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Integrated prescriber dispensing can slow generic growth Posted 26/08/2011

Countries such as China, Japan and Taiwan which have public health insurance systems, and which allow physicians to both prescribe and dispense drugs themselves, are the most resistant to generics competition, according to a study by two Taiwanese health economists from the National Cheng-Kung University and Academia Sinica, Taipei, Taiwan [1].

These countries differ from countries like the US because they have national health insurance systems and not private schemes that demand co-payments from patients whenever a claim is made. There are therefore fewer incentives for physicians to prescribe and dispense cheap generic versions of an off-patent brand to save patients' money because under this system, it is the government, rather than the patient, which pays the bill.

Conversely, because Taiwanese physicians have complete control over the dispensed prescription, they will tend to dispense the drug that offers them the highest level of profit. This profit level is simply the difference between the discounted wholesale price at which they purchase the drug, and the state-defined retail reimbursement price which they receive for dispensing the drug. In the vast majority of cases, unless exceptional discounts are offered from the cheaper generic alternatives, the highest level of profit is likely to come from prescribing and dispensing the highest priced version of the drug, i.e. the branded original, thus keeping the generics market share relatively low.

In making these claims, the researchers studied the uptake of 32 generic products into the Taiwanese market. They found that, although the generics market share increased over time, the speed of increasing generics share was relatively slow when compared to that of the US. They found that, on average, generics market share was only around 7%, 12 months after the introduction of the first generics equivalent, and that it took around four years for the generics share to reach approximately 30%. In contrast, generic drugs in the US usually accounted for more than 50% of the market share, in terms of the unit sales, after the same initial 12-month period [2].

They concluded that in complete contrast to the US system, where generic growth was highest when the generic–to–brand price ratio, i.e. the gap between the price of the generic and branded drug, was high, prescriber profit-seeking meant that generics growth in the Taiwanese system was highest when the generic–to–brand price ratio was low. They added that even when generics substitution was used, it was not associated with the high costs savings seen in the US healthcare system, and that any financial benefits were reaped by medical providers instead of payers or consumers.

References

1. Liu YM, Hsieh CR. National Health Insurance and Generic Competition in the Pharmaceutical Market: Evidence from Taiwan [cited 2011 August 26]. Available from: www.humancapital.cufe.edu.cn/upload/00049.pdf

2. Grabowski HG, Vernon JM. Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act. Journal of Law and Economics. 1992;35(2):331-50.

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