The results of this study suggest that generic drugs in China have only modest market penetration, and even after the entry of generic drugs, original drugs still occupy a dominant position in the market. Among the 27 original drugs, 15 have maintained a market share of more than 70% eight quarters after first generic entry. According to a previous study, the market share of generic drugs in some European countries was 46.5–62.1% eight quarters after the original drugs lost their exclusive right; among them are 62.1% in the Netherlands, 55.7% in Denmark, 54.9% in Germany, and 46.5% in the UK [39]. There are differences in the market share of generic drugs among different countries, which may be affected by the policies of each country. For example, the price control system may discourage generic drug manufacturers from entering the market, while economic incentives and education activities may help increase the substitution rate of generic drugs. European countries basically implement an internal reference pricing system. Among them, the United Kingdom has only set price ceilings for very few generic drugs, while Germany, Denmark, the Netherlands, and other countries have not set price ceilings for generic drugs. At the same time, carrying out publicity and education activities for generic drugs, as well as providing economic incentives, may help to promote the use of generic drugs by doctors, pharmacists, and patients [39]. Therefore, the market share of generic drugs in the abovementioned countries is higher.

The low penetration rate of China’s generic drugs obtained in this study is also affected by China’s policies. Before 2016, the consistency evaluation of generic drugs in China was not fully carried out, and the safety and effectiveness of generic drugs lacked clinical evidence. In addition, the common perception that “cheap price equals low quality” negatively impacts Chinese health professionals and patients, reducing doctors’ willingness to prescribe generic drugs, while patients’ brand loyalty reinforces this trend [40]. Studies have found that physicians in developing countries tend to have a more negative attitude toward generic drugs, and nearly half of the doctors in China have an uncertain or negative view of generics [41]. Drug price policy was also considered to be an important contributor to the low generic penetration. Before September 2017, Chinese hospitals were allowed to charge a markup of no more than 15% on drug purchase price to support hospital profit and physicians’ salaries, which may provide an economic incentive to prescribe more expensive original drugs instead of their cheaper generic counterparts [42]. Furthermore, there is no generic substitution policy in China. Most drugs are prescribed by their brand name rather than international nonproprietary name (INN), and Chinese pharmacists do not have the right to substitute generics as they do in the USA [43], which might lower the speed of generic spread.

We also found that in China, the prices of most original drugs did not drop significantly after the generic entry, and there were even some cases of price increases, which is the phenomenon of “paradox of generic drug competition.” This suggests that original drug manufacturers will not respond to generic entry by lowering the price of original drugs, similar to results obtained in previous studies [44]. The results of the study further show that as the number of generic drug manufacturers entering the market increases, the price of generic drugs will further decrease, which will increase the price ratio of the original drug to the generic drug. Several studies have shown that the impact of generic entry on the price of original drugs varies from country to country [45]. Because countries may adopt different pricing and reimbursement policies, original drugs prices change in different patterns. The phenomenon of “paradox of generic drug competition” may be related to the fact that original drug companies have raised the price of original drugs to make up for the loss of market share [46], especially for original drugs that have greater advantages in quality and efficacy compared with generic drugs. In addition, it may also be related to patients’ higher preference and trust in original drugs. Before 1 June 2015, drug pricing relied on the government’s maximum retail price for the drug market. However, a company can apply for independent pricing if it can provide evidence that a drug is of better quality, which may be easier to provide for a original drug. In addition, original drug manufacturers may not choose to cut prices significantly to make up for the loss of market share. These reasons may cause original drug manufacturers to not significantly reduce the price of original drugs after generic entry.

Recently, the Chinese government carried out a series of policy reforms to promote the use of generic drugs. On the supply-side, the government issued the Recommended List of Drugs for Encouraging Generic Drug Production in 2019, 2021, and 2023, which required relevant government departments to support these medicines in clinical trials, critical generic technology research, and priority review and approval [47]. In addition, the first generic exclusive system as part of patent linkage system was established in 2021. On 6 December 2023, Everolimus was officially approved for market entry, becoming the first domestic product to successfully challenge a patent and receiving a 12-month market exclusivity period [48]. The consistency evaluation of generic drugs has been implemented to improve the safety and efficacy of generic products. As of July 2024, a total of 9737 drug specifications have successfully completed the evaluation, significantly meeting the clinical needs of patients [49].

On the demand-side, economic incentive of prescribing more expensive original drugs has been reduced or eliminated in multiple ways, including zero-markup policy, Diagnosis-Related Groups (DRG), and Diagnosis-Intervention Packet (DIP) payment. In December 2018, China launched the national volume-based procurement (NVBP) policy (also referred as the “4 + 7” pilot policy) to reduce drug prices and promote generic drug use. Most drugs in the “4 + 7” list are generic drugs with quality consitency. With a large volume, these generic drugs can penetrate the market faster. Until now, ten batches of volume-based procurement have been carried out, with the average price dropping by 55% and the average substitution rate of generics in tertiary hospitals reaching 58% [12]. In 2018, the Opinions on Reforming and Improving Generic Drug Supply Security and Usage Policies was issued, further supporting the procurement and use of generics [50].

China is pursuing reforms to its healthcare reimbursement system, aiming to establish a reimbursement level, or “reference price,” for the originator and generic drugs that have the same active ingredients. However, progress has been slow because of the concerns that patients may be discontented with the higher co-pay for originator drugs.

There might also be several ways to further increase generic drug use, such as patient education or promoting the implement of generic substitution policy. Policies in China have changed greatly after 2017, thus further studies about implementing results and influencing factors are needed.

The article adds to the existing information on competition between generic and brand drugs in Chinese pharmaceutical market. Nevertheless, it has some limitations and further research is needed in follow-up studies. First, it focuses more on the hospitals and fails to represent pharmacies outside hospitals. However, given that in China most drugs are delivered through hospital systems, the omission of other drug-delivering institutes will make little difference to the results. A second limitation is that the observation period of each sample drug was relatively short. The sample size was small, with only 27 sample drugs, which might compromise representativeness. However, samples were drawn from 28 provinces across the country, a significant improvement compared with previous studies.