The Success of Generic Medicines in the Worldwide Pharmaceutical Industry

Chapter 1

Executive Summary

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 Questions

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?

Relevance

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.

Managerial perspective

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.

Academic perspective

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

Chapter 2:

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.

Chapter 3:

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 4:

Chapter four will explain the role of regulation on the adoption rate of generic medicines (research question 2).

Chapter5:

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.

Historical background

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 elements

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 Netherlands

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).

Poland

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).

Portugal

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.

Market authorisation

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.).

Pricing

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.

Consumer implications

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.

Patient co-payment

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).

Incentives

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).

The Netherlands

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).

Poland

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).

Portugal

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.

	Poland	The Netherlands	Portugal
pricing
Reference pricing	low	Medium	high
Patient co-payment	yes	no	yes
reimbursement	4 levels	Pay excess when Above RP	5 levels
Adoption level	Very high mature market	Medium mature market	Low developing market
Incentives
Physician	Not encouraged but accustomed to prescribe	Stimulate to prescribe	obligated
pharmacist	Allowed and have financial incentive	Allowed unless indicated else	Allowed but no financial incentive
patient	Financial incentive	No financial incentive	No financial incentive

Marketing implications

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).

Chapter 4

What is the role of these regulations on the adoption of generics?

Market authorisation

Approval of generic medicines

The success of a generic medicine depends on several factors including; patent, approval to the market, pricing and reimbursement. These factors eventually lead to successful product life cycle of a generic medicine. The generic medicines can be approved after the patent of the originator medicine is expired (“Frequently asked questions about generic medicines”, n.d.).

Approval to the market will be regulated by the coordinating organization EMEA; they will approve a generic medicine, resulting in the fact that it can be launched on the EU market. The National authority of the EU countries will eventually approve the price and reimbursement authorization. These separated approvals can cause delays in the approval of a generic medicine in a country, while price and promotion regulation also affect the success of a product life cycle regarding a generic medicine (Danzon, 2003).

Decrease in national medicine expenditure

The national governments and the EMEA, which approve the market authorization for generic medicines, create a decrease in national medicine expenditure. A good regulation for generic medicines will increase the adoption level of generic medicines. The low development of new medicines and the increasing expiry dates of patent medicines has lead to a competitive generic market, the involving regulations (e.g: price regulations) will stimulate the adoption in the EU market (Garattini & Tediosi, 2000).

The ageing population in Europe, with its coherent prevalence age-diseases and the need for more specialized and individualised care treatments in Europe, will result in a considerable increase in pharmaceutical costs in the future. (see appendix figure 6)

Pricing

Introducing a controlling price system is a way to control supplier moral hazard. It applies to all services; this is also the case for the pharmaceutical industry.

Consistent with this view of pharmaceutical price regulation, it can be seen that it has become a fundamental strategy for insurances to control the supplier moral hazard.

In general it can be stated that price controls, in most countries, apply only when medicines are reimbursed by the public health insurance (Danzon & Keuffel, 2007).

Policy implications

The reference pricing system which is implemented by the European countries plays a role in the economic pharmaceutical market. This means that the European countries influence the market entry of generic medicines and the price level of generic medicines on the supply side (Simoens & de Coster, 2006).

Subsequently, the reference price system will cause that pharmaceutical companies will decrease their prices, assuming that the demand for the generic medicine will become inelastic when pricing the product above the reference price (Danzon & Keuffel, 2007). However, it is important to notice that the primary objective of a reference price system is to control the pharmaceutical expenditure by controlling the reimbursement level of medicines. The objective is not to stimulate generic use (Simoens & de Coster, 2006).

This means that countries in favour of free market pricing generally have higher medicine prices. High medicine prices stimulate generic market entry, in contrary to regulated price systems (e.g. Portugal) where regulation prices drive down the originator price over the life cycle of the medicine. This lowers the potential profit margin for a generic company and discourages market entry (Simoens & de Coster, 2006).

According to the internal EGA survey, in the case of compulsory prescriptions, doctors are encouraged to prescribe generics in 56 per cent more cases than when it is not compulsory. Only 11 per cent of European countries implement a compulsory subscription system. There are guidelines to inform doctors about the prescription and assist them in the procedure of prescribing (“A Review on the European Generic Pharmaceutical Market in 2005”, n.d)

Incentives

The consumer is not only responsible for the adoption of generic medicines in the market. The physician also plays an important role in the prescription of generic medicines. The physician will determine which specific medicines a patient will use and in which therapeutic class the medicines will be used. The therapeutic class will be determined from the input of the physicians and the patient together. Therefore it can be stated that this relationship is not only a principle - agent relationship but that the patient- physician relationship can also be seen as a partnership due to the interaction of both parties (McCarthy, 2010).

