Price overlap blurs quality between generic, substandard drugs

Healthcare policies favoring low-cost generic drugs over innovators must also require closer regulation of the copycat meds and their manufacturing processes, or some other means of improving information about product quality. Research findings suggest the low-price overlap of bona fide generics and substandard drugs can give the false impression that all low-cost drugs will probably work.

The study correlates drug price with drug quality in 17 low- and median-income countries. It is "the first empirical study on the economics of poor-quality drugs," writes Roger Bate of the American Enterprise Institute and co-authors in a paper slated for the November issue of the Journal of Health Economics.

Results show that price and quality are "fundamentally linked," and the fight against poor-quality meds cannot be isolated from drug affordability, Bate says in an email. Generics makers must "realize they have a problem in that poorer quality drugs are on average cheaper, and hence, their products might be confused with the substandard products. This means that improved education is required to convince people that these drugs are indeed good."

Using 899 drug samples obtained covertly from 185 private pharmacies in the 17 countries, researchers tested the drugs for visual appearance and disintegration, and then analyzed ingredients using chromatography and spectrometry.

Fifteen percent of the samples failed at least one test and can be considered substandard, the researchers say. And it turns out the failing drugs are priced 14% to 19% lower than non-failing drugs.

The researchers acknowledge the effect of price is incomplete, however, especially for non-innovator brands. Additional stats suggest "high price does not always guarantee high quality." For example, some non-failing, non-innovator drugs are priced more than 30% lower than innovator brands. "As a result, the prices of these presumably true 'generics' (which act identically to innovator brands) overlap significantly with those of failing drugs," the paper says.

And that's the problem. The impression inexpensive drugs will probably work will invite cheaters and further obscure the signaling effect of price on quality.

Tighter registration requirements, strict consequences for non-registered drugs, and more frequent drug sampling and testing top the list of needs for improving the overall quality of drugs available, the paper says.

- here's the link to the manuscript
- see Bate's blog post