When one turns to look at the market figures, one encounters at first some confusion and some surprises. The proportion of the market taken over by generic drugs does not always seem so high as to justify the hullabaloo which they have caused. It is however necessary to understand clearly what the figures mean.

In the first place, not everyone has defined the term «generics» in the same way; some researchers include under this heading the specialities on which patents have expired but which are still being sold under their protected trade name; others exclude them. Similarly, some calculations exclude (while others include) those substitution products which carry a trade name alongside their generic connotation.

Let me now take one of the lower estimates which has been made, and which I cannot verify, that by 1991 the market share of generics in Europe was 7 per cent of the total drug market, with figures as high as 15 per cent in Germany. That may not seem unduly dramatic, and the figures indeed seem to exclude the original specialities which are out of patent. However, one also needs to extrapolate from these figures. If 7 per cent of a market is accounted for by generics, and these are being sold at prices which are - let us say - only one third of the price of the corresponding specialities, then that 7 per cent is equivalent in unit terms to some 21 per cent of the market; and had those drugs been sold as specialities every hundred dollars spent on drugs would have been $114. The income of the speciality companies would thus have been 14 per cent higher and, since pure profit is taken largely from the top percentiles of sales, profits would have been very much greater. If one applies these same assumptions to the 15 per cent of the German drug market said to have been acquired by generics, the results are very striking: without generic competition the speciality industry would have earned some 30 per cent more and perhaps doubled its already high profits. These are only estimates and orders of magnitude, but they give an impression of the reasons for the controversy.

The importance of the phenomenon is much more marked when you look at some other estimates which have been made. Figures quoted by Lemoine and derived from the European Generic Medicines Association point to a 1992 market share in unit terms of no less than 36 per cent in the United Kingdom, followed by Germany and the Netherlands, the estimates for France and Italy being much lower (Table 3). The prominent place of the United Kingdom is explained by official mechanisms designed to encourage physicians to prescribe generically. The apparently much smaller place of generics in France and Italy is undoubtedly in part due to the fact that these countries have always had a strict pricing policy for specialities, so that the gains attainable by generic prescribing are much less marked; in addition, French law has traditionally forbidden substitution where a product has been prescribed under brand name, though it does not discourage prescribing under generic name.

TABLE 3. - Generic market shares in Europe: 1992

Note: These figures are not derived from fully compatible sources in each country and there can be some difference of opinion between these countries as to what is considered a «generic» drug.

Source: EUROPEAN GENERIC MEDICINES ASSOCIATION, cited by LEMOINE (1994).

Figures for the USA (Table 4) are particularly interesting since they reflect the role which generics can come to play in a country where the prices of medicines are not controlled. According to a study by the Centre Français du Commerce Extérieur (CFCE) published early in 1994, the generic market would attain six billion dollars in that year; this would represent 10 per cent of the market by volume and some 20 per cent by price. It would represent an increase of no less than 14 per cent over the previous year, and generics would account for the first time for more than 50 per cent of drug deliveries on prescription. The proportion of new prescriptions filled using generics was expected to attain 65 per cent in 1995, and one has to recall that a decade ago that proportion was only 15 per cent. The generic market would then be three times larger than it was in 1991.

TABLE 4. - Generic drugs in the USA: some salient figures

These events in the US reflect not only the causal factors which I have mentioned already but also some specific to that country; these include the abolition of the prohibition on generic substitution by the pharmacist in 1970, the introduction in certain states of an obligation on the pharmacist to provide the lowest-cost drug, and in 1984 a change in regulatory law which rendered the approval of generic drugs simpler and faster; more recently one has watched the emergence of Medicare, Medicaid and the Health Maintenance Organizations as bodies firmly committed to a generic policy. The rise of the generic industry has also been striking: Zenith Laboratories has a turnover over 540 million dollars annually, Mylan has attained 250 million. Some of the changes in the US may be modified by current shifts in political influence - possibly marked by greater support for the speciality industry and a reduction in federal health spending - but both may well be outweighed by efforts to make the health dollar productive, and that can only accentuate the trend to generic prescribing.