Health Care in Georgia

March 2013 Mikheil Kukava Gerard de Boer

Pharmaceutical Market

• Most pressing issue:

• Access to medicines

• Market

• Policy

Access to medicines

• “WHO considers equitable access to safe and affordable medicines as vital to the attainment of the highest possible standard of health by all.”

• Georgia as a member state signed a commitment to this principle.

Pharmaceutical Market in Georgia

• Vertical Integration

• Two companies dominate the market on the import/distribution, retail and production level.

• Control of prices; the majority of small retail stores dependent on the distribution of the two large companies that set the prices

Market-shares 2011

25%

23%

9%

10% 4%

4%

3%

3%

19%

Importshares 2010

Aversi

Psp

GPC

ABC Pharmacia

Gea

Impexpharm

Medinserve

Tonus

59.4% 28.8%

3.2%

2.3%

1.5%

4.8%

Manufacturing shares

Rational Aversi

GMP

Batfarma

Biopharm

Neopharm

other

132 118

41

30 30

1853

Amount of pharmacies

Aversi

PSP

GPC

ABC Pharmacy

Peoples Pharmacy

Others

Competition Law

• 2009; Amendments to the law on pharmaceutical regulation introduced, to boost competition by expanding import opportunities.

– Recognition policy

– Parallel import and simplified registration

Competition Law 2009 • The law has been a good start to improve

competition

• It allowed companies to import medicines easier into the country and sell in their pharmacies.

• Weakened import monopoly

• But only one company exploited the opportunity.

• Limited effect

Markups

103.90%

60%

85.60%

90.30%

66.60%

33.90%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

2009 2010 2011

Markup change medians 2009-2011

LPG

OB

73%

79%

27%

21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Original Brands Lowest Price Generics

Amount of medicines increased/decreased 2009-2011

Increase

Decrease

Pharmaceutical Production • Shift to local production and the sale of

local generics

• Between 2005 – 2011 value of local production grew at an annual rate of 35% between 2005 and 2011.

• Total value of local medicine production increased from $8 million to $48 million.

• 63% of the total value of production was for local sales.

Price Availability Generics

• Large pharmaceutical chains promote own generics at high prices

• Differentiate prices; same medicine can be sold under different brands for different prices.

Generics

• Production is also packaging

• Same imported medicine Ceftriaxone, sold as:

– Avexon: GEL. 11.00

– Raciocef: GEL. 3.30

• International branding companies and prices

• Cefamed 1g #1+solvent World Medicine GEL. 14.30 Egypt

• Rotacef 1gr #1+solvent Ratapharm GEL. 13.87 Spain - Egypt

• Pan-ceftriaxone 1g #1 Panpharma GEL. 5.15 France

Generics

• Meloxicam: • Loxidol tab 15mg #10 Unipharma GEL. 15.39 • Camelot tab 15mg #10 GMP (PSP) GEL. 11.0 • Melsikam forte tab 15mg #10 NOBEL ILAC GEL. 9.650 • Existen Sanovel forte tab 15mg #10 SANOVEL ILAC GEL. 14.25 • Movalis tab 15mg #10 Boehringer Ingelheim GEL. 4.80

• No data about sales

• Import data suggests the expensive generics are more popular

Generics • Georgian as well as international branding

companies are very active in the promotion of their generics.

• Newly established chains have contracts with “new suppliers” from Europe that are relatively low priced. These are less sold.

• The branding companies often sell their brands at higher prices and do not have these generics in their retail stores.

Generic promotion • Why do people buy expensive generics?

– Prescribed by doctors, promotion branding companies

– Vertical integration: offer it in their pharmacies

• Result: While there are medicines at low price available people do not know this and only a few companies sell them.

Quality

• The Agency for State Regulation of Medical Activities

• Lack of resources and expertise

• Very small amount of medicines is checked on quality

• Loophole registration procedure of 10 days

Recommendations - Affordability

• The market will regulate if it is given time?

• Or…..

• Access to medicines is the best achieved through a sound regulatory framework?

