A report from The Economist Intelligence Unit · A report from The Economist Intelligence Unit Uneven progress MODERNISING HEALTH SYSTEMS IN THE BALKANS MODERNISING HEALTH SYSTEMS

Supported by

A report from The Economist Intelligence Unit

Uneven progress

MODERNISING HEALTH SYSTEMS IN THE BALKANS

MODERNISING HEALTH SYSTEMS IN THE BALKANSUneven progress

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MODERNIS ING HEALTH SYSTEMS IN THE BALKANSU N E V E N P R O G R E S S

© The Economist Intelligence Unit Limited 2016

2 About this report4 Executive summary6 Keyfindings7 Chapter1:Healthcaresystemsintransition17Chapter2:Towardsaconsistentapproachtohealthtechnology

assessment23Chapter3:Deficientdecision-makingprocessesforpricingand

reimbursement28Conclusion

CONTENTS

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ABOUT THIS REPORTModernising health systems in the Balkans: Uneven progress is a report by The Economist Intelligence Unit (EIU) report, supported by Novartis. The report examines and assesses the reimbursement landscape, the structure for health technology assessment, funding models and the policy outlook for ten Balkan countries: Albania, Bosnia and Hercegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Romania, Serbia and Slovenia. The findings of this report are based on desk research and interviews with a range of healthcare experts, policymakers and economists.

In March and April 2016 The EIU conducted 17 interviews with experts on Balkan health systems. The insights from these in-depth interviews appear throughout the report. The EIU would like to thank the following individuals (listed alphabetically) for sharing their insight and experience:

• Patriciu Achimas-Cadariu, former minister of health, Romania

• Tit Albreht, co-ordinator, Joint Action Cancer Control, National Institute of Public Health of Slovenia (NIJZ); assistant professor in public health, University of Ljubljana, Slovenia

• Enis Baris, sector manager for health, nutrition and population, Europe and Central Asia, World Bank

• William Bartlett, senior research fellow, European Institute, London School of Economics

• Tomislav Benjak, head, department of prevention of disability, Croatian National Institute of Public Health (HZJZ), Croatia

• Jelena Cugurovic, steering committee member, CML Association of Serbia, and member, Initiative for Innovative Approach to Improving Access to New Medicines in Serbia

• Antoniya Dimova, associate professor of management, University of Varna, Bulgaria

• Jurij Fürst, head, medicinal products department, Health Insurance Institute of Slovenia

• Stanimir Hasardzhiev, chair, National Patients’ Organisation (NPO) of Bulgaria, and secretary-general, Patient Access Partnership, European Patients’ Forum

• Mirjana Huic, assistant director and head of the department for development, research and HTA (AAZ), Agency for Quality and Accreditation in Healthcare and Social Welfare, Croatia

• Elke Jakubowski, senior adviser for policy and strategy, division of health systems and public health, World Health Organisation (WHO) Regional Office for Europe

• Tanja Novakovic, product manager, Galenika, and president, pharmacoeconomics section, Pharmaceutical Society of Serbia

• Peter Pazitny, partner, Healthcare Consulting & Research Center, Bratislava, Slovakia

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• Stanislav Primozic, head, sector for pharmacoeconomics, pharmacovigilance and HTA, Public Agency for Medicinal Products and Medical Devices (JAZMP), Slovenia

• Ivan Svajger, former director, Agency for Quality and Accreditation in Healthcare and Social Welfare, Croatia

• Bojan Trkulja, managing director, Association of the Manufacturers of Innovative Drugs (INOVIA), Serbia

• Sinisa Varga, member of parliament, former health minister, Croatia

The EIU bears sole responsibility for the content of this report. The findings and views expressed in the report do not necessarily reflect the views of the sponsor. Andrea Chipman was the author of the report, and Martin Koehring was the editor.

June 2016

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EXECUTIVE SUMMARYThe Balkan region is among the poorest areas in Europe and has been battling to make up lost ground since the wars of the early 1990s that led to the break-up of the former Yugoslavia. As a result, the degree of success in developing health systems in the region that offer similar levels of service to those of their western counterparts has been uneven at best.

The ten Balkan countries examined in this report—Albania, Bosnia and Hercegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Romania, Serbia and Slovenia—continue to make slow progress in modernising their health systems.

Most of the region’s countries are in limbo, with structural remnants of the cradle-to-grave health systems that are no longer viable. These systems, which were built under the socialist system, are no longer able to adequately meet the needs of its populations. This comes amid rising demand for higher-quality services, ageing populations and skyrocketing prices for drugs and new medical technology.

Moreover, intra-regional distinctions are clear: while EU members Bulgaria, Croatia, Romania and Slovenia have access to EU structural funds, the experts interviewed for this study generally agree that Croatia and Slovenia have made more progress overall, with the states that emerged from the former Yugoslavia generally benefitting from better primary care systems dating back to the socialist period. Serbia and Bosnia and Hercegovina, meanwhile, have made more moderate progress, while the region’s smallest and least developed countries, including Kosovo and Montenegro, have generally lagged behind.

“Health indicators have improved in all countries of the south-eastern European region on average in the past decade, but still lag behind the EU,” says Elke Jakubowski, senior adviser for policy and strategy in the division of health systems and public health at the World Health Organisation (WHO) Regional Office for Europe in Copenhagen.

Bosnia and Hercegovina has invested in the strengthening of community-based mental health services, while Albania has demonstrated best practice when it comes to low-fat and high-fruit intake and extending vaccination coverage to children, according to Dr Jakubowski. However, she notes that poverty remains an underlying threat to population health. “Overall, inequalities in health outcomes have persisted, and in some cases they have increased.”

While a select group of countries, including Croatia and Slovenia, have notched up more significant achievements in modernising their public health systems and hospital networks and others have begun to restructure reimbursement and pricing systems for new technologies, only a few have tried to introduce a standardised system for health technology assessment (HTA). However, even the most advanced of these systems are not yet functioning across the board.

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The absence of such a system makes it more difficult for the region’s health systems to accurately measure the cost-effectiveness of the investments they are making in new healthcare solutions. This in turn creates complex and challenging problems for health systems, which can result in poor outcomes, even in the most advanced countries in the region. Indeed, the OECD has found that although most of Slovenia’s health indicators are in line with the EU average, healthy life expectancy at birth remains among the shortest.1 In addition, with many of Europe’s most developed healthcare systems focusing increasingly on broader population-health indicators, reliable interim indicators measuring quality, efficiency and access are crucial. The Balkan region lags far behind many of its EU neighbours in this regard.

This paper evaluates the progress made by individual Balkan countries compared with both their regional neighbours and west European countries.

1 OECD, Reforming health and long-term care to ensure fiscal sustainability and improve service delivery, Slovenia Policy Brief, May 2015. Available at: https://www.oecd.org/policy-briefs/slovenia-reforming-health-and-long-term-care.pdf

https://www.oecd.org/policy-briefs/slovenia-reforming-health-and-long-term-care.pdf



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KEY FINDINGSManylocalhealthsystemsremainexcessivelydecentralised,complicatingtheprocessofmodernisation.Bosnia and Hercegovina is split into three separate regions, one of which has ten separate cantons, and each has its own health fund. Elsewhere in the region, individual localities and hospitals have significant autonomy and resources, making the standardisation of services more difficult. An emphasis on secondary care over primary care and a lack of measures to encourage more efficient health delivery have often meant poor use of health budgets.

Universalhealthinsuranceremainsinconsistentandout-of-pocketcostsarerising.While many of the Balkan countries nominally guarantee universal healthcare, access to services can be uneven and out-of-pocket costs remain high, accounting for as much as 40% of healthcare expenditures in Bulgaria and other parts of the region.

