Life after patent: Drug price dynamics and cost-effectiveness analysis

Abstract

AbstractThis study analyzed the effects of patent expiration on drug prices in eight countries (US, UK, Cana-da, Australia, Japan, France, Germany, and Switzerland) and the impact of these price dynamics in cost-effectiveness assessments. First, using an event study design, we showed that average prices of drugs substantially decreased eight years after patent expiration. Then, to assess the implications of this finding for cost-effectiveness assessments, a theoretical cost-effectiveness model simulated two real-world scenarios: (1) the comparator drug was a generic and the patent of the new drug expired after market entry; (2) the comparator drug was also under patent protection, but the patent expired prior to the patent of the new drug. Not accounting for genericization or patent expiration of the com-parator drug resulted in an underestimation or overestimation of the incremental cost-effectiveness ratios, respectively. Our pricing dynamic estimates can be applied to base-case analyses of cost-effectiveness models.