Recommendations – access to medicines

• Evidence based strategies: Expert committee within the Ministry of Health.

• Essential list of medicines

• Regressive mark-up strategy for a list of essential medicines for Georgia.

• Generic Promotion: Through retail and combined with incentivising doctor’s prescriptions, combined with other strategies

• Reference pricing: Involvement of insurance companies, patients pay the difference between reference price and price of their choice.

Recommendations - Quality

Increased Resources for the Drug Agency

– Financial

– HR

– Expertise

– Methodology

• Increase the registration period

Hospital Sector

Major findings • The privatization of the hospital sector has led to the rapid

construction of modernly equipped hospitals.

• Almost all hospitals are owned by private investors. The insurance market owns a large share of over 40%. In the regions the largest part of hospitals are owned by insurance companies.

• The effectiveness of the policy relies on competition, the situation on the social insurance and hospital market create obstructions to competition and consumer choice.

• There are severe doubts about the sustainability of a large part of the hospitals which creates risks for their long term existence.

• Patient rights are not well protected.

• Weak position of medical staff.

Hospital and Insurance Sector Reform and Vertical Integration

• Lack of investment in hospitals in 2008.

• Large scale involvement of insurance companies in the process. More than 40% of the hospitals are owned by insurance companies.

• In 2010 the social insurance system changed from a voucher system to a regional system.

• Major overlap of companies providing social insurance and owning hospitals in a region, resulting in vertical integration and real Ownership

Sustainability of hospitals and services • Of all the hospitals, 64% has less than 50 beds. There are

severe doubts that hospitals with less than 50 beds will be profitable.

• Doctors and specialist expressed concerns that expensive services will disappear.

• There will be a limited range of services provided.

• Several tender contracts oblige hospitals to keep the profile of a hospital for seven years.

• No obligations for hospitals to maintain a certain range of services after the 7 years, when the contract expires.

Position of medical staff

• Especially in the regions the salary is low

• Companies do not want to work with the Trade Union for Medical Staff.

• Doctors who protest or tell the press risk to be fired. (The case of Chiatura and of Zugdidi)

• Specialists move abroad system is vulnerable for Out of Pocket Payments.

Recommendations

• Cooperation between hospitals and the MOH to ensure crucial services will not disappear.

• Long term strategy to ensure the sustainability of hospitals

• Better protection of the staff

• Better regulatory framework to ensure quality; Introduction of an inspection task force

• Gathering of data: crucial for developing a sound and effective policy

Pharmaceutical Expenditures

• From 2007-2010 the expenditures on pharmaceuticals increased with 23,7% every year. (HUES 2010)

• Of the disposable income of the average household, 34% was spend on health care of which 60% was spend on medicines.(HUES2010)

• In Georgia 4% of the GDP is spend on pharmaceuticals. In the US 2% of the GDP is spend on pharmaceuticals and in the EU around 1%.

Pharmaceutical Production • Shift to local production and the sale of

local generics

• Between 2005 – 2011 value of local production grew at an annual rate of 35% between 2005 and 2011.

• Total value of local medicine production increased from $8 million to $48 million.

• 63% of the total value of production was for local sales.

March 23, 2013 Mikheil Kukava

Georgian Health Insurance Industry

Challenges, Risks and Recommendations

What Prompted our Interest in Health Insurance

• In 2008-2013 the Georgian insurance market saw an upsurge in activity that had never been seen before. The number of those publicly insured jumped from an estimated 100,000 in 2006 to more than 4 million people in 2013.

• This expansion of public insurance schemes brought about both opportunities and challenges in Georgia that had not been seen before.

We raised concerns about the

• government’s reluctance to contribute to a voluntary insurance scheme. We found that individual and corporate insurance package holders, who pay 100% of their insurance premia:

• i) act more responsibly when it comes to prevention (30% of them are more likely to take preventive measures)

• ii) are more demanding about health service quality than non-contributing insurance holders.

• quality of medical services in the hospitals run by health

insurers. We propose that these hospitals should be run by independent management companies rather than subsidiary companies wholly owned and controlled by insurers.

