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Rise of generic medicines in Portugal

From a nation in love with branded medicines to one reliant on generics

The deep recession and debt crisis that has engulfed Portugal led to a substantial growth in the generics market in the last years, particularly in terms of volume. Generics have been the cornerstone of a series of government austerity measures to reduce healthcare spending. However, there is no coherent policy to support a market that is hampered by such low prices that is dropping in value as it swells.

The shift over the last 10 years in Portugal from using branded medicines to generics has been dramatic. In the 1990s, the market was inundated with copies, which were converted into generics after 2003, under legislation to regulate off-patent drugs.

According to regulatory body, Infarmed, generics now represent 27 per cent of the market in volume and 18 per cent in value (in 2011, the market was worth €540m). The share of generics in the Portuguese National Health Service, Serviço Nacional de Saúde (SNS) has now reached 38.5 per cent.

The economy is the main reason the government has embraced generics so enthusiastically. Patent cliffs and a growing popularity among politicians and hard up patients for generics may offer opportunities, but what are the effects on the industry of disparate policies, little competition and price erosion from generics?

The Portuguese government agreed with the European Union, European Commission and International Monetary Fund a series of reforms to restore confidence and reduce public deficit under the terms of the 2011 bailout. The “Memorandum of Understanding” stipulated healthcare budget cuts and targets for reduction of the public pharmaceutical expenditure (a decrease of 1.25 per cent in 2012 and 1 per cent in 2013, in relation to GDP). These cuts have had a negative impact on the pharmaceutical sector.

Pedro Pita Barros, professor of economics and Nova School of Business and Economics, told PME: “Patients have largely benefited from price decreases (for example, simvastatin dropped from above €50 for a two-month supply to below €5). All major policy reforms adopted in other countries to promote generics have been implemented in Portugal (some to a larger extent than others). The major barrier to entry of new generics is still the intellectual property disputes (and their cost), which should be carefully assessed and, if necessary, changed.”

Thorny issues
Apogen, the Portuguese Generics Association complains the market has been hindered by pricing regulation, patent litigation, delays in approval of new generics (up to 400 days in 2010) and weak incentives to doctors when prescribing, and pharmacists when dispensing, unbranded products.

Health Minister Paulo Macedo stated that savings of up to €40 to 50m a year could be achieved if 20 to 40 new active substances were approved. And laws are catching up with the need to speed up market access and approval of generics.

Prices of pharmaceuticals were set in comparison with four reference countries: France, Spain, Italy and Greece, where branded products have also been suffering their share of price reductions. In February this year a decree law established Spain, France and Slovakia as new reference countries.

There is an internal reference pricing system by active substance applied to medicines with generic alternatives included in reimbursement lists. Medicines are clustered in what is known as homogeneous groups (with the same active substance, pharmaceutical form, strength and route of administration) that include at least one generic on the market. The reference price is the average of the cheapest in each homogeneous group.

Generics are subject to annual price cuts depending on their market share. For instance a 50 per cent market share of the active ingredient leads to a price cut of 5 per cent.

Prices have decreased around 70 per cent since 2008 and on average all reference countries have higher prices for generics when compared to Portugal. This issue affects mainly national companies unable to survive with diminishing profits to reinvest, but it also discourages multinationals from launching new generics in Portugal. 

Hospitals and other public payers often delay payments and try to negotiate deals that involve purchasing generics below production costs. 

The pharmacy landscape is also dire. The Portuguese Association of Pharmacies has launched the campaign 'Pharmacies in mourning' to draw attention to their plight. Until the end of the year, around 600 pharmacies are under threat of closure, like many other shops and businesses in Portugal. A combination of high rents, taxes, lower consumption rates have impacted on profits, even if pharmacies sell pricey cosmetics and diet products and benefit from flat rates for their margins. Generics companies offer discounts to pharmacists to create incentives for substitution and now the government has suggested increasing pharmacy margins for those practising high levels of substitution with generics. Pharmacies facing closure or financial difficulties tend to have unavailable stock and struggle to keep up with demand.

