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Journal of Generic Medicines: The Business

http://jgm.sagepub.com/content/2/1/42The online version of this article can be found at:

 DOI: 10.1057/palgrave.jgm.4940051

2004 2: 42Journal of Generic Medicines: The Business Journal for the Generic Medicines SectorMohamed Azmi Hassali, David C. M. Kong and Kay Stewart

Utilisation of Generic Medicines in the Australian Healthcare System  

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Utilisation of generic medicines inthe Australian healthcare systemReceived: 6th June, 2004

Mohamed Azmi Hassaligraduated with a Bachelors degree in pharmacy and a Masters degree in clinical pharmacy from Universiti Sains Malaysia.His research interests are in the area of clinical pharmacoeconomics, social pharmacy and the role of pharmacists in publichealth. Currently, he is undertaking his PhD research on the topic of generic medicine utilisation in Australia at theDepartment of Pharmacy Practice, Monash University, Australia.

David C. M. Konggraduated with a pharmacy degree from Monash University, Australia. He also gained his Masters degree and PhD in thef|eld of pharmaceutics and organic chemistry from the same university. His research interests include pharmaceutical drugutilisation, issues on medication safety and adherence, synthesis of anti-infective agents and rational use of anti-infectives� especially anti-fungal agents. He currently holds a joint appointment as a lecturer in the Department of PharmacyPractice at Monash University and as Head, Clinical Research and Education, Pharmacy Deparment, The Alfred Hospital,Melbourne, Australia.

Kay Stewartgraduated with a pharmacy degree from the University of Queensland, Australia and has a PhD in the f|eld of pharmacypractice from the same university. Her research interests include quantitative and qualitative aspects of medication usageand implementation of specialised services in community pharmacy. Currently, she holds a senior lecturer position at theDepartment of Pharmacy Practice, Monash University, Melbourne, Australia.

Abstract Generic medicines have a key role to play in the eff|cient allocation of f|nancialresources for pharmaceutical medicines. In Australia, the current utilisation of generic medicinesis comparatively low compared with other Organization for Economic Co-operation andDevelopment countries. This paper discusses the current issues and problems relating to the useof generic medicines in Australia and the role they play in the Pharmaceutical Benef|ts Scheme,which is a comprehensive system for subsidy of prescription drugs covering the whole population.

Keywords: generic medicines, pharmaceutical subsidy, generics policy, generics substitution, prescription ofgenerics

INTRODUCTIONMost industrialised nations want similar

things from their healthcare systems:

effective services that improve the health and

quality of life of their citizens, equitable

access to those services and efficient use of

resources.1,2 In pursuing these goals,

however, different countries have

historically taken very different paths. In the

last decade, efforts to control healthcare

costs — a major priority in many

industrialised countries — have produced

some interesting shifts in strategy. These

shifts focus not only on limiting

governmental spending on health, but also

include some measures to involve citizens in

cost-sharing mechanisms, such as

introducing ‘co-payments’ for healthcare

services delivered by the public sector.1,2

Another recent trend common to most

industrialised nations is the rapid growth in

expenditure for prescription drugs.3,4 In

Australia, increasing cost to the

Pharmaceutical Benefits Scheme (PBS),

Kay StewartDepartment of PharmacyPracticeVictorian College ofPharmacyMonash University381 Royal ParadeParkville 3052MelbourneVictoria, AustraliaTel: +61 (0)3 9903 9618Fax: +61 (0)3 9903 9629E-mail:kay.stewart@vcp.monash.edu.au

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which is a comprehensive system for subsidy

of prescription drugs covering the whole

population, has resulted in the

Commonwealth Government instituting a

number of strategies to hold down rising

pharmaceutical costs.5 One of these

strategies is to encourage the use of generic

medicines.6–9 Generic medicines provide the

opportunity for major savings in healthcare

expenditure, since they are usually

substantially lower in price than their brand-

name equivalents.8–10

DEFINITION OF ‘GENERICMEDICINE’ IN AUSTRALIAThe term ‘generic medicine’ is used in

different ways. It can mean a product

marketed under the drug’s approved

international non-proprietary name (INN),

or it can, as is usual in Australia, mean a

product marketed under a different brand

(proprietary) name.11 The Therapeutic

Goods Administration (TGA), which is the

regulatory body for registering and licensing

medicinal products in Australia, defines

‘generic medicine’ as follows:12

. it has the same qualitative and quantitative

composition in terms of active principles;. the pharmaceutical form is the same; and. where necessary, appropriate

bioavailability studies have been carried

out.

