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Restrictions for generic substitution

Country: 
Finland
Partner Institute: 
National Institute for Health and Welfare (THL), Helsinki
Survey no: 
(4)2004
Author(s): 
Lauri Vuorenkoski
Health Policy Issues: 
Pharmaceutical Policy
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no no no no
Featured in half-yearly report: Health Policy Developments Issue 4

Abstract

The policy objective is to promote preconditions for research based drug companies by excluding process patent medicines but not a product patent from generic substitution. The patent protection of pharmaceuticals in Finland is not as strong as in other EU countries. The present generic substitution system may unbalance drug markets in the EU, while it favours generic companies and endangers drug R & D in Finland. By restricting the generic substitution these problems were to be amended.

Purpose of health policy or idea

The aim of the policy proposal is to promote the operational preconditions of research based drug companies by excluding drugs with a process patent, but not a product patent from generic substitution.

From the perspective of the pharmaceutical industry, generic substitution has been too effective in reducing expenditure on medicines in Finland, and the industry has a strong need to limit the scope of generic substitution. Patent protection in Finland is not as strong as generally at the member countries of the European Union.

The Ministry of Social Affairs and Health (MSAH) was concerned that recently introduced generic substitution may unbalance drug markets in the European Union while the substitution system is too favourable for generic companies and thus endangering drug research and development in Finland. By restricting the generic substitution system these problems were intended to be amended.

Main points

Main objectives

The objective of the policy is to promote the operational preconditions of research based drug companies by excluding drugs with process patents but not product patents from the generic substitution system.

Type of incentives

To balance operational preconditions of research based drug companies and generic drug companies, to promote drug research and development in Finland to balance drug markets in the EU.

Groups affected

Pharmaceutical Industry, Patients, Public health insurance run by the Social Insurance Institution

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Characteristics of this policy

Degree of Innovation traditional neutral innovative
Degree of Controversy consensual controversial highly controversial
Structural or Systemic Impact marginal rather fundamental fundamental
Public Visibility very low high very high
Transferability strongly system-dependent strongly system-dependent system-neutral

The MSAH made the proposal under a strong pressure from the pharmaceutical industry. The issue is quite purely on the balance between the economic interests of the research oriented pharmaceutical industry, the public health insurance and the patients.

Political and economic background

The generic substitution of prescription drugs was introduced in Finland in April 2003. It has been very successful in promoting price competition in the situation where several drugs containing the same active substance are sold at the market. The prices of both generic and brand name products have substantially decreased, in some cases more than 50%. In the first year of generic substitution the Social Insurance Institution running the public health insurance system and the patients have saved 88.3 million euros, which is about 6% of the total yearly outpatient drug expenses.

Price competition led also to situation where the governmental Pharmaceutical Pricing Board had to lower the maximum affordable prices of some brand name drugs.

Until the 1990s the Finnish pharmaceutical patent protection was based on process patents and the Finnish drug industry focused almost solely on producing generic drugs. Product patents were introduced in 1995 as a part of the process to harmonise the Finnish and EU legislation but as it normally requires more than 10 years from the patent application before the drug reaches the market, no medicine with a product patent is not yet sold in Finland. Since the majority of European countries has introduced product patents significantly earlier than Finland, generic drugs are often marketed in Finland before other European countries.

The parallel importation of drugs impedes the original producers of medicines to enter the price competition in Finland, while they may still apply patent protected monopoly pricing in most other European Union member countries.

Complies with

Pressure from pharmaceutical companies

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no no no no

Origins of health policy idea

When generic substitution was introduced, the pharmaceutical industry relied on doctors and patients to refuse on substitution and the industry carried out a strong lobbying campaign on doctors for this. However, generic substitution is denied by doctors in only 0.4 of the prescriptions.

After the successful start of generic substitution pharmaceutical companies started lobbying the MSAH to restrict the list of substitutable drugs. They argued that in the worst case they are not able to introduce drugs to the Finnish markets and they also claimed that the situation may restrict their research and development activities in Finland.

The top executives of some major international pharmaceutical companies visited in Finland in the spring 2004 and presented their deep concern on this issue to the MSAH.

Approach of idea

The approach of the idea is described as:
amended: Generic substitution legislation

Stakeholder positions

In the early summer 2004 the MSAH prepared urgently a proposal for a legislative change to exclude drugs which have process patent, but not product patent from generic substitution.

In July 2004 the National Agency of Medicines gave a strong negative statement arguing that this would seriously affect generic substitution and a significant proportion of drugs must be removed from the substitution list. They also argued that the proposed change would be very difficult to implement, because there is no clear record of the process patents of drugs. Several process patents are often applied at different times for the same drug, and it is not straightforward to define which patents are relevant as exclusion criteria and which are not.

The pharmaceutical industry argued that the change would influence only few drugs. The MSAH had not evaluated this properly when it prepared the proposal for the legislative change, and had no answer what would really be the impact of the reform.

As a public opinion was also somewhat critical, the MSAH stopped the process. The MSAH has planned to analyse in the autumn 2004 what would be the real impact of the change on the generic substitution system.

Influences in policy making and legislation

The MSAH will review the impact of the possible legislative change. After that it will reconsider the issue which may lead to a legislative change as an outcome of the process.

Legislative outcome

n/a

Adoption and implementation

Depending on the outcome of the process, the implementation will be in the responsibility of the National Agency of Medicines.

Monitoring and evaluation

Generic substitution is monitored by the Social Insurance Institution which is responsible for reimbursing outpatient drug costs.

Expected outcome

If the legislative change is introduced according to the original proposal of the MSAH, it would increase the prices of drugs and drug expenditure. Whatever the outcome is it will probably not have any influence on the research and development activities of the pharmaceutical industry in Finland. If the generic substitution system is not changed, some brand name drugs with generic alternatives may be removed from the market.

Impact of this policy

Quality of Health Care Services marginal marginal fundamental
Level of Equity system less equitable neutral system more equitable
Cost Efficiency very low high very high

The process has had a negative impact on the relationship between the pharmaceutical industry and civil servants in different governmental institutions. It had also a negative impact on the public image of pharmaceutical companies.

References

Author/s and/or contributors to this survey

Lauri Vuorenkoski

Suggested citation for this online article

Lauri Vuorenkoski. "Restrictions for generic substitution". Health Policy Monitor, 02/11/2004. Available at http://www.hpm.org/survey/fi/a4/1