Off-patent drugs in Italy. A short-sighted view?

The new Italian policy to off-patent products, although similar to recent reforms in other European countries, seems to use some interesting instruments and has achieved significant results in the past 2 years. In particular, the prices of branded products have been reduced for all active ingredients where a generic version is available. However, this strategy may raise some problems in the longer term. Our analysis identified two open issues that might limit the long-term sustainability of the present scheme: the limited diffusion of generics and the reallocation of demand. The first stems from the new regulatory schemes which equate generics to branded off-patent products and exploit their presence only to cut prices. The second is favored by tough price competition that induces large companies to divert demand towards more profitable "me-too drugs." Solutions exist, but they are not easy to apply because so many difficulties arise when certain aspects of a long-standing equilibrium are modified.