Comprehensiveandconsistent systems for health technologyassessment (HTA)arenon-existentorunderdevelopedinmostoftheregion.Most of the countries in the region have no HTA infrastructure to speak of, although those that are already EU members are increasingly looking to co-operate more closely with EU-wide initiatives, given their small size. Even in countries such as Croatia and Slovenia, where HTA systems are beginning to emerge, their use has yet to become standard practice.

Austeritymeasureshaveledtoreducedspendinginmanypartsofthehealthbudget,especiallyintheareaofpharmaceuticals.Most Balkan countries continue to struggle economically in the wake of the global financial crisis, with incomes well below the European average. While many of the most cutting-edge medicines and devices are reimbursed in principle for all citizens, the reality is that governments have cut health budgets in recent years, many face shortages or a complete lack of accessibility to the latest treatments, and some of the poorer countries often find it difficult to maintain access to even basic technology.

Balkan health systems need to improve their procedures for negotiating prices formedicines and devices. Most governments in the region have poor systems for negotiating competitive prices for essential drugs and devices, reflecting the lack of a comprehensive system for assessing healthcare investments and, in some cases, local procurement practices.

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CHAPTER 1: HEALTHCARE SYSTEMS IN TRANSITIONThe transition process for countries in the Balkans has been taking place for more than two decades, since the conclusion of the war that led to the division of the former Yugoslavia.

Many of the region’s health systems still bear a strong imprint of their socialist past, yet exposure to western Europe has increased demands for higher-quality healthcare. While public-sector budgets are increasingly unable to meet these demands, evolving private insurance schemes have only filled a portion of the gap.

Since independence, many healthcare systems in the former Yugoslav states have become increasingly decentralised, complicating the policymaking process and making it more challenging to ensure equal access to healthcare across populations. In addition, most remain overly dependent on expensive inpatient care, with less investment in primary care, which is sparsely staffed in many places.

“It would be fair to say that in all these countries there have been significant improvements in health outcomes,” says Enis Baris, sector manager for health, nutrition and population in Europe and Central Asia at the World Bank. He mentions progress in increasing healthy life expectancy and reducing infant and maternal mortality rates, but adds that “with regard to reforming the health systems, I wouldn’t necessarily be too positive and favourable”.

Meanwhile, access to care—which is comprehensive in principle—remains patchy both between countries and within them. In particular, high levels of out-of-pocket (OOP) payments make many treatments and services unaffordable to all but the wealthiest few.

This situation has been exacerbated by strict budget constraints in recent years that have hit service provision and investment, especially in the most innovative therapy areas. The populations of most countries in the region are primarily covered by social health insurance (SHI), which is linked to their place of work. Unemployment has increased in the wake of the global financial crisis in 2007-08 and, in turn, SHI funding has been hit. Economic pressures have exacerbated levels of corruption, which were already high in many of the region’s health systems.

Fragmented health networks

In Bosnia and Hercegovina, at perhaps the more extreme end, there is no national healthcare system to speak of. Instead, its three regions—the Federation of Bosnia and Hercegovina (BiH), the Republika Srpska (RS) and the self-governing district of Brcko—are divided into 13 separate health systems between them (including ten separate

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cantonal ministries for the Federation of Bosnia and Hercegovina), each with their own health ministers and individual methods and scope of insurance coverage.2

This structure has an impact on equitable access to health services for the country’s almost 4m people, undermining planning co-ordination and transparency in decision-making as well as throwing up obstacles to regulatory and supervisory control.

In Croatia, which has seen some of the most advanced reforms in the region, decision-making is frequently decentralised on several levels, including county hospitals and primary-care centres.

“The more centralised a healthcare system is, the better off it is,” says Sinisa Varga, a trained dentist, member of parliament and minister of health in Croatia’s centre-left Social Democratic government from 2014 to January 2016. “Since we have only 4.3m people, if you disaggregate into ever smaller groups, you lose economies of scale.”

The fragmentation of Balkan systems further complicates the process of making health systems more efficient and increases inequalities between regions and populations.

A focus on secondary care

In addition to the fragmentation of many Balkan health systems, most governments in the region share an excessive focus on secondary care at the expense of primary healthcare. The lack of investment in primary-care services contributes to the inefficient use of resources and persistent poor health outcomes for populations, those interviewed for this study say. “Primary healthcare services are better in the former Yugoslav states, especially Croatia and Slovenia, but all of these countries still have a lot of hospitals and a lot of beds, and they haven’t necessarily been very successful at reforming inpatient care both in terms of rationalisation and efficiencies,” Dr Baris says. In addition, structural problems in the hospital sector have helped to drive up costs.

Tomislav Benjak, head of the department of prevention of disability at the Croatian National Institute of Public Health (HZJZ), notes that the key element of primary health reform in his country included privatising the role of general practitioners; they had previously been government employees, and the change merely led to a reallocation of spending rather than improved health outcomes. “My opinion is that reform has not had a great impact on reducing the quality of healthcare for patients. For example, since the reform in Croatia we have had increasing use of emergency healthcare in hospitals.”

Ivan Svajger, former director of Croatia’s Agency for Quality and Accreditation in Healthcare and Social Welfare, notes that in Croatia a huge amount of hospital budgets goes to salaries—more than 90% in some hospitals. The lack of human resource management contributes to this problem, according to Dr Svajger, resulting in shortages of doctors and nurses in some parts of the country.

2 Catic, T, HTA in Bosnia and Herzegovina: Herzegovina Situation Overview, presentation to ISPOR 14th Annual European Congress, Madrid, Spain, November 8th 2011. Available at: http://www.ispor.org/congresses/spain1111/presentations/HTA-CEE_CaticTarik.pdf

http://www.ispor.org/congresses/spain1111/presentations/HTA-CEE_CaticTarik.pdf



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“What I see as a major problem is the cost of the service,” he adds. “Hospitals try to do more and more volume to be able to collect some money from national funds, but they also collect costs at the same time, because there are costs relating to services.” As a result, he says, some private-sector providers have begun to reject contracting with the national insurance funds and turned exclusively to out-of-pocket payment for services.

Croatia has nevertheless travelled further down the reform road than many of its neighbours. The country’s National Reform Programme outlines efforts to expand capacity within hospitals, while at the same time reducing the average stay by 10-30% in order to increase patient flows.3

“We’ve had a fairly progressive government, adapting the system to the modern needs of chronic care and ageing populations, gearing it towards patients and their needs,” says Dr Varga. He notes that his government has moved from a capped budget to a partial payment-for-performance system.

Dr Varga and his Social Democratic government also agreed to pay significant debts incurred by 64 hospitals, including ten national teaching hospitals, on condition that local governments relinquish control of the running of the hospitals to the central government. But although the government paid two instalments of debt relief between 2013 and 2014, the new government has said it will not extend the initiative. According to Dr Varga, the limited success of many regional governments in making systems less focused on tertiary care has raised issues of fiscal sustainability.

In Slovenia, where one-third of overall healthcare spending is on inpatient care, the OECD argues that excessive reliance on secondary and specialist care rather than primary care curtails opportunities for cost containment and care co-ordination.4

At the same time, the country has benefitted from the fact that once it had achieved independence, it was able to curtail defence expenditure earlier than other former Yugoslav states. This gave the country a head start in health institution-building.

“The two western republics (Slovenia and Croatia) were mostly industrialised, and GDP per capita was higher than in the others,” says Stanislav Primozic, deputy director and head of pharmacoeconomics, pharmacovigilance and HTA at the Public Agency of the Republic of Slovenia for Medicinal Products and Medical Devices (JAZMP). He adds that the government has ring-fenced Slovenia’s health budget from general spending, making it “independent and stable”.

