This research will look at the adoption of generic medicines in specific three countries in Europe (The Netherlands, Poland and Portugal). These three countries have a significant difference in adoption; the reasons for this adoption difference can be explained by several regulations which are implemented by these countries. In previous research it is proven that regulations have a direct effect on the adoption however, this research will have a closer look which regulations in specific are important to stimulate generic medicines in the market. Results show that too much regulation around the entry of generic medicines in the market will lead to slow growth adoption in the market compared to countries which adopt less regulation. Recommendations to stimulate the generic medicines in the market will be presented in the last chapter.
The problem background
A lot of research has been done on the introduction of generic medicines. Examples include the obstacles to generic substitution in Sweden (Anderesson et al. 2005) and the use of generic medicines and the implications for the pharmaceutical market (King & Kanavos, 2002).
However, there is limited cross-country research examining the relationship between the implementation of regulation, the effects of incentives given to pharmacies and physicians and consecutive adoption of generic medicines.
The available research is limited to one of these elements, there has not been made a direct consideration between these elements which influence the adoption of generic medicines.
In 1995 the European Medicine Evaluation Agency (EMEA) offers a EU- wide authorization process which replaced the ongoing single authorization process of each country separately, this means that regulation is harmonized regarding the entry of generic medicines The EMEA will approve the generic entry of a medicine before it can be presented on the European pharmaceutical market. This centralized procedure has decreased the approval delays for generic medicines in the EU resulting in the fact that patent regulation and approval procedures for medicines no longer have a large effect on the development of generics (Danzon, et al. 2003).
National regulation still has an impact concerning price and reimbursement approval which has to be authorized by national authorities. Moreover, it is examined that generics have had more success in countries with more flexible pricing policies (Garattini & Tediosi, 2000) and previous research has shown that the prescription of generic medicines is dependent on the incentives given to pharmacist, and other parties (Hellerstein, 1998).
However, with recent reforms in the national regulation systems across European countries, flexible generic pricing policies and incentives given by the national governments are no longer the main determinants of successful entry of generics on the market. Obligatory generic substitution systems and other regulations implemented by European governments have become at dominant factor in explaining the adoption of generic medicines as a consequence that incentives for physicians, pharmacists and patient have decreased due to the obligatory system (Timonen, et al. 2009).
This thesis gives an overview of the relation between the adoption of generic medicines and the regulation in three European countries: The Netherlands, Portugal and Poland. These countries are chosen because they have different implementations in regulation concerning generics and the adoption rate in these countries differs significantly. Recommendations for European countries and a conclusion about the most effective method to increase the use of generic medicines in relation with regulation will be exposed.
The problem statement
The differences among three countries; (The Netherlands, Portugal and Poland), concerning the adoption of generic medicines in relation with regulation and influencing incentives in these European countries.
The motive to present these specific three countries is resulting from the fact that the adoption level of generic medicines differs significantly. Therefore a clear image can be provided between the differences of adoption connected with the accompanying regulation adopted in that country concerning generic medicines
Dependent variable: adoption of generic medicines
Independent variable 1: regulation of generics medicines
Research question 1:
What are the differences in regulation about the use of generic medicines among the Netherlands, Portugal & Poland?
Research question 2:
What is the role of these regulations on the adoption of generics?
The thesis should give European countries and in particular public policy makers, a clear image on the effects incentives can have concerning the adoption of generic when prescribing these medicines, and which type of regulation is the most effective for the increase in adoption of generics.
The prescription of generic medicines is intensively regulated. This results in many implications for pharmaceutical companies especially, concerning the implementation of generic medicines in the market. Considering, the fact that the regulation of the prescription of generic medicines has a direct effect on the use of generic medicines. Therefore the adoption level for generic medicines is likely to change when the regulation changes.
Pricing strategies for pharmaceutical companies have a diminishing effect due to the strict pricing regulation implemented by public policy makers.
Branding strategies are also complicated to implement in the pharmaceutical industry because of the many regulations adopted. However, branding strategies are very important; they can strengthen the bond between the buyer and the seller (Blackett & Robins, 2001).
Pharmaceutical companies have to make important decisions regarding the implementation of the generic medicines in the market. They should be aware of all regulation to be able to compete in the pharmaceutical industry.
Country-specific results have been presented in several papers how regulation influences the use and adoption of generic medicines. However, a cross-country research on the effects of regulations implemented, in relation to the adoption of generic medicines. More specifically, the effects of incentives, given by policy makers, to pharmaceutical companies and the accompanying marketing strategies implemented by pharmaceutical companies, have not been examined earlier.
