Can targeted information persuade patients to take generics?

To date, healthcare policy has focussed heavily on financial incentives to make the switch to generics more attractive. However, it is often overlooked that markets only function efficiently if buyers and sellers are sufficiently informed. In the healthcare sector, however, numerous formal and informal hurdles impede the flow of information for patients. For example, advertising for medicines aimed directly at patients is largely prohibited, and the large number of preparations makes the market confusing. In addition, doctors and pharmacists have a certain financial incentive not to provide their patients with comprehensive information about available generics. Patients are therefore at a clear information disadvantage, which impairs their decision-making. Nonetheless, the role of patient information in generic substitution has so far been largely ignored. However, if patients are unaware of the existence of cheaper generics when purchasing medicines, they are also unable to react to the existing price differences.

However, as with any needs-based support programme, the question arises as to how these transfer payments reach the recipients. Some cantons have decided to transfer the amount directly to the bank account of the respective recipient at the beginning of the year. With these so-called "cash transfers", recipients of premium reductions then pay the full premiums themselves, just like all other insured persons. Other cantons, on the other hand, transfer the money directly to the health insurance companies, which reduce the recipients' premium bills accordingly. The aim of these so-called "transfers in kind" is to ensure that the support is actually used for health insurance premiums. So far, however, there has been little scientific evidence worldwide as to whether cash or in-kind transfers are more effective in preventing financial problems.

One way of measuring effectiveness would be to simply compare the proportion of generics in patients before and after the letter was sent. However, such a before-and-after comparison runs the risk of overestimating the effect of the generic letter. This is because some of the patients contacted would probably have switched from the original to a generic medicine even without the letter. For one thing, the mailing system did not check whether a generic purchase had already been made for the corresponding medication since the triggering purchase. Secondly, we know from research that consumers become increasingly knowledgeable with each repeat purchase of a product and are more likely to look for information on alternatives themselves. However, such "independent" switching should not be attributed to writing.

In order to nevertheless determine the causal effect of the letter, we had to subsequently find a suitable control group. We took advantage of the fact that the generic campaign was only a small part of the customer communication. To prevent insured persons from receiving too many letters in a short space of time, all communication at CSS is prioritised internally. If several pieces of correspondence are due at the same time, the one with the highest priority is sent first, while all other correspondence is held back for a few weeks. As the generic letter was not very time-critical, dispatch was often temporarily blocked. This led to a quasi-random distribution of the time at which patients received the information by letter. For every "nth" purchase, we were able to compare the probability of a generic withdrawal of patients who had already received the letter at that time with those who received the letter later. This comparison makes it possible to isolate the causal effect from other factors and to estimate the actual effectiveness of the letter.

In our analysis, we calculated the average effect of the generic letter on 60,000 recipients with a total of 540,000 drug purchases. If we only look at the three purchases before and two purchases after receiving the letter in a so-called "event study", we can see how much the letter increases the probability of switching to generics. With the first informed purchase, the share of generics immediately jumps by around 28 percentage points. If we assume that the letter also motivates other patients to switch during the second purchase after the mailing, this results in an overall effect of 29 percentage points. Compared to an average generic share of around 10 per cent before receiving the letter, this corresponds to an almost four-fold increase in the generic share.

There are policyholders who do not have to pay any co-payment for the rest of the year when they first purchase the policy after receiving the letter. On the other hand, there are policyholders who still have to pay at least part of the purchase price themselves at this point. A comparison of the two groups shows that insured persons without cost sharing react somewhat less strongly to the letter. Financial incentives therefore do have an effect, but the difference is only around 2.5 percentage points. Even if the choice between generic and original makes no financial difference to the insured person, the letter still triples the probability of switching to a generic. Information therefore proves to be an extremely effective instrument. It is remarkable that information also has an effect on those who are not exposed to financial incentives. These insured persons therefore contribute to cost reduction without deriving any benefit of their own. Strengthening patient sovereignty through targeted information therefore has a much broader effect than financial incentives alone.

Market mechanisms such as cost sharing only really work well if all market participants have sufficient information. This emphasises the hitherto neglected role of patient information, especially in the Swiss healthcare system, which expects patients to make decisions similar to those made in a normal goods market. At the same time, patients' access to urgently needed information is often hampered by regulatory barriers that do not exist in this form in other product markets. For example, CSS's generics mailing was banned due to a circular issued by the Federal Office of Public Health (FOPH) and discontinued in 2022. As a result, service providers remain the only source of information, which is hugely inefficient, not only in terms of financial costs but also in terms of time. In addition, patients are forced into situations where their only source of information can directly benefit financially from the decision made. Politicians should be called upon to make the benefits of digitalisation for informing patients legally possible. After all, empowered patients ultimately mean a healthcare system that works better for everyone.