Medicines Pricing Policies in Europe

Richard Laing with materials provided by

Kees de Joncheere

WHO HQ and WHO Regional Office for Europe

and

Claudia Habl

GÖG ÖBIG

And

Overview

Health and health care in Europe : some data

Pharmaceutical markets in Europe

Pharmaceutical policies and strategies on improving use and containing costs

Challenges and conclusions

Health care expenditures in Europe as % of GDP, 2000 or last

3 4 0 1 0 2 T o ta l h ea lth ex p en d itu re a s % o f G D P

0 2 4 6 8 1 0 1 2

1 9 9 9G e rm a n y1 9 9 8S w itz e rla n d1 9 9 9F ra n c e1 9 9 9N o rw a y1 9 9 4C ro a tia2 0 0 0M a lta1 9 9 9B e lg iu m1 9 9 9Ic e la n d2 0 0 0G re e c e1 9 9 9E U a v e ra g e2 0 0 0Is ra e l2 0 0 0D e n m a rk1 9 9 9A u s tria2 0 0 0N e th e rla n d s1 9 9 8S w e d e n1 9 9 9Ita ly2 0 0 0S lo v e n ia1 9 9 8P o rtu g a l2 0 0 0Y u g o s la v ia F R2 0 0 0C z e c h R e p u b lic1 9 9 8S p a in1 9 9 9U n ite d K in g d o m1 9 9 9F in la n d2 0 0 0H u n g a ry2 0 0 0S lo v a k ia1 9 9 9P o la n d2 0 0 0L ith u a n ia1 9 9 9E U R O P E1 9 9 9L u x e m b o u rg1 9 9 9Ire la n d2 0 0 0E s to n ia2 0 0 0C E E a v e ra g e2 0 0 0G e o rg ia2 0 0 0L a tv ia1 9 9 8T u rk e y1 9 9 4B u lg a ria2 0 0 0F Y R M a c e d o n ia2 0 0 0B e la ru s2 0 0 0U k ra in e1 9 9 3A rm e n ia1 9 9 1B o s n ia -H e rc e g .1 9 9 6T u rk m e n is ta n2 0 0 0N IS a v e ra g e2 0 0 0U z b e k is ta n2 0 0 0M o ld o v a2 0 0 0R u s s ia1 9 9 4A lb a n ia1 9 9 8R o m a n ia1 9 9 9K y rg y z s ta n2 0 0 0K a z a k h s ta n1 9 9 8T a jik is ta n2 0 0 0A z e rb a ija n

L a s t A v a ila b le

EU 15 average

CCEE average

NISaverage

Pharmaceutical expenditure/capita in Europe (year 2003)

0

100

200

300

400

500

600

FR IT GR AT SE FI NL DK ES IR EL HU CZ SK PL

Pharmaceutical Expenditure in € per capita

Source: OECD 2005

Pharmaceutical expenditure/GDP in Europe (year 2003)*

* HU: 2002Source: OECD 2005

0.0

0.5

1.0

1.5

2.0

2.5

SK FR HU PL IT ES GER EL CZ AT SE FI NL DK IR

Total pharmaceutical expenditure in % of GDP

Patient share of Price of Medicines

Source: WHO, Alcimed, Member States, Industry associations

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LV LT PL DK FI EE PT SL HU SE FR SK BE AT EL CZ IR ES GER UK IT NL

Public coverage Patient share

Medicines in Europe – key data

EU average (BE, FR, GR missing): 8.3

changes 1990 – 2000: highest increase in SE (elderly populat.)

particular decrease in 90s in DE and IT due to cost-containment

no direct connection between the number of prescriptions and extent of public PE

EU average expenditure per prescription at the expense of Social Insurance/NHS: € 20,-

Number of prescriptions

per capita 2000/latest

14.4

12.5

11.4

5.0

5.0

5.4

5.7

5.8

6.9

7.3

8.3

9.5

10.6

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0

ES

AT

PT

GB

DE

EU

IE

SE

IT

NL

DK

FI

LU

average number of prescriptions per inhabitant

Statins

0

10

20

30

40

50

60

70

NOR FRA NED BEL SWE FIN GER IRL SPA UK AUS PRT DNK ITA

Country

DD

D p

er

1000 p

ers

on

s c

overe

d p

er

day

Total*

Fluvastatin

Lovastatin

Cerivastatin

Pravastatin

Atorvastatin

Simvastatin

The use of Statins in Europe 2000(EURO-MED-STAT data)

