Elements of the Pharmaceutical System

Nina Zimmermann, Peter Schneider

WHO Collaborating Centre forPharmaceutical Pricing and Reimbursement Policies, Vienna

Gesundheit Österreich / Austrian Public Health Institute

2nd Summer School Pharmaceutical Pricing and Reimbursement Policies28 August – 01 September 2017 | Vienna, Austria

Pharmaceutical Pricing

The information and data provided in this presentation was collected and analyzed by the WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies located at the PharmacoeconomicsDepartment of Gesundheit Österreich GmbH (GÖG).

The data do not have any legally binding value. This is not a presentation of WHO. The presenter is responsible for the views expressed in this presentation, and they do not necessarily represent the decisions and policies of the World Health Organization.

Credits go to:- PPRI team members & WHO Collaborating Centre staff at GÖG- The members of the PPRI network (= competent authorities for

pharmaceutical pricing and reimbursement)

Information used from this presentation has to be correctly quoted. Commercial exploitation is forbidden.

Disclaimer and acknowledgements

2© 2017 Vienna WHO Collaborating Centre

Outline

© 2017 Vienna WHO Collaborating Centre

Medicine pricing policies

Different pricing policies for different types of

medicines

Pharmaceutical distribution chain and

remuneration of pharmacies and wholesalers, taxes


Timely and equitable access to pharmaceuticals for

patients

Reward for valuable innovation within a

competitive and dynamic market that

also encourages Research &

Development

Control of pharmaceutical

expenditure

Conflicting policy goals in medicines policy

Source: High Level Pharmaceutical Forum 2005- 2008. Conclusions and Recommendations. European Commission DG Health & Consumers. 2008.

» Collate and appraise the available evidence on policies for managing medicine prices

» Based on best evidence and practice and experience develop recommendations for medicine pricing policies in countries

» Publish and disseminate the policy guidelines and recommendations to countries and other stakeholders

» 3 overarching questions:

1) Should countries use price control measures to manage medicine prices?

2) Should countries adopt measures to control add-on costs in the supply chain?

3) Should countries promote the use of quality assured generic medicines as a strategy to manage medicine prices?


WHO Guideline on Country Pharmaceutical Pricing Policies 2015

http://apps.who.int/medicinedocs/documents/s21016en/s21016en.pdf


WHO Guideline on Country Pharmaceutical Pricing Policies 2015

Key principles

» Combination: use a combination of different pharmaceutical pricing policies (based on the objective, context and health system) that address supply and demand issues

» Transparency: make pricing policies, processes, and decisions transparent

» Legal basis: implement appropriate legislative framework and governance and administrative structures, supported by technical capacity - regularly reviewed, monitored and evaluated and amended

» Effective implementation: If regulation of pharmaceutical prices is introduced, effective implementation will be required to ensure compliance (e.g. incentives, enforcement, price monitoring system, fines)

» Promotion of generics: adopt policies to promote the use of quality assured generic medicines in order to increase access and affordability

» Collaboration: Countries should collaborate to promote exchange of information about policies, their impacts, and pharmaceutical prices


Price control Free pricing

Statutorypricing

Pricenegotiations

Price is seton the basis

of a law, enactment,

decree

Prices arenegotiatedbetween

manufacturerand payer

Medicine pricing policies

Public procurement / tendering

Formal andcompetitiveprocurement

procedure

By thegovernment /

authorities

Source: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies.Glossary of pharmaceutical terms. Update July 2016. Accessible athttp://whocc.goeg.at/Glossary

http://whocc.goeg.at/Glossary

8

Medicine prices – subject to price control

» Price control in most of the European countries

» Majority of the countries price control is limited to

reimbursable medicines

» BUT: Linkage between pricing and reimbursement in DE and DK

» Most common price control policy = statutory pricing (i.e.

setting the price on a regulatory, unilateral basis); e.g. BE, BG,

CY, CZ, EL, ES, LT, LU, PT, SE

» Price negotiations are used in a few countries (e.g. FR, IT)

» Procurement in the hospital sector and/or for public function

» Mixture

» Statutory pricing after negotiations (EE, LV, PL)

» In case of failure of negotiations (e.g. FR) or non-availability of

data for comparison (e.g. IE)

Pricing = The act of setting a price for a medicine (Glossary of the WHO Collaborating Centre Vienna)Source: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies

