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SA losing out on generic cost savings

Some medical schemes want the cheapest generics used, but doctors and pharmacists resist them.

The medical scheme industry can save in excess of R1.5 billion per year in medicine expenditure if the lowest priced generics in the market were prescribed and dispensed where possible.

This is according to Discovery Health (DH) which states in its submission to the Competition Commission’s Health Market Inquiry that various factors in the local market prevent the optimal usage of generics.

The local medicine sector is wrought with complexities such as price and fee regulations as well as lagging patent approvals – to name a few. In this environment the generic market plays an important cost saving role for health care funders and consumers who can pay significantly less for a generic product compared with the brand originator product.

DH estimates that the optimal use of low cost generics can save its Discovery Health Medical Scheme alone around R520 million per year.

In South Africa generics currently account for around 60% of the overall market in terms of volume, but because of their low cost, around one-third in terms of value. This growth is supported by government procuring mass volumes of generic products via tenders, while the private market for generic drugs is also growing, according to the Deloitte 2015 Life Sciences Outlook Report.

Not enough

The substitution of branded medicines by generics in South Africa has increased from 44% to 60% for in-hospital medicines and from 52% to 73% for out-of-hospital chronic medicines.

DH says this substitution rate should be higher and more in line with the international average of 80% to enlarge the benefit of generics as cost savers. Also, many generics still seem to be relatively expensive in South Africa.

The average generic price difference relative to brand innovator medicine in the local market is around 33%, which is smaller than in most international markets.

There are generics where the cost variance between the two are much higher. Take for instance Coversyl, where the price difference between clones or generics and the brand originator is as much as 74% (see below). This can amount to a tremendous saving if the lower cost generics are indeed used, but it often doesn’t happen.

Comparisons between generic and clone prices of medicines to the brand originator prices

Comparisons between generic and clone prices of medicines to the brand originator prices

Source: Discovery Health submission to Health Market Inquiry

A fly in the ointment seems to be that generics are often not prescribed by doctors, even though they are available. According to DH anecdotal evidence suggests that some doctors mistrust the efficacy of generics.

Mediclinic says in its Health Inquiry submission says it ranks the products in each product category by price and recommends cost-effective alternatives to doctors. However due to the clinical independence of the doctor and the patient’s right to choose, the doctor or the patient may reject any recommendation to use cost-effective alternatives or generics.

Life Healthcare found that in specific environments like ICU, for example, some doctors have resisted conversion to generic drugs.

When generics are dispensed DH says it often occurs that the more expensive generics are given to patients though lower cost equivalents are available.

This is despite the regulation in the Medicines Act, which states that dispensers must dispense a cheaper generic medicine, i.e. not a branded medicine, unless specifically forbidden by the patient to do so.

More expensive medicines (brands or more expensive generics/ clones) therefore often have a significantly larger market share than lower cost equivalents.

“One reason cited for this by pharmacists is that the lowest cost generics are often in short supply, and they thus prefer to dispense products for which supply is guaranteed. Another reason is likely to be the fact that some manufacturers pay pharmacies various marketing and data fees to incentivise them to dispense their products,” states DH.

Venlor for instance, despite being the most expensive antidepressant of the generics in the venlafaxine medicine class, remains the most widely dispensed venlafaxine product in the market.

In April and May 2014, Venlor experienced a stock shortage and was replaced with the cheaper alternative, Venlafaxine Adco. This drop in market share was soon reversed when Venlor was restocked. (see graphic)

The use of Venlor and Venlafaxine Adco as generic substitutions to Efexor

The use of Venlor  and Venlafaxine Adco as generic substitutions to Efexor

Source: Discovery Health Medical Scheme

DH attributes this rapid return to market share to a combination of factors such as consumer preferences and doctor prescriptions, but also to pharmacists’ dispensing fee income which is based on a percentage of the product price, as well as rebates and marketing fees that are paid by manufacturers to pharmacists for dispensing some higher priced generics more frequently over lower priced generics.

