If you’ve recently had a prescription filled out at your local chemist you may already have been asked “if you’d like the generic brand”.
Naturally we all wonder if it is the same as the original. Is it safe? Will it work the same? A lower price is pretty useful but why is it cheaper? To answer these questions we looked into the world of generic medicine.
20 years passes quickly
When a drug is taken to market in Australia it is typically protected by either a 20 or 25 year patent. At this point it is probably useful to point out that a pharmaceutical product is generally a very complicated construction. And the patent, which seeks to protect it, can cover all manner of defined compounds, formulations and even structures within a pill or other delivery mechanisms such as a derma patch.
And there is a lot at stake to protect
In 2010 the global pharmaceutical industry had sales worth US $860 billion. And crucially 34% of this amount, or $295 billion, was generated by just 133 drugs. Interestingly 13 of these pharmacological superstars have come off, or will come off, patent protection by 2013.
Twenty years ago, hot on the heels of a mini revolution in drug research, many new and powerful drugs were made available to patients. But the years have passed and many of these big name drugs are all coming off patent at pretty much the same time. Accordingly many in the industry are describing this phenomena as a “patent cliff”. A precipice which will cost some of the big industry players up to $250 billion in lost sales up to 2015.
Some of the big drugs that have come off patent, or are just about to, include some very common brands including, Lipitor (Cholesterol), Levaquin (antibiotic), Zyprexa (antipsychotic), Plavix (anti-platelet), Actos (Type 2 diabetes), Enbrel (Arthritis) and Singulair (asthma) and there are still more to come.
In Australia when a drug does come off patent, the original brand generally loses up to 35% of sales to competitors offering generic versions of the original. Interestingly the US market can see up to 90% market share loss. And on average, generic drugs are only 30% of the original price.
The manufacturers of generic drugs are often literally lined up at the pharmacy door the very day that restrictions are lifted. With formulations approved, stocks developed, sales material printed up and sales staff trained.
So is there a difference?
In reality there is no real difference in functionality or bio-equivalence between a brand medicine and the generic version. Although sometimes the shape or colour can be different due to the use of different fillers, binders, colours and flavours (i.e. gluten free for instance). However the key point is that a generic medicine also has to comply with the same regulatory criteria as a branded medicine.
In Australia, the first brand listed on Pharmaceutical Benefits Scheme (PBS) is called the innovator/originator brand and other brands containing the same active ingredient are called the generic brands.
When compared to an innovator brand a generic medicine has:
the same active ingredient
the same dose and strength
the same onset of action
and stays in the body for the same amount of time.
For all prescription medicines the Therapeutic Goods Administration (TGA) independently reviews manufacturing, toxicity and clinical research data prior to granting marketing approval. The TGA also monitors the quality and any unintended outcomes. The same high standards apply to both the originator and generic manufacturers.
Why use generics
Sometimes a Doctor will restrict brand substitution but in practice this is fairly uncommon. So when you have a script filled out at the pharmacy, you generally have the choice of what medicine to purchase.
However for most people the choice is generally between the innovator brand and only one of the generic options. The range of generic brands, in pharmacy, is often fairly limited as most pharmacies purchase their supplies via a number of buying groups. These buying groups in turn have supply agreements with specific generic manufactures.
If you wanted to split hairs about this process it should also be noted that many of our medicines, both originator and generic, are sourced from overseas. That a medicine is manufactured in China or India may be an issue for some. However that being said, for most people a purchase at the pharmacy is increasingly just about the price.
Why generics are cheaper
When a drug comes off patent the various suppliers of the drug both originator and generic are required to disclose their prices to the PBS. Due to some pretty stiff competition, these prices are generally significantly lower than the price charged while the drug was under patent protection. The government price (or subsidy) is then calculated using the newly supplied pricing and a pretty complicated averaging formula.
Effectively for the consumer, a generic medicine is cheaper on the whole because competition brings prices down and more specifically because a generic medicine does not include an additional brand premium or brand fee.
Generally the price of a PBS listed medicine is broken down into the following components. The patient’s contribution, a government subsidy and an optional brand premium. To see how this works let’s take look at how 80mg of a representative cholesterol lowering medication has its price calculated.
To purchase the originator branded product a General Patient would be $39.35 out of pocket, while they would be up for $35.40, if they chose the generic equivalent. In both options they will have paid the maximum patient contribution of $35.40 and received a government subsidy of $21.37. The difference in this case is made up of a Brand fee of $3.95.
On the other hand, a Concession Patient pays only $5.80 for the generic version, as the government subsidy is significantly larger. If they choose the branded item, then the out of pocket cost would be $9.75, as a Brand fee of $3.95 is incorporated into the price.
So even when there is no brand fee, you are saving money as the generic brands contribute to reducing what tax payers pay for medicine on the PBS.
The big picture
The issue of cost and sustainability is a big one. In the last financial year the PBS cost $8.8 billion dollars. A 5.7 per cent increase over the previous year. And while prescription volumes only increased by 2.3 per cent, the greater expenditure was caused by a trend of doctors prescribing newer and more expensive drugs.
And this growth was experienced during a period when the government has intentionally slowed down the approval rates for new drugs.
To get a health professionals view on the big picture we spoke to Jo Kim, Vice President Asia Pacific at Synthon. Synthon is a generic medicine manufacturer, originally founded in the Netherlands but which now has a global presence that includes the EU, the US, South America and Australia.
When asked about the use of generics , Jo was quite passionate in her response. “My view on why we need to encourage use of generics is because generics are critical to ensuring the PBS is sustainable.”
“We have a world best system in the PBS ensuring medicine is affordable to all irrespective of their circumstances in life. With the ageing population and also the cost of newer therapies such as for cancer and autoimmune disease becoming more expensive, unless we can have cost savings in the PBS, the whole thing will not last.”
“Generics are critical in this sense as they are the brands which bring about price reductions at the end of patent expiry. After the originator has enjoyed the monopoly period for their IP, generics are allowed to enter the market leading to a 16.5% reduction in price which the tax payer funds. These savings mount to hundreds of millions of dollars each year, which can then be used towards funding newer medicines for cancer etc. “
And it should be noted that even the Pharmacy Guild is behind the use of generic medicines.
"The Pharmacy Guild of Australia supports generic medicines because they have the capacity to bring down the cost of medicines to taxpayers and consumers. The Pharmaceutical Benefits Scheme is the best subsidised medicines scheme in the world, but it needs to remain sustainable in terms of Government expenditure. Generic medicines can help to keep down the cost of the PBS. When generic medicines enter the market, the price reductions that occur in the market, flow through to taxpayers through the system of price disclosure. Most consumers will continue to pay the highly subsidised ‘co-payment’ which is $5.80 for concessional and pensioner patients, and $35.40 for general patients”
And while the Guild is generally very positive about the safety and efficacy of generic medicines they also point out that you should check with your Doctor or Pharmacist about which brand is most appropriate for your needs.
To recieve regular updates like BigPond Money on Facebook
The views in this article are those of the author and are not necessarily those of Telstra BigPond. Any advice or information contained in this article and website is of a general nature only and is not intended to constitute or replace medical or professional advice. Please seek advice from your medical or healthcare practitioner concerning any treatment options. Any quoted prices are intended to be indicative only.