Country Pricing of medicines in the out-patient sector

State/Authority Pharmaceutical company

Albania, Belgium, Cyprus, Greece, Lithuania, Luxembourg, Turkey

All medicines ------

Denmark* ----- All medicines

Austria, Croatia, Czech Republic,Denmark*,Estonia, Finland, France, Germany, Hungary, Ireland, Italy,

Latvia, Poland, Spain, Sweden, Switzerland, Slovakia, Slovenia,

United Kingdom**

Reimbursable medicinesNon-reimbursablepharmaceuticals

MaltaMedicines in the public

sectorMedicines in the private sector

Bulgaria, Iceland, The Netherlands,Norway, Portugal, Romania

Prescription-only medicines(POM)

Over-The-Counter medicines(OTC)

9

* Denmark has free pricing for all medicines, but reimbursement limits are regulated** United Kingdom has indirect price control via Pharmaceutical Price Regulation Scheme (PPRS)

Who decides on prices?

» At the level of price types» Ex-factory price (manufacturer

price)

» Pharmacy purchasing price (wholesale price)

» Pharmacy retail price (gross / net)

» Different kind of medicines» Prescription-only medicines / Non-

prescription medicines

» Reimbursable / non-reimbursablemedicines

» On-patent / off-patent medicines

» Generics / biosimilar medicines

» Orphan drugs

» High-priced medicines / high-costmedicines

» For different sectors» Out-patient / in-patient sectors

» Public / private sectors

» From different perspectives» From industry perspective: ‘starting

price’, usually ex-factory price (sometimes also pharmacy purchasing price )

» From payer’s perspective: reimbursement price (actual price, tendering price in specific situations)

» From patient’s perspective: Pharmacy retail price / public price


Medicine prices – dimensions of price control

Key pharmaceutical pricing policies - overview

External pricereferencing

(EPR; synonyms: externalreference pricing, international

price comparison, etc.)

Value Based Pricing Cost-Plus Pricing

Tendering / publicprocurement

Price negotiations Differential pricing

Discounts/ rebates

ManagedEntry

Agreements








Discounts/ rebates

ManagedEntry

Agreements

Definition:

the practice of using the price(s) of a pharmaceutical product in one or several countries in order to derive a benchmark or reference price for the purposes of setting or negotiating the price of the product in a given countrySource: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies. Glossary of pharmaceutical terms. Update July 2016. Accessible at http://whocc.goeg.at/Glossary

Coverage 2017

» EU Member States: 25/26 (DK in H) of 28 EU-MS

» different methodological approaches

13

External price referencing – definition and coverage


Notes: DK: EPR is used to set the price cap for new medicines in the hospital sector. In the out-patient sector the pharmaceutical manufacturer can freely set the price. DE: elements of EPR are – together with elements of free pricing and VBP - applied in the pricing process

Source: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Information, data collected with PPRI network

Use of EPR in European countries, 2017 (or latest available year)


Notes: DE: EPR is provided for in law but not used in practice; DK: EPR is used to set the price cap for new medicines in the hospital sector; in the out-patient sector the manufacturer can freely set the prices; IE: EPR is used as a supportive policy to set prices for new single source on-patent medicines, and as a main criterion for realignment of existing prices; SI: EPR is used as the main policy for setting maximum allowed prices, and it is applied as a supportive policy for medicines with extraordinary higher prices and for medicines with lower prices agreed between the manufacturer and the purchaser/payer; SE and UK (and in DK in the out-patient sector): other pricing policies are in place.

Role of EPR in the pricing process, 2017 (or latest available year)


Notes: ES: the number of countries has not been defined, mainly Euro zone countries are taken into account. IT: the countries are not defined, but prices from countries which participate in the Euripid database are considered. SE and UK (and in DK in the out-patient sector): other pricing policies are in place. DE: EPR is not applied in practice.

Number of countries in the basket, 2017 (or latest available year)

Major criteria for country baskets: geographic neighborhood or a comparable economic situation in the reference countries


Countries in the basket, 2017 (or latest available year)


Notes: CZ, EL, NO & SK: Average of the three lowest prices of reference countries in the basket. EE: Prices cannot exceed the highest valid price in reference countries. FR: prices should be similar to those in the reference countries and should not be lower than the lowest price in one of the four reference countries. IL: Average of four countries (FR, BE, HU, ES). The lowest price between this average and the price in NL will be chosen. In case of no reference from all five countries the average price between DE and UK. IS: The average price of reference countries is used for out-patient medicines while the lowest price of reference countries is used for in-patient medicines. LT: The reference price shall not exceed 95% of the average price of reference countries. LV: The third lowest price in the country basket, but not higher than the price in LT & EE. SI: The lowest price is used for original medicines and the average price for generics. SE and UK (and in DK in the out-patient sector): other pricing policies are in place. DE: EPR is not applied in practice.