The clones come out to play

The competition for generic usage is aggravated by so-called clone products of originators that are manufactured prior to patent expiry. “The company releases a product identical to the original, but with a different brand and package. It is priced at a discount to the originator, but typically higher than generic equivalents. These clones compete for market share with generic equivalents.”

Scheming schemes

Medical schemes can also be a deciding factor in the dispension of medicine, not only through their formularies but also through reimbursement models.

Formularies define the pharmacy products for which the medical schemes will pay. Products not included on the formulary must be authorised by the patient as the patient will have to pay for these products out of pocket. If certain generics are not on the list, it will not be covered and scheme members are left to choose the formulary options to avoid carrying the cost themselves.

The Pharmaceutical Society of South Africa (PSSA) gives in its submission to the Health Market Inquiry an example of a scheme that proposed a new dispensing fee model two years ago by offering pharmacists a substantially higher dispensing fee when a branded medicine, as specified in the schemes formulary, is supplied rather than when another similar priced or even lower price product is supplied. Despite this being in contrary to the requirements of the Medicines Act.

On the other hand there are schemes that have a performance-based reimbursement model that reward pharmacists for supplying low-cost generic medicines. This is seen as an incentive to pharmacists to lower the cost to the patient.  

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Provided the active ingredients are identical in both the chemical composition and dosage, then the generic is precisely the same as the patented original. The fact that the original may be (say) white and the generic pink makes not the slightest difference. They will do the job equally well. The “some doctors” who distrust generics need to refer back to their chemistry studies. I find that most pharmacies do not offer one a generic, and moan when I ask for one. Profit under attack, shame.

The article suggests that all generics are the same, which they are NOT. Even the same ingredients and cohesive agents prepared under different conditions yield different results. Quite often generics are not as good as the branded product and reference needs to be made to evidence based medicine as to the efficacy of the drug. A low cost drug might result in higher hospital episodes that a more expensive generic or branded product would avoid or lessen. One further point, its the doctor that can get sued not the medical scheme trustees if the better drug is not used.

“………………..mistrust the efficacy of generics.”

With full justification too. Our own personal experience is that some generics simply are seriously ineffective and do not do the job at all. Invariably after trying the generic with sometimes close to zero results, one has to go upscale to a more recent medicine to get better. The so-called costs saving just disappears into thin air. In addition newer branded medicines tend to have fewer and less severe side effects than old, outdated past their sell by date generics. Generics do work sometimes but not all the time.

We have found clones to be at least more effective.

This article is basically a load of crXp. If generics worked as well as they are touted (simply propaganda) then there would be no R&D in pharmaceutical companies.

You are playing with your life here.

It was found that fully 10 present of 1,500 India-made drug samples collected from 22 cities throughout Africa contained insufficient levels of the key active ingredients. (POOR QUALITY DRUGS AND GLOBAL TRADE: A PILOT STUDY; NATIONAL BUREAU OF ECONOMIC RESEARCH; September 2014)
We are reassured that the Medicines Control Council approves and registers these products. It is also supposed to evaluate the safety, quality and efficacy of the generic products. But how do they do it? Do they have the laboratories and expertise to check the purity, stability and quality of the chemicals of all the products initially and on a continuous basis? Do they have the capacity to check safety, quality and efficacy of the product with clinical trials? In real life they can only detect problems if patients do not respond to therapy or die in observable numbers and it is noted and reported by somebody. I suggest people should carefully consider why doctors and patients are not always keen on all generics. They are the primary users of medicine and are the only ones with practical experience with these medicines. They may have noticed a few things that the promoters of generic medicines do not know and never mention.

In India, millions of people are dispensed with the generic drugs at 1/10th the cost of the same product in South Africa. My relative has been using generic drugs from India for his high blood pressure illness for the last 12 years without any adverse effects. He hassaved himself thousands of rands.

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