Sustaining Generic Medicines Markets in Europe

Sustaining generic medicines markets 8515 Potential savings from generic substitutionTo underline the need for developing generic medicines markets, an exercise was conductedquantifying the potential savings from increased substitution of generic for originator medicines ina number of countries for which data were available in 2004.Focusing on the off-patent market, the top 10 active substances were selected by expenditure oforiginator medicines in 2004. As these active substances have the highest expenditure oforiginator medicines, they would be expected to generate the largest potential savings fromgeneric substitution. This exercise calculates the savings that can be made if originator medicinesfor the top 10 active substances are replaced by generic medicines. There is no country thatattains a 100% generic substitution rate in the off-patent market. Therefore, our analysis assumedthat, following generic substitution, 5% of market volume for each active substance would bemade up by originator medicines and 95% by generic medicines. Hence, the term “increased”generic substitution is used.Annual savings from generic substitution were obtained by calculating the average price level forthe group of originator medicines and for the group of generic medicines. The price differencebetween originator and generic medicines was then multiplied by the volume of originatormedicines to be substituted. The following equation was used to calculate savings from genericsubstitution:Annual savings = (average price of originator medicines – average price of generic medicines) x(volume of originator medicines – 0.05 x (volume of originator and generic medicines))It is important to stress that this exercise is carried out for illustrative purposes and does not claimto generate an exact estimate of savings from generic substitution. Also, generic medicinesmarkets evolve rapidly so that, even though the most recent data relating to 2004 were used, thedata may no longer reflect the market situation. One additional limitation of the analysis needs tobe noted. An active substance may contain medicines in different forms, strengths and packagesizes. Our analysis did not account for differences in form, strength or package size betweenindividual products, but substituted generic for originator medicines at aggregate level.Figures 20 to 30 show the top 10 active substances for a country, public expenditure on originatormedicines with that active substance, savings from increased generic substitution in absoluteterms and as a proportion of expenditure on originator medicines. These Figures indicate thatincreased substitution of generic for originator medicines can yield substantial savings. For the