to use the same fillers and non-active ingredients so they can give you odd reactions, and maybe Europeans don't trust them for that reason. I've had that happen with some meds I've used and been able to get the pharmacy to switch me away from some makers altogether.
Then too, aren't there some major pharma companies in Europe? They'd consider it a prestige industry with global penetration that they may not want to undermine or weaken in any significant way.
An aside:
> We have either insurance rules or state regulations that say pharmacies can fill scrips with generic equivalents unless the brand name is specifically prescribed...
Apparently in New York, pharmacies are *required* to fill prescriptions with generics unless specified otherwise. For reasons unfathomable, at one point my insurance plan covered the name brand version of a drug I take but not the generic version. The pharmacy told me that it would be illegal for them to fill it with the much cheaper (to me) name brand version, unless I got the doctor's office to resubmit the prescription with the "fill as written" box checked.
Are name brand drugs covered by most European government health insurance programs? Is the net cost to the consumer (copays?) less if they specify generic drugs? Its not the total cost that matters to people with health insurance, its the net cost after copays.
Most of my generic, commonly used drugs, are usually fully covered by Medicare Part D (if tier I of course), and would be significantly more expensive if I insisted on name brand versions. My mom had antibiotics that cost her $1000 for 10 days, Medicare Part D copay. I believe the full cost was over $4K for 20 pills.
Drug companies come up with modestly better versions of old drugs. The old version is off patent and generics are available, the new drug is patented and name brand only.
Perhaps in Europe doctors prescribe the newer versions since they are not much more expensive, while in the US doctors prescribe the older version because there is only a small medical difference and the price difference is vast.
I realize this doesn't explain why generics are more expensive in Europe.
Don’t know, but generic drugs from India are a little suspect.
As a European, I never ask whether prescribed drugs are generic or brand since the public health insurance pays. But I had a friend who worked for a pharma company, and his job was to visit doctors and push that brand. It makes no difference to the patient.
Also, most things are more expensive in Europe than in the US, so 90% for generics doesn't surprise me.' Drugs you don't need a doctor's prescription for, though, are cheap for the most part. The only ones I regularly buy, anti-allergy pills, come at 4 euros a box. Since I need hem only during hayfever season, my annual out-of-pocket expenses for drugs is 8 euros.