All OECD countries see the development of generic markets as a good opportunity to increase efficiency in pharmaceutical spending but many do not fully exploit the potential of generics (Figure 10.12). In 2013, generics accounted for more than three-quarters of the volume of pharmaceuticals sold in the United States, the United Kingdom, Chile, Germany and New Zealand, while they represented less than one-quarter of the market in Luxembourg, Switzerland, Italy, and Greece.

Some of the differences in generic uptake can be explained by market structures, notably the number of off-patent medicines, and by prescribing practices, but generic uptake also very much depends on policies implemented by countries (EGA, 2011; Vogler, 2012). Several countries have expanded their efforts to encourage generic uptake since the onset of the economic crisis in 2008.

Prescribing in International Non-proprietary Name (INN) is permitted in two-thirds of OECD countries and is mandatory in a few countries (e.g. Estonia since 2010, Portugal and Spain since 2011, and France since 2015). Similarly, pharmacists are allowed to substitute brand-name drugs with generics in a majority of OECD countries. While generic substitution is mandatory in some countries (e.g., Denmark, Finland, Spain, Sweden, Italy), New Zealand and the United Kingdom have high generic penetration without any substitution mandate.

Financial incentives for physicians, pharmacists and patients have been implemented to boost the development of generic markets. For instance, France (in 2009 and 2012) introduced incentives for GPs to prescribe generics through a pay-for-performance scheme while Japan (in 2012) increased the share of generics in total prescribing leading to a bonus.

Pharmacies are often paid through mark-ups based on the price of medicines. This disincentive to substitute a generic for a more expensive drug has been addressed in some countries. France guarantees pharmacists an equivalent mark-up, while in Switzerland, pharmacists receive a fee for generic substitution. In several countries, pharmacists have the obligation to inform patients about the possibility of a cheaper alternative.

Patients have a financial interest to choose cheaper drugs when their co-payment is lower for generic drugs than for its equivalent. This is generally the case in all systems using reference prices (or fixed reimbursement amount) for clusters of products. In Greece, patients choosing originator over generic drugs are now required to pay for the difference. In France, since 2010, patients refusing generic substitution have to pay in advance for their drugs and are reimbursed later.

These policies, associated with patent expiries of several blockbusters in recent years, have contributed to the increase in generic market share observed over the past decade (Figure 10.13). In Portugal, the generic reimbursed market grew from virtually zero in 2000 to 39% in volume and 23% in value in 2013. In Spain, the generic reimbursed market share reached 47% in volume and 21% in value in 2013, up from 3% in 2000. Beyond encouraging generic take-up, it is also important to promote the lowest possible price for generics. Figure 10.12 suggests, for instance, that the differential price between brand-name and generic drugs is much higher in the United Kingdom than in Germany.

One way to exert pressure on generic prices is tendering, which has been used in New Zealand, the Netherlands and Germany with some success. Many countries, however, prefer regulating the price of generics at market entry by reference to the price of the originator (a practice known as “generic price linkage” ). Several countries have recently increased this gap. In Canada, several provinces have introduced or reduced the reimbursement prices of generics included in public plans' formularies since 2010. As a result, generic price caps are around 25% of brand name products' price (PMPRB, 2015). France and Greece also increased the gap between originator and generic prices to 40% and 60% respectively (Belloni et al., forthcoming).

References

Belloni, A., D. Morgan and V. Paris (forthcoming), “Pharmaceutical Expenditure and Policies: Past Trends and Future Challenges” , OECD Working Paper, OECD Publishing, Paris.

EGA – European Generic Medicines Association (2011), Market Review – The European Generic Medicines Markets, EGA.

PMPRB – Patented Medicine Prices Review Board (2015), NPDUIS CompassRx: Annual Public Drug Plan Expenditure Report 2012/13, 1^st Edition.

Vogler, S. (2012), “The Impact of Pharmaceutical Pricing and Reimbursement Policies on Generic Uptake: Implementation of Policy Options on Generics in 29 European Countries – An Overview” , Generics and Biosimilars Initiative Journal, Vol. 1, No. 2, pp. 44-51.

Note: Information on data for Israel: http://dx.doi.org/10.1787/888933280737