Improving the PPI sample for prescription pharmaceuticals

Monthly Labor Review

Volumn 120, Issue 10, 1997, Pages 10-17

  Kelly, Gregory G ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

GENERIC DRUG; NON PRESCRIPTION DRUG;

ARTICLE; CLASSIFICATION; DRUG APPROVAL; DRUG COST; DRUG INDUSTRY; ECONOMIC ASPECT; ECONOMICS; FOOD AND DRUG ADMINISTRATION; HEALTH INSURANCE; INFORMATION PROCESSING; PRESCRIPTION; STATISTICS; TIME; UNITED STATES;

DATA COLLECTION; DRUG APPROVAL; DRUG COSTS; DRUG INDUSTRY; DRUGS, GENERIC; DRUGS, NON-PRESCRIPTION; ECONOMIC COMPETITION; MANAGED CARE PROGRAMS; PRESCRIPTIONS, DRUG; TIME FACTORS; UNITED STATES; UNITED STATES FOOD AND DRUG ADMINISTRATION;

EID: 0031242529     PISSN: 00981818     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (22)

1. For more information on the Producer Price Index, including background and methodology, see "Producer Prices," BLS Handbook of Methods, Bulletin 2490 (Bureau of Labor Statistics, 1997), pp. 130-43.
2. Generic drugs are new versions of existing (predecessor) drugs that use the same active ingredient and are rated as bioequivalent to the predecessor drug by the FDA. The FDA'S bioequivalence criteria requires that the absorption rate and peak concentration in the bloodstream of the generic drug does not vary significantly from the predecessor drug.
3. The act is titled Drug Price Competition and Patent Term Restoration Act of 1984.
4. A variety of internal research is conducted by PPI analysts on a continual basis.
5. Ernst Berndt, Zvi Griliches and Joshua Rossett, "Auditing the Producer Price Index: Micro Evidence from Prescription Pharmaceutical Preparations," Journal of Business and Economic Statistics, July 1993.
6. Ernst Berndt and Paul Greenberg, "An Updated and Extended Study of the Price Growth of Prescription Pharmaceutical Preparations," in Robert B. Helms, ed., Competitive Strategies in the Pharmaceutical Industry (Washington, The AEI Press, 1995), pp. 35-48.
7. Zvi Griliches and Iain M. Cockburn, "Generics and the Producer Price Index for Pharmaceuticals," in Helms, ed., Competitive Strategies.
8. Richard Caves, Michael Whinston and Mark Hurwitz, in "Patent Expiration, Entry, and Competition in the U.S. Pharmaceutical Industry," Brookings Papers: Microeconomics (Washington, 1991), showed that branded drug producers sacrifice significant market shares to low-priced generic substitutes, but the reductions are fairly small given the price differentials. They presented an example with five generic competitors showing a generic/branded price ratio of 0.456, but the branded drug's market share falling only to 0.748.
9. Caves and others also showed that entry of additional generic producers depressed the price of existing generic products much more severely than the price of the branded drug. They showed ratios of generic to branded drug prices of 0.558 with 1 generic on the market, 0.496 with 3 generics on the market, 0.294 with 10 generics on the market and 0.171 with 20 generics on the market.
10. For more information on these programs, see the following in the BLS Handbook of Methods, Bulletin 2490 (Bureau of Labor Statistics, 1997): "Producer Prices," pp. 130-43; and "Employment and Wages Covered by Unemployment Insurance," pp. 42-47.
11. For more information on these programs, see the following in the BLS Handbook of Methods, Bulletin 2490 (Bureau of Labor Statistics, 1997): "Producer Prices," pp. 130-43; and "Employment and Wages Covered by Unemployment Insurance," pp. 42-47.
12. For more information on these programs, see the following in the BLS Handbook of Methods, Bulletin 2490 (Bureau of Labor Statistics, 1997): "Producer Prices," pp. 130-43; and "Employment and Wages Covered by Unemployment Insurance," pp. 42-47.
13. Represents share of countable units, such as tablets. Pharmaceutical Research and Manufacturers of America (PhRMA), 1997 Industry Profile (Washington, March 1997).
14. Standard and Poor's, Industry Surveys, Healthcare: Pharmaceuticals May 29, 1997 (New York, McGraw-Hill, 1997).