The lack of investment in public-sector healthcare, especially primary care, is a problem in the region, notes William Bartlett, senior research fellow at the European Institute of the London School of Economics (LSE). He adds that he visited one hospital in Serbia, in which a new wing and CT scanner financed by the World Bank contrasted sharply with a dilapidated primary-care centre nearby.

3 Republic of Croatia, National Reform Programme, April 2014, p. 23. Available at: http://ec.europa.eu/europe2020/pdf/csr2014/nrp2014_croatia_en.pdf

4 OECD, Reforming health and long-term care.

http://ec.europa.eu/europe2020/pdf/csr2014/nrp2014_croatia_en.pdf

http://ec.europa.eu/europe2020/pdf/csr2014/nrp2014_croatia_en.pdf

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Neighbours such as Romania and Bulgaria, meanwhile, have made even less progress in reducing the focus on secondary care. In Bosnia and Hercegovina shortages of pharmacists remain a major obstacle, exacerbating the problem of accessing drug supplies in hospitals.

Yet the basic organisation of hospital services is also a major drain on the system, with many individual facilities, especially in less-developed countries, characterised by too many beds and poor levels of care, those interviewed say.

Lack of efficiency and consistency also hampers systems

Consistency of treatment also receives short shrift in many parts of the region, according to interviewees. In some countries, including Macedonia and Romania, there has been little effort to standardise clinical practice guidelines for the treatment of common diseases or for the monitoring, prescribing and use of medicines. Lack of equipment also continues to affect some parts of the region.

Dr Baris says that in some countries, such as Serbia, there is quite a lot of pressure on the government, with cancer treatment being rationed because there are not enough linear accelerators for radiotherapy. He adds that the World Bank has been helping the Serbian government to procure the technology.

Elsewhere, the absence of a supportive legislative framework has hamstrung the reform process. “In Bulgaria, after the introduction of the health insurance system in 1998, there were no significant changes to improve efficiency, effectiveness or public health,” says Antoniya Dimova, associate professor of management at the University of Varna. She says that, although the government approved some changes to the laws on health insurance and healthcare establishments that regulate the system in 2015, the Ministry of Health has yet to issue the necessary accompanying orders.

Other efforts to introduce greater efficiency in expenditure have had mixed results. In Croatia, the use of performance-related payments—a mix of capitation, payment for quality in services and achieving key performance indicators—started in primary care in 2013, with strong results, and was expanded to hospitals in 2015, according to Dr Varga. He adds, however, that the new right-of-centre Croatian Democratic Union (HDZ) government, elected in November 2015, has said that it will not continue the reforms.

Universal care becomes more limited in scope

Unlike in western Europe, there is no tradition of universal healthcare in the Balkan region. Although SHI is the largest source of coverage, it excludes those who are self-employed, such as workers in the agricultural sector as well as the growing ranks of the unemployed, according to Dr Bartlett. “There is no formal universal coverage, and even less so in practice. The only entitlement to healthcare is on the basis of social contributions, not

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citizenship.” Gaps persist in the region’s insurance systems and, as a result, OOP costs continue to rise.

Although in many countries state funding covers vulnerable populations, including pensioners, children and those with low incomes, other disadvantaged groups, such as the Roma minority, find it more difficult to access healthcare, and high levels of health inequity persist across the region. Moreover, the range of services covered varies significantly, according to those interviewed for this report.

Dr Baris notes: “Universal health coverage is there in theory, but not necessarily in practice in many countries. I wouldn’t say there is universal coverage for most of the services you would expect to be covered in western Europe, given the implicit rationing and high out-of-pocket expenses even for essential care.”

Kosovo, which only gained independence in 2008, is a notable example. The country has no social health insurance yet in place, despite the government’s 2010-14 Strategic Plan envisaging such a system being implemented by 2013.

In Romania, where most of the population is covered by a combination of SHI contributions, taxation and co-payments, the Ministries of Transport, Defence, Interior and Administrative Reform, Justice and the Romanian Intelligence Agency operate their own parallel health systems with separate facilities. Only 10% of the female population is able to get coverage for cervical cancer screening. According to Dr Baris, cervical cancer-related mortality is ten times higher than in western Europe. Meanwhile, in Bulgaria, 23% of the population were not covered by any insurance scheme in 2011, and although in need of social assistance, they were not entitled to it.5

The number of people covered by voluntary health insurance (VHI) varies considerably across the region, and the lack of a well-developed private health sector has contributed to the challenges facing the region. “The major problem in Croatian healthcare is that more than 80% is public and only 20% is private,” says Dr Svajger.

Yet in Slovenia, 85% of the population have had some form of VHI as of 2007.6 The OECD argues that the widespread use of VHI in Slovenia has a “regressive impact on the funding of healthcare and lowers incentives for practitioners to prescribe appropriate and cost-effective care”.7

The challenge of protecting against financing risk

The range of benefits on offer has become more limited in many of the Balkan countries due to economic constraints, and as a result private spending on healthcare has increased. Consequently, levels of OOP payments make up a large share of expenditure in many countries in the region. According to health-spending data from the WHO, out-of-pocket spending accounts for around half of total health expenditure in Albania and more than 40% in Bulgaria and Montenegro. In Croatia and Slovenia the share is much

5 ICARE4EU, Regional non-profit organisation (NPO) “Diabetic care”, Burgas, Bulgaria, p. 16. Available at: http://www.icare4eu.org/pdf/Diabetic_Care_Burgas_programme_Case%20Report.pdf

6 Albreht, T, Turk E et al, “Slovenia: Health system review”, Health Systems in Transition, Vol. 11, No. 3, 2009. Available at: http://www.euro.who.int/__data/assets/pdf_file/0004/96367/E92607.pdf

7 OECD, Reforming health and long-term care.

http://www.icare4eu.org/pdf/Diabetic_Care_Burgas_programme_Case%20Report.pdf



http://www.euro.who.int/__data/assets/pdf_file/0004/96367/E92607.pdf

http://www.euro.who.int/__data/assets/pdf_file/0004/96367/E92607.pdf

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lower at 11% and 12% respectively (see chart 1), similar to the shares seen in France (6%), the UK (10%) and Germany (13%), for example.

In Serbia, the country in the region with the highest level of health spending as a percentage of GDP, at 10.4% in 2014 (see chart 2), OOP spending makes up more than

Out-of-pocket expenditure as a percentage of total healthexpenditure, 2014 (%)

Albania

Bulgaria

Montenegro

Macedonia

Serbia

Bosnia and Hercegovina

Romania

Slovenia

Croatia

Source: WHO Global Health Expenditure Database.

Chart 1

49.9

44.2

42.8

36.7

36.6

27.9

18.9

12.1

11.2

Total expenditure on health as a percentage of GDP, 2014 (% of GDP)

Serbia

Bosnia and Hercegovina

Slovenia

Bulgaria

Croatia

Macedonia

Montenegro

Albania

Romania

Source: WHO Global Health Expenditure Database.

Chart 2

10.4

9.6

9.2

8.4

7.8

6.5

6.4

5.9

5.6

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one-third of total health expenditure. Hence, while overall levels of healthcare spending (as a share of GDP) are comparable with many west European countries, these funding anomalies mean that patients are shouldering a substantial share of overall healthcare spending in the Balkans.

