Generic Substitution of Prescription Drugs

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Abstract

Spending money on medicines increased about 10-12% during the last decade. Based on earlier legislation there was an option for generic prescription which was marginally used by doctors. The generic prescription was aiming at cost effective medicine use and lower patient medicine costs.

Purpose of health policy or idea

• The main objectives of the introduction of generic substitution are to improve cost-effective use of medicines and to encourage price competition in order to contain the rapidly increasing costs of prescription drugs and its burden to the National Health Insurance.
• The pharmacies are obliged to substitute a prescribed drug with the cheapest corresponding medicine of the same pharmaceutical substance included in the list of substitutable medicines issued by the National Agency for Medicines. The prescribing doctor may decline generic substitution for medical or therapeutical reasons. The patient does not any reason in order to decline substitution and he/she is refunded according to the actual costs of the prescription.
• The theoretical maximum savings due to generic substitution are expected to be about 2.5% of the total costs of medicines in Finland.
• Due to high co-payments for prescription drugs, generic substitution lowers also the patients' medicine costs.
• The main focus is in pharmaceutical companies which encourage to increase price competition. The reform hits the companies selling established brand names which have no more patent protection but which are overpriced due to their strong market position.

Main points

Main objectives

1. cost containment of increasing prescription costs;
2. legal obligation to generic substitution of listed prescription drugs. 

Type of incentives

1. legal obligation for pharmacies to follow generic substitution;
2. savings for patients in their drug expenditure;
3. encouraged price competition for pharmaceutical companies

Groups affected

pharmaceutical companies, patients, pharmacies

Degree of Innovation	traditional		innovative
Degree of Controversy	consensual		highly controversial
Structural or Systemic Impact	marginal		fundamental
Public Visibility	very low		very high
Transferability	strongly system-dependent		system-neutral

Political and economic background

• Like other countries the expenditure for medicines is the fastest growing item in the health expenditure in Finland. The annual increase has been 10-12% during the last decade.
• According to earlier legislation there was an option for generic prescription but doctors have used it marginally. In Finland, cheap generic drugs make only 3% of  the retail sells of pharmaceuticals.
• Generic prescription have been considered a one measure to contain costs of medicines and to improve cost-effectiveness of drug utilisation in several occasions by the policy documents and working groups of the Ministry of Social Affairs and Health (MSAH).

Change based on an overall national health policy statement

No specific documents but recognised in several occasions as a potential measure to contain medicinal costs.

Purpose and process analysis

Current Process Stages

	Idea	Pilot	Policy Paper	Legislation	Implementation	Evaluation	Change
Implemented in this survey?

Origins of health policy idea

Generic prescription is used in several countries. The idea was presumably copied from elsewhere by the MSAH who has been the main proponent of the reform.

Stakeholder positions

• The legislation on generic prescription was strongly opposed by pharmaceutical industry which was supported by the Finnish Medical Association and some prominent representatives of the profession. The organisation of pharmacies opposed the legislation because of a higher expected work load and longer service times / customer. Some patient organisation also criticised the reform.
• During the legislative process, the pharmaceutical industry was lobbying very prominently which somewhat irritated the legislators and the Ministers. The industry is still continuing their campaign and it is lobbying doctors and patients.

Influences in policy making and legislation

• The amendments for the laws on medicines and health insurance were passed in the Parliament in late 2002.
• No significant changes were made to the original draft bill.

Adoption and implementation

• The pharmacies have a legal obligation to offer generic substitution for patients. The implementation of the legislation is dependent on patients (whether they accept substitution) and on doctors (whether they actively oppose generic substitution by denying it in prescriptions).
• No follow-up information on the implementation is available because generic substitution starts in pharmacies on April 1, 2003.

Monitoring and evaluation

The use of generic substitution, sells of generic drugs and other experiences on the system will be followed as normal activity of relevant government agencies but no specific formal review mechanism exists.

Expected outcome

• It is probable that generic substitution will be implemented and also the attitudes of medical profession will be alleviated.
• The expected savings in the total drug expenditure are small. While the maximum savings were theoretically  calculated to be about 2.5% of the total drug expenditure, the actual savings are expected to be only less than 1% due to the patients' or doctors' declines of substitution.
• The pharmaceutical industry have to make some adjustments in their strategies and marketing. Specially, the only substantial Finnish company which have been selling established branded drugs without patent protection will be hit and its market share will probably decrease.

References

Suggested citation for this online article

. "Generic Substitution of Prescription Drugs". Health Policy Monitor, 20030506. Available at http://www.hpm.org/survey/fi/a1/1