0

5

10

15

20

25

30

35

FR GR LU PT IT BE SK HR PL IS IE ES FI BG CZ SI SE HU NO UK DK DE LV AT EE NL

DD

D p

er 1

000 in

h. p

er d

ay

Variation in outpatient antibiotic use in 26 European countries in 2002

Source: Goosens et al, Lancet, 2005; 365: 579-587; ESAC project.

Goals for pharmaceutical policies in Europe

Equitable access for patients to effective, safe and good quality medicines

Enhancing appropriate use of medicines for better health outcomes

Ensuring value for money

Balance with industrial policy objectives

Underpinning values : equity, solidarity, access, quality, participation

Medicines provision in Europe

Funded by State taxes or through compulsory social insurance, or a combination

In many countries “private” or semi-private delivery of services :

in many countries physicians and pharmacists are privately employed professionals who are fully contracted by the national health system

hospitals are often privately or semi-government owned, but get contracted by the health service

Overall stewardship role of government / state

The rising costs on medicines Higher volumes and higher price component

Ageing Shift to new medicines in same therapeutic category New drugs for prevention, and for diseases that could

not be treated e.g. AIDS, MS “Life-style drugs” Hospital - primary care shifts

especially for Eastern Europe : increase public coverage and close treatment gap

Mind the gap

Public finance cannot keep up with increase in drug expenditures

Options for policy-makers Increase health budgets : funding from …? Limit range of drugs to be reimbursed : medical need

and quality treatment Increase efficiency (regulation of prices, prescribing,

use, …) : requires sustainable funding and programmes

Shift expenditures to patients :

equity, solidarity …?

Increasing use of strategies to select medicines for public provision

Positive list for reimbursement ( NL, DK, Swe, …) Reference pricing, with generic or therapeutic groups (D,

Ita, NL, Por, Rom, …) Differential reimbursement % ( Fr, Bul, …) Economic evaluation of medicines ( Fin, NL, Swe, UK,…) Promote use of generics ( UK, DK, D, Fr, …) Co-payment mechanism (DK, N, Esp, …) Standard treatment guidelines (UK, DK, Esp, …) …

Ways of pricing – Manufacturer / importer level

Free pricing, Price notification

Public procurement / Tendering

Direct pricing (e.g. cost-plus pricing, statutory price fixing with different methods like international price comparisons)

Price negotiations (price-volume agreements, pay-backs, discounts)

(Indirect) Profit control

Pricing (manufacturer level) 2005 - EU-15

Free Pricing Price Negotiations Statutory Pricing

AT (in general: all pharm.) - (legal basis for all ph.)

BE OTC - POM

DK for non-reimbursable pharm - reimburs. ph. (alternate)

DE for innovative pharm. (~ not under reference price system)

- indirect via reference price system

FI for non-reimbursable pharm. - reimburs. ph.

FR for non-reimbursable pharm. reimburs. Pharm. -

EL - - all pharmaceuticals

IR OTC POM -

IT for non-reimbursable pharm. reimb. p. (EU registrat.) reimb. p. (nat. registrat.)

LU for non-reimbursable pharm. - reimburs. ph.

NL for non-reimbursable pharm. - reimburs. ph.

PT OTC Reimburs. Pharm. POM

SE non-reimbursed pharm. - reimburs. ph.

ES EFP = non-reimb. OTC - Eticas= POM+reim.OTC

UK for non-reimbursable pharm. and reimbursable brands but profit is controlled through PPRS generics

Internal Reference Price Systems

Definition

Operates by grouping similar products together and specifying a relative price. The use of a reference price as a reimbursement benchmark, implies that the government will only pay that particular price. Any excess above the reference price has to be paid by the insured.

