Approaches to Pharmaceutical Regulation in Europe and the USA

8/3/2019 Approaches to Pharmaceutical Regulation in Europe and the USA

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Approaches to PharmaceuticalApproaches to PharmaceuticalRegulation in Europe and the USARegulation in Europe and the USA

Panos Kanavos

London School of Economics

Washington, D.C., 10 June 2003


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AgendaAgenda

Pharmaceutical Regulation in Europe

Lessons for the US


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Key issueKey issuess: maintain quality: maintain qualityof care whilst containingof care whilst containing

increasing costsincreasing costs &&improving allocation ofimproving allocation of

resourcesresources


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Trends in health care expenditureTrends in health care expenditure

Health care expenditure as % of GDP

0

2

4

6

8

10

12

1960 1970 1980 1990 2001

Aus

Bel

Den

Fil

Fr

Ger

Gr

Ice

Ire

It

Lux

Neth

Nor

Por

Sp

Sw d

Sw s

Uk

Average


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Pharmaceutical consumption, 1998/9Pharmaceutical consumption, 1998/9

0

50

100

150

200

250

300

350

400

450

UK

Germ

any

Fran

ceIta

ly

Spain

N

ethe

rland

s

Swed

en USA

Per capita spend, US$ PPP

0

5

10

15

20

25

UK

Germ

any

Fran

ceIta

ly

Spain

Netherland

s

Swed

en USA

Rx spend as % of total health


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EUEU--US differences in Rx Drug policyUS differences in Rx Drug policy

In European Union member states, there is/are

Limited role of voluntary health insurance

(Near) universal access to Rx medicines

A process of frequently regulated ornegotiated drug prices

Modest patient co-payments

Significant co-payment exemptions

No explicit DTCA, but access to information

Significant and rising parallel trade


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BiBi--lateral comparisons of exlateral comparisons of ex--manufacturermanufacturerprices (UK=100)prices (UK=100)

1995 1996 1997 1998 1999 5-yr av

France 106 112 86 85 84 95

Germany 128 124 108 108 97 112

Italy 82 91 82 81 83 92

Netherla 134 112 93 - - -

Spain 87 88 71 71 67 77

USA 170 183 175 174 184 187Austria - - - 81 83 96

Belgium - - - 86 84 97

Finland- - - 86 85 98


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Rx drug spending increasesRx drug spending increases

Between1990 and 2000

spending onprescriptiondrugs faroutstrippedspending for

hospital careand physicianservices

49.6

57.5

139.5

0

20

40

60

80

100

120

140

Hospital Care Physician

services

Prescription

medicines

% of

increase in

spending


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National approaches to the pricingNational approaches to the pricing

of Rx medicinesof Rx medicines

Rate ofReturn (RoR)Regulation

Price Setting

command & control

Negotiation and agreement


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Pricing & Reimbursement Methodologies:Pricing & Reimbursement Methodologies:Managing the Supply SideManaging the Supply Side

Free pricing (Germany, Denmark, Hungary, Estonia)

Profit control (UK)

Average Pricing (Czech Republic, Ireland, Italy,Netherlands, Portugal, Slovenia, Sweden)

International Price Comparisons (several)

Cost-Plus Pricing (Spain, Greece, Poland, Czech)

Reference Pricing (Germany, Netherlands, Sweden,Italy, Norway, Spain, Czech)

Periodic price reductions (France)

Price Cuts/F

reezes(most European)


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Pricing & Reimbursement Methodologies:Pricing & Reimbursement Methodologies:Controlling the Supply SideControlling the Supply Side

Me-too Pricing (France, Sweden, Hungary)

Industry paybacks when budgets are exceeded

Taxes on promotion expenditure (France, Sweden)

Developing a market for parallel imports (UK,

Netherlands, Germany, Denmark)

Developing a market for generics (mainly UK,

Netherlands, Germany, Denmark)

Controlling generics prices (France, Greece)

Fixed or revenue budgets for industry (Spain,F

rance)


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Variation in Average European PricesVariation in Average European Prices

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Arix

tra

Tamifl

u

Elidel

Zeld

ox

Pegasys

Lantus

Valcyte

Xigris

Ivan

z

Cancid

as

Vfend

P

ricing methods attimes irrelevant

Little evidence of

price consistency

between US the EU


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Rate of Return RegulationRate of Return Regulation

Supply-side

PPRS, Jul.99-Jul.04

Price cut @4.5%: 1999 -

2001 Free price modulation

from January 2001

Price control for

generics

Limited negative list

PPRS judicial review

Demand-side

NICE: binding clinical

cost-effectiveness

guidance Practice guidelines

Extensive generic

prescribing

Cost conscious GPs

Budgets for PCGs

Prescription audit


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Price SettingPrice Setting RegulationRegulation Historical

Pricing+Justifiable

Cost Increases Different variations

Price comparisons

Basic cost

Cost-plus

RPI-X

Inevitable, Arbitrary

Categorisation often

ad hoc rules Exhaustive Rules

Loopholes or Tedious

Updating Process

Enforcement is

dependent on

Resource Potential of

Agency


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Reference Pricing variationsReference Pricing variationsCountry Year Attributes