STRUCTURE OFPHARMACEUTICALSUBSIDY IN AUSTRALIAThe PBS, along with Medicare, is a key

component of Australia’s healthcare

system.13 The PBS provides access to

necessary and lifesaving medicines at an

affordable price. Most pharmaceuticals in

Australia are provided under the PBS,

administered by the Commonwealth

Department of Health and Aged Care

through the Health Insurance Commission

(HIC).13,14 The scheme is financed primarily

from a budgetary allocation of the

Commonwealth Government. The PBS

distinguishes between two major categories

of patients (ie consumers of drugs supplied

under the PBS). The first category of

patients is ‘concessional patients’.

Concessional patients are those patients who

hold one of the following cards issued by

Centrelink, which is a government agency

delivering a range of Commonwealth

services to the Australian community:

. Commonwealth Seniors Health Card;

. Health Care Card; or

. Pensioner Concession Card.

Commonwealth Seniors Health Cards are

available for all Australian residents of

pensionable age or older (65 years for men,

62.5 years for women) who have either a

single income of less than A$50,000 per year

or a combined income of less than A$80,000

per year. Health Care Cards are issued to

people under 60 years of age receiving

various kinds of government support

payments including Newstart Allowance,

Partner Allowance, Widow Allowance,

Special Benefit, Exceptional Circumstances

Relief Payment, Youth Allowance

(Unemployed) and Parenting Payment and

Sickness Allowance. Pensioner Concession

Cards are issued to all pensioners and

recipients of Mature Age Allowance, Mature

Age Partner Allowance, Carer Payment and

Single Parenting Payment.

For people with a concession card, the

maximum payment per prescription was

A$3.80 as at 1st January, 2004.14 General

patients (ie non-concessional card holders)

pay a maximum of A$23.70 for drugs

available under the PBS.14 These prices are

revised regularly, usually annually. In

addition, if concessional cardholders incur

costs singly or as a family above a safety

threshold amount (currently A$197.60)

during the course of a year, they can

apply for a Safety Net Entitlement Card,

allowing drugs to be supplied at no cost

to the patient for the rest of the year.

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General patients can apply for concessional

status once their expenditure exceeds a

threshold, currently at A$726.80. The PBS

pays the pharmacist the difference between

the co-payment and the dispensed price of

the drug as listed in the Schedule of

Pharmaceutical Benefits. If the drug carries a

brand premium or therapeutic premium, this

premium is paid by the patient in addition to

the co-payment.

DEVELOPMENTS INAUSTRALIAN GENERICMEDICINES POLICYGenerics have been available in Australia

since the 1950s and have been widely used

in hospitals, where brand substitution has

long been widely practised as a consequence

of competitive tendering.8 The challenge to

brand-name products in terms of supply

under the PBS only began in the 1990s.7,8

Key policy junctures with regard to this

include the Brand Premium Policy (BPP)

introduced in December 1990, the

legalisation of brand substitution in 1994 and

the Therapeutic Group Premiums (TGP)

policy from February 1998.

