Explaining why increases in generic use outpace decreases in brand name medicine use in multisource markets and the role of regulation

Abstract

Background: Healthcare systems worldwide face escalating pharmaceutical expenditures despite interventions targeting pricing and generic substitution. Existing studies often overlook unwarranted volume increases in multisource markets due to differential physician perceptions of brand name and generics.

Objective: This study aims to explain the outpacing of generic medicine use over brand name use in multisource markets and assess the regulatory role, specifically examining the impact of reference pricing on volume and intensity increases.

Methods: Analyzing German multisource prescription medicine markets from 2011 to 2014, we evaluate regulatory mechanisms and explore whether brand name and generic medicines constitute separate market segments. Using an Oaxaca-Blinder decomposition approach, we divide the differential in brand name versus generic medicine use rates into market structure and unobserved segment effects.

Results: Generic use rates surpass same-market brand name substitution by 3.87 prescriptions per physician and medicine, on average. Reference pricing mitigated volume increase, treatment intensity and expenditure. Disparities in quantity and expenditure dynamics between brand name and generic segments are partially explained by market structure and segment effects.

Conclusion: Generic medicine use effectively reduces expenditures but contributes to increased net prescription rates. Reference pricing may control medicine use, but divergent physician perceptions of brand name and generics, revealed by identified segment effects, call for nuanced policy interventions.

Fig 1. Prescription volume and expenditures per patient by marketing authorization year in multisource markets.

Note: The figure shows utilization and expenditure of prescription medicines authorized between 1996 and 2014 prescribed in 2011–2014. Expenditure and prescriptions are expressed in million prescriptions. Prescription data was obtained from the CEGEDIM MEDIMED panel, 2011–2014. Data of first availability of a medicine in Germany by active ingredient was obtained from Arzneiverordnungsreport, 1997–2015. Prescription medicines approved earlier are excluded.

Fig 2. Decomposition of differential in use rates of brand name and generic medicines.

Note: The figure shows the utilization differential in medicines use rates of generic and brand name medicines decomposed by market structure, segment effects, interaction between market structure and segment effects (dashed line) and the difference (solid line) (Panel A) and the proportion of the explained and unexplained part of the decomposition (Panel B) by medicine use rate related outcomes by quarter from Q1/2011 to Q1/2014. In panel B, values larger than 150% were excluded from the figure. Prescription data was obtained from the CEGEDIM MEDIMED panel, 2011–2014. Expend: expenditure; Prescr: prescriptions, pat: patient.