Methodology to determine the reference prices, 2017 (or latest available year)

Differences between countries with respect to

» scope of medicines e.g. originators, prescription-only

medicines, new innovative medicines

» price type considered e.g. ex-factory price, wholesale

price, list prices

» price revisions (regular and irregular intervals)

» price sources (mainly MAH)

» dealing with missing information

» exchange rates

19

Further results on EPR

» Savings:

» EPR can lead to substantial savings for public payers, but the effect seems to ‘fade-out’ in the course of time

» The authorities who recently introduced EPR considered the policy as effective, whereas authorities with longer-term experiences with EPR said that the benefits of the beginning have increasingly been foiled by limitations arising after some time

» Limitations:

» Incentivises manufacturers to first launch in high-priced countries and delay (or not launch) in lower-price countries availability problems

» Non-consideration of (even statutory) discounts lead to a distortion of prices, and public payers risk overpaying transparency concerns

» EPR is not a simple exercise but requires expertise and administrative efforts to establish and run an appropriate system

» Prices obtained by EPR do not reflect the value of a medicine in the given country and are influenced by the design of the system

» EPR is exposed to exchange rate-volatility when referenced prices are denominated in local currencies

20

Experiences with EPR according to a literature review

Countries which apply EPR have lower prices.

Price differences among countries that apply EPR.

Source: Leopold, C., Mantel-Teeuwisse, A.K., Seyfang, L., Vogler, S.,de Joncheere, K., Laing, R.O., Leufkens, H.G.M.: Impact of External Price Referencing on Medicine Prices – A Price Comparison Among 14 European Countries. In: Southern Med Review, 5(2): 34-41

21

» EPR as benchmark: Countries should consider using external reference pricing as a method for negotiating or benchmarking the price of a medicine.

» Part of overall strategy: Countries should consider using external reference pricing as part of an overall strategy, in combination with other methods, for setting the price of a medicine.

» Transparency: In developing an external reference pricing system, countries should define transparent methods and processes to be used.

» Comparability: Countries / payers should select comparator countries to use for ERP based on economic status, pharmaceutical pricing systems in place, the publication of actual versus negotiated or concealed prices, exact comparator products supplied, and similar burden of disease. 22

WHO Guideline: Use of External Price Referencing



» A simple base scenario was constructed to highlight general features of EPR systems within Europe

» Inputs for the model were extracted from a survey

» Medicine prices for countries that stated not to re-evaluate their EPR prices stay constant over the years

» In other countries, prices drop at consecutive re-evaluation rounds

» The erosion of the average price over the years is at about 15%

Simulations of different scenarios

23

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0100

0 50 100 150 0 50 100 150 0 50 100 150 0 50 100 150 0 50 100 150

0 50 100 150

Austria Belgium Bulgaria Croatia Cyprus CzechRepublic

Denmark Estonia Finland France Germany Greece

Hungary Iceland Ireland Italy Latvia Lithuania

Luxembourg Malta Norway Poland Portugal Romania

Slovakia Slovenia Spain Sweden Switzerland TheNetherlands

UK

me

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ine p

rice a

t m

onth

=12

0

monthGraphs by country

0

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DK

SE

UK

AT

BE

LU

CH IE DE IS NO SI

FR

NL FI

PT

MT

CY

PL

LT

HU

BG

CZ

EE

EL IT LV

SK

ES

RO

HR

Source: Vogler S, Lepuschütz L, Schneider P, Stühlinger V.: Study on enhanced cross-country coordination in the area of pharmaceuticalproduct pricing. Written by Gesundheit Österreich Forschungs- und Planungs GmbH, University for Health Sciences, Medical Informaticsand Technology (UMIT) and SOGETI. Funded by the Health Programme of the European Union, 2016, Viennahttps://ec.europa.eu/health//sites/health/files/systems_performance_assessment/docs/pharmaproductpricing_frep_en.pdf

https://ec.europa.eu/health/sites/health/files/systems_performance_assessment/docs/pharmaproductpricing_frep_en.pdf

Simulations of six scenarios

» In the simulations six scenarios were explored

» (1) Consideration of statutory discounts;

» (2) regular price revisions;

» (3) changes in country baskets with respect to size and income;