Overall, it can be stated that incentives given to physicians, pharmacists and patients have limited focus, in accordance with the improvability of regulation system incentives can stimulate an increase in adoption.

Marketing implications

Persuasive advertising namely, product differentiation stimulates generic medicines in the market. This will cause for lower prices of the medicines in specific after the patent is expired. The advantages of these lower prices have been explained earlier, in this chapter. Brand- name advertising will decrease the adoption in the market for generic medicines because price elasticity of demand in the pharmaceutical will decrease due to the fact that brand loyalty has increased (Königbauer, 2007).

Important to notice is that the regulations cannot affect the incumbent level of advertisement nor can they control the pharmaceutical firms whether they enter the market with generic medicines. However, regulations can manipulate the conditions under which the incumbent chooses to the profit maximization level.

In addition health authorities can guide the extent physicians are allowed to accept gifts or sponsored reference trips to reduce the obligation of the physician to prescribe a specific brand or product. Detailing is generally allowed under strict condition concerning advertisement. It is assumed that detailing is mainly used to inform the physician or patient. Lenient price regulation will strengthen the advertisement advantages by allowing generic medicines in the market and restricting high patent prices (Königbauer 2007).

Chapter 5

Recommendations:

General recommendations

Time is an important factor when concerning the approval of generic medicines for the market. It can give a significant value to different patient groups, and therefore a reduction in the delay in approval for in the market of a generic medicine is crucial (Kazakov, 2007). This can be accomplished by a more transparent system.

Considering the restrictions regarding promotion and advertisement of medicines, pharmaceutical companies have to find ways to introduce the product to the prescriber and the user of the generic medicine. Price competition also limits the revenue for pharmaceutical companies, this leads to a very competitive even rivalry pharmaceutical market. As a result, pharmaceutical companies have to respond to regulation in such way; they make a profit out of the regulation for their own interest. This complies with an ongoing regulation changes that have to be induced (Richard & Frank, 2007).

Another implication with price regulation can arise, when the price of generic medicines is too regulated. Resulting in a low percentage of competitive medicines available, causing a higher (monopolistic) price (Königbauer, 2006).

In other words, in a flexible pricing system, a pharmaceutical company has the opportunity to compete with other companies using pricing strategies taking into account the restrictions enforced by the national regulation in specific taken into account reference price. Therefore a flexible pricing system is recommended over a strictly regulated system (for example: Portugal).

Other measures recommended are Pro generic measures. In particular, the areas of pricing and reimbursement mechanisms should be improved and be more transparent. Governments should also try to increase the knowledge of patients by informing them about generic medicines. This can be done through the channels of physicians and pharmacists (“A Review on the European Generic Pharmaceutical Market in 2005”, n.d.).

Although there is no concrete or well defined policy concerning the encouragement of the physician in the countries where measures exist toward the encouragement of prescription of generic medicines by the physician have a higher adoption level compared to countries who do not adopt such measures. Therefore measures encouraging physicians to prescribe generic medicines (example: budgetary incentives or prescription monitoring) are recommendable for all European countries (Bongers & Carradinha, 2009).

Finally, it remains difficult to recommend one best fitting regulation to implement for all European countries due to the fact that the adoption level concerning generic medicines differs significantly across European countries and not all regulations fit when there is a difference in the maturity of the market. Therefore one strategy will not be compliable anymore for all European countries. However a more transparent and central European regulation model should guide all European counties into one direction.

Specific recommendation for the Netherlands, Poland and Portugal

Given, that the adoption rate of generic medicines in the three concerning countries presented in the thesis have a significant difference and taking into account the different regulation presented above. There can be made several recommendations for the concerning policy makers in the specific countries.

The Netherlands

As mentioned earlier in the thesis, generics have a better adoption rate when the country has introduced a flexible pricing system, however, it does result in a higher medicines price compared to other EU countries (Garattini & Tediosi, 2000).

The Netherlands has developed an electronic subscription system however this is not completely introduced yet; a complete implementation of this system together with better transparency concerning pricing should create a competitive generic market.

