Pharmacoeconomics and Management in Pharmacy IIstsimonpharmacy.com/docs/Pharmacoeconomics and... ·...
Transcript of Pharmacoeconomics and Management in Pharmacy IIstsimonpharmacy.com/docs/Pharmacoeconomics and... ·...
2010 [UNIT PH 3340] 1
Pharmacoeconomics and
Management in Pharmacy II
[John Vella B.Pharm.(Hons.) M.Sc.(Pharmacoeconomics)]
2010 [UNIT PH 3340] 2
Economic considerations
Part One
J. Vella [PH 3340]
Price (i)
• One of the basic facts in economics
• Every good, or service has a price, at which
two parties, the buyer and the seller are
mutually satisfied and will execute a
transaction
• The process of deciding upon the price is
that of price negotiation
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Price (ii)
• Prices can be stable or highly volatile
• Equilibrium is reached when neither has
further incentive to bid further
• Market for medicines is unique
• A ‘negative’ product
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Prices (iii) - Elasticity
• An good or service exhibiting elastic
properties reacts according to the classic
curve
• ‘inelastic’ goods, such as medicines, do not
exhibit a drop in purchase with a
concomitant increase in price
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Prices (iv) - Elasticity
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The relationship between the prices of cigarettes
and their price in the UK for the period 1972-92
(Townsend et al, 1994)
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Supply & demand curve (i)
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Supply & demand curve (ii)
• The price of a product will vary according to
how much of it is available for purchase, and
how many buyers there are
• if the supply curve shifts, so will the point of
intersection with the demand curve, and a
resultant modification in the equilibrium price
will necessarily take place
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Competition (i)
• A situation of perfect competition exists
when no buyer or seller can wield a
substantial and unilateral influence on the
behaviour of the market
• A monopoly exists when one seller or
service provider exerts a controlling effect on
the market for a particular good or service
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Competition (ii)
• The patent system for medicines allows a
period of 20 years monopoly from patent
registration
• E.g. Pfizer held a monopoly on the
manufacture of pharmaceutical preparations
containing atorvastatin (Lipitor®) until a few
years ago
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Competition (iii)
• A monopsony is the opposite, when one
buyer has a considerable sway over the
market for a particular good
• E.g. a local supplier for generic hospital-only
products in Malta is bound by prices set by
the government, who is the only buyer for
their product
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J. Vella [PH 3340]
Inflation (i)
• Inflation is a rise in the general price of
goods and services in a defined economic
area or country
• Prices are usually tracked via an accepted
price index, such as the Retail Price Index in
Malta, and the HICP(Harmonised Index of
Consumer Prices)
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J. Vella [PH 3340]
Inflation (ii)
• A healthy economy requires a low rate of
inflation
• The European Central Bank aims ‘to keep
inflation levels at around 2% per annum’
• Too little or no inflation and the economy
does not grow
• Too high a rate and money depreciates too
fast
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Inflation (iii)
• Inflation is the economic term for what we
call the change in the ‘cost of living’
• In Malta, medicine prices form part of the
Retail Price index, as part of the Personal
Care and health sub-index
• The National Statistics Office publishes
monthly updates
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J. Vella [PH 3340]
The composition of the RPI, Malta
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The RPI, in detail
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Rate of inflation, ROI
• The annualised rate of change of a specific
price index, having a predefined base year
• This enables a comparison of the relative
‘cost of living’ at different temporal points
• The ROI, or ‘cost of living’ is an economic
indicator that is widely utilised and quoted by
various stakeholders in policy formulation
and implementation
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2010 [UNIT PH 3340] 18
Sample study on medicine
prices
Part Two
Medicine prices in Malta and
their relation to economic
indicators
John Vella
19Pharmacy Symposium 2010
J. Vella [PH 3340]
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J. Vella [PH 3340]
Medicine prices - a topical subject!
