Pharmaceutical Cost Containment in Europe: National Governments Tighten the Screws

Faced with economic stagnation, rising unemployment, diminishing tax revenues, and growing budget defi cits, European governments are redoubling their efforts to curb public expenditures on healthcare. Although prescription drugs account for only a modest share of total healthcare spending, the pharmaceutical market is invariably the focus of government cost-cutting endeavors, and the research-based pharmaceutical industry is the easiest and most common target of these initiatives. Drug manufacturers need to prepare now for signifi cant changes in several leading markets-most notably, measures that will transform the pricing and reimbursement environment in Germany and Spain.

Questions Answered in This Report:

• The French government is intensifying its efforts to promote more economical prescribing and dispensing. What penalties will pharmaceutical companies face if they exceed the sales growth target? How is the government trying to modify physician prescribing behavior? What measures have been introduced to stimulate greater use of generics in France?
• The German government plans to overhaul the country's complex pharmaceutical pricing and reimbursement system. Which measure has been the mainstay of the German cost-cutting strategy, and what plans does the government have for increased use of this tool? What plans does the government have for mandatory rebates and price freezes? How is pricing freedom in Germany under threat?
• The Italian government will likely remain focused on exercising strict control on Italian drug prices, which consistently rank among the lowest in Western Europe. How has the government used the pharmaceutical budget, price controls, and reference pricing to curb spending? What efforts have been made to encourage physicians to prescribe more economically? Why is the Italian market becoming more fragmented?
• The Spanish government recently unveiled a series of reforms intended to reduce pharmaceutical expenditures by ?1.5 billion ($2.1 billion) per year. How will the reference pricing system become more aggressive? What plans does the government have for price cuts? What will manufacturers need to do to secure favorable pricing and reimbursement terms for new drugs in the future?
• The U.K. government uses a more limited range of cost controls than most of its European neighbors. What are the most important cost controls in the United Kingdom? How has health technology assessment become a critical element in cost containment? Why have patterns of parallel trade shifted dramatically in the United Kingdom in recent years?