Poland

Poland has chosen for a low Reference Pricing system by putting the reimbursement level on the cheapest generic medicine. When Poland switches to a flexible pricing system the adoption rate can increase, this is examined in previous research (Garattini & Tediosi, 2000). However Poland should take in account that medicine prices will increase.

Portugal

As presented earlier in chapter 3, regulated pricing system drive down the price of generic medicines; resulting in a discouraging entry for generic medicines.

Therefore it would be recommended to abolish the regulated pricing system and implement a flexible pricing system. This encourages pharmaceutical companies to adopt in de Portuguese market.

In general Portugal should create proper regulations and conditions that increase the competitiveness and stimulate the entry of generic medicines (Bongers & Carradinha, 2009).

Limitations

The research presented above is focused on three chosen countries (The Netherlands, Poland and Portugal). Due to the different national policies and regulations some regulations applicable specific for the countries presented in the thesis may not be declared applicable to other European countries. Therefore assumptions and conclusions for all European countries cannot be made or are not representative.

However, it is possible to present European countries a guideline what a favourable policy or regulation would be considering the outcomes of these countries.

Further comparisons between European countries should be made. A better insight of the ultimate adoption of generic medicine can be investigated; this can be done by comparing all developed generic markets in Europe. A more detailed insight should be presented of the European countries concerning several strategies and temporary policy agreements to explain particular increases in a specific period of time in relation with the adoption of generic medicines in the market. In extension of this further research and more detailed and concentrated adoption results of generic medicines in the market should be retrieved.

Policies and regulations concerning a further increase of generic medicines in the markets have not been investigated. Therefore developed generic markets should try to find new short-term strategies or regulations which can increase the total adoption in the market for generic medicines, this to prevent that the increase of adoption concerning generic medicines will stop.

Perception of neither the physicians nor the patients is included as a mediating variable. Research is conducted about the perception of generic medicines concerning these parties, as mentioned previous in the research the patients can play an influencing role in the prescription of the drugs. This can have consequences when taking in account that European countries have different cultures and therefore different perceptions regarding generic medicines.

Conclusion

It can be concluded that countries which do not have a long-term or consistent generic medicine regulation implemented, are in general countries that have the smallest market volume in the generic medicine market (see figure 7 appendix).

These countries are creating little awareness and economic benefits for the healthcare system. Savings for governments and affordable prices for patients are minimal (Bongers & Carradinha, 2009).

Regulations implemented in a country, have a direct effect on the adoption of generics medicines in the pharmaceutical market.

Flexible pricing systems are favored above strict price regulations, it encourages the pharmaceutical industry to develop and establish a better generic market in the concerning country, competitiveness among pharmaceutical companies will increase.

Moreover pharmacists, patients and physicians are also encouraged to use and prescribe generic medicines. A flexible pricing system results in increasing adoption of generic medicines in the market (example the Netherlands). In general, we can conclude that regulations concerning generic medicines can constraint or provide the adoption of generic medicines in the pharmaceutical market. The Highest market share concerning generic medicines is found in countries where the industry had historically the greatest pricing freedom among which The Netherlands (Lofgren, 2002). Too much regulation will cause no flexibility for the pharmaceutical industry to develop (example Portugal). Hence, cultural and historical aspects also remain an important factor that influences the adoption in the generics industry (example Poland).

Marketing implications concerning generic medicines constrain the development of generic medicines. Pharmaceutical industries are very limited regarding advertisements and branding of the medicines, other regulations such as price and reimbursement regulations make the possibilities to enter the pharmaceutical market inflexible therefore, policies makers should take that in account and mainly consider flexible policies.

Transparency of generic medicines in the pharmaceutical market is also an important factor is; it can reduce delays for an approval on the European market. Another increasing concern of the European governments is the sustainability of the healthcare system. The expenditure on pharmaceutical products is a significant component of the healthcare system. Generic medicines contribute to a sustainable healthcare system partly due to the reduction in costs (Bongers & Carradinha, 2009). The importance of a sustainable healthcare system is acknowledged. However, the implementation of these sustainable healthcare systems can be implemented by balanced policies and regulations. On the one hand, the policies and regulations will take care of affordable prices for healthcare systems in general, which extends to affordable prices for the patients. But on the other hand, the generic medicines sector provides a continuous source of cost effective medicine treatments and generates yearly savings of more than 25 billion Euros for the European healthcare system. In addition generic medicines will create a competitive market resulting in a decrease of medicine prices (Bongers & Carradinha, 2009).

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