» (4) changes in the calculation method;

» (5) changes in choice of exchange rate; and

» (6) the consideration of the affordability-to-pay

24

Source: Vogler S, Lepuschütz L, Schneider P, Stühlinger V.: Study on enhanced cross-country coordination in the area of pharmaceutical product pricing. Written by Gesundheit Österreich Forschungs- und Planungs GmbH, University for Health Sciences, Medical Informatics and Technology (UMIT) and SOGETI. Funded by the Health Programme of theEuropean Union, 2016, Viennahttps://ec.europa.eu/health//sites/health/files/systems_performance_assessment/docs/pharmaproductpricing_frep_en.pdf


» A few countries have statutory (i.e. legal) discounts in place (e.g. DE)

» Compared to the base case, average medicine prices fall by 27 percent, from 78.1 to57.15 Euros

Simulations: Consideration of discounts

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0

10

20

30

40

50

60

70

80

90

100

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DK

SE

UK

AT

BE

LU

CH

DE IS IE NL

NO

HU SI

CY FI

FR

PT

MT

PL

LT

HR

CZ

LV

EE

ES

SK

EL

BG IT RO

» Assumption: countries re-evaluate their medicine prices every 6 months

» Results in drop of average price of all EPR countries after 10 years of 6 percent, from 78.1 to 73.6 Euros

Simulations: Regular price revisions

26

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40

50

60

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90

Start Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Med

icin

e p

ric

e i

n €

Base case 6 month re-evaluation

» Assumption: Countries agree not to reference to the least wealthy countries (lowest GDP quintile)

» Leads to a negligible, insignificantly small rise in EPR prices

Simulations: Changes in country baskets

27

0

10

20

30

40

50

60

70

80

90

100

DK SE UK AT BE LU CH IE DE IS NO SI FR NL FI PT MT CY PL LT HU BG CZ EE EL IT LV SK ES RO HR

Prices under base case Prices when excluding lowest-income quintile from reference baskets

Source: Vogler S, Lepuschütz L, Schneider P, Stühlinger V.: Study on enhanced cross-country coordination in the area of pharmaceuticalproduct pricing. Written by Gesundheit Österreich Forschungs- und Planungs GmbH, University for Health Sciences, Medical Informaticsand Technology (UMIT) and SOGETI. Funded by the Health Programme of the European Union, 2016, Viennahttps://ec.europa.eu/health//sites/health/files/systems_performance_assessment/docs/pharmaproductpricing_frep_en.pdf


» Assumption: All countries use ‘minimum price in basket‘ as their calculation mechanism

» Average EPR price drops by 25.5 percent

Simulations: Change in calculation method

28

0

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20

30

40

50

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90

100


» Scenario of all countries using average monthly exchange rates compared toyearly exchange rates

» For BG, CZ, IT and NO the price changes by more than 7 percent

Simulations: Choice of exchange rate

29

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UK SE DK IS CH AT BE LU IE FI FR SI DE NO NL PT CY MT PL HR RO LV IT LT EE CZ ES SK EL BG HU

using average yearly exchange rates using average monthly exchange rates

» Assumption: all countries include PPP-adjustments for their reference prices

» Prices in some wealthy countries increase, while they drop in some less wealthy countries such as BG, HU, PL, RO

Simulations: Purchasing Power Parity

30

0

20

40

60

80

100

120

140


Base scenario All countries applying PPP adjustments

Key take-aways from the simulations

» Choices in the design of EPR mechanisms (e.g. basket,

re-evaluation period, calculation method, exchange rate

used) matter

» Referring to actual prices paid might reduce prices by

allowing countries with low negotiation power to benefit

from discounts

» Regular re-evaluations tend to lead to faster price drops

and lower average prices

» Coordinating to adapt EPR formulae, such as adjusting

for purchasing power parity, might reduce medicine

prices in lower-income countries in relation to wealthier

countries

31

32

Suggestions for improvements EPR

» Clear methodology

» Well-chosen basket of countries (issue of work-load for large basket)?