We raised concerns about the

• Right of the publicly insured consumers to choose their medical service provider - our analysis showed that the vast majority of consumers were unable to choose their provider during 2010-2012.

• Government being ignorant of how much of the public

insurance premia is comprised of check-ups, diagnostic tests, remuneration, overhead expenses Why to be concerned about this?

• Because the failure makes it impossible for the government to implement corrective action, e.g. as our research showed, a tiny fraction of the insurance premium goes to lab tests, which compromises the quality. If the government is aware of this they might try to adjust the breakdown.

Number-Crunching

Number-crunching based on our health insurance survey, yielded very interesting, but quite unexpected results:

• About 260,000 poor PIS beneficiaries are willing to

contribute towards their insurance. • What does this mean? This means they could migrate

from public insurance to a voluntary insurance scheme if the GoG were to resume the scheme and offer better terms.

• Why is this important?

Number-Crunching

• The number of public insurance consumers in the two major schemes whose income made them ineligible to be in the public insurance schemes is around 140,000.

• What’s our Concern?

Ineligible beneficiaries are a drain on the GoG’s public insurance resource, which is limited as it is.

What did we do? We explained to the government why/how they should put a better screening mechanism in place to reduce the number of ineligible consumers to a minimum.

Number-Crunching

• The number of unjustly rejected claims by public health insurers in 2011 alone was around 45,000. We found that this was entirely attributable to governmental pressure on insurance companies to build hospitals, causing major financial stress to them (for greater detail see the insurance report and Statistical and Sampling Methodology).

Universal Healthcare Programme Challenges

• The state universal healthcare programme will

guarantee insurance for all non-insured individuals living in the country, which is too broad-brush an approach. We believe that it is possible to include people in the programme based on their income.

• How? government could use a database of all employed people, which must be set up for the administration of the untaxed minimum in income tax collection.

Universal Healthcare Programme Challenges

• Lack of guidelines & protocols

• Why is this a problem?

Because clinical guidelines describe the treatments for particular clinical conditions, while protocols describe the stages of treatment, necessary medications, the order in which they should be taken, the prices of services etc.

Universal Healthcare Programme Risks

• If the new insurance programme insures all non-

insured individuals, there will be a sharp increase in the number of these individuals at the expense of those insured in the private sector. There’s a significant chance that employers will no longer spend resources on insuring their own employees.

• To prevent free-riding, health insurance taxes could be levied against employers or employees.

Universal Healthcare Programme Risks

• The state insurance’s share of the health insurance market is

approximately 75%.

• This means that not only the development of the insurance market, but the very existence of the market itself depends on the government’s decisions on the implementation of the state insurance programme.

Universal Healthcare Programme Perverse Incentives

• The universal insurance programme’s greatest risk is that the

Social Service Agency may not be able to manage the programme effectively, which will ultimately increase the programme costs.

• Because medical service providers are paid for emergency out-patient and in-patient care on a case-by-case basis. Thus, medical service providers can deliberately aggravate a patient’s diagnosis or give a patient a different diagnosis in order to receive additional compensation/reimbursement for the treatment.

Universal Healthcare Programme Perverse Incentives

• For normal out-patient services, however, the state pays medical service providers participating in the programme a fixed price of GEL 0.86 for each beneficiary. Here, a medical service provider does not have an incentive to change or increase the severity of a patient’s diagnosis, since the provider is paid a fixed amount per beneficiary whether or not it provides services to them.

Universal Healthcare Programme Challenges

• Considering that the programme will not be implemented by private insurance companies, the fines imposed by the Agency could be entirely insufficient for medical service providers.

• For example, if the prescribed diagnosis does not correspond to the programmatic compensation or if it is increased in severity, or if it is represented as an accompanying diagnosis, the implementing provider will be required to return the reimbursed amount in full as a fine.

• Even by investigating on a large scale, the Social Service Agency cannot identify every violation, which is why we believe that the prescribed fines for service providers cannot be any lower than the income the providers collect in violation of the terms and conditions.

Thank you