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Physician and pharmacist perceptions of generic drugs
Physician and Pharmacist Perceptions of Generic Drugs William O. Bearden*and Joseph Barry Mason Generic prescribing and dispensing is increasingly being suggested as a means of limiting the rising costs of health care. However, general acceptance has been moderate despite efforts by the Food and Drug Administration (FDA), the Federal Trade Commission (FTC), and many state legislatures to encourage the use of generic drugs. This article describes the results of a stud), designed to explore physician and pharmacist concerns about generic" drugs and their impact on the prescription drug industry. Results indicate that both groups are concerned about production quality and regulatory control across multiple manufacturers. Differences were found both within and between groups that could affect diffusion of generic" practices. Implications are provided for marketing managers and others concerned with the changing environment within the prescription-drug industry.
INTRODUCTION Historically, prescription drug products have flowed from manufacturer to wholesaler to pharmacist to consumer with supportive channels of communication regu-
*Present address: Department of Marketing, College of Business Administration, University of South Carolina, Columbia, South Carolina 29208. ?Present address: Department of Marketing, Graduate School of Business, University of Alabama, University, Alabama 35486.
larly occurring between manufacturers, physicians, and pharmacists. Marketing communications from pharmaceutical manufacturers to physicians have traditionally been frequent since physicians originate drug prescriptions and in effect serve to "pull" drugs through their distribution channels. This commercially supplied information from manufacturers, while designed to sell products, has also been instrumental in keeping physicians informed about new drugs (see Fig. l) [3, 4]. However, continuing efforts by federal and state regulatory agencies to encourage the prescribing of drugs by generic name in efforts to limit health-care costs are changing the traditional roles of the participants involved in the marketing and distribution of prescription drugs. Consequently, new marketing strategies may be necessary for managers within the drug industry to successfully adapt to these changes. The spread of generic drugs and recent regulatory activities suggest a variety of potential changes likely to affect the prescription-drug industry. For example, the Federal Trade Commission is seeking to implement regulations that would require comparative price disclosure for prescription drugs. The Food and Drug Administration has already established maximum allowable cost guidelines (MAC) for Medicare and Medicaid drug payments for many frequently prescribed drugs. These ac-
© Elsevier North-Holland, Inc., 1979 Industrial Marketing Management 8, 63-68 (1979) 0019-8501/79/01006306501.75
63
Manufacturers-,~ . . . . . . . i Wholesalers
.~.
Regulatory Agencies ~<
+ *
~ ~Physicians
Pharmacists .,A ~
/
/
Consumers FIGURE 1. Traditional product flow and channels of influence.
tions and others are causing shifts to occur in the traditional relationships between the organizations (i.e., drug manufacturers) and individuals (i.e., physicians, pharmacists) normally involved in the distribution of prescription drugs. INDUSTRY'S
CHANGING
ENVIRONMENT
Most issues involving generic drugs whose final resolution will impact the traditional operating policies of firms marketing prescription products are related to concerns about the FDA position that, with few exceptions, no substantial differences exist between brand name and generic drugs. Specifically, the FDA contends that: All drugs, whether they are sold under brand name or generic name, must meet the same FDA standards for safety, strength, purity, and effectiveness, and all drug
WILLIAM O. BEARDEN is Associate Professor of Marketing at the University of South Carolina. He has published in the Journal
of Applied Psychology, Decision Sciences, Journal of Advertising Research, Journal of Retailing, and Industrial Marketing Management. He is currently a member of the American Marketing Association, the Association for Consumer Research, the American Psychological Association, and the National Association of Purchasing Management. JOSEPH BARRY MASON is Board of Visitors Research Professor of Marketing in the Graduate School of Business at the University of Alabama. He has published in the Journal of Mar-
keting, Journal of Marketing Research, Cafifornia Management Review, Journal of Business of the University of Chicago, and Journal of Retailing. He is a member of the American Marketing Association, the Association for Consumer Research, the American Psychological Association, and the American Council on Consumer Interests.
64
manufacturers, big or small, are subject to the same FDA inspection and must follow the agency's Current Good Manufacturing Practice regulation. Consequently, the FDA believes there is no significant difference in quality between generic and brand-name drugs 113]. Concerns about drug-quality assurance have been complicated, however, by a recent report on drug bioequivalency issued by the Office of Technology Assessment [10]. The report in essence states that current standards in regulatory practices cannot assure the bioequivalence of drug products. Thus issues of patient safety, drug side effects, and product quality have intensified following appearance of the report. Questions of bioequivalence have also raised the potential for increased liability for participating physicians and pharmacists [16, 18, 22]. Regardless, the federal government is proceeding with the establishment of maximum allowable cost-reimbursement schedules for Medicare and Medicaid prescriptions [15, 25] and the eventual spread of generic prescribing seems inevitable. Unanswered questions also remain concerning the effects of generic drugs on research and development expenditures by pharmaceutical firms, which now amount to more than one billion dollars annually (excluding investment in facilities) [11]. Questions have been raised concerning the appropriateness of actions designed to divert sales from those companies actively pursuing breakthroughs in the conquest of intractable diseases [20]. The New York and Florida state substitution laws represent recent legislative enactments that underscore the strong pressures for generic prescribing and the equally strong resistance efforts by some channel members. The New York law requires the physician to indicate for each drug prescribed whether substitution is permissible or whether the drug must be dispensed as written. If the physician decides that substitution is permitted, the pharmacist must substitute with the least expensive drug, provided it is on the state-approved list [9, 22]. The New York law has been suggested by the FDA as a model for other states to follow. The Florida law goes even further, making substitution mandatory under certain circumstances. It also requires a pharmacist who gets a prescription for a brand-name drug to substitute a less expensive generically equivalent product under certain restrictions. The patient must be informed of the pharmacist's intention to substitute and be told that IThe MACprogram affectsprimarilythose drugs whosepatentshave expired; however,the patentson 117 of the top 200 mostfrequentlyprescribed dmgs willexpireby 1985 [23].
