Off patent drugs in Italy: a short sighted view?

The new Italian policy to off-patent prod ucts, 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 in gredients 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 longterm sustainability of the present scheme: the limited diffusion of generics and the real location of demand. The first stems from the new regulatory schemes which equate generics to brand ed 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.