Market demands and public healthobjectives:

Can the pharmacy sector combine them?

Luís Matias - PGEU PresidentCádiz, 6 October 2006

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In March 2000, the European Council adopted a strategy to

make the EU “the most competitive and dynamic-based

economy in the world”…

… giving priority to the competition policy foreseen in the

EC Treaty and reinforcing the Internal Market.

EU – Setting the scene

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EU – Setting the scene

A proposal for a Directive on Services has been presented by theEuropean Commission as an important tool to drive this strategyonto the services sector, including health.

After a comprehensive debate on liberalization of services, somesectors were finally excluded from its scope due to their

specificities.

Health services were one of them.

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EU – Setting the scene

In spite of this decision, the European Commission is currentlyasking some Member States to revise their national legislation oncommunity pharmacies, requesting them to justify rules relating

to:

• pharmacy ownership;

• and pharmacy establishment (demographic and geographic criteria).

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Meanwhile, at the level of Member States, some reforms

have also been introduced through the implementation of

measures that go along the same lines…

EU – Setting the scene

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EU – Setting the scene

Pharmacy ownership has been liberalized in countries such as the Netherlands and Norway, announced in Portugal, or changed in its business structure in countries such as France, Germany and Italy;

Pharmacy establishment criteria have been changed in countries such as the Netherlands, Ireland and Norway;

Liberalization of the selling of NPMs (ex: Denmark, Norway, Czech Republic, Portugal and Italy);

Liberalization of the price of NPMs (ex: Denmark, Germany and Italy);

POM to NPM switch (ex: France, Germany, UK and announced in Portugal).

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Pharmaceutical policy environment

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Pharmaceutical policy environment

The rising costs in health:

In recent decades, the pharmaceuticals’ mean share of the GDP has been 1.2% in OECD countries.

Pharmaceuticals accounted for 15.4% of total health expenditure, with public expenditure about half of this amount.

Since 1970, the average share of GDP for pharmaceuticals in most countries has increased 1.5% more per year than GDP growth.

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Pharmaceutical policy environment

Many are the factors that contribute to the rising costs:

Life expectancy is increasing, leading to the aging of population;

The prevalence of chronic diseases is growing fast and, therefore, the demand of healthcare is also increasing with direct impact on costs and on the health structures;

The improvement of the social-economic conditions will correspond to a significant increase of diseases related with lifestyles;

Citizens’ expectations and demands are higher in relation to the services provided.

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Pharmaceutical policy environment

The pharmaceutical expenditure is subject to several components, such as industry income, prescribing habits, wholesaler intervention, pharmacy remuneration and taxes.

In addition, pharmaceutical expenditure analysis must take into consideration other contexts such as the level of patient adherence, waste of medicines and advertising of pharmaceuticals.

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Pharmaceutical policy environment

The market rules and pro-competitive policies:

The focus of today’s legislative procedures in the pharmaceutical

policy is dominated by three policy inputs:• public health policy;• healthcare policy;• and market policy.

The main professional roles of the pharmacy profession fit intothe health policy, but somehow they also touch features of

marketpolicy.

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Pharmaceutical policy environment

Policymakers operate with two conflicting views of pharmacy and pharmacists.

In the first view, policymakers see pharmacies as commercial enterprises and pharmacists as business people.

Governments will most likely make decisions based on cost and relegate to second plan the quality of services.

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Pharmaceutical policy environment

In the second view, policymakers view pharmacies as part of the healthcare sector and pharmacists as healthcare professionals providing a public service.

If this is the case, governments are inclined to regulate this field as they do with other healthcare professionals and healthcare services.

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Pharmaceutical policy environment

The competition issue:

Competition brings to the spotlight a new concept: “Change”

For us, pharmacists: “Change is not a problem; engagement is!”

“ The objective is not to get people to support change but to give them responsibility for engendering change and some control over they destiny”

Harvard Business Review

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Pharmaceutical policy environment

A question remains: How can community pharmacies ensure patient safety and quality of care and simultaneously contribute to cost containment in the healthcare sector?

To optimize medication management in order to produce positive health-outcomes and generate savings to the healthcare sector, we believe that it is essential to uphold a clear regulatory framework for the pharmaceutical sector.

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What must be preserved?

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Pharmaceutical policy environment

What must be preserved?

Professional image of pharmacists, promoting trust and honesty to the public through:- A Patient-focused image that:• Safeguards the public on issues of product safety,

effectiveness and costs• Allows Personalized Care• And promotes Professional Services

- Disease State Management

- Point of Service Lab screening

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Pharmaceutical policy environment

What must be preserved?

The Community Benefit that pharmacy gives to society through:

- Public Health Initiatives• HIV/AIDS, Needle Exchange, Methadone• Hypertension – Diabetes Screening• Poison Prevention• Paediatric dosing schemes• Accidental overdosing

- Partnership with Patient Advocacy Groups and other stakeholders

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Pharmaceutical policy environment

Michael Porter and Elizabeth Teisberg point out:

“In healthy competition, relentless improvements in processes andmethods drive down costs. Product and service quality rise steadily.

Innovation leads to new and better approaches, which diffuse widelyand rapidly. Uncompetitive providers are restructured or go out ofbusiness.

Value-adjusted prices fall, and the market expands. This is thetrajectory common to all well-functioning industries – computers,mobile communications, banking and many others.

Healthcare could not be more different.”Harvard Business Review

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Pharmaceutical policy environment

A recent study published by ÖBIG, an Austrian Health EconomicInstitute, has assessed the consequences of deregulation inthe pharmacy sector, in six European countries, in terms of:• accessibility, quality and expenditure.

According to the study, liberalization doesn’t necessarily lead to:• increased competition;• decrease of NPMs’ price;• containment of public expenditure.

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Conclusions

1. Healthcare environment is complex, and perhaps the most

effective change may require a mix of approaches involving

competition and regulation to ensure patient safety and

quality of care.

2. The perspective of various interest groups (government,

healthcare providers, patients, the public) should be

incorporated in pharmaceutical policymaking, given their

common goal and objectives in public health.

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Conclusions

3. Community pharmacists are an integral part of the healthcare system and, therefore, they contribute to the overall objective of a better performance, efficiency and effectiveness in the healthcare system;

4. International evidence strongly suggests that the involvement of community pharmacists in areas such as generic substitution, medicines information, health promotion, disease prevention and disease management provides cost savings. This is achieved through reduction in wastage and inappropriate use, as well as under-use of medicines.

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Conclusions

5. Intervening simply to reduce pharmaceutical costs without a broader public health perspective will be short-sighted and potentially disastrous, as medicines cost is only one component of healthcare expenditure.

6. While contributing to cost savings both by improving health indicators of the population and by implementing cost control mechanisms, community pharmacists are contributing to the well-being of their country and to the competitiveness of their national economies.

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A balanced approach is needed to market rules,cost-containment and pro-competitive policies in

health, taking into account universal concepts such as

affordability, accessibility, quality, equity and equality.

Conclusions

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… Pharmacists will always be part of the

solutions, as important allies of governments

and consumers in the implementation of the

health policies that better serve the citizens’

interests.

Conclusions

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THANK YOU!