Australia's research-based drug industry has slammed a call by generics makers to increase their products' share of the value of the Pharmaceutical Benefits Scheme (PBS) market from 12% to 16%.

The proposal has come from the Generic Medicines Industry Association of Australia (GMiA), which is urging the federal government not to make any further cost cuts to the PBS in its budget for 2013-14.

Instead, it calls on policymakers to increase generics' market share of the PBS from 12% to 16%, estimating that this would "achieve an ongoing annual saving in the vicinity of A$205 million."

Generics represent 12% of the PBS by value, while original branded drugs account for 4%, and 84% of the dollar value of the Scheme is spent on original brands where there is no competition from generics, before the loss of market exclusivity of the original brand, says GMiA.  Increasing the market share of generics from 12% and substituting the existing 4% of the market currently using original brands subject to generic competition would drive important savings to the PBS, in turn freeing up headroom for the funding of new medicines and ensuring sustainability for the PBS, it says.

Therefore, the group calls on the government to adopt medium-term policies that drive substitution from original branded drugs to generics, a move which it says would "deliver a positive health outcome for patients and a three-way win for patients, taxpayers and the economy. In addition, this will create long-term capacity for breakthrough new medicines to be listed on the PBS."

However, the research-industry group Medicines Australia has attacked the proposal as "protectionist" and says its proposition that substituting originator brands for generics would create savings for the PBS is "flawed on several fronts."

First, says Medicines Australia chief executive Brendan Shaw, the proposition is "based on the fallacy that generic medicines are cheaper for the government than their branded equivalents." In fact, he says, the government pays the exact same price for both, and "won't save one cent by protecting one group of manufacturers over another group of manufacturers."

He also says that protectionism is poor policy, a poor way to run the PBS and at odds with the market-based mechanism of price disclosure, and that giving preference to a generic over an originator brand constrains doctors’ freedom in prescribing as well as consumer choice.

Fourth, good policy comes from consultation and dialogue between industry and government, not "half-baked ideas that come from left field," while fifth, the GMiA proposal assumes that it is the established generics firms which drive price reductions and that automatically giving these firms market share will provide savings.

However, "this may not be the case," says Dr Shaw.

Finally, he points out that there is already a price signal for consumers to choose a generic over a branded medicine where the branded products has a higher patient premium. "Where there is no such premium, as far as the consumer is concerned there is no difference in price between an originator brand or a generic brand," he says.

Local reports note that last year's examination of the future of the PBS by a government working party had discussed the possibility of requiring consumers to use generics rather than branded medicines, and that the Pharmacy Guild of Australia points out that doing so would breach long-term agreements in place between the government and the pharmaceutical industry and pharmacy sector.