The BPPThe BPP was introduced with the intention

of increasing price competition by allowing

different brands of the same medicine to be

included on the Schedule of Pharmaceutical

Benefits at different prices.8,15,16 The subsidy

amount is determined from the lowest

priced brand, the so called ‘benchmark’

brand. For products other than the

benchmark brand, consumers pay the basic

contribution plus the price differential over

the lowest priced brand, with the price

premium not counting towards the PBS

safety net. Benchmark pricing for PBS

medicines means that at any given time, the

price paid by the government for all brands

of the same medicine is the same. Therefore,

there is no direct benefit to the government

in relation to the brand prescribed by the

doctor or used by the consumer. Savings to

the PBS only accrue as a result of normal

market forces acting to reduce the

negotiated price to government over the

longer term when there is competition

between brands. Savings to consumers occur

when prices of different brands differ and a

less expensive brand is used. As at 30th June,

2003, the average brand premium was

A$3.06 and premiums ranged from A$0.06

to A$79.48.17 The majority of brand

premiums were in the range of A$1.00 to

A$2.25.17

The Brand Substitution PolicyThe Brand Substitution Policy (BSP) was

introduced in December 1994.8,9,18 Under

this policy a pharmacist is allowed to supply

a ‘generic equivalent’ product, with the

consent of the patient, in place of the one

prescribed. Under the PBS, a ‘generic

equivalent’ product is defined as a product

with similar dosage form and containing

identical amounts of active drug

ingredient(s).19 In addition, the product

must also be demonstrated to be

bioequivalent or therapeutically equivalent

to the comparator, usually the innovator

product. In the Schedule of Pharmaceutical

Benefits, these products are rated with a

superscript ‘a’ before their brand names,

which indicates that the sponsors of these

brands have submitted evidence that they

have been demonstrated to be bioequivalent

or therapeutically equivalent, or that

justification for not needing bioequivalence

data has been provided to and accepted by

the TGA.14 It would thus be expected that

these brands may be interchanged without

differences in clinical effect. In Australia, the

TGA criteria for assessing bioequivalence are

based on single dose in vivo studies in healthy

volunteers.11,12,19 Bioequivalence is

established based on assessments of the rate

of absorption (peak plasma concentration

[Cmax] and area under the plasma

concentration–time curve [AUC]).11 The

TGA’s criteria are designed to achieve 90

per cent confidence that the ratios of the

Hassali et al.

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test:reference log-transformed mean values

for AUC and Cmax are within the interval

from 80 per cent to 125 per cent.11 The

TGA accepts a –20 per cent to +25 per cent

variation in Cmax and AUC in products that

are considered bioequivalent.11 Under the

BSP, the prescriber may disallow

substitution by indicating on the prescription

that only the named product is to be

supplied, usually by marking a check box on

the government pre-printed prescription

forms. If brand substitution is requested by

the patient contrary to a prescription

instruction, the matter should be referred

back to the prescriber by the pharmacist for

clarification or confirmation.

