Article Text

Short report
A health economic perspective on generic therapeutic substitution
1. Ceri J Phillips
1. Correspondence to Professor Ceri J Phillips, Swansea Centre for Health Economics, College of Human and Heath Sciences, Swansea University, Wales, SA2 8PP, UK; C.J.Phillips{at}swansea.ac.uk

## Abstract

Objectives The aim of this paper is to consider the extent to which generics can be regarded as substitutes for their branded equivalents and whether financial gains achievable are exaggerated given the potential efficiency losses resulting from their adoption when therapeutic equivalence is compromised.

Methods The paper considers the literature to assess the extent to which generics can be regarded as therapeutically equivalent and cost saving.

Results The evidence that bioequivalence equates to therapeutic equivalence remains inconclusive. The approval processes for generics are less intensive than branded therapies and the extent of their clinical equivalence is not fully assessed, while drugs with a narrow therapeutic index require careful monitoring to ensure that patient benefit is not compromised. In terms of cost savings the perspective employed for such an analysis is crucial. At the individual patient level, differences in acquisition cost might be more than offset by additional costs resulting from further consultations, adverse events or compromises to treatment adherence. For individual conditions, the extent of cost difference is dependent on therapeutic equivalence being as exact as possible.

Conclusion Generic substitution is an effective policy in terms of overall cost savings to healthcare budgets. However, it is essential that therapeutic equivalence is not compromised as there are major efficiency losses associated with deficits in treatment efficacy, existence of more adverse effects, increases in patient monitoring and compromised patient adherence to prescribed medication. Further, high quality studies are needed to assess the therapeutic equivalence of branded and generic drugs – and their relative resource utilisation – especially in areas where the evidence is generally weak.

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## Introduction

The aftermath of the financial crisis and the bailout of economies by international financial agencies and governments has been a common feature of news bulletins and media reports, and has led, in many countries, to already stretched public service budgets being faced with unparalleled reductions in financial allocations. As a result, while politicians and policy makers grapple with issues relating to appropriate delivery and funding structures, professionals have become increasingly vociferous in their claims that levels of service provision are unsustainable in the prevailing economic climate. This against a background of increasing expectations and demands from resident populations has culminated in situations in which the provision and funding of public services—and particularly those linked to healthcare—are clearly one of the most contentious political issues of the day.

The discipline of economics is founded on the premise that there never have been and never will be enough resources to completely satisfy human desires and, therefore, their use in one area or activity inevitably involves a sacrifice in another. Therefore, in terms of healthcare, the extent of the gap which exists between the demands for healthcare services and the level of resources available to meet such demands continues to frustrate politicians, professionals and policy makers, and the array of funding and financing mechanisms that have existed and evolved over time, in healthcare systems, bear testimony to the attempts to grapple with the fundamental issue of allocating resources in such a way as to maximise the health benefits for society. Resource allocation is embedded in the notion of efficiency. In its simplest sense, efficiency - or more accurately, technical efficiency - is applied where a choice needs to be made between alternatives that seek to achieve the same goal and exists when output is maximised for a given cost or where the costs of producing a given output are minimised.

Generic substitution has been widely encouraged as a means of reducing the level of expenditure on pharmaceuticals1 ,2 on the grounds that they are therapeutically equivalent to their more expensive branded counterparts and are therefore viewed as being technically efficient in that the same level of therapeutic benefit can be delivered but at reduced cost. For example, it has been estimated that generic drug use has saved the US health system $1.07 trillion dollars in the decade up to 2011, with savings in 2011 of$192.8 million.3 However, the degree of generic drug penetration in healthcare systems varies considerably between countries, with for example 17% in Japan4 and 83% in England.5

The aim of this paper is therefore to consider the extent to which generic therapeutics can be regarded as substitutes for their branded equivalents and whether the financial gains achievable are exaggerated given the potential efficiency losses resulting from their adoption when therapeutic equivalence is compromised.