» Consider the economic situation of reference countries (choice of reference countries, weighting by PPP)

» Regular monitoring and price revisions (key part of the market)

» Consideration of discounts, at least published mandatory discounts;in the longer run transparency related to discounts, cost elements of the prices

» Policy mix and ‘new’ policies beyond the pricing scope

» Collaborative approaches

Country example - Norway

» Current system of EPR – implemented in 2002

» The maximum price for prescription-only-medicines is set due to external reference pricing

» The Market Authorisation Holder (MAH) has to apply for a maximum price (pharmacy purchasing price PPP) before entering the market

» NoMA revises the price of the 250 top-selling active ingredients on a yearly basis

» Maximum prices are based on the average of the three lowest PPP in Sweden, Finland, Denmark, Germany, United Kingdom, the Netherlands, Austria, Belgium and Ireland

» Comparison is mainly be drawn with the same product in the reference countries (incl. different brand names

» Mean exchange rate of the last six whole months, as presented by the Central Bank of Norway, is used for the conversion









Discounts/ rebates

ManagedEntry

Agreements

Definition:

... it is meant for countries to set prices for new medicines and/or decide on reimbursement based on the therapeutic value that the medicine offers, usually assessed through health technology assessment (HTA) or economic evaluation.Source: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies. Glossary of pharmaceutical terms. Update July 2016. Accessible at http://whocc.goeg.at/Glossary

Narrow definition: integrated in the pricing and reimbursement system: link payments for medicines to evidence-based assessments of value for patients (+ their relatives and the society as a whole)

» Countries with narrower definition: SE (UK – planned, not implemented); AUS, NZ

» Countries with broader definition: nearly all EU MS35

Value Based Pricing – Definition and Coverage


» Introduced in 2002

» Pricing processes are completely integrated

» National competent authority (the Dental and Pharmaceutical Benefits Board (TLV)) will communicate a joint reimbursement and pricing decision

» Added value is assessed for all new medicines and where higher prices are granted to medicines that demonstrate higher added value

» Cost-effectiveness is analysed from a broad societal perspective (but hesistant with including productivity effects), also important: severity, uncertainty

» Value based pricing: price in relation to value for society, extensive use of HTA

36

Value Based Pricing – Example Sweden

37

Source: TLV

Value Based Pricing – Example Sweden

» No incentives for manufacturers to price below threshold

» Relatively large differences in the definition of what should be included in ‘value’ and what excluded, across countries

» Value assessments cannot be ‘exported’ to countries which apply EPR since the extent of ‘value’ is country- and system-specific

» Capacity-building

38

Value Based Pricing – Impact and limitations








Discounts/ rebates

ManagedEntry

Agreements

Definition:

Pricing procedure which calculates a ’reasonable’ price for a product based on the production costs, promotional expenses, research & development, administration costs, overheads and profitSource: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies. Glossary of pharmaceutical terms. Update July 2016. Accessible at http://whocc.goeg.at/Glossary

Cost-plus pricing is not used in EU Member States

» Country examples: » Bangladesh, China, Islamic Republic of Iran, Pakistan,…

40

Cost-Plus Pricing – Definition and Coverage


» Not as sole policy: Countries generally should not use a cost-plus method as an overall pharmaceutical pricing policy

» Change to another policy: Countries using a cost-plus method as an overall policy that wish to change their strategy should consider replacing or complementing the cost-plus approach with other policies, including EPR etc.

41

WHO Guideline: Application of cost-plus pricing formulae for pharmaceutical price setting










Discounts/ rebates

ManagedEntry

Agreements

Procurement - Definition: Pharmaceutical procurement is a complex process that involves many steps and many stakeholders. It is also conducted within national and institutional policies, rules, regulations, and structures that may hinder or support the overall efficiency of the procurement process. An effective procurement process at any level must ensure that four strategic objectives are achieved:

- the procurement of the most cost effective medicines in the right qualities,

- the selection of reliable suppliers of high-quality products,

- procurement and distribution systems that ensure timely and undisturbed deliveries,

- processes that ensure the lowest possible total costs.

Tendering - Definition:Any formal and competitive procurement procedure through which tenders (offers) are requested, received and evaluated for the procurement of goods, works or services, and as a consequence of which an award is made to the tenderer whose tender/offer is the most advantageous. For specific medicines for which equivalents (e.g. generics) exist, public payers ask (generic) manufacturers for bids, and the best tender will be awarded a contract for a specific time.

Source: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies. Glossary of pharmaceutical terms. Update July 2016. Accessible at http://whocc.goeg.at/Glossary

43

Tendering / Public procurement – Definition

No centraltendering/procurement in EU

In-patient sector: majorpricing policy

Out-patient sector: fewEuropean countries


44

» Few examples from different European countries (preferential pricing policy – NL, DK, BE/once, CY, MT..)

» Highly competitive measures

» Impact on prices

» Requires flexibility from pharmacists (stock-keeping, e.g. change every two weeks / DK)

» Short-term savings

» Medicines shortages?

