The Spanish pharmaceutical industry has been affected by a number of austerity measures in recent years, and companies selling generics in Spain have encountered various challenges and opportunities as a result. Ángel Luis Rodríguez de la Cuerda, General Manager of the Asociacion Española de Medicamentos Genéricos (AESEG), discusses the state of generics in the industry today and offers his insights as to how generics can achieve higher market share in Spain.
What are the main objectives of AESEG?
AESEG is Spain’s association for all generic companies operating in the country, and represents 92 percent in value and 94 percent in volume of generic pharmaceuticals in Spain. This is important from an industrial perspective in terms of allying with Spain’s health authorities. Generics companies employ 8,000 people directly in Spain and 30,000 indirectly. Three and a half percent of all generic sales are invested in R&D. In productivity terms, this is very important since seven out of ten generics consumed in Spain are produced locally. Additionally, Spain exports more than 18 percent of the total volume of generics produced here to Latin America, Europe, and the Middle East.
These figures are critical because they represent the strength of this sector in units; the generic industry’s goal is to obtain a large volume of units to reduce values. This is the consequence of our compromise in GDP, and AESEG communicates the importance of generics to Spain’s central health administration and its autonomous communities. In Spain, patents of brand products expire after ten years of exclusive commercialization, at which point generics appear in the market at 40 percent of the price of the reference brand. With such low prices, the national health administration has more economic resources to invest in other areas, and generics therefore openly and economically contribute to the sustainability of the health system. In essence, AESEG promotes generics throughout the health administration to maintain reasonable prices for medicines in Spain in the short and long term.
How does Spain compare to other European countries, in terms of units and value in comparison to brands whose patents expire?
Today, generics in Spain only represent 18 percent of the total market in terms of value compared to 59 percent of products with patents and 23 percent of products with expired patents. Generics have saved €13 billion from 1999 to 2013 in Spain with only 18 percent market share. Imagine if this figure was higher; this is why AESEG strongly advocates the use of generic medications, especially considering the European average market share is 25 percent. In terms of units, generics represent 36 percent of market share, while patented brands represent 33 percent and brands with expired patents represent 30 percent. Again, this figure is far from the European average of generic market share of 55 percent.
Spain has the potential to grow its generic market share, but is currently too low compared to value.
Generics in Spain must also take price segments into account. Products that cost between $3 and $7 or products that cost less than $3 represent 80 percent of units and 20 percent of value. This indicates that increasing volume will maintain low prices. AESEG’s message to Spain’s health authorities is that prices for generics cannot be furthered reduced with such low value and high volume, given the numerous austerity measures that have dramatically decreased prices in recent years. Extra savings must be found in other areas like hospitals or human resources. Contrastingly, measures like price deduction, copayments and medication de-listing has reduced health waste from 25 to 15 percent in Spain, which is less than other European countries and only represents 0.9 percent of GDP. If Spain continues to reduce prices, it will be impossible for companies to produce, particularly for more expensive products. After two years of massive price reductions, we have narrowed total waste down to 15 percent. In my opinion, this level is acceptable. Reducing health waste also risks the disappearance of cost-efficient products from the market that will be substituted by more expensive ones. AESEG believes it is impossible to reduce prices further because the high unit volume reduces the value of segments.
What is AESEG’s assessment of the government’s austerity measures? What more needs to be done?
Firstly, we would like to establish a clear difference in price between brand name products and generics. Nowadays, it is mandatory for brands with expired patents to lower their prices to the level of generics to obtain reimbursement. This has been difficult for AESEG because rationally speaking generics are supposed to be cheaper than brands; we would like to recover this established difference by removing the obligation to price expired brands at the same price as generics. AESEG believes brands should maintain high price once generics hit the market. Patients will be reimbursed for generic medicines, and I believe this is good for brands because it allows them to target the private market, which provides brands with good business. With the public market, the health administration pays for one brand prescription and the difference is paid for by patients. This works well in other European countries, and AESEG proposes that there be requirement for brands to be priced at the same level as generics. Brands can compete amongst themselves in a private market and within the public market, patients should simply pay a small difference.