he/she has the fight to refuse the substitution. If a generic substitution does take place, the pharmacist must pass on to the consumer the full amount of the savings involved [21. Pharmaceutical manufacturers and drug wholesalers with heavy commitments to brand-name products fought both measures, contending that the laws open the way to widespread use of questionable-quality products. Pharmacists and consumers should benefit most from the increased spread of generic drugs. Manufacturers and wholesalers will face increasingly strong competition from firms that produce low-priced generic products. Physicians will no longer have virtual complete control over drug prescribing and dispensing. Generic practices will increase the involvement of the pharmacist in health care and should enhance their professional image, which has declined in recent years [17, 19]. However, pharmacists to date have resisted the attendant efforts at cost containment, including the MAC program and posting of comparative price advertising [15, 16, 21, 22]. 2 Consumer advocates contend that consumers should have the right to decide whether drugs are prescribed generically. Their arguments assert that the prescription drug situation represents another setting in which the consumer's "right to k n o w " should be paramount and that manufacturer-consumer communications be expanded beyond birth-control and mass-immunization programs [7]. Consumers now spend more than eight billion dollars annually on prescription drugs [5]. Consequently, even a small percentage of saving on each prescription could theoretically save consumers millions of dollars annually [ 12]. However, despite efforts by pharmaceutical manufacturers and consumers to influence the future of generic prescribing, their views will probably not impact the diffusion of generic drugs to the extent of physicians and pharmacists. Realistically, physicians and pharmacists originate and dispense all prescription drugs. Thus marketers need to be particularly sensitive to their views, since as specialists in health care and drug therapy, physicians and pharmacists will not support those programs that threaten the well being of consumers. To this end, the present study attempted to examine physician and pharmacist perceptions of the issues involved in generic prescribing and dispensing likely to affect operating practices within the drug industry.
2Savings to consumers from the MAC program alone have been estimated conservatively at 6-8% [21], and substantial savings from comparative price shopping based on posted prices of prescription drugs have also been projected [8].
METHOD Data were collected by mail survey from two random samples of physicians and pharmacists. The study was conducted in a state in which legislation designed to encourage generic prescribing was currently being debated in the legislature and publicized in the media. Anonymous questionnaires, which informed recipients of the voluntary nature of the study, were mailed to a random sample of active physicians in those specialties in which prescription writing was deemed a critical part of the practice (e.g., internal medicine, general practice, obstetrics). In total, 1500 questionnaires were mailed to physicians in eight specialties. Four hundred and twelve completely usable responses were obtained (27% usable response rate). A systematic random sample of one-fifth of the state's practicing pharmacists resulted in similar questionnaires being mailed to 600 independent, chain, and institutional pharmacists. One hundred and eighteen complete surveys were returned (19% usable response rate). Each respondent indicated their degree of agreement with a series of statements concerning manufacturers of generic and brand-name drugs. The statements were operationalized as seven-place bipolar measures labeled disagree-agree and were scored 1-7. The 12 items consisted of both positively and negatively worded statements and were developed to represent the major issues regarding the spread of generic drugs likely to impact manufacturers within the prescription-drug industry.
RESULTS The percentage distributions of the physician and the pharmacist responses to the issues examined are shown in Table 1. Individual scores were combined to reflect general disagreement-agreement with each of the statements. Substantial differences were found both between and within both samples regarding the generic-drug issues addressed. Specifically, both groups were divided in their opinions concerning the ability of government regulatory agencies to assure the consistent production of quality, effective prescription products (Table 1, Nos. 1 and 9). However, the majority of both groups were not confident in prescribing and dispensing any governmental approved drug irrespective of the manufacturer's reputation (No. 6). Two-thirds of both samples felt that wider use of generic drugs would lead to less available money for new drug research and that the proposed price ceilings would 65
TABLE 1 Physician and Pharmacist Opinions about Generic Drug Manufacturers and Brand Substitutions" Statement t'
Disagree
Uncertain
Agree
1. No way now exists to ensure that
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
any two different manufacturer's brands of a drug will be uniformly effective in performance Wider use of generic drugs will mean that less money will be available for research to bring new drugs into the market Price ceilings will result in less quality control and research by manufacturers Generic prescribing will lead to a greater likelihood that a brand produced by a manufacturer without a reputation for quality will be used" It is important for the pharmacist to dispense only drugs produced by a manufacturer with an established reputation for quality l feel secure in prescribing (dispensing) any drug approved by a government agency regardless of the manufacturer's reputation High prices of brand-name drugs are due in part to the heavy expenditures used to encourage physicians to prescribe brand names Regulatory agencies should set "maximum allowable costs" for drugs" The F D A is capable of assuring that drug manufacturers maintain high standards of quality for their products Most physicians are unsure of which drugs are produced by multiple manufacturers' Regulatory agencies should require that adequate comparative cost information be provided to consumers" Consumers have easy access to comparative information needed for making drug selections
41/39
6/4
53/57
24/32
8/5
68/63
24/30
7/6
69/64
15/32
5/I
80/67
12/14
3/1
85/85
76/82
5/5
19/I 3
36/31
9/9
55/60
75/93
6/2
19/5
53/53
6/7
41/40
29/14
6/5
65/81
42/87
13/3
45/10
79/69
7/7
14/24
"Figures represent percentage distribution for physicians (n = 412) and pharmacists (n = 118), respectively. ~'Operationalized as seven-place bipolar statements labeled disagree-agree and scored I 7. "Mean scores significantly different between physicians and pharmacists (p < 0.001).