“A particular concern of the WHO is the relatively large share of out-of-pocket payments in the SEE [south-eastern European] countries,” says Dr Jakubowski. “The share of OOP as a proportion of total health expenditure is more than twice as high as in the EU countries.” While she acknowledges that vulnerable groups are technically exempt from additional fees in most Balkan countries, she adds that exemption policies are “partly undermined by the existence of informal payments of patients to providers. Where OOP expenditure exceeds 30% of the total, the incidence of ‘catastrophic’ levels of health expenditure by households increases sharply.”

A substantial share of OOP expenditure goes to pharmaceutical products. OOP spending on medications is a leading source of impoverishment in low-income countries such as Kosovo. While most of the larger Balkans economies claim to cover 100% of medical treatment for chronic diseases and serious conditions such as cancer under their SHI programmes, increasingly strict rules on reimbursement have weakened access to healthcare solutions such as screening and drugs in recent years.

In Kosovo, with a population of less than 2m, the entire structure of coverage and reimbursement of pharmaceuticals is basic, with a Health Care Commissioning Agency (HCCA) developed as a forerunner to an insurance fund to define a list of basic services and costs. Drugs account for 85% of OOP spending in Kosovo, according to a World Bank outline for a project that is designed to create an outpatient drug benefit scheme in the country. The project aims to ensure that at least 65% of primary health facilities in the country have at least one pharmacy contracted to provide an outpatient benefits package by 2018.8

Disparity in the share of OOP payments across the region is due to varying reimbursement rates in different parts of the region, with wealthier countries such as Croatia and Slovenia claiming to reimburse 100% of inpatient drugs for the most serious and chronic conditions, while some poorer countries reimburse on a sliding scale between 50% and 90%. This largely depends on whether the medicine is essential, with vulnerable groups, such as children and pregnant women, ostensibly exempt from co-payments.

In Albania, pharmaceuticals on the positive list are grouped into six categories with different reimbursement rates, ranging from 50% for antibiotics and treatments for skin conditions to 75-85% for chronic diseases such as coronary heart disease, hypertension and asthma, to full reimbursement for cancer and multiple sclerosis.

In several countries in the region, including Slovenia, high-cost medicines are not part of hospital budgets but are covered through funding agreements between hospitals, the health ministries and insurance funds.

8 World Bank, Design Outpatient Drug Benefit Scheme, Kosovo Health Project. Available at: http://www.worldbank.org/projects/procurement/noticeoverview?id=OP00033169

http://www.worldbank.org/projects/procurement/noticeoverview?id=OP00033169



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Cuts in funding leave systems exposed

The ability of regional policymakers to invest in upgrading their health systems has been undermined by the fact that, although economic growth has generally been more rapid in the Balkan countries than in western Europe, the rate of growth of healthcare spending in the region has also outpaced that in the western part of the continent (see chart 3).

The increase in public spending on health between 2007 and 2011 in Albania, Bulgaria and Bosnia and Hercegovina was particularly notable, Dr Jakubowski points out.

Meanwhile, the delayed effects of the global financial crisis in countries such as Slovenia and Serbia have resulted in a decline in economic growth in the earlier part of this decade. In turn, rising rates of unemployment have reduced the resources available to public health funds.

“Because of high unemployment and low salaries, funds available to the health fund are much lower than in socialist times, but the rights of patients in Serbia have stayed the same on paper,” says Bojan Trkulja, managing director of the Association of the Manufacturers of Innovative Drugs (INOVIA) in Serbia.

Even in Croatia, arguably the best-performing country in the region, budget cuts have reduced money for healthcare expenditure. Dr Varga notes that the 15.5% contribution of employers to the Croatian Health Insurance Fund budget does not cover the full costs of healthcare services, especially since an anomaly in the way Croatia’s budget

Source: The Economist Intelligence Unit.

Chart 3Healthcare spending growth and GDP growth, 2006-15(%)

-10

0

10

20

30

40

50

60GDP growth, real, 2006 to 2015HC spending growth, 2006 to 2015

USUKSpainItalyGermanyFranceSloveniaSerbiaRomaniaCroatiaBulgaria

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is divided means that maternity leave and sick leave pay are covered out of the healthcare budget instead of out of welfare budgets, as is the case in most European countries, thus creating an additional source of expenditure. Many international organisations believe Croatia spends too much on healthcare, Dr Varga says.

Moreover, between 2002 and 2015 Croatia’s Ministry of Finance combined the entire healthcare budget with the pool of central Treasury funds, with health spending ultimately at the whim of the finance ministry, according to Dr Varga. “We often had a discrepancy between what was guaranteed to patients compared with what money was available. That’s when we had a very big rise in waiting lists, especially for elective surgery.”

As is the case in many countries in western Europe, meanwhile, rising pharmaceutical prices, especially for the most cutting-edge drugs, are putting particular pressure on already stretched health budgets. A position paper by the Forum of International Research & Development Pharmaceutical Companies, EIG, a non-governmental professional organisation based in Ljubljana, argues that these constraints have led Slovenia’s sick fund and hospitals to press doctors to limit prescriptions of drugs, resulting in problems with drug availability.9

Those interviewed for this paper note that the inability of many Balkan states to efficiently negotiate discounts from manufacturers is exacerbating the problem, as is the fact that austerity programmes commit many Balkan governments to reduce the amount they are spending on drugs.

Consequently, spending on medications varies significantly across the region, with six countries spending 16% or less of their healthcare budgets on pharmaceutical products, while three countries—Romania, Bulgaria and Kosovo—spend 30% or more of their healthcare budgets on drugs.10

In Kosovo, despite the existence of an essential drugs list, the supply for outpatient and inpatient care is insufficient, and essential drugs are often only available in private pharmacies.

In Albania, although the government’s 2014 pharmaceutical policy reforms replaced some drugs on the reimbursable list with generics, doctors reported shortages of even basic drugs a year later, according to BIRN, an independent non-governmental organisation in Albania specialising in investigative journalism.11 The report noted that the reforms introduced a pricing formula using reference prices from Macedonia, Greece and Italy, which led to a fall in drug prices but also reportedly caused many multinational companies to exit the Albanian market, compounding shortages.

The BIRN report also noted that doctors were sceptical about the efficacy of some of the drugs supplied through the scheme. While public spending on healthcare in Albania accounted for only 2.9% of GDP in 2014, the lowest rate in the Balkan region, private spending was among the highest in the region, also at 2.9% of GDP, according to World Bank data.12

9 Forum of International Research & Development Pharmaceutical Companies, EIG, Recent Developments in Slovenian Health Care Environment – Drug Availability Perspective, p. 6. Available at: http://www.firdpc.com/img/File/Recent_developments_in_Slovenian_health_care_environment-drug_availability_perspective.pdf

10 Business Monitor International; IMS Health; Cegedim Romania; quoted in: “SEE pharmaceutical market healthy in 2010”. Available at: http://t o p 1 0 0 . s e e n e w s . c o m / 2 0 1 1 / 0 7 /s e e p h a r m a c e u t i c a l - m a r k e t -healthyin-2010/; and Imasheva, A and A Seiter, The Pharmaceutical Sector of the Western Balkan Countries, February 2008, Health, Nutrition and Population (HNP) Discussion Paper. Available at: http://apps.who.int/medicinedocs/documents/s17510en/s17510en.pdf

11 BIRN, “Patients Pay Price for Albania’s Drug Reform”, September 24th 2015. Available at: http://www.balkaninsight.com/en/article/patients-pay-price-for-albania-s-drug-reform-09-23-2015

12 World Bank, World Development Indicators. Available at: http://databank.worldbank.org/data/home.aspx

http://www.firdpc.com/img/File/Recent_developments_in_Slovenian_health_care_environment-drug_availability_perspective.pdf




http://apps.who.int/medicinedocs/documents/s17510en/s17510en.pdf


http://www.balkaninsight.com/en/article/patients-pay-price-for-albania-s-drug-reform-09-23-2015



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Romania is also among the countries that have faced shortages of essential drugs in the past few years, especially for the treatment of cancer and diabetes, according to its former minister of health, Patriciu Achimas-Cadariu. He adds that the government has introduced various measures to ensure that drugs are not siphoned off into the informal sector, including limits on the export of pharmaceuticals where commercialisation is believed to lead to shortages and the exclusion of unauthorised medicines in Romania. The government has also approved legislation to allow quick access to medicines for compassionate use.

