Pharmaceutical pricing, i reimbursement, Europe: an overview. Elias Mossialos and Reinhard Busse

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1 Pharmaceutical pricing, i reimbursement, HTA and cost containment measures in Europe: an overview Elias Mossialos and Reinhard Busse

2 Policy issues in pharmaceutical markets Structure of the pharmaceutical market (i.e. product life-cycle, e, market segments, e therapeutic markets) Characteristics of the health care environment and pharmaceuticals (financing, coverage, rising costs and reforms) Supply-side failure (patents) Demand-side failure (three-tired demand, third party payers) Objectives of pharmaceutical policy (public health, health care policy, industrial policy objectives)

3 What are the policy goals? Macroeconomic expenditure control, particularly l during periods of stagnation or recession. This policy goal may be related to the size of the pharmaceutical market. Micro economic efficiency and quality. Equity of access. Significant social inequalities in the take-up of proven technologies (e.g. antihypertension treatment) offers a challenge for government. Such technologies (e.g. beta blockers) may be cheap and out of patent but give high levels of population p benefit at low cost to the taxpayer. py

4 Regulation 1. What is the objective of regulation? 2. What forms do the regulatory intervention take? 3. What are the theoretical expectations of the regulatory interventions? 4. What evidence is there of the impact of the regulatory interventions with a particular emphasis on cost-control, efficiency, quality and equity of access? 5. How can the regulatory environment be improved?

5 OECD (2012), Pharmaceutical expenditure, in Health at a Glance: Europe 2012, OECD Publishing

6 Organisation for Economic Co operation and Development (OECD). OECD Work on Health

7 What decision makers want Safety and Efficacy are first steps to provide evidence for a new drug; Effectiveness and Efficiency i need to be proven Safety Efficacy Effectiveness Efficiency Measure of adverse effects Measure of effect under ideal conditions Measure of effect under real life conditions Relationships between costs and benefits Efficacy does not imply effectiveness and effectiveness does not imply efficiency Safety and efficacy are the competence of regulators, effectiveness and efficiency are the competence of payers/insurers Use of Health Technology Assessment to assess value

8 Regulatory Frameworks for Pharmaceutical Markets DEMAND-SIDE REGULATION AND INCENTIVES Physicians * Financial incentives * Drug budgets * Prescribing guidance, data and information Pharmacists * Generic substitution * Profit margins Patients * Fixed copayments * Differential copayments Expenditure = Price x Volume Suppliers * Free Pricing * Price regulation * Fixed reimbursement levels * Profit regulation Suppliers * Lower barriers to entry SUPPLY-SIDE REGULATION AND INCENTIVES

9 Policies to influence patient demand User charges: Does this policy reduce waste, or is waste the product of poor decision-making by physicians? Are there co-payments and if so how much are the co-payments, what are the conditions of the co-payments and are there exemptions? Differential co-payments

10 Protection from user charges in selected countries, 2012 Primary care annual cap OP prescription annual cap Inpatient annual cap (daily charge) AT 10 (poor free) 2% 28 days (10%) BE 450-1,800 depending on income DK FREE 480 (chronic only) FREE DE FREE (since 2013) 2% (1% for chronically ill) FI 630 (minors x 7 days (minors only) ( 32) free) FR x (chronic free, minors free primary care) 31 days ( %) IR x (poor free) 120-1,440 (chronic free, low for poor) NL FREE 220 NO (poor free) ( 75) SE x ( 10) UK FREE 130 FREE

11 Value-based user charges for outpatient drugs The value-based approach is not a panacea! Source: Thomson, Schang and Chernew, Health Affairs 2013

12 Policies to influence patient demand Developing a market for OTC products: Are OTCs reimbursed? How is OTC status t defined? d? What is the impact of patient education on patient demand? Direct to consumer advertising for prescription-only-medicines

13 European variation in OTC availability Belgium Portugal UK Chloramphenicol Codeine Fluconazole ole Levonorgestrel Naproxen Simvastatin

14 Policies to influence providers Guidelines, protocols and utilisation reviews. Is there an economic component in such guidelines and, if so, what form does it take? Provider compliance

15 Policies to influence providers Monitoring prescribing practice; Computer assisted prescribing support systems; Disseminating knowledge and evidence on prescribing; Risk management;

16 Policies to influence providers Educational outreach programmes to encourage cooperation between doctors and pharmacists. Financial incentives. Payment methods for doctors, soft budgets for pharmaceutical expenditure, fixed and indicative budgets for doctors.

17 Key Issues Regarding Physicians Monitoring of physician behavior 22 EU Member States monitor prescription behaviors Clinical practices/prescription guidelines States (most in EU) may apply indicative, non binding guidelines regarding drug prescription Pharmaceutical budgets Budget limits may be applied to pharmaceutical expenditures (used in at least 9 EU Member States) Prescription quotas May set targets ont types pes(e.g., generics) oraverage eragecosts of prescriptions made by physicians Financial incentives Financial i mechanisms may reward or punish ihphysicians i who do not follow guidelines, budgets, or quotas Education and information Physicians may be given access to prescribing advice, e.g., through electronic resources (applied in most of EU)

18 Policies Targeting Physicians in EU Adapted from: Carone, G, et al. Cost containment policies in public pharmaceutical spending in the EU. European Commission. September 2012.

