Competition in Off-Patent Drug Markets: Issues, Regulation and Evidence

Generic medicines are proven to be chemically and therapeutically equivalent to originator brands, but are in principle significantly cheaper because they are allowed to enter the market after the patent expiry of the originator brand. In this way, generic manufacturers do not incur R&D costs and are able to offer a significant price advantage to the originator brand. As a result, health insurance is keen to promote generic use among patients as well as encourage generic competition by using a variety of policies with a view to maximising savings on the drugs bill. Given the emphasis on health care cost containment and the pursuit of efficiency in resource allocation generic policies and their perceived and actual effectiveness have been at the centre of attention for many years in the majority of OECD countries.