66
result in less quality control and research by drug manufacturers (Nos. 2 and 3). The physicians and pharmacists were in general agreement that consumers do not have easy access to comparative information needed for making drug selections (No. 12). The majority of each professional group also agreed that the high prices of brand-name drugs are due in part to the heavy expenditures used to encourage physicians to prescribe brand names (No. 7). In contrast, although some general support for generic practices among physicians and pharmacists was found, 85% of both samples indicated that dispensing only prescription drugs produced by manufacturers with established reputations for quality was important (No. 5). Significant differences between physicians and pharmacists were found for four items. Specifically, 80% and 67% of the physicians and pharmacists, respectively, reported feeling that increased generic prescribing will lead to a greater likelihood that a brand produced by a manufacturer without a reputation for quality will be used (No. 4). As expected, significantly more of the pharmacists indicated their opposition to the proposed regulatory activities regarding the establishment of maximum allowable costs for reimbursement payments and the required provision of comparative cost information to consumers (Nos. 8 and l l). And, lastly, over 80% of the physician respondents felt that most of their peers were unsure of which drugs are produced by multiple manufacturers
(No. 10). CONCLUSIONS AND IMPLICATIONS Generic prescribing has been suggested as a means of limiting the rising costs of health care paid by consumers. Over eight billion dollars are now spent annually for prescription drugs, and generic practices seemingly provide the potential for lessening somewhat the financial pressures faced by the public without sacrificing the overall quality of health care or infringing extensively on traditional professional responsibilities. However, genetic prescribing does represent a shift of responsibility for selecting a particular drug brand from the patient's own physician to the dispensing pharmacist--all on the theory that duplicate products can be expected to perform equally well under the existing safeguards provided by the FDA and by individual manufacturers [6]. The issues involved have become widespread, and general acceptance to date has been disappointing. Eventual resolution of these issues will impact directly on the marketing envi-
ronment within which the prescription drug industry operates. This research attempted to investigate these issues by examining the perceptions of practicing physicians and pharmacists. Specifically, the responses of two random samples to a series of statements regarding drug manufacturers and their role in the production of generic prescription drugs were described. The major managerial issues examined, the regulatory actions (positions) taken, and the sample responses are summarized in Table 2. Despite the official position by the FDA that no real differences between generics and branded products exist and their ongoing inspection and quality control efforts, concerns about quality, efficacy, and consistency of products across an increasing number of multiple manufacturers apparently remain. Arguments for and against generic drugs remain in the media and trade literature. The physicians and pharmacists participating in this study were divided in their opinions about the ability of the FDA and other regulatory agencies to adequately monitor prescription-drug products. Issues regarding the reputation of drug manufacturers are closely related to external assurances of control. The Food and Drug Administration maintains that all drugs and drug plants are subject to the same inspection and manufacturing regulations. Both samples in this study agreed that finn reputation is important. The physicians
were particularly concerned that the diffusion of generic drugs would lead to widespread use of drugs produced by less reputable firms. Price controls and the maximum allowable cost guidelines have drawn significant industry attention. The FDA is currently setting reimbursement limits for many frequently prescribed drugs that are already available from multiple sources. Both the physicians and pharmacists surveyed were strongly opposed. The provision of comparative information for use by consumers is increasingly being suggested. The FTC is actively encouraging the posting of comparative drugprice information. Legislation in some states now exists that requires the posting of prices by pharmacists. The sampled physicians and pharmacists were consistent in their opinion that consumers now have inadequate shopping information. However, only the physicians strongly favored the provision of comparative price data. These issues and the concerns of physicians and pharmacists have definite implications for marketing managers within the prescription-drug industry. The increased role of the pharmacist will now necessitate substantial attention from industry "detail" personnel, since brand selections will no longer be under total physician control. Continuing concerns about drug quality and consistency across multiple sources underscore the need for assurances of production control by both drug-related agencies and drug-firm management.
