At Wavedata we have always believed that product complexity and manufacturing cost was the limiting factor on how quickly prices would fall after generic launch. However, is this correct?
To clarify this Wavedata looked at 414 solid dose, combined, liquids, devices and creams to see how quickly prices came down in reality. To do this we tracked the average prices paid or offered to pharmacists or dispensing doctors after launch, and adjusted the data to show the number of months since the launch rather than the actual dates.
The graph shows that as we suspected, solid dose tablets and capsules decline the fastest, probably because they are easier to make. The solid dose products also show the scalloped curve which has been seen before in products as diverse as televisions and computers. The next fastest group of products to see their prices decline are combined products which include two active constituent chemicals. These are usually commonly used chemicals like Paracetamol and Tramadol, but the delivery mechanisms were very variable, so they included solid dose, liquids and inhalers.
Creams and ointments are fairly consistent in the speed with which they decline, but they are much slower than solid dose or combined products which gives manufacturers much more time to make profits on these more complex products. Liquids are also slow to decline, but their prices are erratic in the first few months. This may be related to ‘specials’ manufacturers charging higher prices and the supply chain following suit.
Finally there are the devices which in this study include patches and ampules. These declined in a simple way until 29 months after launch when all but one saw prices rise dramatically. This applied to products launched in 2018, 2015 and 2013, so it wasn’t a specific event which caused this. Based on this analysis we can say that the devices are the least predictable of all the products we looked at.
The meaning of this analysis is that it looks as if we were right in thinking that complexity does delay price decline, presumably by limiting the number of competing manufacturers.