Pharmaceutical management strategies of industrialized countries

Health care costs as a percentage of the gross national product have been increasing in most industrialized countries. As part of the trend, pharmaceutical expenditures also have been rising. In many countries, pharmaceutical costs are the largest single health care expenditure. In an effort to contain rising costs, governments are exploring a variety of pharmaceutical management strategies. These include price controls, restrictive formularies, budget caps, profit controls, and practitioner education.     

Pricing and reimbursement of pharmaceuticals in Belgium

The Belgian healthcare system has a tradition of access and equity at affordable prices. As in other countries, the system becomes pressured by increasing healthcare costs. This paper describes the actual situation in Belgium with special focus on pharmaceutical products and the potential role of pharmacoeconomics in decision making on price and reimbursement. Nearly all people in Belgium are covered by compulsory health insurance. The system is paid for by social security, the patients and the federal and regional authorities. The part of the consumption of pharmaceuticals that is charged to insurance was about 62.1 billion Belgian francs (BeF), i.e. about 50% of the pharmaceutical market in 1994. Price setting in Belgium has been rather low due to the positive reimbursement list, where the price of a new drug is compared to existing drugs in a comparable therapeutic class (so-called reimbursement criteria). The expenditure on pharmaceuticals is increasing faster than global funding for public health. In order to control drug budgets, different cost-containment measures have been or are being taken, i.e. a mix of price, reimbursement and volume controls. These cost-containment measures are not necessarily in accordance with a health economic approach. This paper suggests the scope for better implementation of pharmacoeconomic evaluation, which can lead to more flexible reimbursement systems in specific indications. Therefore, a formal recognition of the role of objective economic evaluations is needed for both hospital and ambulatory care. This process should be proceeded by improving the understanding and robustness of pharmacoeconomic evaluations.     

Pharmaceutical risk-sharing agreements

Increased spending on pharmaceuticals continues to foster debate over healthcare policy. The increasing costs of bringing products to the market, as well as increased utilization of pharmaceuticals contribute to increased pharmaceutical expenditure; however, appropriate pharmaceutical use can, in certain cases, reduce overall healthcare costs. Nevertheless, the perception of high drug prices still puts pressure on pharmaceutical companies to build confidence in the proposition that their products are worth the additional expense. One potential approach to building this confidence, and maintaining investment incentives, is for the pharmaceutical company to share the risk of a situation in which there is uncertainty about whether the product is effective for the consumer and payer. Such risk-sharing arrangements for pharmaceuticals, like warranties, can be used to signal high quality when product quality is not fully observable. While there may be difficulties in devising such schemes for every product, such risk-sharing plans may become a staple feature of the market in the future.     

Cost-Containment as Part of Pharmaceutical Policy

In this article the authors provide insight into the basis for price setting of medicines, the increasing pharmaceutical budgets in the past decades, and the measures governments and insures have taken to curb rising pharmaceutical costs. Four reasons are out lined for the fact that medicines are by some considered expensivey: 1) there are fundamental differences between medicines and other consumer products; 2) medicines are technology requiring an inordinate amount of research and development; 3) medicines are developed, manufactured, and distributed according to strict regulatory requirements; 4) medicines are most often selected by a physician for a specific patient and reimbursed in whole or in party by a third-party insurer or the state. Pharmaceuticals mean share of GDP has been 1.2% in OECD countries in recent decades. Pharmaceuticals accounted for 15.4% of total health expenditure, with public spending 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. Four types of strategies to curb rising Pharmaceuticals costs are described and a taxonomy of strategies provided These are:1)price and profit controls; 2) reimbursement system charges; 3) other fiscal measures; 4) quality measures. Pharmaceuticals policy has suffered from the pervasive misunderstanding that drugs are like any other commodity; resulting in policy makers viewing pharmaceuticals expenditures without thinking about drugs in their proper content of health care. The authors conclude by advocating a balanced approach to policymaking in a environment of rising pharmaceuticals costs. * This article is the third in a series of articles on this topic that will appear in Pharmacy World & Science during 2005. An erratum to this article can be found at .     

Pharmaceutical reference prices. How do they work in practice?

Reference pricing systems are reimbursement ceilings set by payers in an effort to constrain pharmaceutical expenditure for a private or public drug benefit. In recent years, many governments have adopted reference pricing either as a replacement or in addition to product specific price controls. Programme administrators should consider whether these policies are providing the intended benefits or whether there may be a more effective method. This article provides a review of reference pricing in Europe, North America and other countries. There are many similarities in the reference price policies but the markets to which they apply are more likely to be different. The European experience gives a 'once-for-all' lowering effect on pharmaceutical expenditure, often at the expense of compromises on prescribing. In Germany and The Netherlands, reference pricing has been relatively ineffective in lowering expenditure which has led to a succession of other interventions to achieve expenditure control goals. The US also has reference pricing, but it occurs in a very competitive market which may be responsible (at least in part) for the relatively modest growth in expenditure compared with European countries. The review of countries with reference pricing policies suggests that such policies are less effective than competitive markets in moderating pharmaceutical expenditure. Nonetheless, governments continue to pursue reference pricing strategies.     

