Do follow-on therapeutic substitutes induce price competition between hospital medicines? Evidence from the Danish hospital sector.
OBJECTIVE
The pricing of follow-on drugs, that offer only limited health benefits over existing therapeutic alternatives, is a recurring health policy debate. This study investigates whether follow-on therapeutic substitutes create price competition between branded hospital medicines.


METHODS
New follow-on drugs and their incumbent therapeutic competitors were identified from Danish sales and product registration data on hospital pharmaceuticals using medically relevant criteria. We examined whether follow-on drugs adopt lower prices than their incumbent competitors, and whether incumbent competitors react to entry of follow-ons through price adjustments using a random intercept panel model.


RESULTS
We found no evidence that follow-on drugs adopt lower prices than their incumbent competitors. Furthermore, potentially due to low sample size, we found no evidence that prices for incumbent pioneer products were significantly reduced as a reaction to competition from follow-on drugs.


CONCLUSION
Competition between patented therapeutic substitutes did not seem to increase price competition and containment of pharmaceutical expenditures in the Danish hospital market. Strengthening hospitals' incentives to consider the price of alternative treatment options paired with a more active formulary management may increase price competition between therapeutic substitutes in the Danish hospital sector in the future.