Same Difference
by Simon Kent
July 2008
Across Europe, incentive programs have been designed, redesigned and implemented to encourage physicians to prescribe generic medications. Although the practice may help reduce costs, does it represent value for everyone?
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One of the main problems for government-subsidized health services is that the cost of that service is inexorably rising. An aging population, plus advances in medical knowledge and practice, puts national health services across Europe under pressure. As a result, politicians and critics alike are keen to analyze the delivery structures of health systems to identify areas where costs can be saved. The United Kingdom and Germany, for example, have been gripped by arguments about the bureaucracy that surrounds their health provision—from the way funds are raised and managed to the number of managers the service employs.
Although opinion is often divided about how to organize people and finances, one area of provision seems to unite commentators as a relatively easy win for delivering the same health care at a decreased cost: the prescription of generic pharmaceuticals. In the United Kingdom—where almost 25 percent of all primary care expenditure is for drugs—prescribing generic medicines rather than more expensive brand names theoretically gives physicians the chance to cut expenditure without compromising the quality of treatment.
Best of all, generic prescribing is not a one-time price-cutting measure—there is always room to improve and realize greater savings. Despite the fact that generic prescribing already accounts for 83 percent of prescriptions in the United Kingdom, a report from the U.K. parliament’s Public Account Committee in February stated that the National Health Service (NHS) could save £200 million pounds (around US$395 million) per year by increasing generic prescribing. To the NHS, this would represent an approximate 5 percent savings off of the £8.2 billion pounds (around US$16 billion) it annually spends on prescription drugs.
Karolina Andersson, a researcher at The Nordic School of Public Health, in Göteborg, Sweden, wrote a thesis in 2006 called Swedish Pharmaceutical Benefit Reforms – Analysis of implementation, pharmaceutical sales patterns and expenditures, which drew the conclusion that changes to the way generics had been supplied to patients since 1997 have reduced health expenditures for the country.
Finally, a 2007 IMS Health report — The Impact of Healthcare Reform on Germany’s Pharmaceutical Market — has forecast a decrease in costs of 2 percent to 3 percent, or US$32 billion to US$37 billion, attributed to changes in the supply, pricing and prescribing of generics. Furthermore, as new significant patents expire and global competition in the generic market increases, these savings may be only the tip of the iceberg.
On the face of it, this is good news for governments and taxpayers, but whether it is equally good news for patients and the pharmaceutical industry remains to be seen. Governments and health organizations may design and maintain incentives for their doctors to prescribe generics, but the worry is that this practice effectively skews physicians’ decisions.
A Worthy Substitute
According to Douglas Lundin, a health economist at the Swedish Pharmaceutical Benefit Board based in Solna, Sweden, the introduction of mandatory generic substitution in 2002 has been met with broad acceptance by his country’s prescribing physicians.
“They accept the situation because they operate in tight budget restrictions,” he says. “Generic substitution can help them afford new drugs to use on other patients. It’s a question of where the expenditure is directed.”
In Sweden, the switch from branded drugs to generics is made at the pharmacy level rather than by the physicians themselves, so every drug prescribed is automatically switched for the cheapest generic whenever possible. Lundin says because the pharmacist’s margin is a percentage of the price paid, it means revenue is lost by the pharmacy every time a switch is made. This is no hardship, however, because the pharmacy is a state-owned monopoly. It may become a problem when and if the current government opens the pharmacy service to private business who will be less convinced of the need to forgo profits in order to keep overall health service costs down. “If we want the system to work efficiently in the future with privately owned pharmacies, we will have to provide incentives to the pharmacists,” Lundin says. “They won’t do the switch if they lose money.”
Lundin reports drug expenditure as being “almost constant” in Sweden for three or four years until the recent introduction of new cancer drugs caused an upturn—a classic illustration of how medical advancement can cause financial difficulties. Maintaining control over these costs without mandatory generic substitution may prove extremely challenging because, according to Andersson’s research, other methods of providing incentives for generic prescribing have a less effective impact on overall expenditure. An increased co-payment for pharmaceuticals, for example, was associated with only a temporary decline in cost increase.
A Generic Too Far?
Dr. Martin Duerden is both a general practitioner and medical director at Conway Local Health Board in the United Kingdom. He has experience with incentive schemes from the perspective of prescribing generics from the strategic level, designing a system to deliver cost savings, and in the clinic, where patients need access to quality health care.
“There is an argument that states that simply prescribing generically is not the be-all and end-all of delivering efficient health care,” he says. In some cases, such as with products that have modified release, it may be better not to prescribe generically because the alternatives may have a different effect, even though they have been licensed as “essentially similar” to the originator product, Duerden says. “There is an effective limit to generic prescribing,” he says. “Ideally you should build in a basket of drugs you wouldn’t want to prescribe generically.”
Although medical schools generally encourage U.K. physicians to prescribe generic medications—also known as INN prescribing (after the International Non-proprietary Name standard)—on the grounds that it is perceived as being more scientifically correct, further incentives are at work within the NHS. Rewards and penalties for meeting and exceeding budgets and for hitting and missing generic prescription targets have been introduced in diverse ways by Primary Care Trusts (PCTs), each with the aim of reducing costs. In addition, the NHS Institute Productivity Metric for prescribing statins now sets a clear target for generic prescribing across the country. Indeed, the Department of Health creates “League Tables” showing which PCTs are closest to achieving those goals and which aren’t—a huge incentive for PCTs to work hard ensuring they don’t appear at the bottom of the table.