Competition vs. regulation ?

Tendering in the out-patient sector

» 2007/2008: ‘Kiwi light model’ (higher R rate for winner)

» 2 tenders (simvastatin & amlodipine), supply problems,

discontinued

» Increased utilization of further publicly funded, not

tendered statins in the year of the first tender neutralized

savings of € 14.6 mio. made on the simvastatin tender

45

» Companies are obliged to report their planned PPP for next

two weeks to the Danish Medicines Agency (IT system)

» All reimbursable out-patient medicines

» Decrease in public pharmaceutical expenditure and at the

same time increase in medicine consumption

» ‘Preference price policy’: 2005-2008 collectively, since 2008 by

individual sickness funds, similar models by some health insurers

» Large savings (€ 352 million in 2009, € 654 million in 2012 and

€ 679 million in 2014), temporary increase in the dispensing fee

» Large-scale shortages for tendered and non-tendered medicines

ResultsResults

Source: Vogler S, Gombocz M, Zimmermann N.: Tendering for off-patent outpatient medicines: lessons learned from experiences in Belgium, Denmark and the Netherlands. In: Journal of Pharmaceutical Health Services Research, 2017

http://whocc.goeg.at/Literaturliste/Dokumente/Articles/Vogler_et_al-2017-Journal_of_Pharmaceutical_Health_Services_Research.pdf

» Robust legal framework

» Strategic design of tender (e.g. winner-

takes-it-all principle?, contract duration)

» Strategies to address medicines shortages

» Stakeholder management

» Demand-side measures to promote generic

uptake

46

Discussion & conclusion: key prerequisitesTendering in the out-patient sector - prerequisites

Tender NO

SE

FI

DK

DE

FR

ESPT

CH

IT

MT

CY

ATHU

SI

SKCZ

PL

EE

LV

LT

IE

EL

BG

RO

BA

HR

AL

MKME

RS

LU

BE

NL

Not scope of the survey and/orno information available

UK

IS

Source: PHIS Hospital Pharma, based on PHIS Hospital Pharma reports and further surveys; 27 countries (EU MS excl. EL & LU; NO + TR)

TR

IS

47

Tender & Negotiation

Procuring strategies in hospitals







Price negotiations (Differential pricing)

Discounts/ rebates

ManagedEntry

Agreements

Definition:

A pricing procedure, where medicine prices are discussed/ negotiated (e.g. between manufacturer and public payer).


» Results of the price negotiations are lower prices than the list prices and often kept confidential

» Confidential prices distort price comparisons

49

Price negotiations – Definition and Coverage


Discounts and rebates to public payers, 2011

Only discounts and rebates by pharmaceutical industry

Vogler S, Zimmermann N, Habl C, Piessnegger J, Bucsics A.: Discounts and rebates granted to public payers for medicines in European countries. In: Southern Med Review 2012, 5(1): 38-46http://whocc.goeg.at/Literaturliste/Dokumente/Articles/Vogler_Discounts_Rebates_SMR_2012_5_1.pdf

50

http://whocc.goeg.at/Literaturliste/Dokumente/Articles/Vogler_Discounts_Rebates_SMR_2012_5_1.pdf

Discounts and rebates on medicines

Study results 2016 within a sample of high-income countries:

» Most frequent discount received was between 20% and 29% of official list prices;

» 6 participants reported: 60% or more of the list prices;

» On average: confidential discounts were more common, complex, and significant for specialty pharmaceuticals than for primary care pharmaceuticals;

» Participants had a more favorable view of the impact of confidential discount schemes on their health systems than on the global marketplace


Source: Morgan S, Vogler S, Wagner A.: Payers’ experiences with confidential pharmaceutical Price discounts: A survey of public and statutory health systems in North America, Europe, and Australasia. In: Health Policy, 121, Issue 4: 354-362, April 2017, http://dx.doi.org/10.1016/j.healthpol.2017.02.002

http://www.sciencedirect.com/science/article/pii/S0168851017300301








Discounts/ rebates

ManagedEntry

Agreements

Definition:

» Different prices for different groups of customers

» ‘Equity pricing’ vs. ‘discriminant monopolist’

» Systematic use of DP has been limited to vaccines,

contraceptives and ARVs mostly in LMIC; wide-

spread use of EPR and parallel trade concept limit

application within EU

Differential pricing: Definition and coverage

53

Experiences with Differential Pricing (DP)

54

» Benefits

May ensure access to medicines that would

otherwise have been unaffordable for these countries

Under specific conditions: when competitive production is feasible,

rapid access and small quantities of medicines are required

Benefits for manufacturers: increased revenue

» Limitations

Not an instrument for savings

Generic competition is likely to be more effective in reducing

prices than DP

Not a ‘stand-alone’ policy

Reliance on industry

Not sustainable

» v

For example

» High priced medicines / high-cost medicines

» Generics / biosimilars


Different policies for different types of medicines

» Definition? What is a high price?