## The extent of clinical substitutability

Generic drugs have been defined by WHO as a: pharmaceutical product, usually intended to be interchangeable with an innovator product, that is manufactured without a licence from the innovator company and marketed after the expiry date of the patent or other exclusive rights.6

While there are differing requirements across health systems that specify the characteristics of generics, one of the key features is the concept of bioequivalence. For example, European regulations require that generics must demonstrate between 80% and 125% of the bioavailability of the originator drug.5 A similar range is used by the FDA in the USA—where a generic drug is regarded as bioequivalent when: the rate and extent of absorption do not show a significant difference from the listed drug or the extent of absorption does not show a significant difference and any difference in rate is intentional or not medically significant.7

However, the question as to whether bioequivalence adequately represents substitutability and clinical equivalence is an issue that remains contentious. The approval processes for generics are less intensive than those for branded therapies and therefore the full extent of their clinical equivalence is not fully assessed, which has been viewed by some as unethical.8 Further, while many generic drugs contain exactly the same active ingredient as the originator product, it may be in a different chemical form, such as another salt.9 Differences between excipients can also occasionally influence the acceptability of medicines and adherence rates,9 which is likely to be compounded by pharmacy purchasing policies that are based on price rather than consistency of generic supplier and resulting in different generics being prescribed when the therapies are dispensed for patients.10

The evidence that bioequivalence equates to therapeutic equivalence is inconclusive and somewhat controversial.8 ,11 It has been tested in cardiovascular disease,12 with a systematic review of 47 studies—including 38 randomised controlled trials—indicating that brand name products were not superior to generic products: aggregate effect size (n=837) of −0.03 (95% CI −0.15 to 0.08). However, in other therapeutic areas the evidence appears to be contradictory. A systematic review of studies comparing adverse events in antiepileptic drugs found no difference in the odds of uncontrolled seizures for patients on generics relative to patients on branded medications when randomised controlled trials were considered, but found increasing drug and service utilisation in patients on generics when observational studies were assessed.13 In a study of neurology, psychiatry and transplantation medicine, there were significant differences between generics and branded therapies,14 while in a literature review of psychotropics, the authors cautioned that there was sufficient evidence to warrant switching to generics on an individual basis with close monitoring during the transition period.15 In drugs with a narrow therapeutic index—such as tacrolimus and ciclosporin in transplant medicine—it has been advocated that small changes in exposure could result in increased toxicity or reduced immunosuppression that requires careful monitoring and supervision by a transplant specialist.16 This concern has been reflected strongly by other authors who have argued that since studies have shown that similar treatments can generate different clinical outcomes, promoting switching between branded medicines and generics on financial grounds alone is ‘potentially harmful to patients and is incompatible with patient-centred medicine’.8

## The extent of cost differences

The extent to which therapeutic deficits in generics that result in adverse events, lower levels of efficacy or patient monitoring and therefore require additional treatment, patient management and costs is an argument that is a consistent feature of the arguments offered by opponents of therapeutic switching. For example, a systematic review has suggested that higher overall healthcare costs were evident during periods of generic antiepileptic use than during periods when branded therapies were used, with more pronounced cost increases in patients receiving multiple generic versions.17 Other studies have confirmed that the acquisition costs differences between generics and branded in antieplieptics are likely to be offset by additional costs elsewhere within healthcare systems.18 ,19 Similarly, studies have shown that increases in relapses and reductions in compliance associated with psychiatric medications resulting from generic substitution can also affect the cost differentials,20 ,21 while a study in renal transplantation has demonstrated that patients receiving generic ciclosporin had significantly higher overall healthcare costs than those treated with the branded version.22 There are also a number of studies that highlight the additional costs arising from switching in hypertension, with additional clinic visits being the key cost driver, as a result of increased communication for explanation and reassurance and dose titration requirements.23 One such study, for example, suggested that it would take 17 months for the costs incurred as a direct result of the switching to be offset by reductions in acquisition costs.24

However, the majority of the studies on which such arguments are based are towards the less rigorous end of the evidence quality hierarchy with no virtually no randomised controlled trials available to substantiate such claims. Observational studies are subject to many confounding factors which have not been considered when comparisons have been made. There are grounds for suggesting that in drugs where there is a narrow therapeutic index, the tolerable ranges that bioequivalence criteria operate within might be too large and there are likely to be additional costs resulting from a switch to generics. This is an issue that regulatory agencies probably should investigate when increasing targets for generic drug penetration in healthcare systems.

