Switzerland - How will the government’s cost-containment plans affect the generics market?

The generics market will benefit from upcoming patent expiries, but further price controls may hinder growth in money terms.

The Swiss government is keen to contain costs in the healthcare sector, and a number of specific measures have been taken to rein in costs. The promotion of generics has been at the forefront, with spectacular success since 2001, when generic substitution was introduced.

The first price control on generic drugs was implemented in 2005; new generics had to be priced at least 30% below the level of the corresponding original drug in order to qualify for reimbursement. In 2008, this was reduced further to 40%. This is likely to boost generic use by volume, but will serve to hinder growth in value terms. The major companies in the market have been able to cope with previous price cuts by increasing volume sales, although the decreasing amount of ‘slack’ in the market may make growth harder to maintain in 2010. Patent expiries will become a far more significant source of growth.

By international standards the Swiss generics market remains uncompetitive. Over 70% of generic sales are made by two companies; Mepha, acquired by Cephalon in April 2010, and Sandoz. A more competitive environment would almost certainly lead to lower price levels. However, the government’s policy of period price reductions may prove counterproductive in this regard, by making the market less attractive for new players and further solidifying the position of the existing manufacturers. A few other companies, notably Teva, Actavis and sanofi-aventis (through Winthrop), are active in the market, but to date have not gained much market share. It is noticeable that, in stark contrast to the other leading markets of Western Europe, no Indian or central European companies have yet shown much interest in Switzerland.

Further reading - An in-depth analysis of the Swiss pharmaceutical market is available from Espicom: The Pharmaceutical Market: Switzerland (published May 2010)

Turkey - What are the future prospects for the Turkish pharmaceutical market?

The Turkish pharmaceutical market continues to exhibit strong growth.

Turkey is a key emerging market which is continuing to grow strongly, despite the government’s ongoing healthcare reforms and recent economic crisis. Due to its large population and GDP, Turkey accounts for around 40% the total Middle Eastern pharmaceutical market. The Turkish pharmaceutical market is expected to grow by a relatively high CAGR between 2010 and 2015, driven by import growth; the value of imports grew by 23.7% in 2008. Turkey carries out most of its trade with the EU and USA.

Around a third of the pharmaceutical market is represented by generic drugs, in value terms. As Turkey recovers from the economic downturn, generics may become a more popular alternative to expensive branded pharmaceuticals. This will be helped by the fact that generic substitution is legal in Turkey; the pharmacist is obliged to inform the patient of the substitution, but this may be declined. The ageing population and associated increase in health spending may also force the government to look into the possibility of using generics to cut costs.

Further reading - A detailed review of the Turkish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Turkey (published May 2010)

Finland - How is the Finnish government attempting to contain the rising costs of pharmaceuticals?

A reference price system has been introduced in an effort to reduce the use of more expensive pharmaceuticals.

Several cost-containment measures have been implemented in the past few years. Generic substitution was first implemented in April 2003 and has generated considerable cost savings since then. In January 2006, the government followed the example of other EU member states, and for the first time statutorily cut the approved wholesale prices for all reimbursable pharmaceuticals by 5%.

The most recent measure is the introduction of a reference price system for medicines, which came into force in April 2009. The new system is expected to reduce the use of more expensive pharmaceutical products, thus lowering the costs for patients and reducing the pressure to raise health insurance payments. A recent study has estimated that the reference price system will reduce the costs of medicines in Finland by 10%, while total pharmaceutical expenditure is also expected to fall by 5%. However, the effect of the reference price system on medicinal costs may be less significant than would normally be expected due to the strong price reductions resulting from generic substitution.

Also in April 2009, generic substitution was extended to include medicinal products protected by analogy process patents, which were previously excluded. This will result in further cost savings, but patented original products are entering the generic price competition phase several years before product patents expire in other European countries.

Further reading - A detailed analysis of the Finnish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Finland (published April 2010)

Germany - How is the German generic market set to perform in the future?

The generic market has become increasingly competitive in recent years and will gradually increase its market share.

Reforms instigated in 2004, which entailed greater use of substitution, have placed a lot of pressure on older branded drugs, and prescribers and patients have been given financial incentives to switch to generics. However, reforms have not been especially ‘pro-generic’, so whilst generics will continue to be increasingly widely prescribed, their value share of the overall market will alter less rapidly. In 2007, generic drugs accounted for 36.5% of the prescription market by value; around 81% of this was covered under the GKV. In volume terms, the generic market has continued to grow each year. This was particularly impressive in 2007, when it reached 65.4% of the total market, compared with 60.0% in 2006.

