Medicines Pricing Policies in Europe

1. 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

2. 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

4. Pharmaceutical expenditure/capita in Europe (year 2003) Source: OECD 2005

5. Pharmaceutical expenditure/GDP in Europe (year 2003)* * HU: 2002Source: OECD 2005

6. Patient share of Price of Medicines Source: WHO, Alcimed, Member States, Industry associations

7. Medicines in Europe – key data Number of prescriptions per capita 2000/latest • 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,-

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

9. Variation in outpatient antibiotic use in 26 European countries in 2002 Source: Goosens et al, Lancet, 2005; 365: 579-587; ESAC project.

10. 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

11. 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

12. 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

13. 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 …?

14. 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, …) • …

15. 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

16. Pricing (manufacturer level) 2005 - EU-15

17. 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]

18. 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

19. Price comparisonin 24 EU Member States Source: ÖBIG 2005

20. VATintheEU

21. 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 ?

22. Pharmacy Margins 2005 - EU-10

23. 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.

24. 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

25. 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!