Germany, Sweden, Denmark, Italy, Belgium, Netherlands, Norway, Australia, New Zealand, Canada [British Columbia]

External price referencing

Def.: International, cross-country price comparisons using different, so-called country “baskets”

Careful selection of methodology used (e.g. selection of comparative products, price levels etc) is crucial for success

Prices in countries are interlinked, as they influence each other poorer countries pay more, rich pay less

Most often referenced country in Europe: Germany

Only 4 Countries (AT, FI, IT, PL) reference to all other EU Members (or even other countries)

Industry tries to react using price bands

External price referencing, like parallel trade, benefits the rich countries at the expense of poor countries

Price comparison in 24 EU Member States

Source: ÖBIG 2005

Fluoxetine 20 mg capsule of Eli Lilly

€ 0,00

€ 0,20

€ 0,40

€ 0,60

€ 0,80

€ 1,00

€ 1,20

AT BE CY CZ GR DK ES ET FR EL HU IT IR LT LU NL PT SK SE UK

Ex-factory price in € per cap

Member State Standard VAT Pharms Specific regsAustria 20% 20%Belgium 21% 6%Cyprus 0% 0%Czech Republic 19% 5%Denmark 25% 25%Estonia 18% 5%Finland 22% 8%France 20.6% 2,1% (reimb.) 5,5% (non-reimb.)Germany 16% 16%Greece 18% 9%Hungary 25% 5%Ireland 21% 0% (oral) 21% (non-oral)Italy 20% 10%Latvia 18% 5%Lithuania 18% 5%Luxembourg 15% 3%Malta 0% 0%Netherlands 19% 6%Poland 22% 7%Portugal 19% 5%Slovakia 19% 19%Slovenia 20% 8.5%Spain 16% 4%Sweden 25% 0% (POM) 25% (OTC)United Kingdom 17.5% 0% (NHS) 17,5% (OTC)

VATin

theEU

Price regulation pharmacies

Regulating distribution margins In Europe, pharmacies 10-30% and wholesalers 1-10% Use degressive margins How to deal with rebates and discounts ?

Pharmacy Margins 2005 - EU-10

Statutory provisions Regulation

EST for all products regressive scheme with maximum margins and flat rate elements (15-40%)

LV 1 for reimbursable products, 1 for non-reimbursable

2 diff. regressive scheme with max. mark-ups (reimbursables: 5-30%, non-reimbursables: 10-40%)

LT for reimbursable Rx regressive scheme with maximum mark-ups (4-22%)

M for all products maximum linear mark-up on wholesale/import price

PL for reimbursable products regressive margin scheme (average 23%)

SK for all products maximum mark-up (plus additional maximum dispensing mark-up for wholesaler and pharmacist) (average 34%)

SLO no regulation no margin, but fee for service

CZ for all products maximum dispensing mark-up for wholesaler and pharmacist together (29%)

HU for all products regressive scheme with mark-ups

CY for all products maximum linear margin on wholesale price (25%)

My Personal Conclusions

All price control systems have problems! Start with the easier options.

Remember that there is a difference between being a payer and a price regulator.

The Health Ministry is not responsible for the profitability of the local pharmaceutical industry. The Health Ministry is responsible for the health (both physical & financial) of their people.

My Personal Conclusions (2)

Remove duties and taxes on medicines. For innovator patent protected products for which there are

no therapeutic alternatives, use pharmaco economic analysis to determine prices (See Australia PBS)

Where there are therapeutic alternatives e.g. statins use internal reference pricing system if possible

If there is a political decision to use international price comparisons choose your comparator countries carefully and review frequently (Remember New Zealand)

For generic products for which there are multiple competitive suppliers consider having no price controls and provide information to consumers about quality and pricing of products. Provide international price comparisons such as MSH IDPIG

If generic prices MUST be price controlled, set the prices UP from procurement prices not DOWN from originator prices

My Personal Conclusions (3)

Whatever is done, monitor for intended and unintended effects on price, prescribing and dispensing practices and volumes. Use time series analysis.

Collect information regularly from HAI Medicine Prices web site and WHO Sources of Price Information sites

There is a lot of money in medicines. Reducing prices may result in reduced profits! This can result in political or other such responses!

Be careful and ensure that you use the best available data and information in a transparent fashion!

Good luck!

Time Series Analysis Results

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50%

60%

0 2 4 6 8 10 12 14 16 18 20

Time

Val

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Policy Group Control Group