19 Policies to influence providers Organisation of the pharmacy sector and the method of distribution of pharmaceuticals to the public. Regulation of the distribution chain, including payment methods for pharmacists (i.e. digressive margins, flat rates) and wholesalers, pharmacy monopoly rights, substitution rights and e-pharmacy. Number of pharmacies and pharmacists? Are pharmacists Number of pharmacies and pharmacists? Are pharmacists involved in prescribing or advising patients?

20 Policies to influence providers Is there generic substitution and is the use of generics promoted? Are there limited lists and, if so, what is the criteria for entry? Regulations regarding pharmaceutical expenditure in hospitals (including procurement policies and formularies).

21 Carone, G, et al. Cost containment policies in public pharmaceutical spending in the EU. European Commission. September 2012.

22 Rickwood, S (6 Mar 2013). A robust generic market: difficulties and complexities. IMS Health.

23 Rickwood, S (6 Mar 2013). A robust generic market: difficulties and complexities. IMS Health.

25 Policies to influence the industry Reimbursement controls (including the fourth hurdle). Wh t f t d t i h th d t What factors determine whether a product will be reimbursed and the price that is set?

26 Policies to influence the industry Price and profit controls (on patents, OTCs and generics). Price-volume trade-offs. Limitations on promotional spending.

27 Price and Volume (Budget) Agreements A penalty is foreseen when a new drug is overshooting a pre-set budget (PxQ) Penalty can take the form of Rebate or payback Lower price for volume above agreed limit Lower future price Variety of payback clauses Supplier is fully accountable Prescriber and supplier are jointly accountable Rebate/Payback to be shared among suppliers Examples: Australia, France, Italy, Portugal

28 A regulator s perspective Economic criteria Pricing budgets assessment of cost effectiveness Scientific criteria & assessment of therapeutic benefit what is innovation? Industrial policy (good citizenship approach) R&D Employment Exports

29 Industrial Policy US: little or no regulation on supply side (price) BUT lists in place >> more laissez faire UK perspective: RoR regulation, applied flexibly and defining the rules of the game French perspective: from command and control towards agreements and good citizenship approach Spanish perspective: price regulation with some incentives for R&D

30 Pricing & Reimbursement Methodologies: Controlling the Supply Side Free pricing i Average Pricing i International ti Price Comparisons Cost-Plus Pricing Reference Pricing Price Cuts/Freezes

31 Reference Price Systems Variations External referencing International Price Comparisons Average Pi Pricingi Clustering (Internal reference pricing) i - Different types of clustering - Clustering with wealth adjustments

32 International Price Comparisons Take into account in price negotiations Little knowledge by regulators What countries to reference? (similar income? Where product has been launched?)

33 Why international comparisons Real cost data very difficult to get Transfer price?

34 Preference-Based Policies and Tendering: underlying economic theory Reverse Auction A reverse auction is a type of auction in which the roles of buyers and sellers are reversed. In an ordinary auction (also known as a forward auction), buyers compete to obtain a good or service, and the price typically increases over time. In a reverse auction, sellers compete to obtain business, and prices typically decrease over time.

35 Key Issues in Pricing External reference pricing cross country referencing, international price comparison Applied in 24 EU Member States (except Denmark, Sweden, and UK) Internal reference pricing 20 EU Member States compare new medications internally with drugs already marketed in similar chemical, pharmacological, or therapeutic groups Price updates Prices may be updated depending on pricing regulations Value Added Tax (VAT) VAT may apply to medicines; VAT rates on drugs may be standard (e.g., Germany), reduced (e.g., Switzerland) or eliminated (e.g., Sweden, UK).

36 Key Issues in Expenditure Control Discounts/rebates May be applied onto manufacturers and pharmacists as part of a Clawback strategy of price controls Policy type that may be applied onto pharmacies, forcing them to return a portion of revenues to third party payers Payback Policy type that forces manufacturers to return some portion of their pharmaceutical revenues if budget ceilings are surpassed Risk sharing sharing arrangements Financial or performance based scheme; trigger price reductions or refunds from manufacturers if certain targets are not met Pi Price freezes and cuts May be legislated or may result through negotiations between parties Public tendering Suppliers produce closed bids to try to win a contract from purchasers

37 HTA, Positive/Negative Lists, Expenditure Controls Adapted from: Carone, G, et al. Cost containment policies in public pharmaceutical spending in the EU. European Commission. September 2012.