Specialty pharmacy cost management strategies of private health care payers

BACKGROUND: The rate of increase in spending on specialty pharmaceuticals is outpacing by far the rate of increase in spending for other drugs. OBJECTIVE: To explore the strategies payers are using in response to challenges related to coverage, cost, clinical management, and access of specialty pharmaceuticals and to describe the potential implications for key stakeholders, including patients, physicians, and health care purchasers. METHODS: Sources of information were identified in the course of providing consulting services in the subject area of specialty pharmaceuticals to health plans, pharmacy benefit managers, employers, and pharmaceutical manufacturers. RESULTS: Specialty pharmaceuticals represent the fastest growing segment of drug spending due to new product approvals, high unit costs, and increasing use. Health care payers are faced with significant challenges related to coverage, cost, clinical management, and access. A variety of short- and long-term strategies have been employed to address these challenges. CONCLUSIONS: Current management techniques for specialty pharmaceuticals often represent a stop-gap approach for controlling rising drug costs. Optimum cost and care management methods will evolve as further research identifies the true clinical and economic value of various specialty pharmaceuticals.     

Risk sharing methods in middle income countries

The pricing strategy of innovative medicines is based on the therapeutic value in the largest pharmaceutical markets. The cost-effectiveness of new medicines with value based ex-factory price is justifiable. Due to the international price referencing and parallel trade the ex-factory price corridor of new medicines has been narrowed in recent years. Middle income countries have less negotiation power to change the narrow drug pricing corridor, although their fair intention is to buy pharmaceuticals at lower price from their scarce public resources compared to higher income countries. Therefore the reimbursement of new medicines at prices of Western-European countries may not be justifiable in Central-Eastern European countries. Confidential pricing agreements (i.e. confidential price discounts, claw-back or rebate) in lower income countries of the European Union can alleviate this problem, as prices of new medicines can be adjusted to local purchasing power without influencing the published ex-factory price and so the accessibility of patients to these drugs in other countries. In order to control the drug budget payers tend to apply financial risk sharing agreements for new medicines in more and more countries to shift the consequences of potential overspending to pharmaceutical manufacturers. The major paradox of financial risk-sharing schemes is that increased mortality, poor persistence of patients, reduced access to healthcare providers, and no treatment reduce pharmaceutical spending. Consequently, payers have started to apply outcome based risk sharing agreements for new medicines recently to improve the quality of health care provision. Our paper aims to review and assess the published financial and outcome based risk sharing methods. Introduction of outcome based risk-sharing schemes can be a major advancement in the drug reimbursement strategy of payers in middle income countries. These schemes can help to reduce the medical uncertainty in coverage decisions for valuable innovative healthcare technologies. However risk-sharing schemes can also reduce the transparency of pharmaceutical pricing and reimbursement, as the payback, and consequently the actual price per patient can be calculated only retrospectively. Therefore risk-sharing agreements can be interpreted as special forms of confidential pricing agreements to facilitate the implementation of differential pricing in middle income countries.     

Recent trends in drug prescribing rates and costs in New Zealand

Pharmaceutical benefit expenditure has grown rapidly and disproportionately in recent years to nearly 15% of Vote Health. Annual average increases in prescribed drugs of 3.1% by volume and of 6.9% in real prices have occurred since 1981. For the 1986/87 year volume and real price increases were 5.7% and 11.5% respectively, possibly due to the lifting of the price freeze and the effect of extending prescribing to three months from February 1985. Factors explaining these trends include the growth in numbers of general practitioners and the availability of new and more expensive drugs supported by promotional activities of pharmaceutical companies. There are almost no effective managerial, professional or educational strategies on the part of government to counter these influences. Pharmaceutical benefit expenditure and its growth is almost totally unmanaged and uncontrolled. With severe limits on government expenditure this growth could threaten other areas of health expenditure. Major changes are required in its management including a substantial part charge to the user, decentralisation to area health boards of primary health care services and funding, and professional mechanisms for better prescribing, supported by national policies for a comprehensive, computerised pharmaceutical and primary health care information system.     

