Strategies to achieve fairer prices for generic and biosimilar medicines

Internal reference pricing

Internal reference pricing is a reimbursement policy used in several countries worldwide.610 Insurers implementing this policy establish groups of interchangeable medicines, and a reimbursement price for all medicines in the group is set. The internal reference pricing group is made up of either medicines with the same active ingredient or medicines with different active ingredients but considered to have similar efficacy and safety profiles. The model works by making patients pay the difference if the price of the medicine dispensed at the pharmacy is higher than the reference price. There is mixed evidence on the impact of internal reference pricing on prices and use. However, a 2014 Cochrane review found that internal reference pricing may reduce expenditure by insurers on medicines in the short term by directing patients towards medicines that cost no more than the reference price.11

Studies comparing price decreases in internal reference pricing systems versus non-regulated markets found larger price decreases in non-regulated markets.12 In internal reference pricing systems, once a certain reference price has been set after patent expiry there is little incentive for manufacturers to offer prices below the reference price, whereas competition for market share led to lower prices in free markets. Similar findings were reported for use of internal reference pricing versus tendering for outpatient prescription medicines.13 While in most countries internal reference pricing includes only off-patent products, in Germany, for example, on-patent products which have no additional benefit to existing medicines are included in reference pricing groups.14

Generic or biosimilar price linked to originator product

Several European countries mandate specific price reductions on generic and biosimilar medicines based on a percentage of the originator price.1014 The specific discount can be negotiated and may therefore vary from one medicine to another. This is the case for biosimilars in Belgium, Ireland, and Spain. Other countries set the same discount for all medicines. For example, generic outpatient prescription medicines in Estonia are at least 15% cheaper than the reference medicine.15 In these countries, different levels of price reduction may still apply, depending on whether the generic or biosimilar product is the first, second, or third to enter the market.15 Similar to internal reference pricing, mandating fixed discounts could discourage price competition between different manufacturers that might otherwise lead to greater price reductions. Another factor influencing the efficacy of this policy option is the price of the originator or reference product against which the price of the generic or biosimilar medicine is set.

Non-proprietary prescribing and generic substitution

International non-proprietary prescribing is the practice of prescribing medicines by their generic name rather than their trade name. Generic substitution happens at the pharmacy and entails substituting the prescribed medicine brand with a less expensive medicine with the same strength and active ingredient. This practice may be mandatory, voluntary, or not allowed, depending on the country.

Generic medicines were found to enter the market earlier in European Union countries with mandatory generic substitution.16 In the US, 90% of prescriptions are dispensed as generics.17 Dispensing generic medicines rather than their brand equivalent saved Medicare Part D and patients enrolled with it a total of about $33bn (£27bn; €30bn) in 2007.17 Evaluation of generic substitution on price development in Finland showed that the average price of substitutable medicines decreased by more than 10% during the first year of implementation.18 There was wide variation in price development, with some medicines having price increases and others price decreases by more than 50%.18 The number of competitors, the type of medicine (originator versus generic), and the price difference between the most and least expensive product for a particular active ingredient were the most important determinants of price changes.18

A number of barriers to implementing international non-proprietary prescribing and generic substitution exist. These include perceptions by prescribers, dispensers, and patients about the quality, safety, and bioequivalence of generics with the originator product; perceptions about possible side effects as a result of switching patients to generic medicines; and distrust in authorities and lobbying by interest groups such as trade organisations and manufacturers.6192021 In settings where mandatory implementation of these policies in not possible, allowing voluntary implementation would be a first step in this direction.

Switching patients from the reference biological product to its biosimilar has been the subject of debate. The reference biological product is the product that was granted marketing authorisation first and to which the biosimilar product is compared. During its marketing authorisation process, the biosimilar is compared to the reference product for being highly similar and not showing any clinically meaningful differences from the biosimilar.2223 While still an area for debate,24 studies have shown that the risk of immunogenicity related safety concerns or diminished efficacy is unchanged after switching from a reference biological to a biosimilar medicine.25 In some settings, regulatory standards and their implementation present challenges. For example, a review of regulatory pathways and quality of the evidence required for biosimilar approval in Latin American countries highlighted important differences between countries and discrepancies between regulation and practice.20

