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Notes

¹ In the United States, the average retail price is estimated to be 1.27 times the true average wholesale price (US Department of Health and Human Services 2000: 98).

² Discounts for generic drugs to payers such as Medicaid vary widely. About 75 percent of generics offer maximum discounts of 40 percent to 50 percent. About 25 percent of generics offer maximum discounts of 13 to 15 percent. Thus, the weighted average discount is about 45 percent (US Department of Health and Human Services 2000: 104, 108). The study assumes that the average pharmacy receives a discount of about 18 percent (as for branded drugs). Thus, the true wholesale price to a pharmacy is approximately the HCFA price times 0.82 / 0.55, or about 1.50.

³ The authors realise that there is a 16 month delay from the end of the period for which quantities were sampled and the collection of retail price data but we believe that retail prices did not change significantly over the period in either the United States or Canada. However, this was not confirmed.

⁴ Drugs are usually protected from competition solely by patents. In the United States, however, the Food and Drug Administration can also grant exclusivity to a drug for other reasons. For example, orphan drugs (those with small potential markets) or drugs for paediatric use are granted exclusivity, notwithstanding their patent status.

⁵ Although a branded drug may not have patents or exclusivity preventing competitors from selling imitators, it does not always follow that competitors will always enter the market. Some drugs do not enjoy legal protection from competition but market factors alone prevent the entry of substitute products.

⁶ Classification according to generic or branded was done according to the lists in the Red Book. The branded subset was further segregated into exclusive and branded-only subsets through querying the United States FDA Center for Drug Evaluation and Research's Orange Book at the FDA website.

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Last Modified: August 23, 2000.