Changing habits, gaining trust
The 'Memorandum of Understanding' also stipulates that generics achieve a market share of 60 per cent with the SNS by 2014, as a necessary cost containment tool to ensure the required savings, which led to supportive measures for the generics industry.

Since 2012, doctors must prescribe by International Non-proprietary Name (INN) and pharmacists are allowed to offer substitution. Any generic entering the market has to be at least 50 per cent lower than its branded equivalent.

Data on generics in Portugal
Generics market share in pharmacies27.1 per cent in volume/18 per cent in value
Generics market share in the Portuguese NHS38.7 per cent in volume
Growth of market share in the NHS5.1 per cent (from February 2012) in volume
Average price of a generic medicine€6.80
Price reduction since 200767 per cent

Measures to promote generics introduced under the Memorandum of Understanding (terms of the Portuguese bailout)

  • Setting the maximum price of the first generic to enter the market in its class at 60 per cent lower than the price of the originator product
  • Automatic reduction of the price of the originator pharmaceutical product when the patent expires
  • Resolving the legal dispute over intellectual property to ensure speedier entry of generics Resolving the legal dispute over intellectual property to ensure speedier entry of generics
  • INN prescription compulsory for doctors
  • Substitution at the pharmacy of prescribed products by generics under certain conditions; moreover, pharmacies are forced by law to carry at least three of the five lowest-price generics in each class defined by a branded product. 
  • Generics bestsellers in volume

  • Simvastatin
  • Alprazolam
  • Oneprazol
  • Ibuprofen
  • Paracetamol
  • Metformin
  • Nimesulide
  • Clopidrogel
  • Source: Infarmed 

    Ranking of top generics companies in the Portuguese market:

  • Ratiopharm (in sales at ex-factory prices)
  • Generis
  • Mylan
  • Snadoz
  • Mepha
  • Source: IMS Health 2011 

    Doctors can add brand names to INN prescriptions and there are exemptions where branded prescribing is possible, such as patient preferences. Without proper monitoring, incentives or tar 1 gets for doctors, it is hard to establish how INN has impacted on generics. There is, however, anecdotal evidence that prescription patterns are slowly changing. The Portuguese healthcare observatory in its 2013 report pointed out that the offer is certainly growing, but incentives for doctors, pharmacists and patients have to be created to stimulate demand. Some doctors still distrust generics and fear that bio-equivalence tests have not been performed properly. One specialist said that he follows the rules and prescribes generics but chooses those from large, trustworthy and more well known companies, citing Ratiopharm.

    Apogen, together with the industry association Apifarma and the Doctors' Association, criticised the introduction of INN prescriptions. For Apogen the main issue was the impact on the national industry, which is already struggling, and would prefer mandatory generic prescribing.

    Paulo Lilaia, chairman of Apogen, said: “To be sustainable, this market cannot see lower prices. However there is a huge potential for growth. Doctors are prescribing more generics, but they have to prescribe much more. Pharmacies need incentives and patients need more information to be able to request generics and benefit from them. Trust in generics has grown substantially among the public”. 

    Mr Lilaia added that there are three areas of potential growth for generics: existing medicines, where generics are not being used; medicines with generic versions that are coming off patent in the next years; and biosimilars. “We came half way, but have to keep up with the rest of European countries, where generics have true penetration to support manufacturers and bring savings that are sustainable,” he concluded.

    Levels of co-payment have been increased to face rising costs in the National Health Service but since 2009, all low-income pensioners are now entitled to 100 per cent reimbursement on generics. 

    For patients, affordability of medicines is a key issue, without forfeiting availability nor access to innovative branded treatments. Generics play a crucial role in a sustainable SNS, but without a dynamic market, with incentives to all players involved: manufacturers, doctors and pharmacists this model for cost containment only offers savings in the short term.

    Article by
    Catarina Féria

    freelance journalist specialising in the pharmaceutical industry

    8th October 2013

    Article by
    Catarina Féria

    freelance journalist specialising in the pharmaceutical industry

    8th October 2013

    From: Sales, Healthcare



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