Generic products and generic substitution

Generic products

A generic medicine is an alternative to a medicine that has already been placed on the market, i.e. the reference, or innovative, medicine. The generic and reference medicines contain the same active substance in the same dose and are administered via the same route.

When the patent on a reference medicine has expired (when the period of exclusivity is over) other pharmaceutical manufacturers can introduce their own generic products to the market.

Generic medicines must meet the same strict criteria with regard to the ingredients used, the manufacturing process and the final medicinal product as the reference medicine. Strict quality standards have been set by the EU and are monitored by national regulatory authorities (the Finnish Medicines Agency Fimea in Finland), the European Medicines Agency (EMA) and the European Commission. This promotes consumer confidence in generic medicines.

The generic medicine may differ from the reference medicine in terms of its appearance, colour or shape. Different generic medicines may also look different from one another. Manufacturers may use different inactive ingredients and colouring agents and the final product may also have a different shape. Despite these variations, all generic preparations must meet the same strict regulatory requirements, designed to ensure the safety of the products.

Generic substitution

Generic substitution means the replacement by pharmacy personnel of the medicinal product prescribed by a doctor or a dentist with the cheapest or nearly cheapest generic medicine suitable for substitution. Not all medicines can be replaced with generic products (e.g. medicines used to treat epilepsy and arrhythmia).

Generic products are usually cheaper than the original reference medicine, but offer the same efficacy. Patients with chronic conditions in particular will benefit from lower prices when generic medicines enter the market. In addition, the pricing competition prompted by generic medicines also forces the manufacturer of the reference medicine to lower their prices.

When the first generic medicine appears on the market alongside the reference medicine, the price of the generic medicine is usually 20–30% lower. Initially, the markets will determine the exact price. As further generic preparations enter the market, the competition between providers intensifies. The generic substitution policy also exerts further downward pressure on prices. Thus, the prices of generic medicines may ultimately be as much as 70–90% lower than reference medicines.

Due to their lower price, generic medicines bring direct cost savings both to the patients and the Social Insurance Institution of Finland (Kela). Following the introduction of the generic substitution policy in 2003, several hundred million euros have been saved through the use of generic medicines and generic substitution. At the same time, the Finnish population continues to age and consume more medicines, which are subject to the national medicine reimbursement system administered by Kela. The savings generated by generic products have kept the cost of medical reimbursements at a moderate level despite the fact that new, patented medicinal products are being introduced to the markets.