Shortages of medicines also make it more difficult for doctors in the region to develop their skills and familiarise themselves with the most innovative treatments, according to Jelena Cugurovic, a member of the steering committee at the CML Association of Serbia, a non-profit organisation which acts on behalf of patients with chronic myeloid leukaemia, and member of the Initiative for Innovative Approach to Improving Access to New Medicines in Serbia.

Overall, discrepancies in spending between the public and the private sector contribute to inequities, according to Dr Bartlett. “It’s not that [the Balkans have] a backward health service. The skills of the doctors are good, on a western European level, they are up-to-date with medical knowledge, but the system is not equal for everyone—especially now, with pressure to reach budget-deficit targets.”

The South-eastern Europe Health Network (SEEHN), a WHO-supported multi-country partnership, was set up in 2001 as a political and institutional forum with the aim of helping countries in the region with their modernisation efforts. Over the past ten years SEEHN has been promoting the development of public health services and health systems as well as the treatment of communicable diseases and mental health, among others, with a focus on the challenge of introducing universal healthcare.13

13 “Universal health coverage top of agenda for South-eastern Europe Health Network”, WHO, December 15th 2015. Available at: http://www.euro.who.int/en/countries/serbia/news/news/2015/12/universal-health-coverage-top-of-agenda-for-south-eastern-europe-health-network

http://www.euro.who.int/en/countries/serbia/news/news/2015/12/universal-health-coverage-top-of-agenda-for-south-eastern-europe-health-network





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CHAPTER 2: TOWARDS A CONSISTENT APPROACH TO HEALTH TECHNOLOGY ASSESSMENTAgainst a backdrop of economic constraints and reduced spending, Balkan governments need to be able to make difficult decisions about how to make the best use of their scarce budget funds. Currently, the institutions for helping to guide healthcare policymakers to make these decisions are underdeveloped at best, and non-existent in many cases.

The lack of sufficient tools for assessing and comparing the efficiency and level of innovation of new treatments and technologies also has a knock-on effect on procurement and pricing.

Evaluating and comparing the efficiency and cost-effectiveness of new treatments is still a foreign concept in the region, even if many of its health systems are beginning to look more closely at health outcomes.

Slovenia’s National Institute of Public Health (NIJZ) is a participant in EVIPNet, a global WHO initiative that promotes the systematic use of health-research evidence in policymaking. According to Tit Albreht, co-ordinator of Joint Action Cancer Control at the NIJZ and assistant professor in public health at the University of Ljubljana, the institute hopes to expand its involvement in the years to come. Although Slovenia has not systematically introduced performance indicators into healthcare delivery, some performance-based incentives have been introduced in primary care to meet the national preventative programme’s targets, Professor Albreht says. This also includes ongoing work on quality indicators in Slovenian hospitals for benchmarking purposes and the sharpening of clinical guidelines.

Moreover, the decentralised nature of healthcare provision makes it more difficult to develop transparent and streamlined guidelines and systems for evaluating healthcare technology. At the same time, more of the region’s governments are at least recognising the value of doing so. Given their small size and limited resources, many of the region’s countries rely heavily on HTA reports compiled by EU institutions or other international bodies.

As in other aspects of healthcare, Slovenia and Croatia lead their Balkan neighbours in developing systems for evaluating healthcare technology and care pathways, although even here much work remains to be done, according to Dr Baris of the World Bank. “In those two countries, there are some formal mechanisms. Croatia has an agency in charge of HTA, and there is a lot of talk about it elsewhere, but ultimately it boils down to setting up a committee with experts that will look at the evidence. It’s not always clear what the criteria are on which they decide which drugs will be reimbursed.”

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In Bulgaria, while efforts to set up an HTA system are at a more rudimentary stage, the country’s politicians have acknowledged the importance of access to medicines and quality healthcare for its citizens, something that was not always the case, according to Stanimir Hasardzhiev, chair of the National Patients’ Organisation (NPO) of Bulgaria and secretary-general of the Patient Access Partnership, European Patient’s Forum. “We strongly encourage this process, but there is still a lack of understanding of the role of HTA in these countries. Many politicians have introduced HTA as a mechanism that will allow them to delay or stop growth of costs. Actually, the rationale for HTA is completely different: allowing them to decide which medicines need to be reimbursed.”

Historical legacies and the role of the European Medicines Agency

The relatively recent evolution of democratic societies in the region is part of the legacy that has made it more difficult for policymakers in the region to develop the necessary systems for increasing the efficiency of healthcare systems.

Ongoing corruption and politically influenced decision-making, including high levels of informal payments, are a major challenge. Another obstacle is the legacy of trade-union power throughout the formerly socialist societies. This makes it more difficult to gain the support of healthcare professionals, whose backing is needed to introduce necessary reforms.

The output of the European Medicines Agency (EMA), a London-based EU agency for the evaluation of medicinal products, has been a key part of the authorisation process for new medicines in the Balkan region, allowing its smaller and poorer member countries to avoid costly duplication of efforts. By contrast, the process of drug pricing and reimbursement remains a national responsibility. In many countries in the region drugs can be authorised either by the national agency or centrally through the EMA. In Serbia, manufacturers can only apply for local marketing authorisation if their product already has marketing authorisation in its country of origin, the EU or the US. In theory, authorisation should take 210 days for medicines not registered through the EU, but in practice it is closer to 300 days, Mr Trkulja says.

“We have quality, efficacy and safety very much in place at the EU level,” says Mr Primozic of the JAZMP. “Pricing and reimbursement is very national in competence and likely to stay for some time a national competence.” He adds that, as a small country, Slovenia is unable to staff HTA agencies with hundreds of employees, as is the case in larger EU countries. Instead, the JAZMP—which was established in 2007 as a regulatory agency and started its HTA unit two years ago with three people—is sharing the resources of the National Institute of Public Health and the Ministry of Health.

A number of countries use HTA reports from other European countries as part of an interim process for determining reimbursement and procurement decisions. Given the

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lack of capacity for conducting full HTA processes in many countries in the region, there are nascent efforts to introduce a joint HTA process using methodologies based on those of well-established HTA bodies in Europe, such as the UK’s National Institute for Health and Care Excellence (NICE), according to Mr Hasardzhiev of Bulgaria’s National Patients’ Association.

Existing HTA regimes are patchy

Croatia and Slovenia have the most developed HTA regimes in the region, although even these are patchy in areas and not yet working in a consistent manner.

Croatia, like many of its Balkan neighbours, has automatically applied all marketing authorisation approvals that follow the centralised procedure of the EMA. The country’s Agency for Medicinal Products and Devices, which was established as an independent agency in 2003, is responsible for marketing authorisation, medicines quality and pharmacovigilance. The Croatian Health Insurance Fund (CHIF), set up in 1993, defines services covered by SHI, reimbursement based on budgetary impact and demonstrated efficacy over comparator treatments and price setting; it also provides VHI that covers additional charges.