Overview of the Rest of the Chapters
This chapter gives an overview on the question: What are the differences in adoption of generic medicines between the Netherlands, Portugal and Poland?
These three countries will be investigated carefully; previous literature studies will give a clear image about the actual adoption of generic medicines in these countries.
Background information will be presented to understand the structure of the chosen countries and the differences in adoption.
Data will be gathered to come to an answer to the research question 1: What are the differences in regulation about the use of generic medicines among the Netherlands, Portugal & Poland?
Chapter four will explain the role of regulation on the adoption rate of generic medicines (research question 2).
Public policy makers are in general in favour of increasing the use of generic medicines, because of the market advantages. Chapter 5 will give an overview of the most effective policy which is used among the three countries presented earlier in the thesis.
Further recommendation to the public policy makers and limitations of the research will be dealt with in this chapter. A conclusion of this research will be presented.
Chapter 2: differences in adoption of generic medicines
This chapter will give an answer to the differences concerning the adoption of generic medicines between the Netherlands, PortugalandPoland.
The level of generic medicine adoption differs significantly across Europe. This chapter will have a look at these differences and the resulting factors that have lead to these differences in adoption.
Other implications such as different policy regulations and incentives given to pharmacist by the policy makers will be dealt with in chapter 3. They will be dealt whit in a separate chapter because they are dominant factors in the adoption of generic medicines.
A distinction can be made between mature generic markets and developing generic markets (Simoens, 2009). The level of adoption of generic medicines in these countries differs from less than 10 per cent to more than 40 per cent. The share value in the market for generic medicines is 8.8 per cent for the Portugal, 19.8 per cent in the Netherlands and Poland ranks the top with 65.2 per cent (“A Review on the European”, n.d.).
Comparing these figures with other European countries, Portugal falls in the lower range of adoption and Poland is situated in the upper range of the adoption level of generic medicines in their market.
According to Simoens and Coster, (2006), Poland and the Netherlands are seen as mature generic markets in Europe, while Portugal is seen as a developing market.
There are several factors (historical background and cultural elements), which have influenced the adoption rate of generic medicines in these countries. Clarifications of these elements are stated below.
An explanation for the differences in adoption of generic medicines can partially be explained by the historical differences between the Netherlands, Portugal and Poland.
In Western Europe, pricing and reimbursement policies naturally developed as an evolutionary economic process. However, this was not the case for Central and Eastern Europe states (CEE) which are now members of the EU. These CEE countries used to have a socialistic type of economy, and after the fall of the Berlin wall (1989) many of those countries faced political and economic bankruptcy. Large-scale reform was necessary in every single sector to guarantee their economical and political well being. The health care system was also a part of this sector and even today, ongoing reforms are taking place. There is still a lot that has to be done in the CEE countries, specifically within the health care system. Hospital decentralization, modernization and privatization and pricing and reimbursement policies are some examples of areas where further development is preferred (Kazakov, 2007).
These necessary reforms and changes are also applicable to Poland. The Netherlands and Portugal do not suffer from these reforms, due to fact of not having a communistic history.
Another implication of this socialist history is the fact that Poland was already used to adopt generic medicines, as brand medicines were not available in these countries due the absence of product patents until early 1990s (Simoens & de Coster, 2006).
Cultural sensitivity is one of the most widely accepted principles among public health (Resnicow, et all. 2000). According to Resnicow (2000), cultural sensitivity indicates “The extent to which ethnic/cultural characteristics, experiences, norms, values, behavioral patterns, and beliefs of a target population as well as relevant historical, environmental, and social forces are incorporated in the design, delivery, and evaluation of targeted health promotion materials and programs” (page 272).
The relation between the pharmacist and the pharmaceutical representative can have a huge impact on the prescription of medicines and therefore on the adoption of generic medicines.
Historical developments in Poland have created a positive attitude towards prescribing generic medicines, as prescribing generic medicines has been a common practice in Poland until the early 1990s. In the Netherlands, on the other hand, generic substitution is more driven by the pharmacist (Simoens & de Coster, 2006).
On average a pharmaceutical company will spend twice as much on marketing to the pharmacist and the public than on research and development (Zipkin, et all. 2005).
