Lower generic drug prices won't help consumers

"You're not going to increase generic usage just by decreasing price," said Alan Sheppard, Global Head of Generics Thought Leadership for IMS Health. He was speaking at the International Generics Pharmaceutical Alliance (IGPA) conference in Cape Town last week.

While generic medicines are an essential part of making healthcare affordable in South Africa, the reluctance of doctors, pharmacists, and patients to use them has hindered their usage.

Pharmacists and doctors not helping generic adoption
Simply lowering the price will not lead to wider adoption of generics. One of the main reasons for this is that consumers do not directly choose the drugs they use. There are always intermediaries, doctors or pharmacists, who must prescribe the medicines and this is where the issue lies.

If these intermediaries are unwilling to prescribe generics, or have greater incentives to prescribe brand-name drugs, it doesn't matter how low the price of the generics are; the generics won't be chosen.

Under the current system, pharmacists receive a larger dispensing fee for prescribing brand-name drugs than for prescribing generics. This means that there is little incentive for the pharmacist to opt for generics. The result is that people repeatedly pay more for their medicines than they need to by opting for brand-name drugs.

According to Sheppard, the only way to combat this is to increase the fees that pharmacists receive so that they are greater than those for brand-name drugs. "Merely setting them at the same level won't be effective," he said.

Generics used cautiously
In SouthvAfrica, patents on medicines can last for up to 20 years. Once the patent expires on a new medicine, companies other than the patent holders are allowed to produce generic versions of the drug using the same ingredient. Because there is no need for research and development (R&D), the companies then sell the drugs at a much lower price.

Generic drugs, with their lower prices, are a good thing for consumers, especially in emerging countries like South Africa where a large percentage of the population struggle to pay for brand-name medicine.

But unfortunately for generics companies, once the prices drop below a certain point, it stops being economically viable for most competitors to enter or remain in the market. When this happens, the consumer can only choose between the original drug and the remaining generics in the market, which are under reduced competitive pressure to lower their prices.

"Governments still do not realise the impact that price cuts have on the generics industry," said Sheppard.

These “cheaper” drugs are often viewed with suspicion, both by medical professionals and consumers, meaning that people repeatedly pay more for their medicines than they need to by opting for brand-name drugs.

Japan a model of success
The South African government can learn from nations that have introduced effective models. In 2007, the Japanese government issued a statement that their goal was to increase the percentage share of generics in the pharmaceutical market to 30% in five years.

Following Japans increase from a base of only 18% to 23% by 2011 Sheppard said: "When I heard of the Japanese goal, I thought it was a pipe dream, but I look forward to eating humble pie".

The most effective measure used by the Japanese was financial incentives for pharmacists and physicians who prescribed generics. This resulted in a substantial increase of generics used in the market.

Coupled with that was a drive to educate the general public. In a joint effort between the Japanese government and the Japanese Generics Medicines Association (JGA), consumers were exposed to television and internet adverts, posters, and flyers. They were also issued generic-request cards that could be shown to pharmacists and physicians.

Also speaking at the IGPA conference, Anban Pillay, Cluster Manager for Financial Planning and Health Economics at the National Department of Health, said that the government recognised the challenge of incentivising prescribers and raised the additional matter of educational initiatives, both for medical professionals and the general public.

He emphasised that generic medicines are of growing importance in South Africa and measures to increase their adoption should be pursued when he said: "The generics industry plays a major role in providing access to medicine, especially in developing countries", yet stopped short of committing to changes mentioned by Sheppard.

(Press release, International Generic Pharmaceutical Alliance)

November 2011


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