Is greater generic competition also linked to lower drug prices in South Korea?

Abstract

Background Although the association between the price of generic drugs and market competitiveness has been explored in various high-income countries, this association has not been empirically evaluated in South Korea. We aim to determine the association between the prices of generic drugs and market competitiveness in South Korea. Methods A list of originator drugs approved by the national authority from 2000 to 2019 and their corresponding generic drugs were grouped along with the baseline information. The market was categorized into four groups based on the number of manufacturers: duopoly (2 manufacturers); low- (3–25 manufacturers); medium- (26–75 manufacturers); and high-competition (more than 76 manufacturers) markets. Price variance, calculated as the difference between the maximum price and minimum price divided by the maximum price, was obtained. A multivariate regression model was applied to regress price variance on the characteristics of market competitiveness, controlling for the characteristics of the originator drugs and their price level in the market. Results A total of 986 originator drugs were identified and then divided into duopoly (31%), low- (56%), medium- (9%), and high-competition (4%) markets; the median of the price variance for these markets was 0.013, 0.077, 0.200, and 0.228, respectively. In a multivariate regression model, price variance was associated with the characteristics of the originator drug, including the Anatomical Therapeutic Chemical classification, the route of administration, and the approval year. Controlling for the characteristics of the originator drugs, market competitiveness was positively associated with price variance. Conclusions The positive association between price variance and market competitiveness is still consistent in South Korea, where rare price competition among a large number of generic manufacturers has been reported. However, no significant price variance was observed between medium- and high-competition markets. These findings support policies for managing a large number of generic manufacturers in South Korea.

Who initiates price competition when generic entrants are introduced into the South Korean pharmaceutical market?

“…Third, we observed a counterintuitive effect of drug lag on price competition. In principle, the manufacturers that are granted later marketing approval ("latecomers") would be expected to proactively drop their prices in an attempt to penetrate markets that have already matured (22)(23)(24)29). In fact, our models show that drug lag was not a significant predictor of price competition.…”

“…Positive associations between price variance of active substances and the number of generic drugs including those substances were recently reported (24). Previous research on the topic is limited by its narrow focus on substance characteristics without considering product characteristics (24). In this study, we investigate product-and substance-level determinants of price competition following the entry of generics into the South Korean market.…”

“…For instance, in South Korea, there are more than 100 generic versions of well-known blockbuster drugs (20,21). Generic competition is linked to lower drug prices in other markets (22)(23)(24). It is reasonable to expect price competition among generic drugs.…”

“…Numerous pharmaceutical products including the same active substances are available in South Korea (20,21). Positive associations between price variance of active substances and the number of generic drugs including those substances were recently reported (24). Previous research on the topic is limited by its narrow focus on substance characteristics without considering product characteristics (24).…”

Analysis of the Korean generic medicine market: Factors affecting the market share of generic medicines

“…Although the above‐described policy was appropriate to decrease pharmaceutical expenditures, it did not address other points to induce the market competition of generic medicines, and thereby to push down the prices of generic medicines spontaneously. 17 , 18 Therefore, there is still a need to amend the pricing policy of generic medicines to achieve further price reductions. Moreover, the use of generic medicines in Korea has not been properly documented in terms of the characteristics of patients and classes of medicines.…”