A more detailed view about the adoption rate of generic medicines concerned the three countries (the Netherlands, Poland and Portugal) are presented below:
The Dutch generic market has grown rapidly over time; public expenditure has increased from 185 million euro in 1994, resulting in a market share value of 8.5 per cent. In 2004 the market share has increased to 17.7 per cent; this means that the value has almost doubled. The market share increased also dramatically from 19.9 per cent in 1994 to 44.3 percent in 2004 (Simoens & de Coster, 2006). Results from an EGA survey conducted in 2007; show that the market share of generic medicines has increased to more than 50 per cent (see figure 2 and 3 in appendix B).
Due to historical implications mentioned before, Poland has a very mature generic market. In 2006 the market shares of Poland were 60 per cent by value and close to 80 per cent by volume (see figure 2 and 3 in appendix B).
In the 1990s the generic medicines adoption in Portugal did not exceed more than 1 per cent. An introduction in the generic policy in the year 2000 caused for an increase in market share of 8 per cent measured until 2004. An explanation of the generic policy will be provided in chapter 3 (Simoens & de Coster, 2006).
Recent results from an EGA survey implemented in 2007 show that the market share has slightly increased to almost 10 per cent (see figure 2 and 3 in appendix B).
Chapter 3: differences in regulation about the use of generic medicines
What are the differences in regulation about the use of generic medicines among the Netherlands, Portugal & Poland?
There are several domains in regulation which will eventually influence the structure of the market and determine how the pharmaceutical companies can operate most effectively in this pharmaceutical market. This thesis presents the most important domains where regulations are implemented; market authorisation, pricing, incentives, and marketing implications.
In Europe, the process regarding market authorisation is very complex. Market access for generic medicines may differ from country to country; this holds there is little transparency regarding the entry of generic medicines in Europe.
A pharmaceutical company may receive market authorisation to enter the market in a specific country. However, other regulations regarding the reimbursement and price of the generic product still need to be determined by the government. This means the process, concerning the entry of the generic medicine, can be delayed up to three times (“A Review on the European Generic Pharmaceutical Market in 2005”, n.d.).
The EU directive was introduced to create a better system regarding the entry of generic medicines in Europe. There is a transparency directive, 89/105/EEC, which specifies that there is a 90 day limit regarding the reimbursement and pricing decision. However, the time delays vary from country to country (Garattini & Tediosi, 2000).
The table below (“A Review on the European Generic Pharmaceutical Market in 2005”, n.d.) gives an overview of the times delays per country for price approval to enter the market.
With respect to the countries in this thesis, the table above (“A Review on the European Generic Pharmaceutical Market in 2005”, n.d.). shows the following:
- Poland does not have a time delay because the pricing and reimbursement approvals are granted together with the market authorisation of the generic medicines.
- In the Netherlands, we can see a delay of between 10 and 15 days which could be defined as a relatively efficient time to approval compared to other countries in Europe.
- Portugal is very inefficient with the entry of the generic medicines, the status of pricing and reimbursement will only be given after a 90-day delay (“A Review on the European”, n.d.).
Price regulations are only applicable when the generic medicines will be reimbursed. The most effective regulation is a price restriction on the maximum reimbursement of that specific medicine or a maximum price that pharmaceutical companies may charge the medicine users (Danzon & Keuffel, 2007).
Most European countries, including the countries in this study, have introduced a reference price system. A reference price system entails that there are regulations which will restrict the reimbursement level of generic medicines, but that the price of the generic medicines itself will be uncontrolled. Under the reference price system, groups are clustered into certain reimbursement level, based either on the same compound or different compounds but with the same mode of action or with a similar name.
All products that are placed in the same group are reimbursed at the same price per daily dose, which is also called the reference price. In general, the reference price in a group will be set at the level of the cheapest medicine or the median in that group. If pharmaceutical manufacturers price their product above the reference price, the user of the generic medicines needs to pay the outstanding amount above the reference price.
There are two different pricing systems in Europe: a generic free pricing system and a generic price-regulated system. Both systems determine the degree of adoption of generic medicines. In a generic free pricing system companies can decide on the height of the price of a new generic medicine introduced in the market themselves, in contrary to a price regulated system (Simoens, 2010).
The reference pricing system has three levels of implementation, the higher the level of the system is, the more the prices are regulated.
Poland has a low reference pricing system, the Netherlands could be defined as a medium reference pricing system and Portugal uses a high reference pricing system.
As presented in the table below (Bongers & Carradinha, 2009), one can see which European countries fall in a regulated price system and have no free pricing system.
The patients themselves (the demand side) play an important role in the prescription of generic medicines. Physicians and pharmacists and other contributing parties will prescribe generic medicines to reduce the costs for the payer, which is in this case the consumer of the medicine.
