GENERICS - BRIDGING THE GAP Or BALANCING COST AND ACCESS

Generic vs Patent Generic Patent Same API Same action Same GMP/quality standards Single regulator of safety, quality and efficacy Majority APIs/Excipients sourced internationally Research focus on drug formulation Research focus on API Need to show bioequivalence to patent - biostudies Needs to show effectiveness of API – clinical trials

Snapshot of SA Generic Industry Independent analysis - IMS & Medikredit data SEP introduction -Cumulative savings = 37%. Price Freeze 2005 / 2006 - Cumulative savings = 12% Ratio of average generic to originator price = 48.8% (Aug 06) Top 8 generic molecules - Cumulative savings = +/- R 2,077 bn . For every 1% drop in originator price, there is a commensurate 1.9% drop in generic price Volume growth of generics disproportionate to value growth

Average generic prices as % of originator in SA market (2000 – 2006) Ratio of generic to originator price has decreased consistently over time Extent of the decrease is dependant on the number of generic entrants in the market

Further Generic entry reduces price of generics & the originators X1 X2 R 78.00 R 65.00 R 52.00 R 39.00 R 26.00 SAVINGS D A B D C C Y A reduction of up to 90% for the 250mg Ciprofloxacin Originator price reduced by 22%, as the effect of genericisation began to take effect.

Volume split between generics and originators (S3 –S7) Ratio progression in volume terms bet originator & generic which is within a range of 35.3% up to 53.5 % evidences the significant volume growth for generics compared to that of originator & the relative pedestrian value growth for generics

Value split between generics and originators (S3 – S7) Ethical = originator MAT is the Moving Average Total from December of one year to December of the next year TRD is the Trend in Percentage Rand Ratio progression in value terms between originators & generics which is within a range of 22, 6% to 25% evidences the reasonably static growth of generic uptake in value terms.

Should SA Generics be Benchmarked? Disproportionate Volume growth of generics vs value growth 2002 – 2006 generics have grown by 10.6% in value generics have grown to 51.6% in volume cost effectiveness index (value to volume ratio) = 0,64 2007 volume ratio of generic to originator as at 2007 53%:47% value ratio of generic to originator as at 2007 24%:76% cost effectiveness index (value to volume ratio) = 0,46

Generic Industry – SA vs International PTG Study (2007) CRA International (2007) GESSA Study (2003) SA generic prices are on average priced lower than international equivalents. In most countries, generics are not price-regulated Consequences of cost containment mechanisms delayed launch of medicines reallocation of demand to patent products resultant increase in expenditure

Average Generic prices as % of originator price in Comparator Countries – IMS Data PTG Study Average SA generic prices lower than their counterparts Average SA generic price 44.9 % of originator as compared to Australia (86%).

Generic Utilisation Country % Total Consumption Australia 28.4% Canada 77.4% New Zealand Not available Spain 4.6% South Africa 53.5 %

Should SA Generics be Benchmarked? Generics generate savings by: switching from originator to lower priced generic downward pricing pressure by new generics on existing generics. downward pricing pressure by generic on the originator

Benchmarking Generics - Economic consequences disincentivise first to market generic – manufacturers will be unable to recoup investment cost discourage further generic entrants & consequently restrain competition disrupt market forces due to reduced competition for both originator & generic lead to shortages of medicines in the market provide short term savings, but will not result in a net gain in savings to the economy in the medium to long term. result in the ceiling price becoming the minimum price & not the intended maximum price due to the lack of generic competition. Public sector prices could increase - Cross-subsidy of public & private sector prices may be negatively impacted Affect viability and sustainability of generic manufacturing

NAPM Membership  Aspen Pharmacare  Merck Generics  Austell Laboratories  National Bioproducts Institute  Be-tabs Pharmaceuticals  Omnimed Pty Ltd  Biovac SA  Pharma Dynamics  Bodene  Pharmafrica  Columbia Pharmaceuticals  Ranbaxy SA  Dr Reddy’s Laboratories  Sandoz SA  Enaleni Pharmaceuticals  Sekpharma  Ferring Pharmaceuticals  Thebe Medicare  Medreich SA