Cole and Dusetzina (2018) seek to empirically test whether generic price competition is effective for specialty drugs. Generic competition often occurs between different products that solve the same purpose. Specialty drugs are prescription drugs used to treat complex, chronic conditions like cancer. The authors seek to explore the phenomenon of generic competition in the use of specialty drugs, particularly imatinib, and why it did not contribute to the decrease in the drug prices for over two years of its availability. They focus on the uptake and pricing of and out-of-pocket spending on this drug as a first-line treatment for Chronic Myeloid Leukemia (CML) to explore the possible challenges associated with generic competition in the specialty drug market.
The study used selected outpatient pharmacy claims for the period May 1, 2001-September 30, 2017. The data for the study was sourced from the MarketScan Commercial Research Database for the approved first-line treatments for chronic myeloid Leukemia and nilotinib as recorded by patients during six months. They then estimated the drug’s uptake as the percentage of all fills for which the generic product got dispensed. They then summarized the out-of-pocket spending among patients who initiated the first-line treatment dose compared to the second-generation product, nilotinib, in 2016 and 2017. The purpose was to test whether the availability of the second-generation product affected the uptake of the first-line treatment.
Comparing Gleevec (a previously available specialty drug) and imatinib introduced years later, the authors documented a critical implication. Between 2001, when Gleevec got introduced to the market, and 2016 when imatinib first became available, Gleevec’s price had more than doubled. Generic imatinib accounted for about 58% of all imatinib fills in February 2017 and 74% by December. Another crucial finding was that more elderly patients spent more than $50 out-of-pocket per fill for the second-generation products in 2017. These trends imply a difference between what would be expected in an ideal market scenario, indicating the existence of potential barriers in the market impeding the effectiveness of generic competition.
The authors suggest that the market for specialty drugs has some barriers, unlike those in other clinical areas where generic competition is much apparent. Even considering the number of generic entrants into the market, the price for generic imatinib remained 10 percent lower than the brand-name price in 2017. The value of generic competition becomes even more diminished if uptake of a generic product is considerably low. The authors note the high percentage of dispense-as-written claims could result from a distrust of the generic product, manufacturer copay assistance, or effective brand-name manufacturer advertising. Generic competition may also lose its strength due to a shift in treatment patterns toward newer innovator products if there is a substantial market share loss before expiration among the first-generation products.
The cost of prescription drugs continues to rise. Many researchers have proposed generic competition as a potential solution for reducing prices. Yet, this research implies that the massive shift in pharmaceutical development from drugs used in primary care to specialty drugs presents several barriers to generic competition. To establish the generalizability of the research findings to other specialty products, they recommend further research.
Cole, A. L., & Dusetzina, S. B. (2018). Generic price competition for specialty drugs: Too little, too late? Health Affairs, 37(5), 738-742. https://doi.org/10.1377/hlthaff.2017.1684