Although Croatia’s Agency for Quality and Accreditation in Healthcare and Social Welfare, established in 2007, has a Department for Development, Research and Health Technology Assessment (AAZ), its activities have been restricted owing to a low budget and limited capacity. The first Croatian Guideline for HTA Process and Reporting was published in 2011, and the agency is an associate partner of the European Network for Health Technology Assessment (EUnetHTA) and co-operates with an HTA group at the CHIF to help it prepare HTA reports for the fund.

“Establishing a transparent, scientific, independent evidence-based HTA process in Croatia was not an easy and quick process,” says Mirjana Huic, head of the AAZ, which currently has just three permanent members of staff. “To further the sustainable HTA process in Croatia, with mandatory links to reimbursement/investment or disinvestment decisions, several [items] are needed: support and commitment of government institutions with a full legal framework in place; capacity-building with educated, permanent staff; appropriate stakeholder involvement; further sustainable national and international co-operation and collaboration; and appropriate funding.”

In Slovenia, the country’s Health Council decides which technologies and programmes will be financed from public resources. The Health Insurance Institute (HIIS) classifies pharmaceuticals for the purpose of reimbursement, with advice coming from experts in various health fields and decisions based on both cost-benefit analyses and available financial resources. However, in the absence of a national HTA agency most assessments are driven by industry and performed by private providers. In the meantime, the country continues to collaborate and co-ordinate within the framework of the EUnetHTA.

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Other countries in the region, such as Bulgaria and Serbia, have been working towards developing an HTA framework for a number of years but remain in the earlier stages. While government institutions may fulfil some aspects of the evaluation process, the lack of a consistent system makes it difficult to ensure that health systems are getting the best value for their money, and the lack of transparency makes it hard for stakeholders to know how decisions to approve or deny reimbursement for certain technologies are being made.

In the case of Bulgaria, a number of elements of an HTA system are in place, although there is still no national HTA agency. The health ministry’s National Council on Prices and Reimbursement of Medicinal Products takes the efficacy, cost-effectiveness, budget impact and affordability of new drugs into account for coverage and reimbursement decisions, according to the International Society for Pharmacoeconomics and Outcomes Research (ISPOR).14 At the same time, the authorities tend to defer to the primary European HTA bodies in the UK, France and Germany.

The country’s National Centre for Public Health and Analyses is an associate partner of EUnetHTA. In September 2015 the health ministry established the procedures for setting up an HTA committee, including representatives from the ministry and a number of other agencies, and as of December 2015 the National Centre for Public Health performs assessments for drugs belonging to a group without comparators on the existing reimbursement list. This analysis includes the evaluation of the existence or absence of alternative treatments, expected numbers of patients, the comparative analysis of therapeutic efficacy and safety and financial indicators, including budget impact and cost-effectiveness. It is difficult to determine how many, if any, decisions have been made using these criteria.

Although the understanding of HTA in neighbouring Romania encompasses the evaluation of medicines, medical devices, diagnostic procedures and health management, the country’s system is currently limited to a range of drugs. However, the government expects to expand its remit in the near future, according to Dr Achimas-Cadariu, a former health minister. Core responsibility for HTA belongs to the Department for Health Technology Assessment, a unit that was established in 2012 and which previously operated within the health ministry. It was transferred to the National Agency for Medicines and Medical Devices in 2014.

Under an HTA methodology which was developed in 2014, the department uses interim HTA from three European agencies for reimbursement decisions: France’s National Health Authority (Haute Autorité de Santé, or HAS), the UK’s NICE and Germany’s Institute for Quality and Efficiency in Healthcare (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen, or IQWiG). This involves making a final decision based on a scoring system that uses six criteria, including reimbursement in France and the UK, the number of EU countries where the drug is reimbursed, relative efficacy and effectiveness, relative safety, and relative patient-reported outcomes.

14 ISPOR Central & Eastern European Network Newsletter, 2013, December; 1 (2), p. 6. Available at: http://www.ispor.org/CeeNetwork/documents/News_Across_CEE_Newsletter_Vol1_No2.pdf

http://www.ispor.org/CeeNetwork/documents/News_Across_CEE_Newsletter_Vol1_No2.pdf



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The Romanian HTA department requires budget-impact data as part of the dossiers submitted by applicants, although critics argue that because this analysis is self-assessed, there is no mechanism to address undervaluation by manufacturers. In December 2013 the acceptance rate for HTA reports completed by that date was 80% of new medicines. Romania’s National School of Public Health, Management and Professional Development has also worked on some joint European projects with EUnetHTA.

In Serbia, where drugs accounted for 18% of expenditure by the National Health Insurance Fund (NHIF) in 2014, there is no national HTA agency. The NHIF is involved in pharmacoeconomic assessment to support reimbursement decisions, while the health ministry includes an HTA Committee with wide responsibilities but little technical support. Serbia is not a member of EUnetHTA. The EIU has published a country case study on Serbia that examines the systemic weaknesses in Serbia’s healthcare system, including corruption and the lack of a comprehensive system for assessing both new and existing healthcare solutions, which are undermining access to both basic and cutting-edge health technology and are contributing to poor health outcomes.15

A third tier, including the poorest countries such as Macedonia, Kosovo and Albania, has no system to speak of in place. In Montenegro and Kosovo, international organisations have been involved in providing some funding for structural reforms. A 2013 World Bank project to improve the financial basis of the healthcare system in Montenegro included support for the regulation of drug prices, competition and the introduction of pay-for-performance and diagnosis-related group (DRG) payments for hospital treatment.

The Macedonian health ministry’s Committee on Drugs, Medicinal Products and Medical Devices oversees the authorisation and licensing of drugs. From 2011 to 2014 expert committees appointed by the ministry were responsible for preparing the positive list of drugs, a process made all the more challenging by frequent changes in membership.16 Macedonia’s Health Insurance Fund, which sets up reference pricing and engages in procurement with manufacturers to purchase drugs, has been independent since 2000 but is hampered by a significant budget deficit. The health ministry provides guidelines for using evidence-based medicines in many specialties, but it has no apparent role in formal HTA, and the country currently has no formal HTA system in place.17

In Kosovo, there has been no movement towards using HTA evidence or developing the necessary infrastructure for producing it. There is a similar lack of clinical guidelines or standards for care pathways.

In Bosnia and Hercegovina, which lacks both national and regional HTA agencies, the essential list of 220 drugs, introduced during the war, has been the basis for the positive lists in each canton. Cantonal insurance funds reimburse only a small number of these, creating high levels of OOP payments.18

The variations and inconsistencies in the process for assessing and determining the reimbursement for new treatments in the Balkans frequently leads to delays before drugs are available. This adds to the pressure for a more coherent system.

15 The Economist Intelligence Unit, Modernising the Serbian health system: The need for a reliable decision-making compass, June 2016. Available at: https://www.eiuperspectives.e c o n o m i s t . c o m / h e a l t h c a r e /modernising-health-systems-balkans

16 Angelovska, B, V Ivanovska and E Drakalska, The climate for innovative medicines in the Republic of Macedonia, 2013. Available at: http://eprints.ugd.edu.mk/8241/

17 WHO, Access to new medicines in Europe: technical review of policy initiatives and opportunities for collaboration and research, 2015. Available at: http://apps.who.int/medicinedocs/documents/s21793en/s21793en.pdf

18 Cain, J et al, in Cain, J and E Jakubowski, eds., Heath care systems in transition: Bosnia and Herzegovina. Copenhagen, European Observatory on Health Care Systems, 4(7) (2002).

https://www.eiuperspectives.economist.com/healthcare/modernising-health-systems-balkans



http://eprints.ugd.edu.mk/8241/

http://eprints.ugd.edu.mk/8241/




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“It doesn’t mean each country has to have its own agency,” Dr Baris notes. “Some [assessments] could be delegated to the West, and some could be sub-regional. But I think there has to be a way of doing this in a rational way. I think there is a bit of leadership needed.”

