The potential for cost savings by extensively using generics for chronic conditions in South Africa.

Abstract

Economic factors are a major constraint to quality health care in Africa. One of the aims of the Department of Health in South Africa is to increase availability and affordability of medicine. One way of reducing the cost of drugs is by introducing legislation to control the price of drugs and by the promotion of generics (interchangeable multisource medicines which are cheaper copies of the original brand name drug). Protocols for the Prescribed Minimum Benefits (PMBs) for the 27 conditions on the Chronic Disease List as published in the Government Gazette in 2003, were legally binding from 1 January 2004 and these conditions must be covered by all medical schemes. Medication prescribed for these conditions may have one or more generic substitutes and Government has allowed certain measures to be introduced by the medical schemes in order to contain costs. This study investigates the potential savings if generics are extensively used for these chronic conditions. A census was conducted on the 25 chronic diseases for which algorithms are available. The empirical quantitative data collected was calculated to quantify potential costs savings in respect of each algorithm. The major findings show that there are large cost differentials between originator drugs and their generic equivalents (97% in the case of prednisone) and smaller cost differentials between generics themselves (54.6% in the case of formoterol). This study also shows that there is a correlation between the number of generic equivalents an originator drug has and the percentage cost differential. A total of 67.5% of all cost differentials between originator and generics are greater than the Department of Health's proposed 40% benchmark pricing. The results support the recommendations that government needs to implement various measures to encourage increased use of generics in this country and to look at realistic benchmark price controls.