However, these kinds of targets can seem illogical when applied to the doctor-patient relationship and prescribing of certain classes of drugs. Dr. Berkeley Phillips, MRCP, cardiovascular category medical manager at Pfizer U.K., says it may be difficult for some patients to achieve the lipid targets set by the Quality and Outcomes Framework using generic statins alone. “The current Department of Health prescribing metric stands at 77 percent generic prescription for statins,” he says. “At the same time doctors have been told they need to get their patient’s cholesterol levels down to 5 mmol/L. Modeling suggests that generic simvastatin at the 40mg dose will get about two thirds of patients to that level.” According to Phillips, more recent guidelines have called for lower targets of 4 mmol/L in patients at high cardiovascular risk, such as those with coronary heart disease and diabetes.
Phillips is the lead author of Switching Statins: The Impact on Patient Outcomes, an observational study presented to The European Society of Cardiology Congress in September 2007 and consequently published by the British Journal of Cardiology in November/December 2007. Based on data gleaned from an NHS patient database (The Health Improvement Network or THIN), the authors are clear their findings are hypothesis-generating rather than conclusive. But the suggestion emerges that in the primary care setting, switching statin treatment is “associated with significantly increased risk of death or major cardiovascular events compared with patients who did not switch.”
“One explanation could be that some patients were not being switched to an equipotent dose of the generic statin. Another explanation could be that there may be differences between statins beyond their cholesterol efficacy,” Phillips says. “Switching between branded and generic statins may be more appropriately described as therapeutic substitution. In that case, you cannot always assume you get the same effect from both drugs.”
Naturally, some skepticism has leaked into this controversy because the statin switch observed by the study was based upon Pfizer’s Lipitor product—a switch that has delivered huge savings to the NHS and (presumably) significant reductions in Pfizer’s revenues. However, Phillips maintains he is not against changing from branded to generic versions of medicines where this is clinically appropriate. Instead, he is more concerned that any change in medication should be done with careful clinical consideration of the individual patient, rather than at a population level, and that ongoing diligence is required to ensure compliance with the new treatment.
Resistance to Change
Even with careful consideration, patients may be unwilling to accept generic alternatives prescribed by their physicians. The Switching Statins report highlights that the discontinuation rates within the cohort who had its medicines switched was twice that of those who did not.
Richard Ley of the London-based Association of the British Pharmaceutical Industry argues that research and development can be stifled by an overriding preference for generic use. “There is a grave danger that if you try and shift the balance too far you will stop development, and that’s not reasonable or sensible,” he says.
However, the generic industry believes the opposite is the case. In a June 2006 presentation in Brussels, Eric Gorka, executive vice president of The European Generic Medicines Association (EGA), said that the generics market actually stimulates pharmaceutical innovation through increased competition. The logic being that the pharmaceutical companies could become complacent were their patents not under threat, and by delivering financial headroom for innovation, they enable funds to be redirected from buying existing drugs to research into new products.
A more direct contribution to the industry is suggested by Yasmin Crawford, a director at Opal Healthcare, a small generics company based in South Brent, England, which specializes in injectable medicines for the hospital market. In her experience, research and development is not reserved for new drugs alone. “There is a perception that generics are not a place for exploration, but development and testing means it still takes four or five years of work to bring a generic to market,” she says. “These drugs may be cheaper, but they still need to be high quality.”
Although market leaders may feel they are doing the hard work by creating new compounds, it should be noted that the generic companies are attempting to create equivalent drugs at a fraction of the price—sometimes at discounts of 80 percent to 95 percent. They are operating in a market where success is determined almost exclusively by price. “There is a priority to secure patient safety when delivering treatment,” Crawford says. “But at the end of the day, selection is very likely to be influenced by price.”
A Generic Future
For better or for worse, market penetration of generics will continue to increase across Europe. Pharmaceutical companies already are ensuring they have interests in this expansion—four of five companies already produce both branded and generic drugs—and some have created licensing deals with generic producers for authorized generics. One such deal was created in 2004 between GlaxoSmithKline and Watson Pharmaceuticals covering GSK’s Wellbutrin SR.
A second technique to extend patent life is to introduce alterations to the pharmaceutical just prior to patent expiry—a technique known as evergreening and referred to by the EGA in their 2007 paper The Future of Pharmaceuticals. “The European generic medicines industry heartily endorses pharmaceutical innovation, and fully recognizes incremental as well as breakthrough innovation,” the paper states. “The European generic medicines industry is, however, concerned that certain product changes which claim to bring innovation in reality offer little added benefit to patients and are, in fact, rendered less advantageous to patients by their higher prices. Such products are actually designed to prolong the life cycle of the originator product and to hinder competition from generic alternatives.”
Even if the EGA’s assessment is correct in only one or two cases, this effectively diminishes the currency of incremental innovations placing doubt in the mind of prescribing physicians and lowering the credibility of the manufacturer and even the industry as a whole.
Generics are here to stay and their use will increase. Evolving industries in China and India will bring yet more competition for cheap generics and health services will want to exploit these resources. Duerden notes that prescribing generically does not necessarily mean a prescription will be filled or dispensed generically—the substance required is available only in the branded form in around 20 percent of primary care generic prescriptions in the United Kingdom.
But just as the pharmaceutical companies may need to accept the final decision of the physician, so too should governments and health services. Rather than pushing blindly on for an ever decreasing drug bill through the prescriptions written by physicians, delivery systems should aim to promote and recognize the importance of choosing the right treatment for the right patient at the right time.
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