Overall, Germany is the largest pharmaceutical market in Western Europe, twice the size of Italy. Growth in recent years has tended to be uneven, as government reforms take effect on pricing and/or reimbursement. While overall expenditure is still growing, GKV expenditure, which accounts for around 80% of the market, is characterised by price reductions. These are due to tighter reimbursement rules, greater use of generics and downward pressure on generic prices due to the rebate system.

Further reading - An in-depth analysis of the German pharmaceutical market is available from Espicom: The Pharmaceutical Market: Germany (published January 2010)

Switzerland - How will the government’s cost-containment plans affect the generics market?

The generics market will benefit from upcoming patent expiries, but further price controls may hinder growth in money terms.

The Swiss government is keen to contain costs in the healthcare sector, and a number of specific measures have been taken to rein in costs. The promotion of generics has been at the forefront, with spectacular success since 2001, when generic substitution was introduced.

The first price control on generic drugs was implemented in 2005; new generics had to be priced at least 30% below the level of the corresponding original drug in order to qualify for reimbursement. In 2008, this was reduced further to 40%. This is likely to boost generic use by volume, but will serve to hinder growth in money terms. The major companies in the market have been able to cope with previous price cuts by increasing volume sales, although the decreasing amount of ‘slack’ in the market may make growth harder to maintain in 2010. Patent expiries will become a far more significant source of growth.

By international standards the Swiss generics market remains uncompetitive. Over 70% of generic sales are made by two companies; Mepha and Sandoz. A more competitive environment would almost certainly lead to lower price levels. However, the government’s policy of period price reductions may prove counterproductive in this regard, by making the market less attractive for new players and further solidifying the position of the existing manufacturers. A few other companies, notably Teva, Actavis and sanofi-aventis (through Winthrop), are active in the market, but to date have not gained much market share. It is noticeable that, in stark contrast to the other leading markets of Western Europe, no Indian or central European companies have yet shown much interest in Switzerland.

Further reading - An in-depth analysis of the Swiss pharmaceutical market is available from Espicom: The Pharmaceutical Market: Switzerland (published January 2010)

Turkey - Will generics claim a larger share of the Turkish pharmaceutical market in the future?

Generics represent a third of the Turkish market but there is room for expansion.

Turkey has a strong generics industry; according to the Pharmaceutical Manufacturers Association of Turkey, almost three quarters of locally produced pharmaceuticals were generics in 2008. Generics account for around a third of the market in value terms and over 50% in volume terms; however, physicians are not actively encouraged to prescribe generic drugs and there are no incentives for pharmacists to dispense them, so there is potential for this to increase.

The economy contracted by 5.6% in 2009, but is expected to grow by 3.0% in 2010. As Turkey recovers from the economic downturn, generics may become a more popular alternative to expensive branded pharmaceuticals. This will be helped by the fact that generic substitution is legal in Turkey; the pharmacist is obliged to inform the patient of the substitution, but this may be declined. The ageing population and associated increase in health spending may also force the government to look into the possibility of using generics to cut costs.

Further reading - A detailed review of the Turkish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Turkey (published January 2010)

UK - Experts Call for Consultation on Generic Substitution

Experts have called for a consultation on the effects of generic substitution, proposed to take effect from January 2010 as part of the Pharmaceutical Price Regulation Scheme (PPRS).

A report, which calls into question the proposal to introduce generic substitution, was endorsed by a varied group of experts and patient bodies in July 2009. The Department of Health plans to introduce generic substitution in January 2010, as stated in the PPRS, to drive down costs and reduce the NHS’ drugs bill. However, those opposing the move claim it will in fact increase costs and put patient safety at risk.

The report, which was compiled by CancerBACUP, the Primary Care Dermatology Society and the European Parkinson’s Disease Society, and was funded by Norgine, argues that the move could lead to patient confusion and, crucially, to poorer patient outcomes.

The report calls for a public consultation on “the practical impact of generic substitution on patients adherence and outcomes and the potential impact of varying bioavailability on outcomes and adverse events”.

Further reading - An in-depth analysis of the UK pharmaceutical market, including some background information on the PPRS, is available from Espicom: The Pharmaceutical Market: United Kingdom (published June 2009)