April 8th 2016

Martin Koehring, Senior Editor, The Economist Intelligence Unit

2OVERVIEW

Overview

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• Introduction

• Modernising health systems in the Balkans

• Modernising the Serbian health system: The need for a reliable decision-making compass

• Conclusion

4INTRODUCTION

Introduction

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• Balkan report, Modernising health systems in the Balkans: Uneven progress and new institutions, commissioned by Novartis, to be published by The Economist Intelligence Unit (EIU) in May 2016;

• Findings based on desk research and at least 15 in-depth interviews with a range of healthcare experts, policymakers and economists;

• Report examines and assesses the reimbursement landscape, the structure for health technology assessment, funding models and the policy outlook for 10 Balkan countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, the Republic of Macedonia, Montenegro, Romania, Serbia and Slovenia;

• Country case study and infographic on Serbia to be published too.

6MODERNISING HEALTH SYSTEMS IN THE BALKANS

KEY FINDINGS OF BALKAN REPORT

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• Structural remnants of cradle-to-grave health systems no longer viable and unable to meet healthcare needs of populations;

• Many local health systems remain excessively decentralised, complicating the process of modernisation;

• Universal health insurance remains spotty and out-of-pocket costs are rising;

• Comprehensive and consistent systems for health technology assessment (HTA) are non-existent in most of the region or otherwise underdeveloped;

• Austerity measures have led to reduced spending in many parts of the health budget, especially in the area of pharmaceuticals;

• Balkan health systems need to improve their systems for negotiating prices for medicines and devices.

8MODERNISING THE SERBIAN HEALTH SYSTEM:The need for a reliable decision-making compass

KEY FINDINGS OF SERBIA CASE STUDY

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• Serbia encapsulates many of the health challenges facing less developed Balkan countries;

• Healthcare system is decentralised and fragmented in places;

• Levels of out-of-pocket (OOP) payments and corruption are high;

• Country lacks a transparent and comprehensive system of assessing the value of its healthcare investments and determining how to pay for them;

• These issues undermine access to healthcare and contribute to a mismatch between health spending and outcomes;

• Slow progress in modernising healthcare system will be increasingly in the spotlight as Serbia aims to become a full EU member by 2020.

Mismatch between healthcare spending and health outcomes (1)

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• Serbia actually ranks first in the region in terms of total health expenditure as a share of GDP (WHO data)

Mismatch between healthcare spending and health outcomes (2)

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• But Serbia only ranks fifth in terms of total health spending per capita in Purchasing Power Parity, Int$ (WHO data)

Mismatch between healthcare spending and health outcomes (3)

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• Spending not fully translating into positive health outcomes, e.g. life expectancy significantly below EU average and slightly below average in southeast European region (WHO data);

• EIU study from 2014, Health outcomes and cost: a 166-country comparison, placed Serbia in tier 3 (out of 6 tiers) in terms of health outcomes and ranked it higher for healthcare spending than for health outcomes.

 

Mismatch between healthcare spending and health outcomes (4)

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• Out-of-pocket (OOP) payments (including “informal” co-payments) make a much larger contribution to overall spending in Serbia than in many other parts of the region: just below 40% of total health expenditure;

• Embedded corruption in healthcare sector: health system seen as the most corrupt after the country’s political parties (2013 survey);

• Need for reform in health insurance system (more precise compulsory package; legalisation & formalisation of direct payments for services rendered);

General government expenditure on health as a % of total health expenditure (WHO data)

A gap between funding and commitmentS

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• Serbia struggles to find ways to fulfill commitments to healthcare access for the population with the resources the government has at its disposal;

• National Health Insurance Fund (RFZO) has difficulties collecting contributions from employers, ultimately leading to a shortage of necessary drugs (e.g. hepatitis C, oncology);

• European Commission, November 2015: “the poor financial situation of the public health fund puts the sustainability of the [healthcare] sector in question”.

Decision-making without a reliable compass (1)

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• Development of health technology assessment (HTA) infrastructure in Serbia lags well behind neighbouring countries (e.g. Croatia & Slovenia);

Ø no official HTA agency (RFZO carries out some related activities; ALIMS evaluates quality, safety & efficiency of pharmaceuticals; HTA Committee of Ministry of Health has little technical support);

Ø no participation in European network for Health Technology Assessment (EUnetHTA);

• Reference pricing: maximum prices based on lowest price for three reference countries (Slovenia, Croatia & Italy); price-volume agreements between manufacturers & wholesalers;

• March 2016: negotiations on formalising the introduction of managed entry agreements (MEAs) started.

Decision-making without a reliable compass (2)

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• Process for deciding reimbursement and pricing of pharmaceuticals and medical devices remains patchy;

• Lack of clarity to what extent government is adhering to 2012 rulebook on cost-effectiveness and budget impact analysis for drugs;

• Lack of transparency over exchange rate used in pricing negotiations;

• Fewer drugs placed on reimbursement list in comparison with other countries in the region:

Ø 2007-10: 12 of 228 new medicines registered in EU have been approved for reimbursement in Serbia (vs 148 in Slovenia, 83 in Bulgaria & 62 in Croatia);

Ø Since 2010: EU has registered 139 new medicines, of which Bulgaria put 44 on reimbursement list, Croatia 27 &

Serbia only one.

Efforts to cut drug spending

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• Policymakers have aimed to cut pharmaceutical expenditure in the aftermath of the global financial crisis in 2007-08;

• RFZO introduced new rule for pharmaceutical companies in 2011-12 requiring them to give a 10% rebate on all prescription medicines;

• New regulation (Article 29) introduced in April 2014 with the aim of reducing the price of off-patent originators by up to 49% compared to current list prices in order to save RSD5bn in RZFO drug budget;

• Will these savings be reinvested into modernising the healthcare system?

Impetus for improvement? (1)

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• Limited efforts to bring in reforms to improve efficiency in the system, e.g. capitation system in primary care & launch of payment mechanisms based on diagnosis-related groups (DRGs) for hospital care;

• The World Bank’s Second Serbia Health Project (approved in February 2014) aims to support quality, efficiency & transparency of health system financing for both primary and hospital care:

Ø strengthening HTA and quality improvement systems for healthcare delivery;

Ø management of “selected priority non-communicable diseases”;

• Government is piloting centralised procurement for drugs (but: bidding takes place only once a year);

• Greater focus on monitoring health outcomes (e.g. via patient data).

Impetus for improvement? (2)

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• Modernising Serbia’s healthcare system will become increasingly important in the context of EU accession negotiations (Chapter 28);

• Government joined EU’s health programme for 2014-20, highlighting country’s commitment to improving its healthcare system in line with EU standards;

• But: European Commission has expressed concerns, especially aboutØ health system’s vulnerability to corruption;Ø shortages of medical and administrative staff in primary healthcare;

and Ø particularly weak access to healthcare for specific groups, such as

prisoners and the Roma population.

20CONCLUSION

CONCLUDING REMARKS

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• Systemic weaknesses in Serbia’s healthcare system (including corruption and lack of a comprehensive system for assessing health technology);

• These weaknesses undermine access to healthcare and contribute to mismatch between health spending and outcomes;

• As Serbia continues its preparation for EU membership, its ability to implement much needed reforms of its health system will be in the spotlight.

FOR MORE INFORMATION

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The Balkan report, the Serbia case study and the infographic will be published on the EIU Perspectives website:

http://www.eiuperspectives.economist.com/

Follow Martin on Twitter: @EconomistMartin