1. GENERICS - BRIDGING THE GAP Or BALANCING COST AND ACCESS

2. 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

3. Snapshot of SA Generic Industry
Independent analysis - IMS & Medikredit data
SEP introduction -Cumulative savings = 37%.
Price Freeze 2005 / 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

4. 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

5. Further Generic entry reduces price of generics & the originatorsX1 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.

6. 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

7. 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.

8. 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

9. 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

10. 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%).

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

12. 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

13. 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

14. 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