Do newly marketed generic medicines expand markets using descriptive time series analysis and mixed logit models? Korea as an exemplar and its implications

Many countries are pursuing policies of encouraging the utilization of less costly generic medicines to cut spending and ensure efficient resource distribution. It is generally believed that generic medicines are less expensive copies of originators with the same therapeutic effects and the potential for appreciable savings [1‐11]. Considerable resources can also be saved without compromising patient care by encouraging the prescribing of low costs generics versus more expensive patented products in classes where all products are seen as essentially similar at therapeutic doses. These include the proton pump inhibitors (PPIs), renin-angiotensin inhibitors and statins [6, 12‐16]. However, the actual cost-savings arising from increased utilization of generics versus originators vary from country to country depending on the pricing policies for generics in that country as well as the extent of demand-side measures encouraging their prescribing [3‐8]. The prerequisite for yielding appreciable cost-savings is that originators are substituted by less costly generics and the overall volume of consumption does not undergo significant changes.

However, according to the report of an analysis conducted by Kanovas et al. (2008), no such savings were realized in the seven key OECD countries despite low prices and higher generic penetration [9]. This may be due to different policies across countries enhancing the prescribing of generics versus patented products in a class, with pharmaceutical companies continuing to promote their patented medicines, which can be up to 20 to 30 times more expensive than low cost generics. As a result, reducing potential savings [6, 13, 17]. In addition, the rise in elderly populations across countries with greater prevalence of chronic diseases is leading to increased polypharmacy [18, 19], which coupled with improved management of chronic diseases such as increased use of statins at higher doses in patients at high risk of cardiovascular disease and greater control of blood pressure in patients with diabetes [12, 20], is increasing medicine consumption. Both situations will affect potential savings arising from the availability of generics.

Kwon and Yang [21] identified that no substitution effects were found after the entry of generics in Korea. with the utilization of both generics and originators rising substantially after generic entry. For example, the utilisation of glimepiride increased 22-fold after the introduction of generics [21]. Consequently, the off-patent market in South Korea tends to expand upon the introduction of generic drugs without any apparent substitution effect [21].

Particularly in Korea, pricing policies have traditionally focused on price cuts, under the assumption that lowering prices would directly curtail drug expenditures. However, the launch of an appreciable number of cheaper generics resulted in an increase, rather than a decrease, in drug expenditures by expanding the market along with an appreciable increase in their utilization. Kwon et al. [22] identified that the market expansion of antihyperlipidemic medicines in recent years was mainly attributed to the increase in the number of patients prescribed atorvastatin following patent expiration. Other studies also demonstrated that the quantity of statins prescribed significantly increased in Korea following patent expiration, especially atorvastatin [23, 24]. When faced with such findings indicating that the introduction of less costly generics contributes to increasing drug spending in Korea, and potentially other countries, by inducing market expansion instead of bringing about expected cost savings, further studies are needed to identify which factors contribute to market expansion to guide future policies in these countries.

Consequently, this study aims to explore patterns of generic prescriptions among the statins (antihyperlipidemic agents) and subsequently examine factors contributing to the market expansion after atorvastatin patent expiration using the national health insurance (NHI) claims data in Korean context. The findings will be used to provide future guidance to the NIH and other key stakeholder groups. This builds on our previous findings with the statins [21, 22].

In this study, we firstly identified market expansion induced by newly entered generic atorvastatin in South Korea. Specifically, a substantial proportion of generic atorvastatin prescriptions were dispensed to the newly treated group and the increase in the number of newly treated patients was primarily responsible for the increase in the utilization of generic atorvastatin while the market entry of generic atorvastatin has a partial substitution effect in the previously treated group. Thus, the market expansion effect of the market entry of generic atorvastatin can be explained by the increase in the number of newly treated patients receiving prescriptions for generic atorvastatin.

Furthermore, we investigated the factors surrounding the prescribing of generic atorvastatin once it entered the market place as well as the prescribing patterns of the other statins including originator atorvastatin. The findings showed that the number of patients prescribed generic atorvastatin rapidly increased and that the newly treated group of patients was mostly responsible for this increase. We also showed that the average prescribed dose of generic atorvastatin was significantly lower in the newly treated group compared to originator atorvastatin or other statins and that clinics and secondary hospitals were key players implicated in boosting the prescription of the generic versions. Further research will focus on the rationale for this since such prescribing habits need to be addressed to ensure the full health gain from prescribing statins is accrued in these patients.