Pricing policies for high-priced medicines

Source: Results of a survey among PPRI network members, 2014 (27 countries replied)

WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies

http://whocc.goeg.at/Downloads/Conference2015/Presentations/MO/1545_strandIII_Zimmermann_new.pdf

http://whocc.goeg.at/Downloads/Conference2015/Presentations/MO/1545_strandIII_Zimmermann_new.pdf

Generic price link

Definition:

Practice of setting the price of a generic in relationship to the original product, usually at a certain percentage lower than the original medicine price. The design of this generic price link policy may vary, with different percentages for the different generics (first generic coming to the market, second generic, etc.), and in some cases the prices of orignal medicines might also be part of the policy, i.e. that they will also be required to decrease.



Pricing policies for generics


58

Generic price link 2016

Source: WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Information, data collected with PPRI network 2016

Example Estonia:The first follower is required to be priced 30% below the originator. The next three followers need to be priced by at least 10% below of cheapest medicine in the group Similar

regulationsfor

biosimilars

The staged approachto price components

Source: WHO/HAI 2008: Measuringmedicine prices,availability,affordability and pricecomponents

Pharmaceutical distribution chain and remuneration of pharmacies and wholesalers

In EU Member States:

• Pharmacy andwholesale

remuneration• VAT

Reimbursable medicines

» Most countries regulate both wholesale and pharmacy remuneration

» Two (Switzerland, Czech Republic) out of 30 European countries (EU-28, Norway, Switzerland) have joint remuneration of wholesale and pharmacy markets

» In these countries both actors share the regulated regressive mark-up for distribution and dispensing.

» Three (Malta, Netherlands, Cyprus) countries do not

have binding, national remuneration regulation;

» In Malta and Cyprus the market is

segregated into public and private

sectors with remuneration regulation

only valid in the private sector.

» Netherlands liberalized

pharmacy remuneration in 2012 with

agreements being negotiated

by individual actors.

60

L

Pharmaceutical distribution chain and remuneration of pharmacies and wholesalers

Source: GÖG (2015)‚ Vergütung der Arzneimitteldistribution in den europäischen Ländern

» In eight countries wholesale remuneration is not regulated (e.g. Denmark, Finland, UK);

» In these countries manufacturers and wholesalers negotiate confidential wholesale margins.

» 22 countries regulate maximum wholesale

remuneration for the reimbursement

market; in 11 countries the

regulation applies to all

pharmaceuticals.

61

L

Wholesale remuneration for reimbursable medicines


» Wholesale remuneration in Europe tends to be related to the price of distributed pharmaceuticals (price-oriented remuneration)

» Most countries regulate maximum remuneration through a mark-up on the ex-factory price (exception: Italy)

» Regressive remuneration schemes, in which proportional remuneration decreases with the pharmaceutical price are more common than linear mark-ups.

» The regressive schemes used in

Europe include from 2 (eg. France)

to 16 (eg. Germany) categories often combining percentage-based components with a fixed fee.

62

IE

Wholesale remuneration for reimbursable medicines in detail


» In 16 countries, pharmacy remuneration depends exclusively on the price of disbursed pharmaceuticals (price-oriented remuneration).

» In 5 countries (e.g. UK, the Netherlands) remuneration is exclusively service-based(e.g. fixed fee per disbursed medicine).

» 7 countries (e.g. Belgium, Germany, Switzerland) have a mixed remuneration scheme.

» In most countries with a mixed scheme the price-oriented element appears to be given more weight (Exception: Switzerland).