The changing environment for US pharmaceuticals

Health reform is currently the predominant health policy issue in the US. It carries profound implications for the pharmaceutical field, including the possibility of price controls that could stifle pharmaceutical research. While policy makers are contemplating alternative approaches to reform, the marketplace for pharmaceuticals has changed dramatically. For example, price increases have lessened, price discounting has increased, and new drugs are typically launched at prices lower than those of the leading product in the therapeutic class. These changes are driven in part by the growth of managed care. Further evidence of change in the industry is the number of job reductions announced and the decline in market valuation of pharmaceutical companies. Policy makers need to take the changed marketplace into consideration as they proceed with health reform, to avoid layering additional policy impediments on top of an increasingly harsh and unforgiving market. Such an approach could seriously compromise incentives for pharmaceutical research.     

Pharmaceutical policy regarding generic drugs in Belgium

Pressure to control pharmaceutical expenditure and price competition among pharmaceutical companies are fuelling the development of generic drug markets in EU countries. However, in Belgium, the market for generic drugs is underdeveloped compared with other countries. To promote the use of generic drugs, the government introduced a reference pricing (RP) scheme in 2001. The aim of this paper is to discuss Belgian pharmaceutical policy regarding generic drugs and to analyse how the Belgian drug market has evolved following initiation of the RP scheme.The market share held by generic drugs increased following implementation of the RP scheme. Focusing on volume, average market share (by semester) for generic drugs amounted to 2.05% of the total pharmaceutical market from January 1998 to June 2001, compared with 6.11% from July 2001 to December 2003. As new generic drugs are introduced, their market share tends to increase in the first couple of months, after which it levels off. Faced with increasing generic competition, some manufacturers have launched new variants of their original drug, thereby effectively extending the period of patent protection. Strategies consisting of price reductions in return for the abolition of prescribing conditions and the launch of new dosages or formulations appear to have been successful in maintaining the market share of original drugs. Nevertheless, the introduction of the RP scheme was associated with savings amounting to 1.8% of pharmaceutical expenditure by the third-party payer in 2001 and 2.1% in 2002.The findings of this paper indicate that the RP scheme has stimulated the Belgian generic drug market. However, existing policy has largely failed to take into account the role that physicians and pharmacists can play in stimulating generic drug use. Therefore, further development of the Belgian generic drug market seems to hinge on the creation of appropriate incentives for physicians to prescribe, and for pharmacists to dispense, generic drugs. With respect to incentives to advance generic drug use, EU countries have experimented with various forms of budget constraints for physicians, generic substitution by pharmacists and RP schemes, although more evidence is needed of their impact on consumption and prices of generic drugs, pharmaceutical expenditure and health outcomes.     

European healthcare policies for controlling drug expenditure

In the last 20 years, expenditures on pharmaceuticals - as well as total health expenditures - have grown faster than the gross national product in all European countries. The aim of this paper was to review policies that European governments apply to reduce or at least slow down public expenditure on pharmaceutical products. Such policies can target the industry, the wholesalers and retailers, prescribers, and patients. The objectives of pharmaceutical policies are multidimensional and must take into account issues relating to public health, public expenditure and industrial incentives. Both price levels and consumption patterns determine the level of total drug expenditure in a particular country, and both factors vary greatly across countries. Licensing and pricing policies intend to influence the supply side. Three types of pricing policies can be recognised: product price control, reference pricing and profit control. Profit control is mainly used in the UK. Reference pricing systems were first used in Germany and The Netherlands and are being considered in other countries. Product price control is still the most common method for establishing the price of drugs. For the aim of fiscal consolidation, price-freeze and price-cut measures have been frequently used in the 1980s and 1990s. They have affected all types of schemes. For drug wholesalers and retailers, most governments have defined profit margins. The differences in price levels as well as the introduction of a Single European Pharmaceutical Market has led to the phenomenon of parallel imports among member countries of the European Union. This may be facilitated by larger and more powerful wholesalers and the vertical integration between wholesalers and retailers. To control costs, the use of generic drugs is encouraged in most countries, but only few countries allow pharmacists to substitute generic drugs for proprietary brands. Various interventions are used to reduce the patients' demand for drugs by either denying or limiting reimbursement of products and providing an incentive for patients to reduce their consumption of drugs. These interventions include defining a list either of drugs reimbursed (positive list) or one of drugs not reimbursed (negative list), and patient co-payments, which require patients to pay a proportion of the cost of a prescribed product or a fixed charge. Policies intended to affect physicians' prescribing behaviour include guidelines, information (about price and less expensive alternatives) and feedback, and the use of budgetary restrictions.     

Cost control techniques in Hungarian medicine reimbursement

Health care, and especially reimbursement of medicaments has limited financial resources. The gap between the medically possible and economically acceptable is becoming wider. To keep the costs at a low level, cost controll techniques should be used. The severity of current Hungarian economic situation gives extra actuality of this question. This paper gives a short review of cost control techniques adopted in Hungary during the last approximately 20 years, analyses the present financial situation of health care by focusing on pharmaceutical market, and displays the possible alternative solutions.     