Pricing and reimbursement systems play a role for the patient. The patient will contribute to the financing of the health care system, in particular with the co-payment arrangement. This is a common practice in all European countries (with the exception of Malta), but the implementation of co-payment differs significantly across countries. Nevertheless, in all countries that employ a co-payment arrangement a financial contribution is made by the medicine user. Patient co-payment arrangements can strongly influence the end decision of the patient on which medicines to take (“A Review on the European Generic Pharmaceutical Market in 2005”, n.d.). The reimbursement of generic medicines is taken care of through an insurance model; however the co-payment arrangement is based on a percentage of the cost of the medicine (Kazakov, 2007).
Pricing regulation related to the countries in the thesis;
The Netherlands uses an enforcing pricing regulation, which sets a maximum for the pricing of medicines. In 1996, this system was implemented. In general, it led to a decrease of 15 per cent of the average medicine price in the market (Simoens & de Coster, 2006).
However, the prices of generic medicines in the Netherlands still tended to be higher compared to other EU countries. Mediation in short-term pricing strategies such as implementing similar pricing systems, have increased and stimulated the share in the markets for generic medicines, where competition already existed (Bongers & Carradinha, 2009).
Polish medicine prices tend to be lower compared to other EU countries. They work with a price regulated system for generic medicines. The pharmaceutical companies want to be absorbed in the reimbursement list for medicines. The reference price in Poland is set just below or just above the cheapest generic medicines in the Polish market (Simoens, 2009).
Pharmaceutical companies may price their product above the reference price, taking into account that as a result they will not be placed on the reimbursement list (Kazakov, 2007).
Portugal established a regulation which says that the minimum price difference of generic medicines and brand medicines should be a least 35 per cent in 2001. In 2005 Portugal agreed to reduce the overall medicine prices by 6 per cent. Of that 6 per cent 4.17 per cent had to be reduced by the pharmaceutical company and the other 1.93 per cent had to be reduced by the wholesalers and pharmacists. The reference price system was introduced in 2003 where the reference price was set at the level of the most expensive generic medicine (Simoens & de Coster, 2006).
Despite the fact Portugal has a developed market, the market share concerning generic medicines is still relatively low compared to other countries in Europe. Regardless, of the fact that companies producing generic medicines provide affordable treatments to patients, other savings can only be achieved if government supply side policy initiatives are designed to increase the competitiveness of generic medicines in the market (Bongers & Carradinha, 2009).
To establish a generic medicine market, the supply side (pricing system) needs to be supplemented by demand side policies which create incentives for physicians, pharmacists, and patients to use generic medicines (Simoens & de Coster, 2006).
Instruments to promote generic medicines have been in place for a long time and have been widely accepted in the Netherlands (Vogler & Schmickl, 2010).
Incentives for physicians
The Dutch government has stimulated physicians to prescribe generic medicines, which is supported by an electronic prescription system. In the Netherlands it is customary to develop and implement guidelines and treatment protocols on how to prescribe generic medicines in order to efficiently increase the adoption of generic medicines. An important feature is that there are no sanctions for physicians who do not prescribe generic medicines (Simoens & de Coster, 2006).
Incentives for pharmacists
Generic substitution is allowed for the pharmacist when the physician and the patient agree with it, however, it could be indicated by the physician that generic substitution is not permitted due to health reasons. This means that when a branded drugs’ patent has expired pharmacists are allowed to distribute a generic substitution unless indicated otherwise by the physician. Health insurers have also agreed upon several targets for the pharmacist in distributing generic medicines (Simoens & de Coster, 2006). Generic substitution has been connected to financial incentives for the pharmacist for a long time, however these incentives have been abolished since 2004. Nevertheless, the adoption in the market of generic substitution has not decreased (Vogler & Schmickl, 2010).
Incentives for the patients
In the Netherlands the patients do not have a financial incentive to buy generic medicines because there are no patient co-payments arrangements. Nevertheless, patients do have to pay the outstanding amount when the price of the medicines is above the reference price, which is set by the government (Simoens & de Coster, 2006).
Incentives for physicians
Physicians are not intensively encouraged to prescribe generic medicines. Due to the historical background physicians are already accustomed with the use and prescription of generic medicines (Simoens & de Coster, 2006).
Incentives for pharmacist
Generic substitution is allowed by pharmacists; whenever a branded drug is prescribed a pharmacist may replace this by a generic substitution. Pharmacists are obliged to inform the patients about the generic substitution. Price reductions implemented by pharmaceutical companies encourage pharmacists to prescribe generic medicines (Simoens, 2009).
