Pricing and paying for medicines

Ad Antonisse

AstraZeneca BV

April 2005

Content• The Netherlands compared to other EU countries

• What is the issue with medicines?

• How does the Dutch system work

• G10, OECD, WHO and US

• How to solve the problem

Costs of medicines(% total healthcare - OECD)

0

5

10

15

20

25

%

Spain

France

Italy

Belgium

Austria

Germany

UK

The Netherlands

Consumption of medicines(€/inh. - OECD)

0

50

100

150

200

250

300

350

400

450

€

France

Belgium

Germany

Italy

Austria

The Netherlands

Spain

UK

Consumption of healthcare(% GDP - OECD)

0

2

4

6

8

10

12

%

Germany

France

The Netherlands

Belgium

Italy

Austria

UK

Spain

Consumption of medicines(% GDP - OECD)

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

1,8

2

%

France

Italy

Belgium

Germany

Spain

Sweden

UK

The Netherlands

Consultations with prescription(% - OECD)

0

10

20

30

40

50

60

70

80

90

100

%

Italy

Belgium

Spain

France

Germany

UK

Sweden

The Netherlands

Delivery of medicines (SFK)

0%

20%

40%

60%

80%

100%

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

% other

% pharmacist

% generic

% parallel

% branded

Price index medicines(1996 = 100)

0

20

40

60

80

100

120

1996 1997 1998 1999 2000 2001 2002 2003

What’s the issue?• Low prescription of medicines

• Low consumption of medicines

• High generic substitution

• Average prices with decreasing trend

• Increasing amount of regulations

KNMG (March 2005):

“ Often VWS proposes new regulations and policies in medicines on cost containment and safety, which are not

always in line with each other”

The Dutch system• GVS list 1A

• Clustering based on broad population/indication

• Price based on € / DDD

• Product form not of importance

• GVS list 1B

• Therapeutic added value for broad population against “golden standard”

• “Free” pricing based on FE

This is the issue!• All products priced on 1A limit

• No incentive for innovation in product form

• No incentive for innovation for sub group

• No incentive for incremental innovation

• Long negotiations for 1B products

Incremental innovation

Recommendations G10(May 2002)

• Rec 2: … improve the introduction to the market, in particular for innovative medicines.

• Rec 3: … improving time taken between granting of MA and pricing and reimbursement decisions.

• Rec 4: Competitive generic market

• Rec 6: Price regulation only for those products purchased by or reimbursed by the State

• Rec 7: Development of HTA including cost effectiveness

• Rec 10: Information to patients

OECD - Health Project(2004)

Pag 105: Socially optimally prices need to take into account not only the value of the specific medicine, but also the costs of

research and development, if future innovation is to be sustained.

Pag 106:… such (reference pricing) systems may reduce incentives for innovation.

OECD - Health Project(2004)

Facilitating availability and use of generic alternatives can avert these negative effects by fostering price competition at the

level of the molecule, rather than the therapeutic class.

Employ pharmaceutical pricing systems and other policies that reward cost-effective choices among similar medications and

encourage truly novel innovation in the pharmaceutical sector.

WHO priority medicines(November 2004)

Pharmaceutical innovation in Europe could be improved through reforms of regulatory and pricing policies

Therapeutics can be improved through the development of improved pharmaceutical delivery mechanisms

Pharmaceutical innovation should also encompass special interest groups of patients

U.S. Department of Commerce (December 2004)

As OECD countries individually seek to reduce spending on drugs through price controls, their collective actions reduce R&D that would provide substantial health benefits to all.

Relaxation of foreign price controls, if coupled with appropriate reform of foreign generic markets, could potentially bring

about much of these gains from the flow of new drugs, even without foreign spending on prescription drugs.

…the increased revenues from decontrolling drug prices in OECD countries would, all things being equal, yield on

average 2.7 to 4.1 new drugs per year.

How to maintain integrated care• See medicines as part of total health care

• See medicines (and health care) as investment and not as costs

• Value innovation in healthcare, also incremental and also in product form or sub group

• Use HTA to value healthcare and the components

• Make market access fast and without unneeded administration

“If you think healthcare is expensive,

try disease”