TABLE 2 Major Issues Faced by Drug Manufacturers Issue
Action
1. External assurances of production control and consistency across multiple manufacturers 2. Manufacturer reputation for quality and research
Official FDA position recognizes no differences between generic and brand drugs except for isolated cases All drug manufacturers are subject to FDA inspection and must follow current Good Manufacturing Practice Regulations
3. "'Maximum allowable cost'" (MAC) deternfination for reimbursement to Medicare and Medicaid participants 4. Provision of pricing comparative information
Rates are currently being established by FDA for frequently prescribed drugs available from multiple sources The FTC is actively encouraging posting of price information; Supreme Court has ruled against prohibition of price advertising by professionals; some states now require posting of drug prices by pharmacists
Sample Response Substantial disagreement exists within samples Physicians feel that generic practices will result in use of less reputable firms; both groups consider reputation important Both groups are strongly opposed
Both groups agree information provided is inadequate; physicians strongly support posting of comparative price data
67
"Differences between physicians and pharmacists were found for four." Evidence also indicates that pharmacists and physicians rely heavily on the reputation of the manufacturer for indications of quality. Perhaps as generic drugs become more available from an increasing number of competitive outlets, physicians and pharmacists will have to develop additional evaluative criteria for making product decisions. The drug industry can assist by providing comparative and substantiated drug information and maintain its role as a valuable source of information to both groups. The industry must also face questions of liability, particularly if the FDA is unable to assure bioequivalency. If substitutions for a manufacturer's brand are made, producers of the substituted product and the pharmacists face new sources of potential liability. A 1978 survey by the journal American Druggist indicates that already considerable agreement among pharmaceutical companies has been reached on certain basic questions concerning product liability and defense of pharmacists where substitutions are permitted. Finally, questions of research for new drugs to solve patient health problems must be addressed by the drug industry, physicians, pharmacists, and the federal government. Drug manufacturers whose activities are limited solely to the production of generic drugs have no obligation or competitive need to invest in research and development. Included in the support of generic drugs are those concerned that the increasing costs of medication constitute a burden on patients and on those in government and politics who recognize that a growing share of the costs of medical care is being derived from tax dollars and thus see a responsibility for holding down costs [11]. Yet questions of industry investment in drug research and support for that research remain, and cost concerns must be balanced with new drug development.
REFERENCES 1. Ball, F. M., Testimony Before the South Carolina State Pharmacy Board in Opposition to the Repeal of the Anti-Substitution Regulation, Journal of the Medical Association of South Carolina, 130-131 (April 1976).
4. Bauer, Raymond and Wortzel, Lawrence, Doctor's Choice: The Physician and His Sources of Information about Drugs, Journal of Marketing Research 3, 40-47 (1966). 5. Booster Shot for Generic Drugs, Business Week, 27 (September 6, 1976). 6. Brennan, Bruce J., Drug Substitution--Boon to Consumers Versus Legal Trap for the Professional, Journal (~'Legal Medicine 4, 20 25 (1976). 7. Costello, Joseph M. and Weinberger, Michael, Prescription Drug Product Liability: Shall Patients Practice Medicine?, Journal of Products Liability, 17-20 (January 1978). 8. Dardis, Racheal. and Dowdell, D., Price Variations for Prescription Drugs, Journal <>]"Retailing 52, 15-26 (1976). 9. Deadline Nears for New York Drug Substitution Law: PMA Fights FDA to Halt Nationwide Spillover, Product Marketing, 14 17 (March 1978). 10. Drug Bioequivalence Study Panel Report, Office of Technology Assessment. Congress of the United States, July 1974, pp. I-3. 11. Fisher, David M., Generic Drugs and the Future of Therapy, Hospital Practice, 10-16 (May 1976). 12. Gumbhir, Ashok and Rodowkas, Christopher A., Generic Prescriptions: Can the Consumer Benefit?, Annals of Internal Medicine 82, 711-712 (1975). 13. Hecht, Annabel, Generic Drugs: How Good Are They'?, FDA Consumer, 17-20 (February 1978). 14. How FTC Chadwick would Eliminate the "Hungry Pharmacists" Hazard, American Druggist 174, 16 (1975). t5. How MAC Would Affect Generic Preferences, American Druggist 174, 49 (1976). 16. Huck, John L., MCA/ECA "Savings" Would Cnme Right Out of the Pockets of U.S. Pharmacists, American Druggist 175, 21 (1976). 17. Johnson, C. Anderson, Hammel, Richard J., and Helnem, J. Steven, Levels of Satisfaction Among Hospital Pharmacists, American Journal of Hospital Pharmacy 34, 241-247 (1977). 18. Joint Statement on Anti-Substitution Laws and Regulations, Journal of the American Medical Association 225 (1973). 19. Knopp, D. E., Knopp, D. A., and Edwards, J. D., The Pharmacist as Perceived by Physicians, Patrons and Other Pharmacists, Journal of the American Pharmaceutical Association NS9, 80-84 (1969). 20. Lee, Armstead, M., Benefits and Liabilities of Generic Prescribing, West Virginia Medical Journal 68, 161 - 166 (1972). 21. MAC Will Give RPH Incentive: Schmidt, American Druggist 173, 27 (1974). 22. New York Substitution Law Has Wider Significance, American Druggist 177, 70-72 (1978). 23. Patents on 117 of Top 200 Rx Items to Lapse by '84, American Druggist Merchandising, 167 (1973); 19 (1973).
