Overall, the evidence from ARVs strongly suggests that generic prices are generally lower than tiered prices, and that competition among multiple producers systematically results in dynamic price reductions.
An additional tendering generic reduces originator prices by about 7%, but raises average generic prices, plausibly because tendering generics can charge relatively high prices due to their perceived higher quality.
By contrast, additional retail generics tend to lower average retail generic prices but have no effect on originator prices.
Generic prices were found to be generally lower than innovator prices, which means that, despite tiered pricing patented medications, prices have not yet caught up with the lower prices offered by generic manufacturers.
As of mid-2011, of the three products for which tiered prices were lower than generic prices, two products now have lower-cost generics available.
The marginal effect of tendering generics is significantly negative (−0.068) for originator prices but positive for generic prices in the retail sector.
Generic prices are positively correlated with originator prices, which is what is generally expected for substitutes.
Generic prices are expected to be positively associated with originator prices, as generics and originators of the same molecule are direct substitutes.
The trend to slower growth is arguably due to a combination of two factors: the expiration of patents on blockbuster drugs (also known as the patent cliff) alongside the subsequent entry of lower priced generics, and the move in a number of Canadian provinces to lower generic prices [ 7].
The income elasticity of generic prices is insignificant in the procurement channel, as expected if tendering forces generics to price at marginal cost, which varies little across countries.
By contrast, if generic markets are price competitive, generics would lack the market power necessary to price discriminate across countries, and generic prices should be invariant with PCI. 15 The Gini measure of income equality is expected to be positively related to prices if income inequality leads to higher prices due to demand convexity (Flynn et al., 2009).
