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ABSTRACT
Background: In 1998, the province of Ontario, Canada implemented price-cap ‘70/90ʹ regulations: the first generic must be priced at ≤70% of the associated brand-name price and subsequent generics must be priced at ≤90% of the first generics’ price. The price-cap was further lowered to 50% in 2006 and 25% in 2010 for all generic drugs regardless of the first or subsequent generic entrants. This study assessed the impact of such price-cap regulations on market entry by generic firms using the formulary database from 9 provinces (January 2004-March 2013).
Methods: A logistic regression was estimated to compare the probability of entry during the three policy periods in Ontario (‘70/90ʹ, ‘25ʹ, versus ‘50ʹ). Since different price-caps were subsequently introduced in other provinces, Alberta, British Columbia, New Brunswick and Saskatchewan, difference-in-differences was used to compare market entry.
Results: In Ontario, compared with the period ‘50ʹ, generic firms were 76% and 63% less likely to enter markets in the periods ‘25ʹ and ‘70/90ʹ, respectively. The difference-in-differences showed that the entry probability decreased the most in Ontario during the ‘25ʹ period from the ‘50ʹ period.
Conclusion: Lowering the price-cap level to 25% leads to a significantly lower probability of market entry by generic firms.
Declaration of interest
W Zhang acknowledges the Postdoctoral Fellowship Award from the Michael Smith Foundation for Health Research. The authors have no other relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript apart from those disclosed.