The TGP policyThe TGP policy was introduced on 1st

February, 1998 as an extension of the BPP,

in order to encourage greater price

competition between manufacturers of

drugs and to make doctors and patients more

aware of the costs of medicines.7,15 The

success of the government in controlling

prices of products supplied through the PBS

has often been criticised by the

pharmaceutical industry. Under both the

BPP and the TGP policy, suppliers of multi-

branded items and therapeutically similar

drugs are able to set their own prices at a

level that they think the market will bear. At

the same time, the prescriber and the patient

can decide whether it is necessary to pay

more for a particular brand or drug when a

cheaper one is available and is therapeutically

interchangeable.7,15 This policy applies to

particular therapeutic groups of medicines

that produce essentially similar results on a

population basis. The lowest-priced product

in the group sets the benchmark price and

thus creates competition across the group as

a whole. Substitution by pharmacists

between different drugs in a group is not

permitted (but can occur between different

brands of the same drug). There are four

drug groups currently under the TGP

policy. These are angiotensin-converting

enzyme inhibitors and calcium channel

blockers (used to treat cardiovascular

disease); 3-hydroxy-3-methyl-glutaryl

coenzyme A reductase inhibitors (used for

lowering blood cholesterol); and the H2-

receptor antagonists (used for the treatment

of peptic ulcers). Under the TGP policy, if a

patient cannot — for clinical or compliance

reasons — tolerate the benchmark-priced

drug, the prescriber can apply to the HIC for

an exemption to supply the more expensive

alternative drug at no extra cost to the

patient. As at 30th June, 2003, there were 60

items within the four groups under the TGP

policy.17 These consisted of 176 brands at

the benchmark price, 33 brands with a brand

premium and 14 with a therapeutic

premium. The average TGP was A$4.09

and premiums ranged from A$1.60 to

A$7.01.17

THE PBS AND GENERICMEDICINE UTILISATIONSince the inception of the PBS under the

National Health Act in 1953, the number of

prescriptions filled under the PBS has

increased dramatically. The PBS is

continuing to grow rapidly, at an average 14

per cent per annum over the past ten years,

and this is challenging its long-term

sustainability.20 In the 2001–2002 financial

year, PBS expenditure was estimated at

A$4.83bn, 13.6 per cent more than in the

previous year.5 The rapid growth in the cost

of the PBS is due primarily to the following

factors:9,20,21

. Use of more medication by the ageing

population;. Doctors prescribing larger volumes of

newer, more expensive medication

compared with older, cheaper drugs;. Increasing rates of diagnosis and treatment

of chronic conditions such as mental

illness, diabetes and cardiovascular

diseases; and. The increasing cost of new drug

development.

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It has been estimated that PBS prescriptions

filled by generics make up around 20 per

cent of the total market (in volume terms).8

Several factors contribute to this low usage

pattern in Australia.

Small price di¡erence between abranded and a generic medicineWhen medicines are listed in the PBS

scheme, the government negotiates the price

with the supplying companies and the

companies are then bound to this price

control system. Under the BPP, the

difference that the patient pays for a branded

medicine versus a generic medicine in most

cases is very small. As an example, the price

of the innovator brand of 150mg ranitidine

(60 tablets) is A$24.05. This price is roughly

equivalent to US$17.54 (exchange rate:

A$0.73¼US$1.00 at the time of writing)

compared with A$21.88 (US$15.97) for the

generic preparation.14 Those patients who

opt for the innovator brand of ranitidine pay

a brand premium of only A$2.17 (US$1.58).

This small premium means that some

patients can afford to choose more expensive

brands. In contrast to Australia, patients in

the USA, for example, need to pay a

substantial price difference between a

generic and a branded product.22 To use the

same example, in the USA, the cost of the

branded ranitidine with similar strength and

packaging as mentioned above is about

US$72.48 and the generic version costs

about US$2.50.23 The large price difference

between generic and branded medicines in

the USA is mainly attributable to the

pharmaceutical subsidy arrangements and

cost-containment policies on

pharmaceuticals undertaken by both

governmental agencies and private health

insurance schemes, which are mainly

provided by managed care plans such as

health maintenance organisations.24 For

example, the US government generally

subsidises the cost of a limited number of

pharmaceuticals to particular segments of the

population, namely the poor (through

Medicaid), defence personnel and veterans

of military service (through the Department

of Veterans Affairs). The lower population

coverage of the government subsidy schemes

in the USA and the existence of multiple

private insurers competing against each other

may have strengthened incentives to reduce

pharmaceutical prices, which has a direct

impact on the price variation between a

generic and a branded medicine.22 Thus,

generic medicines in the USA represent

approximately 47 per cent of the

prescription drug market.25

Medical practitioners’ acceptancePrescribing is one of the most important

healthcare interventions undertaken by

medical practitioners. Research in Australia

has shown that at least one medication is

prescribed in about 60 per cent of general

practitioners’ (GPs’) encounters.26 Two

studies have been conducted in Australia

exploring medical practitioners’ views on

generic medicines and generics substitution.

The first study, conducted five months after

the government permitted brand

substitution by pharmacists, was a national

telephone survey of GPs.27 Out of a total of

71 GPs, 28 (39 per cent) said ‘no’ to generics

substitution, 22 (31 per cent) said ‘yes’ to

substitution and 21 (30 per cent) were

ambivalent. The most common reason cited

by those opposed to generics prescribing and

substitution was that it would cause

confusion among patients, particularly the

elderly, because generic brands were often of

different colours and shapes. Other reasons

given were that it was a doctor’s

responsibility, not a pharmacist’s, to decide

on medication and that using generics meant

less money for research. There were also

concerns about bioavailability, adverse

reactions to generics and the need for a free

enterprise environment. Similar views were

expressed by some of the doctors in the

second study, which was conducted eight

years after the generics substitution policy

was implemented in Australia.28 Similar to

Hassali et al.