Trends in generic prescribing and dispensing in Europe

Pressure to control pharmaceutical expenditure and price competition among pharmaceutical companies are fuelling the development of generic medicines markets in ambulatory care in Europe. The aim of this special report is to identify, interpret and discuss the main supply and demand trends affecting the European generic medicines market in ambulatory care. On the supply side, generic price-regulated systems and reference pricing systems are spreading across Europe. On the demand side, European countries have attempted to stimulate demand for generic medicines by focusing on physician prescribing, generic substitution by pharmacists and patient copayments. Finally, the development of biosimilars will probably become an important area of growth for the pharmaceutical industry over the next 5 years.     

Pricing and reimbursement of pharmaceuticals in the Czech Republic and Sweden

Objectives To describe and compare price regulation and reimbursement in the Czech Republic and Sweden. Methods Legal documents, government reports, statutory information, annual reports and scientific articles were searched using the keywords: pharmaceutical market regulation, drug policy, drug pricing, drug reimbursement and patients’ participation in costs concerning both countries. Approaches to regulation and regulatory steps concerning prices were compared between the countries. Main outcome measure (i) Institutional responsibilities in pricing and reimbursement of pharmaceuticals; (ii) principles of patients’ participation in costs on pharmaceuticals. Results Substantial differences were found in terms of pricing. In the Czech Republic, the Ministry of Finance sets maximal prices for pharmaceuticals whereas in Sweden there is a process of price regulation combined with reimbursement decisions taken by the Pharmaceutical Benefits Board. Together with a system of state-owned pharmacies, this ensures that drug prices in Sweden are fixed at the same level throughout the country. In the Czech Republic, prices may differ, since only maximal price levels are set. In both countries, decisions about reimbursement are taken at the national or state level whereas insurance funds or county councils are responsible for covering costs. The private share of pharmaceutical expenditures is substantially lower in the Czech Republic, even though there is no maximal level for patient’s co-payment, as there is in Sweden. Conclusion Differences in price setting and some other regulations of the pharmaceutical market were found. Both systems are designed to promote rational use of pharmaceuticals; and are based on social solidarity.     

Projecting future drug expenditures--1995.

Use of information on inflation, pharmacoeconomics, market introduction of new drug entities, practice-site-specific drug-use patterns, federal legislation, and the changing structure of health care delivery to project drug expenditures is discussed. Drug price inflation has been declining over the past several years, from 6.9% in 1991 to 2.2% for part of 1994. This can be attributed to both the growth of managed care and the industry's fear of government price controls. Pharmaceutical industry analysts project the overall price increase for pharmaceuticals in the next 12-24 months to be 2-5%. Pharmacoeconomic research is likely to become increasingly important; pharmacists will need to understand and critically evaluate this research. Drug budget projections should include a complete review of new drugs and biotechnology agents pending FDA approval, drugs pending approval for new indications, and common unlabeled uses of expensive existing agents. Various methods are available for tracking practice-site-specific drug-use patterns; those that categorize expenditures by diagnosis-related group may underestimate total expenditures associated with treating a given condition. State and federal legislation may affect drug rebates, prices, and ultimately drug expenditures. Although health care reform legislation did not pass in 1994, changes are occurring in both the pharmaceutical industry and in health care delivery, shifting the control of drug selection, utilization, and expenditures from individual prescribers to large purchasers. The accuracy of projections of drug expenditures can be improved by examining inflation, pharmacoeconomic research, the introduction of new drug entities, practice-site-specific drug-use patterns, federal legislation, and the changing structure of health care delivery.     

北京医改形势下药品市场委托代理关系变化与药品价格关系研究

目的:为新医改背景下理顺医药价格形成机制提供理论依据。方法:以药品市场信息不对称理论等为基础,分析北京药品市场中各交易主体的委托代理关系及其在医改实施前后的变化情况。结果:由于医、药学的专业性和技术性较强,信息不对称现象在医药市场中广泛存在,并由此形成了相关的委托代理关系,具体体现在药品生产企业和医院(医师)、医院(医师)和患者、招标部门和医院(医师)、招标企业和医院(医师)之间。通过实施"医药分开"改革和医保资金总额预付改革,修正了医院(医师)和患者之间的委托代理关系,降低了医药费用。但是由于药品的差异性和可替代性,并未从根本上解除医院(医师)和药品生产企业之间的利益关系。基本药物招标采购模式下,招标部门与医院(医师)、药品生产企业的委托代理关系仍然存在,但可降低逆向选择的风险。结论:纠正对医院(医师)的不合理激励、加强医疗保险机构的监督作用、发挥药品招标采购的协同作用,有助于理顺药品市场中各交易主体间的委托代理关系,充分发挥药品市场的作用,形成合理的药品价格。