Drug Prices After Patent Expirations in High-Income Countries and Implications for Cost-Effectiveness Analyses.

ABSTRACT

Importance Understanding how patent expirations affect drug prices is crucial because price changes directly inform accurate cost-effectiveness assessments. This study investigates the association between patent expirations and drug prices in 8 high-income countries and evaluates how the changes affect cost-effectiveness assessments. Objective: To analyze how the expiration of drug patents is associated with drug price changes and to assess the implications of these price changes for cost-effectiveness evaluations. Design, Setting, and Participants: This cohort study performed an event study design using data from 8 high-income countries to assess the association between patent expiration and drug prices, and created a simulation model to understand the implications for cost-effectiveness analyses. The simulation cost-effectiveness model analyzed the implications of including or ignoring postpatent price dynamics. Exposure Drug patent expiration. Main Outcomes and Measures: Change in drug prices and differences in incremental cost-effectiveness ratios when considering vs ignoring postpatent price dynamics. Results: The sample comprised 505 drugs undergoing patent expiration in Australia, Canada, France, Germany, Japan, Switzerland, UK, and US. Price decreases were statistically significant over the 8 years after patent expiration, with the fastest price declines observed in the US 32% (95% CI, 24%-39%) in year 1 after patent expiration and 82% (95% CI, 71%-89%) in the 8 years after patent expiration. Estimates for other nations ranged from a decrease of 64% in Australia to 18% in Switzerland in the 8 years after expiration. The cost-effectiveness simulation model indicated that not accounting for generic entry into the market may produce biased incremental cost-effectiveness ratios of 40% to -40%, depending on the scenario. Conclusions and Relevance The findings of this cohort study demonstrate that drug prices were reduced substantially after patent expirations in high-income countries. Therefore, incorporating information on patent status and pricing dynamics in cost-effectiveness assessment analyses is necessary for producing accurate economic evaluations of new drugs.