Germany 1989 identical substance

Denmark 1993 identical substance,

exemptions Netherlands 1991 clusters of interchangeable

products (incl. patent)

Sweden 1993 identical substance

Italy 2001 identical substance

Spain 2000/1 identical substance

USA (Medicaid) 2002 identical substance; cluster


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Reference pricing: policy dilemmasReference pricing: policy dilemmas

Design parameters

Coverage by reference pricing system

In-patent drugs

Setting the reference price


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Reference pricing: ImpactReference pricing: Impact

Prices: downward pressure

Prescribing volume: unaffected

Switch effect: can be significant

Quality of care: little evidence of

impact


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Reference Pricing: a Specific TypeReference Pricing: a Specific Type

of Incentiveof Incentive--based Formularybased Formulary

Reference price

(ACE inhibitors: $27per 30 day supply)

Paid by drugbenefits program

Out-of-pocketcontribution

Total drugprice


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0

10

20

30

40

50

60

Jan-96 Jul-96 Jan-97 Jul-97 Jan-98

Drugexpendituresperpatient($)

ExtraMDv

isitsperpatien

t($)

observed BP drug expenditures

Drug expenditures for extra visits in drug switchers

Extra visits: 0.7 mill in 1 yr

Drug savings: 6.7 mill in 1 yr

Economic Effects ofReferenceEconomic Effects ofReference

Pricing of

ACE

Inhibitors in B.C.Pricing of

ACE

Inhibitors in B.C.

0

-20

20

(right scale)

Schneeweiss et al, NEJM 2002; 346:822-9)


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Reference Pricing in the USReference Pricing in the US

Massachusetts, August 2002; Delaware, April 2002 Establishment of the Massachusetts Health Drug List:

creating drugs of choice

Group classes of drugs together (e.g. H2-blockers,

PPIs, NSAIDs, Cox-II, non-sedative antihistamines)and reimburse the lowest in the class [whether generic

or brand]

Deviate from above regime in case of demonstrated

medical necessity only

Demonstrated medical necessity means: there is no

other service that would achieve the same outcome at

minimum cost


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Types ofAgreementsTypes ofAgreements

Framework agreements (France, Spain, Denmark)

Price volume tradeoff

Price freezes in exchange for modest increases later

Limit pharmaceutical market growth to GDP growth

(Spain)

Paybacks if pre-agreed upon budgets are exceeded

(Belgium, France, Spain, Portugal)

Faster access to market for speedier subsequent price

reductions (France)


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Current practice

Denmark

Switzerland

Sweden Finland

The Netherlands

England & Wales [NICE]

Portugal Norway

Under preparation

or rising in

influence

Italy

France

Greece Poland

Hungary

Slovenia

Health Economics: OfficialHealth Economics: OfficialRequirementsRequirements


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Regulation and acceptance of economic evaluationRegulation and acceptance of economic evaluation

Acceptance

Regulation

High

LowHighLow

UK

Australia

Canada

France

HollandHolland

ItalyItaly

USAUSA GermanyGermany

SpainSpain

JapanJapan


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Requirements for economicRequirements for economic

evaluationsevaluationsPricing and Reimbursement

Denmark, Sweden, Norway, Finland, Portugal,Netherlands, France, Australia, Canada

AppraisalNICE UK

Not mandatory but considered Sweden, Spain, Italy, Germany, Hungary

Formularies UK, USA, Canada, Australia, Denmark

Used in guidelines Denmark, Germany, Netherlands, Sweden, UK


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The economic impact of parallel tradeThe economic impact of parallel trade

Increasing in significance

Allowed by European jurisprudence

Encouraged by several EU Member States

Parallel trade policies in conflict with other

incentives for industry

Static v. dynamic effects


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CBT versus Total Sales Key Products EUROPE

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

LIPITOR NORVASC ZOCOR ZYPREXA CAPOTEN

(000)LCD

MAT Q2 2001 sales (MNF) CBT import MAT Q2 2001 (MNF)


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StatinsStatins and parallel tradeand parallel trade:: UKUK

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

CBT

STATIN


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Overall concluding remarksOverall concluding remarks

All EU countries continueto be aware of rising costissues and areexperimenting with policy

changes Emphasis on value-for-

money

Strong emphasis on thedemand-side

Continued emphasis on thesupply-side; in some cases,increased emphasis on S-S

Shift towards aggressivebargaining rather thancommand-and-control

Lessons from EU countriesmay include:

Using (the right) economicevidence more intensively

Managing price better ordifferently

Aggressively managingformularies and bargaining

Reference pricing

Physician incentives

Return on capital formulae fordrug procurement

More aggressive discountsrequired for early launch/use

Myth: interventions haveisolated effects: balloon squeeze

Appropriateness of care?

Approaches to Pharmaceutical Regulation in Europe and the USA

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