Unequal treatment

Most governments have implemented policies that provide physicians with incentives to prescribe generics but these have had varying degrees of success. Brand loyalty, generic substitution, price regulations and patient cost-sharing can all affect the future uptake of generic medicines and their market penetration.

With the so-called patent cliff looming, Julie Altier, of London-based strategy and marketing consultants Simon-Kucher & Partners, looks at the role of generic medicines in national healthcare strategies across the world.

As generics are attractive cost-saving options, it is no surprise that they are at the centre of several current and future healthcare reform policies. Most governments have implemented policies and programmes that provide physicians with incentives to prescribe generics and pharmacists with incentives to substitute brands for generics.

In some cases, such as the US, Germany and the UK, these policies have succeeded in promoting generic use. In other markets, they have been less successful in promoting generics and have focused more on lowering overall expenditures. Therefore, brand prescribing remains high in these markets even after loss of exclusivity (LOE).

New and stricter policies have recently been implemented in some markets so the outlook may change in the next few years. This article explores why these policies have had unequal success so far across markets and examine how new policies seek to reverse this trend.

The US has one of the highest generic volume uptakes among developed markets.1 Typically in the US, within 12 months of LOE the market share of branded drugs drops by at least 90% as they are quickly replaced by generics. This can be explained in part by high patient cost-sharing and successful policies giving financial incentives for physicians to prescribe and pharmacists to deliver generics. Representing more than 75% of total prescriptions written in the US in 2010, IMS Health predicts generics will take close to an 80% share of all prescriptions in 2012.2

In the EU, there are two types of markets. On one hand, Germany and the UK are large markets with strong cost-containment measures and high physician acceptance of generics, leading to a fairly high generic volume uptake. As a result, in the UK nearly 85% of prescriptions written are for generics.3 On the other hand, France, Spain and Italy have much lower generic uptakes in terms of volume. In France, generics represent only about 24% of the reimbursable pharmaceutical market in terms of volume.4

There are several key factors that can explain the difference in generic uptake across markets.

Brand loyalty: Patients and physicians in markets with low generic uptake typically have high brand loyalty. Low acceptance and negative public opinion of generics is mainly attributed to a high level of distrust regarding efficacy and safety of generics and high level of comfort with the brand.

Low acceptance and negative public opinion of generics is mainly attributed to a high level of distrust regarding efficacy and safety

Despite demonstrated bioequivalence of the active ingredient, patients may not trust that the generic is the same as the brand. When coupled with little financial incentive to motivate switching and low price sensitivity, patients may prefer not to risk the switch. In addition, physicians in these countries are not used to reassuring patients regarding the safety of taking generics and are reluctant to prescribe generics.

Without further emphasis on education of generic safety and communication between patients and physicians, increasing generic use will remain challenging in markets where it is not common practice.

Generic substitution and physician prescription by International Non-proprietary Name (INN): Measures allowing automatic substitution have been positive in driving generic uptake in the US and Germany. Moreover, physicians’ buy-in is important as they are the ones making prescribing decisions and always maintain the right to require pharmacists to deliver branded drugs.

In the US, Germany and the UK prescribing by International Non-proprietary Name (INN), or generic name, is common practice and generic substitution at the pharmacy level is widespread.

In the US, all states have laws allowing generic substitution, with 15 states mandating delivering a generic unless requested otherwise by the physician.5 Even for states that do not mandate generic substitution, there are still heavy incentives for large pharmacy chains to deliver generics due to significant contracting and discounts currently in the market.

In Germany, physicians have allocated drug budgets and can be fined for being over budget. Therefore they are less inclined to opt out of the automatic generic substitution by de-selecting ‘aut idem’ or prescribing another patented product, unless they feel it is really necessary.

In the UK, programmes such as QIPP (Quality, Innovation, Productivity and Prevention) and the Quality and Outcomes Framework have made significant progress in incentivising physicians to prescribe generics and over-the-counter substitutes. In addition, computer programs such as SCRIPTSWITCH are used by primary care trusts (PCTs) to make suggestions and encourage clinicians to prescribe generic therapies. Although physicians may still require the brand if they think the generic is not appropriate, these programs have been extremely effective in promoting generic uptake.

In the UK computer programs are used by primary care trusts to make suggestions and encourage clinicians to prescribe generic therapies

The UK Department of Health considered mandating generic substitution of medicines in primary care and pharmacy setting in 2010. However, ultimately it decided against it to respect doctors prescribing decisions, which may vary clinically by patient. As such, currently pharmacists may substitute only if the physician allows it. In general, physician programmes are successful in the UK and overall pharmacists are willing to substitute when allowed.

In contrast, Spain, Italy and France have historically had more limited success with similar policies allowing generic substitution. In the past, physicians in these markets have been more reluctant to prescribe generics due to small prices differences between brand and generic along with a lack of mandate or financial incentives to prescribe by INN. However, new policies seek to reverse this trend and increase prescribing of lower priced drugs.