2. Battle over Florida Mandatory Substitution Law May have National Repercussions, American Druggist 176, 17-18 (1977).
24. Smith, Mickey E., The Pharmacist and Generic Drugs--A Study of Ampicillin, Journal of the American Pharmaceutical Association NSI2, 511-515 (1972).
3. Bauer, Raymond, Risk Handling of Drug Adoption: The Role of Company Preference, Public Opinion Quarterly 25,546-559 (1961).
25. Three More MAC Ceilings are Made Final, American Druggist 177, 74 (1978).
68
INTRODUCTION Historically, prescription drug products have flowed from manufacturer to wholesaler to pharmacist to consumer with supportive channels of communication regu-
*Present address: Department of Marketing, College of Business Administration, University of South Carolina, Columbia, South Carolina 29208. ?Present address: Department of Marketing, Graduate School of Business, University of Alabama, University, Alabama 35486.
larly occurring between manufacturers, physicians, and pharmacists. Marketing communications from pharmaceutical manufacturers to physicians have traditionally been frequent since physicians originate drug prescriptions and in effect serve to "pull" drugs through their distribution channels. This commercially supplied information from manufacturers, while designed to sell products, has also been instrumental in keeping physicians informed about new drugs (see Fig. l) [3, 4]. However, continuing efforts by federal and state regulatory agencies to encourage the prescribing of drugs by generic name in efforts to limit health-care costs are changing the traditional roles of the participants involved in the marketing and distribution of prescription drugs. Consequently, new marketing strategies may be necessary for managers within the drug industry to successfully adapt to these changes. The spread of generic drugs and recent regulatory activities suggest a variety of potential changes likely to affect the prescription-drug industry. For example, the Federal Trade Commission is seeking to implement regulations that would require comparative price disclosure for prescription drugs. The Food and Drug Administration has already established maximum allowable cost guidelines (MAC) for Medicare and Medicaid drug payments for many frequently prescribed drugs. These ac-
© Elsevier North-Holland, Inc., 1979 Industrial Marketing Management 8, 63-68 (1979) 0019-8501/79/01006306501.75
63
Manufacturers-,~ . . . . . . . i Wholesalers
.~.
Regulatory Agencies ~<
+ *
~ ~Physicians
Pharmacists .,A ~
/
/
Consumers FIGURE 1. Traditional product flow and channels of influence.
tions and others are causing shifts to occur in the traditional relationships between the organizations (i.e., drug manufacturers) and individuals (i.e., physicians, pharmacists) normally involved in the distribution of prescription drugs. INDUSTRY'S
CHANGING
ENVIRONMENT
Most issues involving generic drugs whose final resolution will impact the traditional operating policies of firms marketing prescription products are related to concerns about the FDA position that, with few exceptions, no substantial differences exist between brand name and generic drugs. Specifically, the FDA contends that: All drugs, whether they are sold under brand name or generic name, must meet the same FDA standards for safety, strength, purity, and effectiveness, and all drug
WILLIAM O. BEARDEN is Associate Professor of Marketing at the University of South Carolina. He has published in the Journal
of Applied Psychology, Decision Sciences, Journal of Advertising Research, Journal of Retailing, and Industrial Marketing Management. He is currently a member of the American Marketing Association, the Association for Consumer Research, the American Psychological Association, and the National Association of Purchasing Management. JOSEPH BARRY MASON is Board of Visitors Research Professor of Marketing in the Graduate School of Business at the University of Alabama. He has published in the Journal of Mar-
keting, Journal of Marketing Research, Cafifornia Management Review, Journal of Business of the University of Chicago, and Journal of Retailing. He is a member of the American Marketing Association, the Association for Consumer Research, the American Psychological Association, and the American Council on Consumer Interests.
64
manufacturers, big or small, are subject to the same FDA inspection and must follow the agency's Current Good Manufacturing Practice regulation. Consequently, the FDA believes there is no significant difference in quality between generic and brand-name drugs 113]. Concerns about drug-quality assurance have been complicated, however, by a recent report on drug bioequivalency issued by the Office of Technology Assessment [10]. The report in essence states that current standards in regulatory practices cannot assure the bioequivalence of drug products. Thus issues of patient safety, drug side effects, and product quality have intensified following appearance of the report. Questions of bioequivalence have also raised the potential for increased liability for participating physicians and pharmacists [16, 18, 22]. Regardless, the federal government is proceeding with the establishment of maximum allowable cost-reimbursement schedules for Medicare and Medicaid prescriptions [15, 25] and the eventual spread of generic prescribing seems inevitable. Unanswered questions also remain concerning the effects of generic drugs on research and development expenditures by pharmaceutical firms, which now amount to more than one billion dollars annually (excluding investment in facilities) [11]. Questions have been raised concerning the appropriateness of actions designed to divert sales from those companies actively pursuing breakthroughs in the conquest of intractable diseases [20]. The New York and Florida state substitution laws represent recent legislative enactments that underscore the strong pressures for generic prescribing and the equally strong resistance efforts by some channel members. The New York law requires the physician to indicate for each drug prescribed whether substitution is permissible or whether the drug must be dispensed as written. If the physician decides that substitution is permitted, the pharmacist must substitute with the least expensive drug, provided it is on the state-approved list [9, 22]. The New York law has been suggested by the FDA as a model for other states to follow. The Florida law goes even further, making substitution mandatory under certain circumstances. It also requires a pharmacist who gets a prescription for a brand-name drug to substitute a less expensive generically equivalent product under certain restrictions. The patient must be informed of the pharmacist's intention to substitute and be told that IThe MACprogram affectsprimarilythose drugs whosepatentshave expired; however,the patentson 117 of the top 200 mostfrequentlyprescribed dmgs willexpireby 1985 [23].
