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
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