Given the immaturity of HTA infrastructure in most of the Balkan countries, the development of co-operative mechanisms for evaluating treatments and technologies is likely to be even more important in the years to come. In addition, participation in EU-wide initiatives will become a greater priority.

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CHAPTER3:DEFICIENTDECISION-MAKING PROCESSES FOR PRICING AND REIMBURSEMENTThe lack of an effective and consistent system for HTA and for reimbursement and pricing in the Balkan region is making it more difficult for policymakers in the health sector to make informed choices about where to spend money. In addition, poor procurement processes are contributing to a lack of bargaining power in price negotiations for innovative treatments and, ultimately, to shortages of cutting-edge drugs and medical devices.

Although data are incomplete, available figures suggest that the impact of drug expenditure on health budgets in the Balkans varies significantly between countries, ranging from just 10-12% of health costs in Croatia, Macedonia and Bosnia and Hercegovina to 40% or more of total health expenditure in Romania and Bulgaria.19

In addition, a lack of negotiating capacity means that some countries in the region are paying over the odds for essential medicines, and in some cases even generics.

Experts interviewed for this report explain that the different external reference pricing systems used to establish the prices of drugs make suitable comparisons difficult and affect negotiating power. While most Balkan states use a few countries as benchmarks for reference pricing—primarily leading EU economies in the case of Croatia and Slovenia or neighbouring countries in the case of Bosnia and Hercegovina—others, such as Bulgaria, Romania and Macedonia, use as many as 12. These larger lists usually include both central and east European economies and other EU countries. Bulgaria, where manufacturing prices in the 12 reference countries are unavailable, includes an additional five countries.20

In Macedonia, the introduction in 2011 of reference pricing by the health ministry (in order to determine maximum pricing) and the country’s Health Insurance Fund (for reimbursement price comparisons) helped to reduce overall drug prices.21

Ultimately, these variations and the lack of a sound basis for making comparisons are contributing to a lack of access to healthcare solutions in many countries and are placing additional pressures on governments.

There are also some countries in the region that have benefitted from the growing domestic production of pharmaceutical products. In Bulgaria, local manufacturers have continued to invest in modernising production facilities since the country’s accession to the EU in 2007. This has attracted some multinational companies into the market through the acquisition of Bulgarian pharmaceutical companies or via local distribution companies.22

19 Business Monitor International; IMS Health; Cegedim Romania; quoted in: “SEE pharmaceutical market healthy in 2010”, Available at: http://top100.seenews.com/2011/07/see-pharmaceutical-market-healthy-in-2010/; and Imasheva, A and A Seiter, The Pharmaceutical Sector of the Western Balkan Countries, February 2008, Health, Nutrition and Population (HNP) Discussion Paper. Available at: http://apps.who.int/medicinedocs/documents/s17510en/s17510en.pdf

20 Savova, A and G Petrova, “Current Practice for Medicines Reimbursement Agreements in Bulgaria”, ISPOR Bulgaria. Available at: http://www.ispor.org/congresses/Dublin1113/p r e s e n t a t i o n s / S p e a k e r % 2 0 2 _Alexandra-Savova-1.pdf

21 Hristova, K and C Habi, “Development of pharmaceutical prices in the Republic of Macedonia in comparison to selected countries outside the national reference baskets”, Journal of Pharmaceutical Policy and Practice, Vol. 8, Supplement 1 (2015). Available at: http://www.joppp.org/content/8/S1/P12

22 Ministry of Foreign Affairs of Denmark, Pharmaceutical and Healthcare Sector: Bulgaria, report prepared by the Danish Embassy in Sofia, September 2014, p. 2. Available at: http://bulgarien.u m . d k / e n / ~ / m e d i a / B u l g a r i e n /Documents/Pharmaceutics%20and%20Healthcare_2014.pdf

http://top100.seenews.com/2011/07/see-pharmaceutical-market-healthy-in-2010/






http://www.ispor.org/congresses/Dublin1113/presentations/Speaker%202_Alexandra-Savova-1.pdf




http://www.joppp.org/content/8/S1/P12

http://www.joppp.org/content/8/S1/P12

http://bulgarien.um.dk/en/~/media/Bulgarien/Documents/Pharmaceutics%20and%20Healthcare_2014.pdf




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Large variations in pharmaceutical spending

But the outlook is hardly identical throughout the region. In Bulgaria, cuts to reimbursement spending have made the country’s short-term outlook comparatively unattractive. However, the pharmaceutical market in Bulgaria continues to grow at a faster rate than in more developed central and east European markets, and this situation is expected to continue in the near future as Bulgarian companies such as Sopharma benefit from growing exports to the markets of the Commonwealth of Independent States (CIS).23

Bulgaria’s Council of Prices and Reimbursement of Medicines, which is part of the health ministry, aims to provide a 100% cover for most innovative drugs, according to Professor Dimova of the University of Verna. Nonetheless, the health system has experienced problems with access and delays owing to the drawn-out public tendering process that is used to purchase medicines. In addition, she says, the government introduced compulsory centralised discount negotiations for drugs on the positive list in 2015, which, it is hoped, will lead to cost savings.

In Slovenia, meanwhile, reimbursement decisions are not one-size-fits-all, according to Jurij Fürst, head of the medicinal products department at the Health Insurance Institute of Slovenia. Drugs coming into the country are defined by external reference pricing and an internal system based on two interchangeable drugs, with finance provided for the cheapest or generic drug. In other cases the price depends on the grading of certain therapeutic cycles, with statins priced according to the percentage by which cholesterol is reduced, while protease inhibitors are priced by dosage.

As in a number of other countries in the region, Slovenia groups pharmaceuticals into several categories, with reimbursement of the intermediate and positive categories ranging from 25% to 75% of the price. New medicines entering the market are automatically placed on the intermediate list until the country’s Institute for Economic Research (IER) has carried out a pharmacoeconomic analysis.

In Macedonia, co-payments are charged for nearly all healthcare services and drugs, with a maximum limit of 20% of the cost, lower co-payments for very expensive services, and exemptions for certain population groups. No co-payments are charged for certain severe chronic diseases, such as cancer and dialysis.

Generics playing a key role

Generics account for a substantial share of overall pharmaceutical sales. According to the latest (2013) data from the European Federation of Pharmaceutical Industries and Associations (EFPIA), in value terms (at ex-factory prices) generics accounted for 24.1% of total pharma sales in Slovenia, 25.9% in Romania, 38% in Bulgaria and 45% in Croatia.

23 Ibid.

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In Romania, generics benefit from higher reimbursement rates than all but the most essential drugs. In Croatia, generics are fully reimbursed, giving patients a financial incentive to purchase them.

In Macedonia, generics accounted for around three-quarters of the medicines registered in the country as of 2013. Meanwhile, of six requests to include innovative medicines on the country’s reimbursement list between 2007 and 2012, only one was included on the positive list, along with three more medicines with the same generic name at a later stage. Although other medicines have been registered in the country, they have been rejected for inclusion on the positive list owing to financial constraints and the existence of therapeutic alternatives. Three professors from Macedonia’s Goce Delcev University of Shtip have argued that “generic prescribing and reference pricing have a negative impact on brand medicines and limit the choice of prescribers and patients, but save budget resources that can be used to include innovative medicines on the market and the reimbursement list”.24

Efforts to improve negotiating powers

As has already been suggested, the lack of a consistent system for undertaking HTA and inefficient procurement processes mean that the Balkan countries often invest in less cost-effective medicines and sometimes pay more for medicines and devices than their west European counterparts, despite their much more limited spending capacity.