Tendering and pooled procurement

The price of generic medicines can be reduced by creating economies of scale and pooling procurement across health facilities or administrative areas. Tendering, where suppliers compete for contracts, can be organised at the level of active ingredient (for example, simvastatin) or therapeutic group level (for example, statins). Tendering has been extensively used in hospital and outpatient sectors in a number of countries to procure medicines, vaccines, and other health products at lower prices.2627

Potential challenges associated with tendering include excessive price pressure and a “winner takes all” approach. Such practices can drive out competitors from the market, particularly small suppliers which may not be able to offer such low prices and/or supply the entire market. Reducing the number of possible suppliers can decrease competition and make the market vulnerable to shortages if, for any reason, the tender winner is not able to supply the agreed type and quantity of medicines on time. Risk mitigation strategies exist, such as dividing the tender award between more than one manufacturer or supplier and considering more factors, not just price, when awarding a tender. Such factors include, for example, past performance of the supplier, shelf life of the medicines, delivery time, and production capacity.2829

Making policies work

No one policy strategy will lower prices, broaden equitable access, and lead to affordable spending for quality generics and biosimilars. Rather, multiple actions by different stakeholders in the system are needed (table 1). These include laws and regulations, efficient procurement systems, formularies, and reimbursement system restrictions (such as tiered co-payments, incentives for prescribers of generics) as well as individual and group targeted education (including social media campaigns).

Whether the policy measures described achieve their goals of increasing market share and producing a fairer price for generic medicines and biosimilars depends on several factors. These policies are implemented in the real world where other policies can influence expected outcomes and where the beliefs, expectations, and interests of affected stakeholders (such as suppliers, doctors, pharmacists, patients, and civil society) can have a substantial impact. For example, a key concern hampering greater use of generic and biosimilar medicines are the perceptions around medicine quality, possible side effects, and potential risk in switching patients from an originator medicine. These concerns can lead to patients and doctors preferring branded medicines where a less expensive generic medicine could be prescribed. In all settings, educational interventions are needed to increase acceptability of generic and biosimilar medicines to doctors, pharmacists, and patients. Workshops and information campaigns for prescribers, dispensers, and patients to help deal with these issues have been implemented in several countries.30 Regulatory systems need to be strengthened in some countries, to assure the bioequivalence of generics and the high degree of similarity between reference and biosimilar products.

Some minimum prerequisites need to be in place to enable policy implementation. These include a healthy market28 characterised by a sufficient number of suppliers to generate competition and timely availability of quality assured generic or biosimilar medicines after patent expiry. Best practice and clinical guidelines are required to facilitate generic substitution.31 There need to be incentives for pharmacists to dispense generics (for example, mandatory substitution at pharmacy level) and patients to ask for them (for example, lower co-payments, knowledge that they can request a generic) so that generic uptake increases soon after patent expiry. A process of consultation with the different stakeholders concerned (clinicians, patients, payers, procurement bodies) ahead of a new policy implementation, where the concerns of different stakeholders can be discussed and compromise sought, is likely to be more acceptable to those affected by these policies than forcing policy through.

However, a number of challenges remain. As patents near their end, patent extensions, litigations, and payments to generic manufacturers are sometimes used by originator manufacturers to delay entry of generic and biosimilar medicines into new markets.32 Furthermore, product hopping can help the originator manufacturer to retain market share after patent expiry and limit generic uptake. It is not uncommon for originator manufacturers to promote a new, similar, high priced, on-patent medicine before the patent on the first medicine expires to retain market share of blockbuster medicines.3233 One such example is memantine, used for treatment of Alzheimer’s disease. Close to the end of its patent term, the brand manufacturer launched another medicine that is taken once a day (extended release) instead of twice a day (immediate release).34 This reformulation granted the patent holder another 14 years of patent protection on the reformulated product.34 Product hopping can reduce the saving which health insurers and patients would have gained had patients switched to the generic. Another challenge limiting savings from the introduction of a generic medicine is the existence of secondary patents for new indications. This means that while an indication has lost patent protection (for example, chronic myeloid leukaemia for imatinib), another indication may still be on patent (for example, gastrointestinal stromal tumours for imatinib).