Portuguese generics: headroom for innovation?
In PharmaBoardroom’s first coverage of Portugal in 2007, generics represented 16 percent of the country’s pharmaceutical market, a tremendous feat considering laws for generics had only been implemented a few years before. Today, generics represent nearly 40 percent of the market in units, with the aim is to increase this to 60 percent by the end of 2014.
Using generics as a means of cost-cutting for a fragile health budget seems like an easy go-to option for Portuguese health authorities. “Portugal has budget constraints, and can only spend around EUR 1.7 billion (USD 2.2 billion) for medicines every year,” says Paulo Lilaia, president of Portugal’s generic association Apogen and CEO of local flagship generics company Generis. “If we want to be able to buy innovative therapeutics that add value, we must save money somewhere.”
Between 2008 and 2013, price cuts resulted in a 75 percent decrease in generic prices, resulting in significantly lower prices for generics compared to Portugal’s new reference pricing countries of France, Spain and Slovakia. This also makes it difficult for generic companies to justify selling in a country where profits would be so low. By contrast, originator prices have only decreased 6.1 percent since 2009, creating an unsustainable gap between originators and generics.
Between 2008 and 2013, price cuts resulted in a 75 percent decrease in generic pricesAccording to Francisco Velez, director general of generics player toLife, innovative companies benefited for many years because Portugal only had process patents, and the balance of product patent protection changed when generics were introduced in Portugal. “The time between the end of a process patent and the beginning of a product patent’s start on the market is too long and generates confusion, which leads to doubts about the market. Until one and a half years ago, toLife, which was acquired by Catalan pharmaceutical group Esteve in 2007, simply had “preliminary injections of registered products in INFARMED. If any innovative company was aware of such product registration, that company could stop the approval program through an administrative court. Such courts are not the right place to decide on patents. I had products approved in 2007 and they have just hit the market this year because they were blocked by the court, sometimes with no reason. We lost huge market opportunities, since otherwise we would be first place in the market.”
The problem is that many stakeholders are involved in the decision-making process”“The generic medicines business model was focused on high prices and the commercial terms you could offer to pharmacies in particular,” states Mylan Portugal general manager João Madeira. “Of course, when you do not have the market developed to the point of pharmacy-based decisions (which you would expect in a substitution market), and when you start adopting strategies and tactics that do not correlate with the profile of that market, you will fail. Focusing business on pricing and commercial strategies alone, without creating the landscape to de-stigmatize generic medicines and increase its understanding by physicians and patients is dangerous.” Generic medicines used to be under a branded prescription-based business: “physicians prescribed, drugs were shipped to pharmacies with a script, and pharmacies would typically dispense whatever was in that script,” continues Madeira. “That definitely did not help to build the generic medicines marketplace in Portugal, and did not allow for a proper understanding of the value of having a developed generic medicines market in Portugal nor the need for the authorities to leverage this market.”
“The problem is that many stakeholders are involved in the decision-making process,” comments Moisés Apura, general manager of generics business Ciclum Farma, which is owned by Stada Group. “Furthermore, pharmacists have lost so much profit in the last three years as they are remunerated through a percentage, so they prefer to sell originators over generics. Doctors lose the power to follow patients due to mandatory INN prescription, especially since the brand dispensed at pharmacy may change every month, complicating patients’ compliance. That is why doctors prefer to prescribe originators. If the law changed so that doctors could manage what is best for a patient and follow the prescription and the margin to pharmacy is settled by fixed value instead of percentage, perhaps generics would be prescribed more frequently.”
Furthermore, according to Aurobindo Portugal country manager Pedro Merlini, clear timeline definitions also need to be established in Portugal. “Companies need to know exactly when an originator is launched, registered, when changes are made to its indication, and when its patent protection ends. Without that clarification, a fair market is almost impossible,” he notes.