As mentioned, in many countries there is an increasing trend is to promote the utilization of lower-priced generics versus originators and patented products in a class where all products are seen as therapeutically equivalents. such as the statins, to contain healthcare costs in the face of continuing resource pressures [6, 12‐14, 16, 17, 30‐32]. In this study, we could verify two effects generated by the entry of generic medicines in Korea: substitution effect and market expansion effect. While the substitution effect was demonstrated in the previously treated group, the market expansion effect was observed in the increase in the utilization of statins in the newly treated group especially generic atorvastatin (Fig. 2a and b).

In Korea, given that there is no marked price difference between originals and generics and no specific demand-side measures encouraging the use of generics, changes in the overall market structure caused by the entry of new generic drugs are of particular interest. Furthermore, in the face of the situation in which the entry of generic medicines appears to act as a driving force for increasing rather than for reducing drug spending, policies regarding generic drugs will have to be reconsidered in Korea alongside the appropriateness of prescribing.

One of the limitations of this study is that we did not explore the rationale behind the considerable increase in the number of newly treated persons (Fig. 2b). This is partly attributable to the nature of the NHI claims data lacking laboratory data or diagnosis information, unlike in other countries, which makes it difficult to identify accurate diagnosis including ICD-10 data. For the same reason, the characteristics of new patients could not be determined more clearly by adjusting the rapidly increased number of new patients with respect to any increases in cases of hyperlipidemia. This will have to be addressed in a future study once epidemiological data on hyperlipidemia are secured alongside research among physicians to ascertain their rational for any rapidly increasing prescribing of statins following the availability of generic atorvastatin. This can include increased awareness of the need to treat patients well with established CV disease to reduce subsequent morbidity and mortality, as seen in the UK with their multiple initiatives [12].

One potential rationale behind the rapid increase in the number of patients prescribed statins in the newly treated group may be partly explained by the physician-induced demand in Korea as seen in a study conducted by Kim [33], i.e. increase in the number of patients initially diagnosed in clinics following greater promotion and marketing activities among pharmaceutical companies, thus contributing to the overall increase in the healthcare costs and patients’ visits. In other words, physician-induced demand can be considered partly responsible for the appreciable increase in number of new patients prescribed statins (Fig. 2b).

In addition, previous studies on physicians’ prescribing behaviors identified financial incentives associated with increased prescribing. It has been seen in a number of studies that the size of mark-up and rebates [34‐38] as well as gifts offered by pharmaceutical manufacturers [39‐45] greatly influenced prescription patterns. Korean domestic pharmaceutical companies are more focused on generics than newly developed medicines [46], and the patent expiration of a high volume medicine such as atorvastatin can give rise to a simultaneous release of over 100 branded generic medicines [47]. However, this strong competition among generic manufacturers is not associated with lower prices as seen in a number of other countries where prices of generic statins can be as low as 2 % to 4 % of pre-patent loss prices with market competition [12, 17, 48]. As a result, leading to generic manufacturers pursuing illegal promotional activities, such as providing physicians kickbacks for prescribing their particular products in view of the margins involved. Physicians received kickbacks of up to 20 % of the value of the prescription [49]. Under these circumstances, it may be inferred that the maximization of financial incentives through higher prescription performance is sought by creating new patients for prescription episodes whilst encouraging the prescribing low dose generic statins to minimize side effects, although evidence for this hypothesis has yet to be established. Ways to address this include greater education of physicians regarding optimal doses of statins prescribed as well as encouraging International non-proprietary name (INN) prescribing as opposed to the prescribing of branded generics as seen in some European countries [12]. This would reduce the incentive of different generic manufacturers to appreciably increase the market after patent expiry through their promotional activities. In addition, appreciable price decreases could be achieved if pharmacists were only reimbursed the price of lower priced generics with manufacturers striving to achieve this as seen for instance in the United Kingdom [12]. INN prescribing also reduces patient confusion if they are dispensed different branded generics without a full explanation, potentially leading to either under- or over-dosing [50].

In conclusion, we believe this study appreciably adds to the literature in that it identified current prescription patterns characterized by a substantial increase in the prescribing of generics in new patients in Korea following their entry, the minor substitution effect on previously prescribed patients as well as the major market expansion effect generated by the rapid increase in the number of new patients prescribed generics. In follow-up studies, other issues related to the entry of generic drugs will be addressed, such as physician-induced demand, the quality of prescribing and rational use of drugs.

Data used for this study can be purchased by making a requeste to Health Insurance Review & Assessment Agency - however only for academic research.