European governments' austerity pricing tactics support generic drug growth

Government initiatives to cut health expenditure are likely to encourage sales of generic medications in Europe, according to a new report by health care experts GBI Research, which predicts an increase in revenue made by generics in the region during the next five years, as cost-containment policies strongly support the consumption of generic drugs over innovative drug use.

Biosimilars are a category of generics, also referred to as generic biotech Active Pharmaceutical Ingredients (API), or follow-on biologics (FOB). APIs derived from biotechnology provide high-growth market potential, but are expensive to develop and manufacture compared to the production of regular small molecule generic API.

France, Germany and the UK have all tightened their health care budgets to tackle the economic crisis, resulting in pressure to reduce pharmaceutical prices. This is bringing about changes in health care pricing and reimbursement across the continent, says GBI Research. Reimbursement restrictions are applied to drugs that are priced higher than the reference price, and will restrict the growth of the innovative and biologic API markets during the next few years. However, while reimbursement cuts are expected to decrease the use of innovative, drugs and hinder API revenue, luckily API generics look set to remain popular, the report notes.