Incentives for the patient
There are four levels of reimbursement for the patient.
The first level includes a fixed amount per prescription which will be reimbursed when these are essential medicines. The second and third level consist of supplementary medicines which will be charged to the patient through the co-patient system. The patients have to pay 30 to 50 per cent themselves. The fourth level holds that other prescribed medicines which are not on the reimbursement list will be fully paid by the medicine user (the patient). However, initiatives to inform the patients about generic medicines have not been presented (Simoens & de Coster, 2006).
Incentives for physicians
In 2002, a regulation was implemented in Portugal which formulated that from that moment on physicians would be obliged to prescribe a generic medicine if possible. However, physicians and pharmacists are free to add brand medicines to prescriptions that include more than one medicine, of which at least one is generic. The physicians are to inform the patient about other generic medicines and the accompanying price differences. Even though guidelines are available, the system has not been fully implemented. An explanation for this is that the physicians and the pharmacists are neither being rewarded for prescribing, nor being punished when not prescribing generic medicines (Simoens & de Coster, 2006).
Incentives for pharmacists
Physicians can indicate whether they permit generic substitution on the prescription form. In the cases that generic substitution is allowed by the physician, the pharmacists have to prescribe the cheapest generic medicines available. Pharmacists do not have any financial incentive to prescribe generic medicines as the generic margins for pharmacists have been dramatically low since the introduction of the regulation in 2005 (the overall reduction of generic medicines prices) (Simoens & de Coster, 2006).
Incentives for patients
Portugal has 5 different levels of reimbursement.
In the first level 100 per cent of the medicine will be reimbursed when they are classified as life saving. The second level holds that 95 per cent of the medicines will be reimbursed, the third level holds 70 per cent, the fourth level 40 per cent, and the fifth level holds a percentage of 20 per cent.
Patients with a low income will receive a 15 per cent additional compensation on the stated reimbursement level.
Until 2005, patients were rewarded with a 10 per cent additional reimbursement when they asked for a generic substitution. However, with the abolishment of the reward system of 10 per cent, the patient will now only receive a price reduction of 6 per cent for the use of generic medicines. The patient does not have an incentive but rather a discouraging effect to use generic medicines. Nevertheless, pro-generic campaigns have been introduced by the government since 2006; the effects of these campaigns are not yet clear (Simoens & de Coster, 2006).
Previous research shows that the patient co-payment arrangement in Poland and Portugal plays a visible role in stimulating the use and adoption for generic medicines (Simoens & de Coster, 2006). For an overall overview of the regulation implemented across these three countries a table is presented below.
|4 levels||Pay excess when
|Not encouraged but accustomed to prescribe||Stimulate to prescribe||obligated|
|Allowed and have financial incentive||Allowed unless indicated else||Allowed but no financial incentive|
|Financial incentive||No financial incentive||No financial incentive|
A generic medicine should appear under the international non-proprietary name (INN). This entails, that a generic medicine should be marketed without a commercial brand name but in fact, three categories there can be distinguished; branded generics (copies of generic medicines with their own brand name), semi-branded generics (products marketed under the INN following the name of the manufacturer of the medicines) and medicines marketed under INN (Garattini & Tediosi, 2000).
The EU directive 65/65/EEC was established, to approve marketing of a drug.
An allowance for introducing a generic medicine and detailing these medicines should be supported by several data available of the generic medicines (for example clinical data.)
There are a lot of restrictions concerning advertisements and promotion activities of pharmaceutical products. These are presented by the The European Parliament and the Council of the European Union (2004) .Together with price regulation, advertising plays an important role in the pharmaceutical market. In general patients are uninformed about the most effective and available treatments, they depend on the diagnosis and treatment suggestion from the physician. Since the physician will prescribe the medicine it can be stated that they will directly affect the extent of competition between different treatments and medicines available. Therefore it not remarkable that the physician is the target of huge advertisement campaigns and that detailing in the pharmaceutical industry is mainly focused on physicians (Königbauer, 2006).
The volume of detailing in the pharmaceutical market depends on several factors such as: the prevalence of the disease, the amount of competition for the medicine, the number of physicians who might prescribe the generic medicines, and like any other product in a market, taking into account the product life cycle of the product (Berndt, et al 2007).
What is the role of these regulations on the adoption of generics?
Approval of generic medicines
The success of a gene