The acceptance of generic switching by patients has received attention and both proponents and opponents of such policies have used studies to support their respective stances. For those who argue that wide scale substitution is problematic, they point to the concern felt by patients when their usual tablets have changed10 or even alarm that some sort of error has been made.5 In Germany, there was scepticism towards generic drugs because of their lower prices and by implication poor quality,25 while in Japan the need to employ public awareness schemes that provide patients with the correct understanding of generic substitution has been emphasised to ensure that acceptance—and by implication compliance—is maximised.2 The impact of such switching on compliance is an important one, and which has also received considerable attention in the literature. As with all aspects relating to generic substitution the evidence remains equivocal and more work is required.

There are other potential situations where the resulting cost differences might be compromised when implementing a policy of generic substitution. For example, a Swiss study has shown that dispensing physicians are more likely to prescribe generic drugs due to the higher contribution to their income than their branded counterparts based on the incentive schemes that promote such behaviour.1 Similarly, in Taiwan, there is evidence to suggest that the providers rather than the payers or the consumers enjoy the financial benefits of generic substitution.26 There is also the potential for price inflation when governments announce targets for generic drug penetration. Such announcements provide generic manufacturers (and suppliers) with the incentive to increase the price of their products—without any risk of reducing sales—as the level of demand for generics will increase by default. In such situations, regulatory authorities should take pains to ensure that any policy designed to increase generic substitution should be complemented by measures designed to avoid cost inflation resulting from increasing prices of generic therapies.

In summarising the extent of cost differences that emerge from generic substitution, the perspective employed for such an analysis is crucial. At the level of the individual patient, any cost differences in acquisition cost might be more than offset by additional costs resulting from more consultations, real or perceived adverse events or compromises to treatment adherence. For individual conditions, the extent of cost difference is dependent on the need for therapeutic equivalence to be as exact as possible—particularly where there is a narrow therapeutic index, in conditions such as epilepsy, organ transplantation and in some psychiatric therapies. At the societal or healthcare system level, there is little doubt that generic substitution leads to significant financial benefits that “may sustain the affordability of health care and may enable a larger number of patients to gain access to health care”.11

## Conclusions

There is no doubt that generic substitution is an effective policy in terms of overall cost savings to healthcare budgets and is technically efficient in that similar health benefits are delivered to patients at a lower cost than would be the case with branded equivalents. However, authorities and policy makers need to ensure that therapeutic equivalence is not compromised as there are potentially major efficiency losses associated with the consequences of deficits in treatment efficacy, existence of more adverse effects, increases in patient information and monitoring and compromised patient adherence to prescribed medication. Regulatory authorities and formulary committees have a major role to play in ensuring that efficiency is not compromised as a result of indiscriminate generic substitution, while research funders should seek opportunities to facilitate high quality studies that assess the therapeutic equivalence of branded and generic drugs—and the relative resource utilisation—especially in those areas where the evidence is generally weak.

• What is known

• Generic substitution has been widely encouraged as a means of reducing the level of expenditure on pharmaceuticals.

• The degree of generic drug penetration in healthcare systems varies considerably between countries, ranging from under 20% to over 80%.

• In order to maximise benefit, it is essential to ensure that therapeutic equivalence is not compromised resulting in efficiency losses as a result of deficits in treatment efficacy, existence of more adverse effects, increases in patient monitoring and reduced patient adherence.

• Research funders should seek opportunities to facilitate high quality studies that assess the therapeutic equivalence of branded and generic drugs – and their relative resource utilisation – especially in those areas where the evidence is generally weak.

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## Footnotes

• Competing interests None.

• Provenance and peer review Not commissioned; internally peer reviewed.

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