63

SI

CY

UK

HU

CZ

ES

SK

CH

SE

RO

PT

PL

AT

NO

NL

MT

LU

LT

LV

HR

IT

IS

IE

EL

FR

FI

EE

DE

DK

BG

BE

Not relevant

Service-based

Mixed

Price-oriented


Pharmacy remuneration for reimbursable medicines


For reimbursable and non-reimbursable medicines

Manufacturerprice

Max. wholesalemark up in %

Pharmacypurchase Price

max. wholesalemargin in %

Starting from to Starting from to

0,00 1,60 20% 0 1,92 16,7%

1,61 2,88 15% 1,85 3,31 13,0%2,89 6,39 10% 3,18 7,03 9,1%6,40 12,78 5% 6,72 13,42 4,8%

12,78 213,08 3% 13,16 219,47 2,9%

Maximum per package 6,39 213,08... 6,39

PharmacypurchasePrice % mark-up

Fixed mark up in Euro

PharmacyRetail Price net

max. Pharmacymargin

Starting from toStartingfrom to

0 0,64 0,38 0 0,64 0,38

0,65 1,28 40% 1,29 1,79 29%

1,29 1,92 35% 1,74 2,59 26%

1,93 2,56 30% 2,51 3,33 23%

2,57 3,2 25% 3,21 4,00 20%

3,21 6,39 20% 3,85 7,67 17%

6,4 44,74 15% 7,36 51,45 13%

44,74… 5,11 Euro 49,85... 5,11 Euro

Country example Estonia

65

CY

UK

HU

CZ

ES

SI

SK

CH

SE

RO

PT

PL

AT

NO

NL

MT

LU

LT

LV

HR

IT

IS

IE

EL

FR

FI

EE

DE

DK

BG

BE

Not relevant

No compulsory pharmacy discounts/clawbacks

Compulsory pharmacy discounts/clawbacks

Compulsory discounts and clawbacks to the public sector influence pharmacy remuneration in 15 countries

Pharmacy remuneration for reimbursable medicines –Discounts/Clawbacks


» Countries should consider regulating distribution chain mark-ups (i.e. regulation of distributors and wholesalers)

» Countries should consider regulating retail chain mark-ups and fees (i.e. regulation of pharmacies, dispensing doctors and dispensaries)

» If mark-ups are regulated, countries should consider regressive mark-ups (i.e. lower mark-up for higher-priced products) rather than fixed percentage mark-ups

» Incentive to dispense higher priced products because they receive a higher net margin

» Countries should consider using remuneration/mark-up regulation to provide incentives for supplying specific medicines (e.g. generics) or to protect specific patients or population groups (e.g. vulnerable groups, remote populations)

» In systems where rebates and discounts in the distribution chain occur, countries should consider regulation and should make them transparent 66

WHO Guideline: Regulation of mark-ups inthe pharmaceutical supply and distribution chain



2021

19

21

19

25

20

23

21

24

20

25

27

22

17

21 21

18

21

23 23

20

25

22

20 20

10

6

20

5

109

6

4

10

2,1

5 5

23

3

5

12

0

6

89

0

9,5 10

0

10

25

12

10

0

5

10

15

20

25

30

AT BE BG CY CZ DE DK EE EL ES FI FR * HR* HU IE** IT LU LT * LV MT NL PL PT RO SE* SI SK UK*

standard VAT in %

VAT in % for reimbursable medicines (marked with an asterix) and for medicines (POM and OTC medicines) supplied on foot of a prescription (UK, SE)

VAT in % for non-reimbursable medicines (marked with an asterix) and for (non-prescription) medicines purchased without prescription

** In Ireland depends the VAT rate on the route of administration e.g. on oral medicines the VAT rate is 0% on external applications (creams,lotions,

ointments, injections, etc.) the rate is 23%; For a few products (low protein biscuits, hormonal contraception) 13,5% VAT is applied

Value-added tax in European countries

» Benefits of tax exemptions» Most likely to have an equity impact on the poor

» Downsides of tax exemptions» Loss of revenue for national governments

» Elimination or decrease of taxation revenue from medicines may have a negative impact on some aspects of the health care system

» Countries should consider exempting essential medicines from taxation

» Countries should ensure any reductions or exemptions from taxes on medicines have the effect to reducing costs to the patient/purchaser

68

WHO Guideline: Tax exemptions/reductions for pharmaceutical products



Nina Zimmermann

Peter Schneider

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1010 Vienna

T: +43 1 515 61 – 132 or 116

F: +43 1 513 84 72

Email:

[email protected],

[email protected]

www.goeg.at

http://whocc.goeg.at

Vienna WHO CC websitehttp://whocc.goeg.at

Contact


mailto:[email protected]

mailto:[email protected]

http://www.goeg.at/

http://whocc.goeg.at/

http://whocc.goeg.at/

Documents

Elements of the Pharmaceutical System