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Australian medical practitioners’ perceptions

of generic medicines, individual medical

practitioners in the USA have expressed

strong opinions about generic drugs through

the years, with opponents of their use

generally being more vocal.29 There is,

however, only limited scientific evidence

quantifying what medical practitioners

generally believe. Banahan and Kolassa

undertook a comprehensive analysis of

medical practitioners’ attitudes towards

generic medication and found that, overall,

their attitudes were fairly neutral, as

indicated by their answers to two key

questions from their nationwide survey.30

While respondents expressed modest

support for generics substitution, they also

had doubts about brand–generic

equivalence. The authors concluded that

attitudes toward the use of generic

medicines are related to prescribing

behaviours, beliefs about and experience

with generics substitution, and perceptions

of therapeutic index and comfort with

substitution. In another study, McGettigan

et al., looking at the concerns of Irish

prescribers about generics prescribing,

concluded that the low rate of generics

prescribing in the Republic of Ireland

compared with England and Northern

Ireland is due to physicians’ concerns about

the reliability and quality of generic drugs,

which have a negative impact on their

prescribing behaviour.31 A study by Tilyard

et al., looking at GPs’ views on generic

medicines and substitution in New Zealand,

found that 200 (52 per cent) of the GPs

opposed generics substitution by the

pharmacists without their knowledge.32 In

the same study, 17 per cent of GPs raised the

issue of confusion among patients due to

different brands of the same medicine as a

limiting factor in prescribing generic

medicines to their patients. The need for

further information on issues regarding

bioequivalence and quality of generic

medicines was also raised by 33 per cent of

the GPs surveyed. As the studies reviewed

here indicate, physicians’ views of generic

medicines are complicated by conflicting

beliefs and knowledge deficits.

Patient acceptabilityIn the debate over the use of brand name

versus generic medicines, the voice of the

patient or consumer, for whom the

medication is prescribed, often goes

unheard.33 Although generics substitution

for brand-name medication has long been an

accepted practice by health bodies across the

world, many patients remain under the

impression that generics are less expensive

than brand-name medication because they

are inferior and less effective.34 Problems

may arise when a generic product is

substituted after a patient has become

familiar with the name, shape, colour and

taste of the branded product. One Australian

study showed that patient acceptability of a

generic product (whether in tablet or inhaler

form) may be increased if the reasons behind

the substitution are explained and

reassurances about quality and therapeutic

equivalence are given.18 Acceptability may

also be increased if the appearance of the

generic product is not too dissimilar from

the branded product (eg salbutamol inhalers

are usually blue and beclomethasone inhalers

are usually brown) — but even this need not

be an obstacle if the patient is forewarned

about any differences.35 In some instances,

no amount of reassurance will convince a

patient that a generic medicine, or an

alternative brand, is equivalent to his or her

previous medication. This is clearly seen in

some studies, whereby elderly patients who

have been using a brand medication for a

period of time think that any changes in

their medication brands will affect their

disease status.36–39 This, in turn, will cause

the patient to decline any offer for

substitution, even though much input may

have been given to the patients by their

healthcare providers that generics will cost

less and give the same therapeutic benefits.

In such instances, prescribing a branded

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product may be the only way to ensure that

patients continue to take their medication as

directed. A small study in Australia,

conducted in 2002, supported this

argument.28 The findings of this study

revealed that up to 40 per cent of consumers

did not know that there were less expensive

brands of medication available. From the

same study, about 18 per cent of the

consumers felt that the more expensive

brands were of better quality and 36 per cent

preferred to use exactly what the doctor had

prescribed.