Some countries, such as Bulgaria, have instituted claw-back mechanisms for new drugs in an effort to get money from innovative drugs back into the healthcare system. However, Mr Hasardzhiev argues that such situations are unsustainable in the long term.

The war years have also contributed to the lack of well-established institutions for the assessment and procurement of new medical technology. In Bosnia and Hercegovina, supplies of pharmaceutical products were channelled through humanitarian organisations during the war and post-war years of 1992-2000. The resulting fragmented system for drug procurement has often led to higher drug prices paid in the country, sometimes at rates more than double the international price.25

This is in large part attributable to the absence of efficient and transparent procurement processes, which make it more difficult to achieve competitive pricing and can exacerbate corruption as part of the process. In Serbia, for instance, procurement takes place only once a year, which adds to delays in making medicines available.

Moreover, the majority of pharmaceutical companies in most of the former Yugoslav states are only registered for marketing purposes and cannot participate in the bidding, Mr Trkulja of the Serbian Association of the Manufacturers of Innovative Drugs notes. Instead, this job goes to wholesalers and distributors who have a significant degree of autonomy in the prices they offer. “The representative for a drug manufacturer may be willing to decrease the price of medicines, but they can’t guarantee that the distributor that is bidding on their behalf will follow suit,” he says.

24 Angelovska et al, The climate for innovative medicines in the Republic of Macedonia.

25 Cain et al, Health care systems in transition: Bosnia and Herzegovina.

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In Romania, where pharmaceutical budget deficits are covered each year by the general budget, several high-priced drugs for rare conditions were in the top-ten list of reimbursed drugs in the country in 2009.26 In 2013 international consultants from the UK’s NICE rated 30 of the top 50 most expensive drugs as too expensive considering the country’s economic situation. “It’s not a fully transparent process, there is quite a bit of discussion, and the World Bank is pushing for it,” says Dr Baris. “In Serbia, we have been instrumental in doing analysis showing that they are paying quite a high price for pharmaceuticals.”

Improving reference pricing is a key part of this process, according to Dr Baris. The World Bank has been trying to create a forum in the western Balkans to harmonise reference pricing for pharmaceuticals. “Given the limited cost base, which is equal to more than 10% of government revenues, and that the countries are aspiring to have a system close to western standards, there is a big agenda there.”

A small handful of countries have begun to follow in the footsteps of their west European neighbours in experimenting with managed entry agreements (MEAs) for pharmaceuticals. These are risk-sharing agreements between payers and drug manufacturers that are traditionally used to identify issues that are material to a reimbursement decision. The agreements are designed to address uncertainty about the performance of new technologies, manage their adoption to maximise effective use, or limit their budget impact through the sharing of risk between producers and purchasers.

In Romania, a price-volume agreement introduced in 2009 gives the government back 5-11% of pharmaceutical sales; the government introduced a similar mechanism for a new hepatitis C treatment in 2015, according to Dr Achimas-Cadariu.

However, with no consistent system for determining coverage in place and no mechanism for involving all stakeholders—including clinicians and patients—in the consultation process, it remains unclear how easy it will be for governments to make effective use of MEAs. Without such involvement and transparency, Mr Hasardzhiev argues that it can be difficult for negotiators to be sure they are getting a good deal. In Bulgaria, he notes, the government reached an MEA for one costly and high-profile medicine, believing it had negotiated a strong price, but it soon discovered that it was paying twice the price achieved in two substantially wealthier countries, Italy and Portugal.

In Slovenia, the health system has negotiated some volume-based agreements as well as some related to results and has generally preferred the former, Mr Fürst says. “We don’t like [pay-by-results] because they take a lot of energy and they are complicated for clinicians to follow.”

In Croatia, financial risk-sharing agreements are becoming more widely used, especially for expensive drugs. A typical example of such an arrangement is a pay-back

26 Imasheva and Seiter, The Pharmaceutical Sector of the Western Balkan Countries.

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agreement between the marketing authorisation holder and the CHIF, in which the fund finances the treatment of a defined number of people based on budget-impact analysis and the manufacturer supplies the treatment to additional patients at its own cost. Such agreements were first introduced in 2009 to allow access to new medicines while at the same time controlling expenditure. Meanwhile, the costliest medicines are financed from dedicated CHIF funds separate from hospital budgets. Financial limits were set in 2010 for each of these funds for each therapeutic indication.

Croatia’s pharmaceutical pricing and reimbursement reforms, which were implemented between 2009 and 2010, resulted in an increase in the number of new medicines during that period; 47 innovative pharmaceuticals were added to different reimbursement lists, and 13 innovative pharmaceuticals were added to the list of expensive hospital medicines during the period in question, compared with just 25 new products added between 2002 and 2009. The reforms also contributed to improved decision-making and transparency.

The country has become more aggressive in its negotiation with producers, Dr Varga notes. Visits to procurement agencies in other European countries have helped Croatian policymakers to learn how their governments achieve lower prices for essential drugs. “No one specifically breached confidentiality, but we are talking about principle and processes about how prices were reached.”

Other broader, macro efforts to reform the system could also help to keep government spending under control while at the same time expanding access, according to Dr Bartlett. He notes that a few steps could go some way towards making systems more sustainable, namely financing public healthcare from taxation rather than SHI (and abolishing the deduction of contributions to the national health insurance system from wages) as well as developing a private insurance sector.

Mr Hasardzhiev believes that the solution will ultimately require an EU-wide restructuring of the pricing process. One possibility is differential pricing, which would involve lower prices across the board for poorer member countries, although there would need to be a “fundamental change” in EU legislation guaranteeing the free movement of goods to ensure that lower-priced drugs are not simply sold at higher prices in wealthier member states.

A more transparent approach, he says, would be value-based pricing, which takes into account the differential value of medicines in different member countries. “I think we are coming to a point where we should reconsider the existing price system in Europe, because it isn’t fair for some of the member states and prevents timely access for some of the patients to innovative medicines,” he adds.

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CONCLUSIONThe Balkan region continues with the gradual modernisation of its healthcare systems, but progress remains uneven. EU member states, especially those from the former Yugoslavia, have seen the most tangible success so far.

Nevertheless, all the countries in the region continue to face a number of similar obstacles, including excessively decentralised health systems; a lack of universal health insurance; over-investment in the hospital sector at the expense of primary care; high levels of out-of-pocket payments, partly a result of corruption; austerity measures affecting healthcare budgets; fragmented systems for drug procurement; and difficulties in assessing the cost-effectiveness of innovative healthcare technologies.

Pockets of progress have become visible, for example in Croatia and Slovenia, where performance-related payments have been introduced in primary care. These two countries have also started to develop systems for evaluating healthcare technology and care pathways, and several countries in the region are experimenting with managed entry agreements for pharmaceuticals and financial risk-sharing agreements to facilitate access to healthcare solutions.

Several countries in the region are working with international organisations and initiatives to support the process of modernisation. Notable examples include the WHO-supported South-eastern Europe Health Network; World Bank projects (for example in Montenegro and Kosovo); working with the European Medicines Agency; co-operation with European HTA agencies to boost the development of drug appraisal systems; using HTA reports from other European countries as part of an interim process for making decisions; and joining the European Network for Health Technology Assessment.

Better collaboration across the region and the use of best practices developed elsewhere will help to make regional healthcare systems fit for purpose. Experts interviewed for this paper propose additional steps towards modernisation, such as improving reference pricing; financing public healthcare from taxation rather than SHI; and developing a private insurance sector.

While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report.

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