SNS Research Brief | 10/14/2024
SNS Research Brief 105. The Right Pharmaceutical at the Right Price – The Significance of An Initial Generic Substitution
David Granlund
Despite the fact that patients are offered cheaper and equivalent alternatives when buying prescription drugs, through what is called generic substitution, some choose to reject such alternatives. This type of reluctance is often due to ignorance and leads to increased costs, according to David Granlund in a new SNS report.
The 2002 generic substitution reform has reduced annual drug costs in Sweden by approximately SEK 4 billion. The cheaper generic alternatives offer the same function and quality as the prescribed drugs – yet some patients refrain from switching. This leads to higher costs for the patient, according to David Granlund, who has written the SNS report “The Right Pharmaceutical at the Right Price – The Significance of An Initial Generic Substitution”.
The report is based on an analysis of all prescription drug purchases made by adult residents of Västerbotten County in Sweden during approximately two years.
As few as 500 individuals accounted for 20 percent of the additional costs related to rejected substitutions, thus indicating that the reluctance to substitute drugs is concentrated in a smaller group of people. In addition, previous research suggests that the individuals who reject substitutions mainly exhibit low incomes and low levels of education, says David Granlund, an economist at Umeå University.
Patients are not forced to substitute drugs. If, however, they choose not to do so, they themselves must cover the difference.
Such reluctance with regard to generic drugs is often due to ignorance and a mistaken belief that the cheaper alternatives are less effective or cause more side effects.
Granlund proposes several measures to reduce the additional costs associated with rejected generic substitutions. In the report, he argues that physicians and pharmacists should spend more time explaining to patients having repeatedly refused to switch that generic drugs are both safe and medically equivalent to the prescribed drugs. He goes on to argue that it is important that these patients are offered better information and support in order to reduce misconceptions.
In addition, doctors should increasingly prescribe drugs with generic names when such drugs are available, as this will increase the willingness of patients to accept a substitution.
Major savings are possible if pharmacies and health care professionals focus on convincing patients to accept an initial substitution. The results show that once a patient has done so, there is a reduced risk that he or she will refuse the generic drug the next time around. Furthermore, this effect also persists over time, says David Granlund.
Facts
Swedish physicians must prescribe a specific drug that not only identifies the active ingredient, dosage form, strength and quantity but also the company that sells the product. The Swedish Medical Products Agency determines which drugs are interchangeable, and these must have the same active ingredient, strength and dosage form. Differences are mainly found in terms of price and packaging.
About the author
David Granlund is an associate professor of economics at Umeå University.
About the report
This study is part of the SNS Research Brief series. The report is based on research carried out jointly with Aljoscha Janssen, assistant professor of economics at Singapore Management University. The analyses in the report are based on data covering all purchases of prescription drugs at Swedish pharmacies made by adults residing in Västerbotten County between January 2014 and April 2016. Just under five million purchases are observed, and the consumer was able to switch to a cheaper product in just under half of these cases.
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