Savings from generic drug substitution in the RSA--is its cost justified?

The causes of the recent rapid increases in health care costs in the RSA are briefly studied. Drug costs have increased largely through the use of new innovations, greater usage and price factors, but price increases have been below the rate of inflation. The savings in drug costs to be expected from the introduction of generic substitution have been calculated to be low in relation to overall health care costs, although of significance in relation to the survival of individual drug manufacturing businesses. The thrust towards generic substitution is possibly misplaced in that the potential savings in hospitalisation costs from the discovery of new drugs are so large that they justify the encouragement of the innovative drug manufacturers.