Market development

Over the past years, expenses for medications covered by mandatory health insurance have been steadily rising – an issue which has been gaining increasing public attention. Costs related to immune diseases, cancer treatment, HIV infections and hepatitis C have experienced a particularly sharp increase. The accelerated use of personalised medicine – for instance, using novel kinds of cell and gene therapies to treat blood cancer or rare diseases – has made treatments possible that were unimaginable just a few years ago. Instead of extending patients’ lives by a few months or years, it is now possible to talk about permanently healing them. We will need to implement new solutions alongside existing approaches in order to guarantee that patients continue to have access to the best possible therapies, and that there is enough funding for a high-quality health care system. One solution that can already be implemented today is the efficient use of generic medications, which can significantly optimise resource allocation within the health care system.

Generics are cost-saving treatment alternatives to proven active ingredients that are no longer patent-protected. The active ingredient is the same as that of the original compound and has to have the same product properties. Generic medications must meet the same strict quality, safety and efficacy requirements as the original medication. In Switzerland, generics can only be put on the market when they receive approval from the medical regulatory authority Swissmedic. They must be approved as compounds with a recognised active ingredient and present sufficient evidence for and confirmation of the generic drug’s bioequivalence or dosage equivalence to the original drug or reference product.

In order for a compound to be eligible for reimbursement from health insurers, it must be included on the Federal Office of Public Health’s (FOPH) list of special medicines, or specialties list. Generics are only profitable when they are considerably less expensive than the original brand name drug. Depending on the medicine’s turnover amount, the ex-factory price difference between generics and brand name drugs ranges from 20% to 70% and varies depending on how the medication is administered, its dosage and the size of the package. The average retail price difference between generics and brand name drugs is around 30%. In 2018, CHF 1,050 million of generics eligible for reimbursement were sold in Switzerland, representing a 3.5% increase compared to the previous year. Over the same time period, the use of medicines increased to 1,475 million daily doses – an increase of 6.2%. This means that the market for generics eligible for reimbursement once again underwent more dynamic development than the reimbursement market as a whole. The growth of generics is primarily determined by when patents on certain active ingredients expire. There are currently generic medications available for 285 active ingredients or fixed combinations of active ingredients. This is two fewer than in the previous year. The 12 active ingredients no longer on the list fell primarily into one of two categories: those that yielded small turnover and were therefore no longer profitable to market, and those that were replaced by other, often more effective treatment methods.

The market concentration for generics is particularly noteworthy: only four companies account for 86% of the turnover. For many indications that have mainly small prescription volumes, there are just one or two product licence holders. This situation is a reflection of the barriers to entering the market, which have traditionally been high, particularly with regard to the strict legal requirements that drug manufacturers have to meet. Strong fragmentation when it comes to treatment demand and specific regional circumstances also play a role.

Generics in Switzerland account for 20% of the market by value and 35% by volume, putting it on a level similar to that of Belgium, France or Austria. However, this does not approach the level of generics used in any other European country. It should be noted, though, that health care systems, regulatory processes, market sizes and patient preferences vary greatly from country to country. In Switzerland, particular value is placed on freedom of choice, clinical benefits and the quality of service.

Over the past years, payers in the health care sector have benefited from the expiration of patents on high-turnover active ingredients. Direct savings from generic substitution grew to CHF 448 million last year. Of this, CHF 400 million occurred within established substitution groups. A majority of these savings were made on just a few, expensive active ingredients.

These savings could have been considerably higher had generics consistently been prescribed in place of more expensive brand name medicines. This would have amounted to an additional CHF 196 million in savings. However, studies from abroad have shown that only around 80% to 90% of all possible daily doses can be replaced by generics under real treatment conditions. The current average substitution rate for generics is around 72%.

An evaluation of generic drug launches over the past two years amply demonstrates that high-turnover active substances with considerable price advantages compared to their brand name counterparts get substituted very quickly, while generics with cheaper active ingredients, smaller markets or a narrower scope of therapeutic application are substituted more slowly. Two active substances that influence lipid metabolism, rosuvastatin (Crestor) and ezetimibe (Ezetrol), enjoyed high substitution rates after only a few months.

Over the next four years, patents for numerous active substances are set to expire. This will impact an ex-factory turnover volume of around CHF 290 million (not including hospitals). There is a particularly great savings potential when it comes to biosimilars. Examples include etanercept (from July 2018) and adalimumab for the treatment of rheumatic diseases and psoriasis, the monoclonal antibodies rituximab (from September 2018) and trastuzumab, and the recombinant hematopoietic growth factor pegfilgrastim in oncology.

In 2018, treatment costs with generics amounted to an average of CHF 0.71 per daily dose at reimbursement prices, making them cheaper than 10 years ago. This trend is also reflected in the price index for generics eligible for reimbursement. Compared to 2003, retail prices have dropped 39.1%, a development that applies to all important generic drug markets.

Generics continue to play a minor role in out- and inpatient hospital treatment, accounting for only CHF 76.8 million (manufacturers’ turnover), or a modest 6%, of generic drug purchases. This figure has even gone down slightly due to expensive, patent-protected medicines experiencing disproportionate growth.

Following a two-year pause, in 2017, the FOPH resumed its periodic assessment of the criteria for acceptance onto the specialties list. This led to further significant savings in the health care sector alongside other factors, such as an increase in the price gap between generics and branded drugs and stricter conditions on variable co-payments. Generic drugs alone accounted for an additional CHF 36.5 million of pro rata costs last year.

Over the past several years, the regulatory authorities, the Swiss Federal Council, the Federal Department of Home Affairs (FDHA) and the FOPH have pushed forward various reform measures aimed at controlling drug costs. More measures are planned, for instance the introduction of a reference price system, limiting reimbursement prices for branded medications with expired patents, introducing a favourability system for medicines eligible for reimbursement, and creating a price-independent commission structure for prescription medication. It is not yet clear to what extent these suggestions can be prudently implemented. In any case, an evaluation of the impact of this regulation commissioned by the State Secretariat for Economic Affairs (SECO) and the FOPH has shown that the potential savings are much smaller than previously thought. Furthermore, it must be assumed that there would be a serious impact on quality of care and that the safety risks to patients would be difficult to assess.

«Not only doctors and pharmacists have the duty to use generics for treatment whenever possible – patients should also play their part and speak up.»

Observer

Generics figures in 2016

Savings of millions of francs through generics

Millions of francs worth of generics covered by health insurances sold

Billions of francs of savings in total (direct and indirect)

Market approval

Generic drugs first need to undergo the drug approval process at Swissmedic, the country’s medical regulatory authority. Swissmedic issues a marketing authorisation when all scientific and medical criteria are fulfilled. The second step is to apply for status as a drug eligible for reimbursement. This is granted by the FOPH when the generic is up to 70% cheaper than the brand name drug, depending on the market size. For niche compounds, i.e. for generic equivalents of brand name products with an annual turnover of CHF 4 million or less, the generic only needs to be 20% cheaper.

Substitution

Article 52a of the Swiss Health Insurance Act (Krankenversicherungsgesetz – KVG) declares that a pharmacist can substitute a cheaper generic medicine for a brand name medicine where both are on the FOPH’s specialties list if the doctor or chiropractor does not explicitly require that the original brand name drug be dispensed. The consent of the patient is required. Physicians and chiropractors must inform the patient if the specialties list contains one or more generics that can be substituted for an original preparation.