In Spain, INN prescribing has historically varied widely across regions. However, after successful policies mandating prescription by INN in some regions such as Andalusia, in September of 2011 a Royal Decree was enacted to implement this policy nationwide. Coupled with an existing policy requiring pharmacists to deliver the cheapest alternative if prescribed by INN, generic uptake in Spain is expected to increase in the coming years and generate annual savings of €424m for the healthcare system.6

Similarly, in Italy, a new decree very likely to pass in 2012 requires physicians to provide clinical rationale for not allowing generic substitution of a branded drug for a specific patient. In addition, they are required to inform patients of generic alternatives for a specific indication. Furthermore, under this policy, given permission by the physician, pharmacists are required to deliver the lowest-priced generic unless patients specifically ask for the brand.

In France, the government recently announced new measures for 2012 to increase generic substitution by giving bonuses to physicians with high substitution rates

Similarly, in France, the government recently announced new measures for 2012 to increase further the rate of generic substitution by giving bonuses to physicians with high substitution rates.

Price regulations: In markets such as the US, Germany and the UK, manufacturers are free to maintain brand prices after LOE and thus the main way to derive cost savings is to reduce usage of branded drugs. There may be other incentives for manufacturers to reduce the price of the brands after LOE such as in Germany where Fixed Reference Price (FRP) groups may include patent protected and generic drugs. In that case, the FRP brings down the reimbursed price of the brand and requires patients to pay the difference between the brand and the FRP level unless the manufacturer reduces the price of the brand.

However, these price changes are not as regulated as in price-controlled markets such as Italy, Spain or France, where cost-saving efforts also involve regulations to lower the prices of brands to or closer to the generic level. For example, when a generic is launched in Spain it has to be priced with a minimum discount over the brand price. A FRP is then created, so that the lowest generic price becomes the maximum reimbursed price.

Similarly in France, there is a mandatory price discount for the generic compared with the brand drug at launch. The branded drug also has a mandatory price cut at generic launch. Both the generic and the brand have an additional price cut after 18 months. FRPs are also created but only for molecules with low generic penetration rates one to two years after generic launch.

These strict pricing rules have had two major consequences. First, generic prices have been prevented from going down further due to limited price competition. As a result, prices of generics in price-controlled markets are not always as low as can be seen with generics in the US, the UK or Germany.

Second, in these price-controlled markets, the price difference between brands and generics is significantly reduced due to negotiated brand and generic prices and FRP groups that establish a maximum reimbursed price based on cheapest alternative or average price within the generic group. This limits the cost-savings that can be obtained from generic use, as the healthcare system saves only a nominal amount by prescribing generics. However, even though manufacturers can be less concerned with losing market share, their revenues will still be affected by price regulations in these markets.

Patient cost-sharing: In the US, generics are preferred through a tiering system so that patients have a financial incentive to request generics. These schemes play a major role in boosting generic uptake. On the other hand, in markets such as France, there is little incentive for patients to take generics, since their out-of-pocket cost at the pharmacy is often the same as the brand.

Patient cost-sharing systems may not always promote generic use, especially if the cost differential is insignificant to the patient

However, patient cost-sharing systems may not always promote generic use, especially if the cost differential is insignificant to the patient. Markets such as Italy and Spain, where price regulations can result in a nominal price difference between generics and branded drugs, the differential may not be sufficient to warrant the patient to switch to generics.

Table 1 provides an overview of the measures and how their impact on generic uptake in the various markets. Looking at the different measures across markets, price regulations and generic acceptance may be factors limiting the potential impact of other policies.

Table 1

Future market outlook

Even though so far generic uptake has been slow and limited in some markets, the recent implementation of new pro-generic policies has the potential to reverse the trend. Recent reforms encouraging or mandating physician prescribing by INN in Italy, Spain and France are expected to save these healthcare systems millions of euros.

However, these policies may receive pushback from physicians and patients, and will take time to become fully implemented. Physicians’ concerns of losing prescribing freedom and lack of punitive provisions may lead them to continue prescribing brands. In addition, with little financial incentive to switch, patients may request to stay on branded drugs.

Without setting the right incentives for key stakeholders, it is unlikely that there will be a dramatic increase in generic use. For branded manufacturers it will be important to monitor changes in markets with historically low generic uptake to determine whether they will continue to remain loyal to brands.


1. Pharmaceutical Key Trends 2011 – Generics Market Overview. Datamonitor, April 2011

2. 74 Percent and Growing: Most Pre-scriptions Now Written For Generic Drugs. About.com Pharma. http://pharma.about.com/b/2011/05/25/74-percent-and-growing-most-prescriptions-now-written-for-generic-drugs.htm

3. UK Department of Health. http://www.dh.gov.uk/en/MediaCentre/Pressreleases/DH_120502. Accessed February 15, 2012

4. Pharmaceutical Key Trends 2011 – Generics Market Overview. Datamonitor, April 2011.

5. Generic Substitution: the Art of Saving. DC Governors’ Staff Briefing, March 9, 2011. Jessica M . Mazer. Pharmaceutical Care Management Association.

6. Impacto de cada una de las medidas del RDL 9/2011. El Global.net. September 2, 2011. http://www.elglobal.net/articulo.aspx?idart=550534&idcat=629&tipo=2. Accessed February 20, 2012.