he/she has the fight to refuse the substitution. If a generic substitution does take place, the pharmacist must pass on to the consumer the full amount of the savings involved [21. Pharmaceutical manufacturers and drug wholesalers with heavy commitments to brand-name products fought both measures, contending that the laws open the way to widespread use of questionable-quality products. Pharmacists and consumers should benefit most from the increased spread of generic drugs. Manufacturers and wholesalers will face increasingly strong competition from firms that produce low-priced generic products. Physicians will no longer have virtual complete control over drug prescribing and dispensing. Generic practices will increase the involvement of the pharmacist in health care and should enhance their professional image, which has declined in recent years [17, 19]. However, pharmacists to date have resisted the attendant efforts at cost containment, including the MAC program and posting of comparative price advertising [15, 16, 21, 22]. 2 Consumer advocates contend that consumers should have the right to decide whether drugs are prescribed generically. Their arguments assert that the prescription drug situation represents another setting in which the consumer's "right to k n o w " should be paramount and that manufacturer-consumer communications be expanded beyond birth-control and mass-immunization programs [7]. Consumers now spend more than eight billion dollars annually on prescription drugs [5]. Consequently, even a small percentage of saving on each prescription could theoretically save consumers millions of dollars annually [ 12]. However, despite efforts by pharmaceutical manufacturers and consumers to influence the future of generic prescribing, their views will probably not impact the diffusion of generic drugs to the extent of physicians and pharmacists. Realistically, physicians and pharmacists originate and dispense all prescription drugs. Thus marketers need to be particularly sensitive to their views, since as specialists in health care and drug therapy, physicians and pharmacists will not support those programs that threaten the well being of consumers. To this end, the present study attempted to examine physician and pharmacist perceptions of the issues involved in generic prescribing and dispensing likely to affect operating practices within the drug industry.
2Savings to consumers from the MAC program alone have been estimated conservatively at 6-8% [21], and substantial savings from comparative price shopping based on posted prices of prescription drugs have also been projected [8].
METHOD Data were collected by mail survey from two random samples of physicians and pharmacists. The study was conducted in a state in which legislation designed to encourage generic prescribing was currently being debated in the legislature and publicized in the media. Anonymous questionnaires, which informed recipients of the voluntary nature of the study, were mailed to a random sample of active physicians in those specialties in which prescription writing was deemed a critical part of the practice (e.g., internal medicine, general practice, obstetrics). In total, 1500 questionnaires were mailed to physicians in eight specialties. Four hundred and twelve completely usable responses were obtained (27% usable response rate). A systematic random sample of one-fifth of the state's practicing pharmacists resulted in similar questionnaires being mailed to 600 independent, chain, and institutional pharmacists. One hundred and eighteen complete surveys were returned (19% usable response rate). Each respondent indicated their degree of agreement with a series of statements concerning manufacturers of generic and brand-name drugs. The statements were operationalized as seven-place bipolar measures labeled disagree-agree and were scored 1-7. The 12 items consisted of both positively and negatively worded statements and were developed to represent the major issues regarding the spread of generic drugs likely to impact manufacturers within the prescription-drug industry.
RESULTS The percentage distributions of the physician and the pharmacist responses to the issues examined are shown in Table 1. Individual scores were combined to reflect general disagreement-agreement with each of the statements. Substantial differences were found both between and within both samples regarding the generic-drug issues addressed. Specifically, both groups were divided in their opinions concerning the ability of government regulatory agencies to assure the consistent production of quality, effective prescription products (Table 1, Nos. 1 and 9). However, the majority of both groups were not confident in prescribing and dispensing any governmental approved drug irrespective of the manufacturer's reputation (No. 6). Two-thirds of both samples felt that wider use of generic drugs would lead to less available money for new drug research and that the proposed price ceilings would 65
TABLE 1 Physician and Pharmacist Opinions about Generic Drug Manufacturers and Brand Substitutions" Statement t'
Disagree
Uncertain
Agree
1. No way now exists to ensure that
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
any two different manufacturer's brands of a drug will be uniformly effective in performance Wider use of generic drugs will mean that less money will be available for research to bring new drugs into the market Price ceilings will result in less quality control and research by manufacturers Generic prescribing will lead to a greater likelihood that a brand produced by a manufacturer without a reputation for quality will be used" It is important for the pharmacist to dispense only drugs produced by a manufacturer with an established reputation for quality l feel secure in prescribing (dispensing) any drug approved by a government agency regardless of the manufacturer's reputation High prices of brand-name drugs are due in part to the heavy expenditures used to encourage physicians to prescribe brand names Regulatory agencies should set "maximum allowable costs" for drugs" The F D A is capable of assuring that drug manufacturers maintain high standards of quality for their products Most physicians are unsure of which drugs are produced by multiple manufacturers' Regulatory agencies should require that adequate comparative cost information be provided to consumers" Consumers have easy access to comparative information needed for making drug selections
41/39
6/4
53/57
24/32
8/5
68/63
24/30
7/6
69/64
15/32
5/I
80/67
12/14
3/1
85/85
76/82
5/5
19/I 3
36/31
9/9
55/60
75/93
6/2
19/5
53/53
6/7
41/40
29/14
6/5
65/81
42/87
13/3
45/10
79/69
7/7
14/24
"Figures represent percentage distribution for physicians (n = 412) and pharmacists (n = 118), respectively. ~'Operationalized as seven-place bipolar statements labeled disagree-agree and scored I 7. "Mean scores significantly different between physicians and pharmacists (p < 0.001).
