Sustaining Generic Medicines Markets in Europe

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Sustaining generic medicines markets 50To make the dispensing of generic medicines neutral from a financial perspective, pharmacistsare guaranteed the same absolute margin in euros on generic and originator medicines if a 35%substitution rate between generic and originator medicines is attained. If this target rate is notachieved, pharmacists’ compensation is supposed to be reduced, although this has neveractually happened.A financial incentive to dispense generic medicines has been created with pharmacists beingentitled to receive discounts of up to 10.74% of the ex-factory price for generic medicines ascompared with 2.5% for originator medicines. In practice, these discount ceilings were notadhered to. In 2004, estimates of discounts awarded to pharmacists amounted to 45% for genericmedicines and 6% for originator medicines (Peny, 2005). Consequently, pharmacists are includedin the Jacob law which regulates discounts awarded in the distribution chain to a maximum of20% in 2006 and 15% in 2007.9.2.6 Incentives for patientsPatient co-payment consists of a fixed amount per prescription and a proportion of the publicprice which varies according to the type of medicine. Patient co-payments are generally coveredby an additional private insurance taken out by the patient.In 2005, patients suffering from a chronic illness and who regularly take an originator medicinewere contacted by the third-party payer to inform them of the existence of a generic equivalent. Ina first instance, patients were sent a personalized letter. If consumption patterns did not change,patients received a telephone call in the second instance. This policy measure followsexperiments indicating that nearly half of patients started using a generic medicine after they hadbeen contacted (Medical Insurance, 2005).9.3 Policy analysisThe growth of the French generic medicines market has been slowed down by the existence oflegislation regulating medicine patent extension.The fact that medicine prices in France tend to be lower than in other EU countries in combinationwith the requirement that generic medicines need to be at least 30% cheaper than the originatormedicine inhibits generic medicine entry. Pressure on generic medicines prices increased as aresult of the introduction of additional price cuts in 2005 and 2006.
Sustaining generic medicines markets 51The implementation of the RPS has been accompanied by price reductions of originatormedicines, thereby removing the competitive price advantage of generic medicines. Also, there issome evidence of re-allocation of demand towards patented medicines with a similar therapeuticindication.The development of the French generic medicines market has been inhibited by the lack ofincentives facing physicians and patients to demand generic medicines. Physicians traditionallytend to prescribe brand-name, originator medicines and incentives to prescribe generic medicinesare limited. Patients have no financial incentive to demand generic medicines as they have to paynothing or a small percentage of already low-priced medicines.The generic medicines market has been driven by generic substitution which is financiallyattractive to pharmacists as a result of discounts awarded by generic medicines companies.However, these discounts benefit pharmacists, but not patients. They also inhibit thedevelopment of a competitive French generic medicines market where companies compete onthe basis of price. The Jacob law setting a maximum discount level reduces, but does noteliminate competition on the basis of discounts.Key factors hindering the development of the generic medicines market:• In the 1990s, the French generic medicines market was inhibited by legislation extending theperiod of patent protection, low medicine prices, the prescription of brand-name medicines byphysicians, and a financial disincentive for pharmacists to dispense generic medicines• Generic medicines have tended to lose their price advantage as compared with originatormedicines as a result of the RPS• Patients have no financial incentive to buy generic medicinesKey factors aiding the development of the generic medicines market:• Some policy measures to encourage physicians to prescribe generic medicines have beentaken in recent years• Substitution of generic for originator medicines is financially attractive to pharmacists
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Sustaining Generic Medicines Markets in Europe

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