• Stakeholders in the local
pharmaceutical industry
defend prices and
availability concerns
• Consumers, both private
and public, look out for
price increases and insist
that medicine prices are
not commensurate with the
social context
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Background Facts
• No published academic work or verifiable and consistent
data is readily available on the subject
• The local press carries claims that are at times based on
unsubstantiated allegations
• A need for accurate and relevant data to enable considered
and informed discussion between the actors involved
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Methodology
• A comparative analysis of medicine prices and the ‘cost of living’
• A sample of 435 medicines, out of 1682a available for sale on the private market in the Maltese Islands1
• An eight year study time-frame
• Prices taken at the end of each calendar year
a As determined as part of the body of work of a dissertation submitted in partial fulfillment of the degree of Master in Pharmacy
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Methodology
• Two indices were constructed, a simple price composite -
the Retail Medicine Index (RMI), and a volume-weighted
version - the Weighted Medicine Index (WMI)
• The main field identifiers employed were price, OTC/POM
and Generic/Originator status and mode of action
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Results
18.79%
11.01%
13.66% 14.13%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
RPIb RMIb WMIb Wageminb
Perc
en
tag
e I
ncre
ase 2
002
-2009
Indices and Minimum Wage 2002 base=100
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Results
• The medicine indices increased less than the ‘cost of living’
indicator, the Retail Price Index(RPI)2
• The minimum wage3 kept pace with the prices of
medicine, but not with the Retail Price Index
• The greatest annual increases were observed in 2004 and
2005, at around the time the new medicines registrations
system was introduced
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Results
• The WMI increased more than the RMI, indicating that faster moving products rose by a greater percentage than slower ones
• The OTC segment increased twice as much as the POM segment
• No difference was observed between the generic and originator fractions
• Medicines comprising the respiratory section exhibited the greatest increase in price
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Malta and the EU-27
• Data analysis for variations
in medicine prices
extracted from
European Central
Bank(ECB)4 sources
places Malta at the mean
value for the whole set
• The data obtained from the
dissertation study shows
convergence with the
European data, an average
of 12 %, as compared to
the ECB figure of 16.48 %
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Malta and the EU-27
16.04%
16.47%
11.10%
13.66%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00%
HICP Malta (Phrm.)
HICP EU-26 (Phrm.)
RMI
WMI
HICP Malta (Phrm.) HICP EU-26 (Phrm.) RMI WMI
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Conclusions
• The cost of medicine definitely did not increase at a rate
greater than that of the cost of living
• The bulk of the increase in price in the last eight years can
be attributed to the integration of the increased costs of
registration into the final retail price
• Considerations of affordability need to be addressed
further, as the model indices included both branded and
generic products
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Conclusions
• A case is made, and a model proposed for the refinement
of the methodology utilised, the Malta Retail Medicine
Index
• Supply and demand-side measures for the increased
penetration of generic products are required to reduce
average medicine prices in the Maltese Islands
• A hypothetical framework for the above is
outlined, involving the linkage of the granting of a Marketing
Authorisation to lower generic launch prices
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Recommendations
• The development of a specialised index to monitor
medicine prices; an addition to data provided by the Health
& Personal Care sub-index of the RPI
• The linkage of such an index to European prices, taking
into consideration the obstacles of Purchasing Power
Parities and pack size uniformity
• This would provide a coherent tool to facilitate the inter-
country comparisons of prices
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Recommendations
• The utilisation of the proposed index in the formulation and
implementation of social policies aimed at improving access
to the therapeutic benefits afforded by modern
medicines, both at a private sector level, and also in the
area of primary healthcare
• The common goal of all parties involved - the local
pharmaceutical industry, academia and government - must
not only include egoistic self-advancement but also a social
context to the benefits derived from the amelioration of
processes, research and policy implementation
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Bibliography and Acknowledgements
• Deshpande PR, PharmD, Dept. of Pharmacy Practice, Manipal University, Manipal, India.
Pharmacoeconomics, Microsoft Powerpoint Presentation
• Drummond M, Sculpher M, Torrance G, O'Brien B, Stoddart G. Methods for the Economic Evaluation of Health
Care Programmes. 3rd ed Oxford: Oxford University Press; 2007
• International Society for Pharmacoeconmics and Outcomes Research (ISPOR), Introduction to
Pharmacoeconomics, ISPOR Distance Learning Program
• Rascati, K. Essentials of Pharmacoeconomics; Philadelphia:LippincottWilliams & Wilkins; 2008
• Satyanarayana K, St.Peter’s Institute of Pharmaceutical Sciences, Pharmacoeconomics, Microsoft Powerpoint
Presentation
• Shull S PharmD, MBA. Basics of Pharmacoeconomics and Outcomes Research:Application to Patient
Care, Microsoft Powerpoint Presentation
• Vella J. Medicine prices in Malta and their relation to economic indicators. Dissertation, University of Malta
2010
• www.nso.gov.mt, National Statistics Office website
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