66
result in less quality control and research by drug manufacturers (Nos. 2 and 3). The physicians and pharmacists were in general agreement that consumers do not have easy access to comparative information needed for making drug selections (No. 12). The majority of each professional group also agreed that the high prices of brand-name drugs are due in part to the heavy expenditures used to encourage physicians to prescribe brand names (No. 7). In contrast, although some general support for generic practices among physicians and pharmacists was found, 85% of both samples indicated that dispensing only prescription drugs produced by manufacturers with established reputations for quality was important (No. 5). Significant differences between physicians and pharmacists were found for four items. Specifically, 80% and 67% of the physicians and pharmacists, respectively, reported feeling that increased generic prescribing will lead to a greater likelihood that a brand produced by a manufacturer without a reputation for quality will be used (No. 4). As expected, significantly more of the pharmacists indicated their opposition to the proposed regulatory activities regarding the establishment of maximum allowable costs for reimbursement payments and the required provision of comparative cost information to consumers (Nos. 8 and l l). And, lastly, over 80% of the physician respondents felt that most of their peers were unsure of which drugs are produced by multiple manufacturers
(No. 10). CONCLUSIONS AND IMPLICATIONS Generic prescribing has been suggested as a means of limiting the rising costs of health care paid by consumers. Over eight billion dollars are now spent annually for prescription drugs, and generic practices seemingly provide the potential for lessening somewhat the financial pressures faced by the public without sacrificing the overall quality of health care or infringing extensively on traditional professional responsibilities. However, genetic prescribing does represent a shift of responsibility for selecting a particular drug brand from the patient's own physician to the dispensing pharmacist--all on the theory that duplicate products can be expected to perform equally well under the existing safeguards provided by the FDA and by individual manufacturers [6]. The issues involved have become widespread, and general acceptance to date has been disappointing. Eventual resolution of these issues will impact directly on the marketing envi-
ronment within which the prescription drug industry operates. This research attempted to investigate these issues by examining the perceptions of practicing physicians and pharmacists. Specifically, the responses of two random samples to a series of statements regarding drug manufacturers and their role in the production of generic prescription drugs were described. The major managerial issues examined, the regulatory actions (positions) taken, and the sample responses are summarized in Table 2. Despite the official position by the FDA that no real differences between generics and branded products exist and their ongoing inspection and quality control efforts, concerns about quality, efficacy, and consistency of products across an increasing number of multiple manufacturers apparently remain. Arguments for and against generic drugs remain in the media and trade literature. The physicians and pharmacists participating in this study were divided in their opinions about the ability of the FDA and other regulatory agencies to adequately monitor prescription-drug products. Issues regarding the reputation of drug manufacturers are closely related to external assurances of control. The Food and Drug Administration maintains that all drugs and drug plants are subject to the same inspection and manufacturing regulations. Both samples in this study agreed that finn reputation is important. The physicians
were particularly concerned that the diffusion of generic drugs would lead to widespread use of drugs produced by less reputable firms. Price controls and the maximum allowable cost guidelines have drawn significant industry attention. The FDA is currently setting reimbursement limits for many frequently prescribed drugs that are already available from multiple sources. Both the physicians and pharmacists surveyed were strongly opposed. The provision of comparative information for use by consumers is increasingly being suggested. The FTC is actively encouraging the posting of comparative drugprice information. Legislation in some states now exists that requires the posting of prices by pharmacists. The sampled physicians and pharmacists were consistent in their opinion that consumers now have inadequate shopping information. However, only the physicians strongly favored the provision of comparative price data. These issues and the concerns of physicians and pharmacists have definite implications for marketing managers within the prescription-drug industry. The increased role of the pharmacist will now necessitate substantial attention from industry "detail" personnel, since brand selections will no longer be under total physician control. Continuing concerns about drug quality and consistency across multiple sources underscore the need for assurances of production control by both drug-related agencies and drug-firm management.