FUTURE STRATEGIES TOINCREASE THE USE OFGENERICMEDICINES INAUSTRALIAThe costs of operating the PBS in future will

be influenced by the prescribing of new,

more expensive medicines for managing

chronic conditions. Within this context, the

use of lower-cost generic medicines

potentially will be an important cost-saving

mechanism. For example, the listing of

generic omeprazole on the PBS in 1999

saved about A$65m.40 Furthermore,

following the 2002–2003 Commonwealth

Budget, the government entered into an

agreement with individual producers of

generic drugs to facilitate the use of these

medicines in return for reduced prices for

manufacturers and regulated to ensure that

prescribing software used by doctors defaults

to generic drugs, unless the doctor

consciously chooses a brand name

alternative.5 This measure was predicted to

generate savings of A$110.9m over four

years.5 Besides these measures, the following

recommendations could help to increase

confidence with regard to generic medicines

use in Australia.

Increasing consumer con¢denceand understanding of genericmedicinesConsumers should be provided with

adequate information on generic medicines,

including the issues surrounding quality,

safety and efficacy. In addition, the role of

the government regulatory agency in the

process of registering a generic medicine

should also be highlighted. The Food and

Drug Administration (FDA) in the USA

provides this information via its consumer

magazines and also through its website.41,42

Health professionals such as doctors and

pharmacists should build consumers’

confidence by encouraging consumers to

raise with them any concerns with regard to

generic medicine use.7

Increasing awareness amonghealthcare professionalsEducating healthcare professionals, especially

medical practitioners, pharmacists and

nurses, with regard to the bioequivalence of

generic products compared with branded

products is also seen as an important aspect

in increasing their confidence in prescribing

or promoting generic medicines. Studies in

the USA have shown that up to 64 per cent

of the medical practitioners surveyed did not

understand the concept of bioequivalence

criteria used by the FDA to test a generic

medicine versus the branded or originator

medicine.30 Inaccurate perceptions held by

healthcare professionals on this issue have a

direct impact on the utilisation of generic

medicines.30

Providing incentives to medicalpractitioners and pharmacistsMedical practitioners’ fixed budgets provide

an explicit incentive to contain costs, which

in turn encourages generics prescribing.

Evidence exists from a comparison of GPs in

the UK, who are limited by a spending

budget (fundholders), and those without this

restriction. Any savings that fundholders

make could be reinvested into the practice.

GP fundholding, while it was in place, led to

an increase in generics prescribing.43–45

Australian trials of healthcare initiatives,

which have included fundholding models,

have not produced convincing quantitative

Hassali et al.

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evidence of health gains, but there is

