OBJECTIVES: Price erosion is considered the key success criterion of generic drug policies. For chronic drug therapy, however, persistence with the original drug substance is equally important. Low persistence may result in poor health outcomes, lead to increased health care costs. Our objective was to estimate the impact of switching drug therapy on health and economic outcomes as a consequence of the Hungarian drug policy in hypertension. METHODS: We retrieved 4-year medical records of hypertensive patients, who had at least 10 prescriptions of original losartan or losartan HCT in the 12 months prior to patent expiry. We allocated patients to 3 groups based on switching history in the 12 months after patent expiry. Group 1 patients were switched to another patented antihypertensive product without risk for generic substitution (n=953). Group 2 patients were switched to generic losartan or losartan HCT, but did not change the generic brand in 12 months (n=630). Group 3 patients were switched at least twice among different generic brands in 12 months (n=1144). We calculated the incidence of major cardiovascular events (MACE) and overall health care cost (289.42 HUF/EUR 2012 average exchange rate) in each group. RESULTS: Total 3-year health care costs were €9,728, €6,594, €8,227, the incidence of MACEs was 13.3%, 9.8%, 12.3% in Group 1, 2 and 3 respectively.   CONCLUSIONS: In chronic diseases switching to generic drugs reduces health care costs. However, frequent switching among generic brands may result in negative health outcomes and increased health care costs. Suboptimal implementation of generic drug policies in chronic diseases may compromise expected benefits (i.e. same health gain at lower costs). Potential confounding factors may limit the generalizability of our conclusions.