TABLE 2 Major Issues Faced by Drug Manufacturers Issue
Action
1. External assurances of production control and consistency across multiple manufacturers 2. Manufacturer reputation for quality and research
Official FDA position recognizes no differences between generic and brand drugs except for isolated cases All drug manufacturers are subject to FDA inspection and must follow current Good Manufacturing Practice Regulations
3. "'Maximum allowable cost'" (MAC) deternfination for reimbursement to Medicare and Medicaid participants 4. Provision of pricing comparative information
Rates are currently being established by FDA for frequently prescribed drugs available from multiple sources The FTC is actively encouraging posting of price information; Supreme Court has ruled against prohibition of price advertising by professionals; some states now require posting of drug prices by pharmacists
Sample Response Substantial disagreement exists within samples Physicians feel that generic practices will result in use of less reputable firms; both groups consider reputation important Both groups are strongly opposed
Both groups agree information provided is inadequate; physicians strongly support posting of comparative price data
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"Differences between physicians and pharmacists were found for four." Evidence also indicates that pharmacists and physicians rely heavily on the reputation of the manufacturer for indications of quality. Perhaps as generic drugs become more available from an increasing number of competitive outlets, physicians and pharmacists will have to develop additional evaluative criteria for making product decisions. The drug industry can assist by providing comparative and substantiated drug information and maintain its role as a valuable source of information to both groups. The industry must also face questions of liability, particularly if the FDA is unable to assure bioequivalency. If substitutions for a manufacturer's brand are made, producers of the substituted product and the pharmacists face new sources of potential liability. A 1978 survey by the journal American Druggist indicates that already considerable agreement among pharmaceutical companies has been reached on certain basic questions concerning product liability and defense of pharmacists where substitutions are permitted. Finally, questions of research for new drugs to solve patient health problems must be addressed by the drug industry, physicians, pharmacists, and the federal government. Drug manufacturers whose activities are limited solely to the production of generic drugs have no obligation or competitive need to invest in research and development. Included in the support of generic drugs are those concerned that the increasing costs of medication constitute a burden on patients and on those in government and politics who recognize that a growing share of the costs of medical care is being derived from tax dollars and thus see a responsibility for holding down costs [11]. Yet questions of industry investment in drug research and support for that research remain, and cost concerns must be balanced with new drug development.
REFERENCES 1. Ball, F. M., Testimony Before the South Carolina State Pharmacy Board in Opposition to the Repeal of the Anti-Substitution Regulation, Journal of the Medical Association of South Carolina, 130-131 (April 1976).
4. Bauer, Raymond and Wortzel, Lawrence, Doctor's Choice: The Physician and His Sources of Information about Drugs, Journal of Marketing Research 3, 40-47 (1966). 5. Booster Shot for Generic Drugs, Business Week, 27 (September 6, 1976). 6. Brennan, Bruce J., Drug Substitution--Boon to Consumers Versus Legal Trap for the Professional, Journal (~'Legal Medicine 4, 20 25 (1976). 7. Costello, Joseph M. and Weinberger, Michael, Prescription Drug Product Liability: Shall Patients Practice Medicine?, Journal of Products Liability, 17-20 (January 1978). 8. Dardis, Racheal. and Dowdell, D., Price Variations for Prescription Drugs, Journal <>]"Retailing 52, 15-26 (1976). 9. Deadline Nears for New York Drug Substitution Law: PMA Fights FDA to Halt Nationwide Spillover, Product Marketing, 14 17 (March 1978). 10. Drug Bioequivalence Study Panel Report, Office of Technology Assessment. Congress of the United States, July 1974, pp. I-3. 11. Fisher, David M., Generic Drugs and the Future of Therapy, Hospital Practice, 10-16 (May 1976). 12. Gumbhir, Ashok and Rodowkas, Christopher A., Generic Prescriptions: Can the Consumer Benefit?, Annals of Internal Medicine 82, 711-712 (1975). 13. Hecht, Annabel, Generic Drugs: How Good Are They'?, FDA Consumer, 17-20 (February 1978). 14. How FTC Chadwick would Eliminate the "Hungry Pharmacists" Hazard, American Druggist 174, 16 (1975). t5. How MAC Would Affect Generic Preferences, American Druggist 174, 49 (1976). 16. Huck, John L., MCA/ECA "Savings" Would Cnme Right Out of the Pockets of U.S. Pharmacists, American Druggist 175, 21 (1976). 17. Johnson, C. Anderson, Hammel, Richard J., and Helnem, J. Steven, Levels of Satisfaction Among Hospital Pharmacists, American Journal of Hospital Pharmacy 34, 241-247 (1977). 18. Joint Statement on Anti-Substitution Laws and Regulations, Journal of the American Medical Association 225 (1973). 19. Knopp, D. E., Knopp, D. A., and Edwards, J. D., The Pharmacist as Perceived by Physicians, Patrons and Other Pharmacists, Journal of the American Pharmaceutical Association NS9, 80-84 (1969). 20. Lee, Armstead, M., Benefits and Liabilities of Generic Prescribing, West Virginia Medical Journal 68, 161 - 166 (1972). 21. MAC Will Give RPH Incentive: Schmidt, American Druggist 173, 27 (1974). 22. New York Substitution Law Has Wider Significance, American Druggist 177, 70-72 (1978). 23. Patents on 117 of Top 200 Rx Items to Lapse by '84, American Druggist Merchandising, 167 (1973); 19 (1973).
2. Battle over Florida Mandatory Substitution Law May have National Repercussions, American Druggist 176, 17-18 (1977).
24. Smith, Mickey E., The Pharmacist and Generic Drugs--A Study of Ampicillin, Journal of the American Pharmaceutical Association NSI2, 511-515 (1972).
3. Bauer, Raymond, Risk Handling of Drug Adoption: The Role of Company Preference, Public Opinion Quarterly 25,546-559 (1961).
25. Three More MAC Ceilings are Made Final, American Druggist 177, 74 (1978).
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