The second goal is to defend prescription by international nonproprietary name (INN), which is very important to AESEG because physicians and pharmacies study pharmaceutical products by INN, and most patients today tend to recognize pharmaceuticals by INN. Patients need to be able to recognize pharmaceutical products by family, not company. Furthermore, the brand name of a generic in Spain is the INN followed by the name of the company plus the Especialidad Genérica Española (EFG). For this reason, AESEG’s second goal is to reinforce INN prescriptions only with patent-expired products.
The third point is to establish exactly when generics come to the market to determine a time period in which it is not mandatory for brands to have the same prices. Years ago, brands had to reduce their prices to generic levels exactly one year after generics were in the market whereas today, both must happen simultaneously. We want this to be optional so that generics can have higher market share. This will never happen if a brand name without patent is competing at the same price.
Finally, Spain needs to implement its rules equally in all 17 autonomous communities, particularly with regard to mandatory prescription by INN.
The rate of growth of the generic market shot up to 40 percent in 2011, and then slumped to 20 percent in 2012 and five percent in 2013. What caused this volatility?
There have been no blockbusters coming to the market recently. In 2011, Clopidogrel and Lovastatin came to the Spanish market, whereas nothing like this came to the Spanish market in 2013. This volatility was also affected by the introduction of copayments and the defunding of over 400 drugs in 2012. The generic market has also been affected by competition from brands and further price reductions in 2013, as well as the requirement to have generics and brands at the same price.
IMS Health predicted in 2013 that a number of small generic companies might disappear as a result of these changes. What is your assessment of this situation?
Generics companies will go to concentrated markets. The top five generic companies control about 70 percent of the total market in Spain, and the top ten control 82 percent. These figures are more concentrated than in previous years. AESEG has 30 companies in its membership who represent 22 percent of the total market.
For smaller generic companies, it is difficult to enter Spain because the market is very developed and with so many strong companies here, it is quite competitive.
I would recommend innovative companies that finalize the patent term to converge brand-name products into generic products in order to compete in the same condition. While this is seen in Spain both with multinationals like Novartis and Sandoz and with locals like Esteve and Pensa, it is not clear for everyone. Perhaps some companies prefer to compete with old brand names to create confusion and barriers for generic entry. For new companies coming into the Spanish market however, you need to place much more capital onto the market for registration of products given all the strong competitors that already exist here.
Do you think the authorities here are truly appreciative of the generic industry’s efforts?
AESEG defends the development of new products, which are critical to the growth of the generics industry. Today, Spain’s health administration considers innovative products to be very expensive. Between cost effectiveness and shared risks, we defend the notion that new and innovative products should be mandatory for the market. They are good for patients, the industry and for the generic sector, albeit ten years later. Put simply, the moment of generics occurs when patents expire; generics motivate innovative companies to innovate more.
I do think the government appreciates generics, but the administration focuses on the fact that 80 percent of the total market’s volume has been obtained with 20 percent of the available money. This is good for AESEG but problematic for the health authorities, who are spending a lot of money on a few expensive products. No new innovative products have been coming to the market lately, which is bad for innovative companies that have historically invested a lot in Spain.
How does Spain compare to the rest of the EU in terms of time to market?
Spain is in the lowest percentile, along with every other Mediterranean country that has suffered from barriers to generic entry. Compared to Northern Europe, where innovative and generic products co-exist more equally, generics sometimes do not hit markets like Spain until 12 years later.
Where can we expect to find the generics industry in Spain in the next five years?
I think that the health and economy administrations have finally found a very useful tool in generics to maintain a stable level of prices for the long term. I think five years may be too short of a timeframe in which generics can realistically attain a much larger market share. However, as new generics come to market for not only big name drugs, but for many of the niche products being developed as well, we can expect to see generics playing a bigger role within ten years.
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