15. The initial impact of Supplement I and future supplements is seen in May of the year of introduction, when final January indexes are published. Due to the PPI calculation methodology and its N-4 month revision period, the weight changes of the predecessor drugs discussed below are not seen until the final indexes are published. For more information on the supplements, see Douglas Kanoza, "Age Distribution and Price Movements of Drugs in the 1994 PPI Prescription Drug Sample," Producer Price Indexes, May 1995; and Douglas Kanoza, "Supplemental Sampling in the PPI Pharmaceuticals Index' Producer Price Indexes, January 1996. The data source for Supplement I items covering the December 1992-April 1995 period was Food and Drug Administration, Center for Drug Evaluation and Research, Approved Drug Products with Therapeutic Equivalence Evaluations, 15th ed. and Cumulative Supplements (For sale by the Superintendent of Documents).
16. The initial impact of Supplement I and future supplements is seen in May of the year of introduction, when final January indexes are published. Due to the PPI calculation methodology and its N-4 month revision period, the weight changes of the predecessor drugs discussed below are not seen until the final indexes are published. For more information on the supplements, see Douglas Kanoza, "Age Distribution and Price Movements of Drugs in the 1994 PPI Prescription Drug Sample," Producer Price Indexes, May 1995; and Douglas Kanoza, "Supplemental Sampling in the PPI Pharmaceuticals Index' Producer Price Indexes, January 1996. The data source for Supplement I items covering the December 1992-April 1995 period was Food and Drug Administration, Center for Drug Evaluation and Research, Approved Drug Products with Therapeutic Equivalence Evaluations, 15th ed. and Cumulative Supplements (For sale by the Superintendent of Documents).
17. The initial impact of Supplement I and future supplements is seen in May of the year of introduction, when final January indexes are published. Due to the PPI calculation methodology and its N-4 month revision period, the weight changes of the predecessor drugs discussed below are not seen until the final indexes are published. For more information on the supplements, see Douglas Kanoza, "Age Distribution and Price Movements of Drugs in the 1994 PPI Prescription Drug Sample," Producer Price Indexes, May 1995; and Douglas Kanoza, "Supplemental Sampling in the PPI Pharmaceuticals Index' Producer Price Indexes, January 1996. The data source for Supplement I items covering the December 1992-April 1995 period was Food and Drug Administration, Center for Drug Evaluation and Research, Approved Drug Products with Therapeutic Equivalence Evaluations, 15th ed. and Cumulative Supplements (For sale by the Superintendent of Documents).
18. This number is lower than would be expected from previously provided information due to attrition of Cycle C items. Attrition can be due to a manufacturer's discontinuation of an item or refusal to continue to provide price data.
19. This percentage was based on an estimate of maximum generic penetration. Data released by Pharmaceutical Research and Manufacturers of America (PhRMA) showed a 57.2-percent to 42.8-percent ratio of prescriptions filled by branded and generic drugs, respectively. The percentage assigned to brand-filled prescriptions was reduced by an estimate of the single source brand drugs - that is, prescriptions filled by branded drugs because only branded drugs are on the market. The ratio of single source to multiple source active ingredients from Approved Drug Products with Therapeutic Equivalence Evaluations was used for this purpose. Ernst Berndt, Iain Cockburn, and Zvi Griliches, in "Pharmaceutical Innovations and Market Dynamics: Tracking Effects on Price Indexes for Antidepressant Drugs," Brookings Papers: Microeconomics (Washington, 1996), found the estimate to be realistic based on their research of one therapeutic class of drugs.
20. The Food and Drug Administration, in Approved Drug Products with Therapeutic Equivalence Evaluations, 15th ed. (For sale by the Superintendent of Documents, 1995), states: "A major premise underlying the 1984 law is that bioequivalent products are therapeuticalIy equivalent and, therefore, interchangeable."
21. As mentioned previously, Supplement I includes drugs approved by the FDA between December 1992 and April 1995, and its initial impact was not seen until the final January indexes were published in May.
22. The data source for Supplement II was Food and Drug Administration, Approved Drug Products with Therapeutic Equivalence Evaluations, 16th ed. and Cumulative Supplements.