Drug Prices After Patent Expirations in High-Income Countries and Implications for Cost-Effectiveness Analyses

Abstract

ImportanceUnderstanding how patent expirations affect drug prices is crucial because price changes directly inform accurate cost-effectiveness assessments. This study investigates the association between patent expirations and drug prices in 8 high-income countries and evaluates how the changes affect cost-effectiveness assessments.ObjectiveTo analyze how the expiration of drug patents is associated with drug price changes and to assess the implications of these price changes for cost-effectiveness evaluations.Design, Setting, and ParticipantsThis cohort study performed an event study design using data from 8 high-income countries to assess the association between patent expiration and drug prices, and created a simulation model to understand the implications for cost-effectiveness analyses. The simulation cost-effectiveness model analyzed the implications of including or ignoring postpatent price dynamics.ExposureDrug patent expiration.Main Outcomes and MeasuresChange in drug prices and differences in incremental cost-effectiveness ratios when considering vs ignoring postpatent price dynamics.ResultsThe sample comprised 505 drugs undergoing patent expiration in Australia, Canada, France, Germany, Japan, Switzerland, UK, and US. Price decreases were statistically significant over the 8 years after patent expiration, with the fastest price declines observed in the US: 32% (95% CI, 24%-39%) in year 1 after patent expiration and 82% (95% CI, 71%-89%) in the 8 years after patent expiration. Estimates for other nations ranged from a decrease of 64% in Australia to 18% in Switzerland in the 8 years after expiration. The cost-effectiveness simulation model indicated that not accounting for generic entry into the market may produce biased incremental cost-effectiveness ratios of 40% to −40%, depending on the scenario.Conclusions and RelevanceThe findings of this cohort study demonstrate that drug prices were reduced substantially after patent expirations in high-income countries. Therefore, incorporating information on patent status and pricing dynamics in cost-effectiveness assessment analyses is necessary for producing accurate economic evaluations of new drugs.