38 Netherlands : Impact on price of generics Item PRICE CHANGE IN PRICE May 08 Jun 08 Sep 11 Feb 12 May June 08 May 2008 Sept 2011 May 2008 Feb 2012 Omeprazole tab/cap, 20mg Alendroninezuur tab, 70mg Omeprazole tab/cap, 40mg Paroxetine tab, 20mg Simvastatin tab, 40mg Pravastatin tab, 40mg Simvastatin tab, 20mg Tamsulosine tab/cap, 0.4mg Amlodipine tab, 5mg Citalopram tab, 20mg % 94% 94% % 99% 99% % 94% 95% % 92% 92% % 93% 96% % 91% 94% % 94% 94% % 91% 91% % 95% 95% % 94% 94%

39 What decision-makers want Safety and Efficacy are first steps to provide evidence for a new drug; Effectiveness and Efficiency i need to be proven Safety Efficacy Effectiveness Efficiency Measure of adverse effects Measure of effect under ideal conditions Measure of effect under real life conditions and vs. other drugs Relationships between costs and benefits Health Technology Licencing/ market accessassessment (HTA): coverage? reimbursement price?

40 Marketing Authorisation - Key Principles The EU is a Single Market for pharmaceuticals: approx. 0.5 billion people In order to sell a medicinal i product in the EU, a company needs a Marketing Authorisation There are a number of ways ( Procedures ) for a company to obtain a marketing authorisation. The main scientific principle used in the evaluation of medicines is the benefit/risk balance, based mainly on quality, efficacy and safety aspects

41 Since 2005: Three European Systems Centralised Procedure (via EMA) Mutual Recognition procedure Decentralised Procedure

42 EU Centralised Procedure Principle: single application / evaluation single authorisation ( direct access to all 28 EU countries + Norway, Iceland and Liechtenstein) Scope: Compulsory for: Cancer, neurodegenerative disorders, diabetes, HIV Auto-immune diseases, viral diseases All biotechnology products Gene therapy Monoclonal antibodies Rare diseases (i.e. orphan ) Optional for any other new active substance (instead of mutual recognition or decentralised procedure)

43 Health Technology Assessments: coverage, reimbursement price & usage Can lead to a refusal to reimburse or cover the licenced drug (or other technology) or Limits the price payers are reimbursing and/or Restricts access to drug (e.g. 2nd or 3rd line use, only for some patient groups, etc.) Some restrictions are harder to enforce than others, and the implementation of recommendations is not automatic Sometimes the mere intention to conduct an HTA can impact on use of the product

44 What perspective to take into account? Different countries different scope (and data) Therapeutic Value Health System Value Societal Value Complexity and breadth of data required to demonstrat e value Pharmaceutical Budget Health System Budget Other Budgets (e.g. pensions, social security) Representative Country France UK Sweden

45 HTA in Europe simplified: direct after launch New drug/ device/ intervention single technology assessment : Important input = structured information( dossier of manufacturer/ promoter not reimburseable With price (e.g. Sweden) Without price (e.g. France) reimbursable only Need (disease burden) & Effectiveness (also for patient sub-groups and selected indications) Additional benefit/ comparative effectiveness (also for patient sub-groups and selected indications) Cost-benefit (comparative, sub-groups ) Free price-setting (if add l benefit large) price negotiated (trend value-based pricing & volume-price) price regulated for selected indications, selected pro- viders, second line ( optimised ) reimburseable only in research (to generate additional data) Reinhard Busse

46 HTA at later stage comparing groups of technologies New drug/ device/ intervention single technology assessment : Old drug/ device/ intervention real HTA: Important input = With price Without price systematic review After a certain time, in case of new evidence, doubts about (cost-)effectiveness Comparative benefit (also for patient sub-groups and selected indications) Comparative cost-benefit Reinhard Busse

47 Technology Appraisals the results 3/2000-1/2014 Decision Single TAs Multiple TAs Recommended 75 (54%) 242 (64%) Optimised 25 (17%) 69 (18%) Only in Research 4(3%) 22 (6%) Not recommended 35 (25%) 44 (12%) Total 139 (100%) 377 (100%)

48 Comparison of Final Recommendations in Canada & Scotland (110 drugs reviewed by both CDR and SMC as of March 2013) 60% 51,6% 50% 45,1% 46,7% 40% 30% 28,7% 24,6% List List with Conditions 20% Do not List 10% 33% 3,3% 0% Canada Scotland Scottish Medicine Consortium (SMC) isfarmore likely than the Canadian CDR to recommend new drugs be publicly funded. Analysis suggests that CDR is unconvinced that new products offer incremental value when older, less expensive alternatives are available. These results are consistent with other studies that concluded that CDR is more restrictive than decisions made by other HTA agencies. Source: Canadian Agency for Drugs and Technology in Health (CADTH), Scottish Medicines Consortium (SMC)

49 Segal, J. Introduction to Comparative Effectiveness Research. Johns Hopkins University.

50 Assessing Cost 1 Effectiveness Probability of rejection Cost per QALY ( 000)

51 1. What is the objective of regulation at this point or of the given actors in the pharmaceutical market? 2. What forms do the regulatory intervention take? 3. What are the expectations of the regulatory interventions? 4. What evidence is there of the impact of the regulatory interventions with a particular emphasis on cost-control, efficiency, quality and equity of access? 5. How can the regulatory environment be improved? po

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