qualitative evidence of improved patient

well-being and significant changes in service

mix, which may produce longer-term health

gains.46 The main stumbling block in the

implementation of fundholding practice in

Australia is that it is difficult to collect

accurate information on the ordering of

pathology, diagnostic procedures,

medication and referrals by GPs.47 A

prerequisite to fundholding involves

registration of individuals with specific GPs,

as in the UK healthcare system. This is not

available in the Australian system.47 The

HIC information may be inaccurate in a

number of ways. For example, for drug

prescribing, changes in patient entitlement

to a Health Care Card and to the PBS safety

net would be a major administrative

problem in monitoring drug costs. In

addition, drug expenditure is likely to be

overestimated because of unrepresented

prescriptions; moreover the HIC records

cannot differentiate between prescriptions

issued at different practice locations under a

single prescriber number.47 Fundholding

would be feasible in Australia only if GPs

gather a substantial amount of clinical and

costing information in a form that permits

regular analysis, review and comparison.47

From the pharmacy perspective, for

policies encouraging the use of generics to

be successful, it is important that pharmacists

are reimbursed in such a way as not to

discourage them from dispensing the least

expensive product.48,49 Pharmacists may

receive discounts and rebates from the

wholesalers and/or manufacturers.48

Discounts typically provide incentives for

pharmacists to dispense one drug product

rather than another, but it has been argued

by some health authorities — especially

from the medical fraternity — that it is not

ethical for a pharmacist to engage in this type

of activity. Elimination of this would leave

only the regulation of margins to influence

pharmacists’ dispensing practices. The

European experience, where pharmacy

margins are regulated, suggests that

pharmacists are typically remunerated by

health insurance organisations by means of

fixed fees per prescription, progressive

(percentage) or regressive margins or hybrid

systems, namely a combination of these

three types of remuneration.48 With a fixed

fee per prescription, the pharmacist receives

the same reimbursement for dispensing an

originator brand as for a generic drug. In

countries where pharmacists are reimbursed

based on a fixed percentage of the drug’s

retail price, there is a disincentive to dispense

generics,50 as pharmacists receive more in

monetary terms for dispensing a branded

product than for dispensing a generic, given

the latter’s lower price. A regressive margin

that pays pharmacists a greater percentage of

the cost on lower-priced pharmaceutical

products removes this disincentive, provided

that the structure of the regressive margins is

such that it ensures profitability for generics

dispensing. Experience from the EU suggests

that most member states are now

remunerating pharmacists on the basis of

regressive margins and view that as an

opportunity to influence generics dispensing

positively.1,25,51 In Canada, pharmacists have

an incentive to dispense generics, as they are

reimbursed by the provincial drug plans for

only the cost of the generic drug equivalent,

if one exists.49 Similar arrangements hold in

the USA for federal or state pharmaceutical

assistance programmes, such as payment of

pharmaceutical benefits for veterans and a

specific group of low-income earners by the

Department of Veterans Affairs and

Medicaid, respectively.52 The majority of

pharmacy remuneration in the USA,

however, is based on reimbursement limits.

Pharmacists can, therefore, increase their

margins by negotiating discounts from

suppliers; there is (federal or state)

government or insurance intervention on

margin determination.52,53 In Australia, the

terms for remunerating pharmacists

dispensing benefits under the PBS are set in

the Pharmacy Guild/government

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agreement.54 The most recent five-year

agreement started on 1st July, 2000, and the

main elements of pharmacists’ remuneration

are dispensing fee and mark-up. Under the

arrangements, the dispensing fee is updated

annually in accordance with the movement

in the Consumer Price Index. The current

dispensing fee is A$4.66 per prescription for

ready-prepared items and A$6.63 for

extemporaneously prepared items.14 The

mark-up arrangements provide rates on the

price to the pharmacist of PBS prescriptions

of 10 per cent on drugs up to A$180, A$18

flat for drugs up to A$450 and a rate of 4 per

cent beyond A$450.54,55 Within this

remuneration context, the only incentive for

the pharmacists to use generics comes in the

form of discounts and rebates from the

generics manufacturers themselves, rather

than the government reimbursement

arrangements. Therefore, to increase the

current use of generics among the

pharmacists in Australia, the government

should come up with a mechanism of

financial incentive for the pharmacists, rather

than leaving it to the manufacturers alone.

Improving prescribing educationat the undergraduate levelStudies have shown that changing the

existing prescribing behaviour of practising

medical practitioners is difficult.56–60

Therefore, explanation of the benefits of

generics prescribing should be focused at

medical students, who will become future

prescribers.61 In the UK, for example, open

generics prescribing practice has been

common since the 1970s.49 British

universities teach medical students to

prescribe using the INNs of active

ingredients, and all information notes on

drugs report the generic names and not the

brand names.62 In the UK it has been

estimated that more than 70 per cent of

prescriptions are written generically, thus

making the issue of generics substitution less

pressing there.62

CONCLUSIONThe use of generic medicines in Australia is

still relatively low. Prescribers can be assured

that generics prescribing will result in a

clinically equivalent, but cheaper, product

compared with the original proprietary drug.

This leads to significant cost savings, not

only to patients but also to the healthcare

system as a whole. Even though the price

difference between a generic and a branded

medicine is small under the PBS, it does

have a significant impact on patients with

multiple medication and also those patients

who are low-income earners. As medical

and pharmaceutical technologies advance at

great pace, the reality is that the health dollar

can only stretch so far. A shift to lower-

priced generic medicines could deliver

significant cost savings to the PBS, which

would assist in its future sustainability.

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