Pricing and Reimbursement 2005 / 2006, Evaluating Key Strategic Issues

Published by: Visiongain

Published: Oct. 1, 2005

Table of Contents

1. Executive Summary: Pricing and Reimbursement 2005

1.1 Aims and Scope of Pricing and Reimbursement 2005

2. Introduction to Pricing and Reimbursement: The Increasing Control of Drug Prices by Governments

2.1 Price is the Key (I)

2.2 Reimbursement: Who Pays

2.3 Price is the Key (II)

2.4 The Reimbursement System

2.5 Different Reimbursement Systems Different Drug Prices

2.6 The Different Systems of Reimbursement

2.6.1 International Reference Pricing

2.6.2 Therapeutic Class Reference Pricing

2.6.3 Profit Controls

2.6.4 Doctors Budgets

2.6.5 Direct Price Controls

2.6.6 Volume Limitations

2.6.7 Rebate Requirements

2.6.8 Reimbursement Restrictions

2.6.9 Fourth Hurdle Requirements/Cost-Effectiveness Reviews

2.6.10 Positive/Negative Lists

2.7 The Influence of Parallel Trade on Drug Pricing

2.8 Marketing Approval is Necessary Prior to Reimbursement

2.9 Pricing Approval Comes After Marketing Approval

2.10 The High Costs of Bringing a Drug to Market

2.11 Drug Purchase Decisions by Doctors Are All Important in Drug Sales

2.12 The Price Inelasticity of Doctor's Decisions Over Drug Prescription

2.13 Government Influence on Doctor in Drug Prescription Does Lower Drug Costs

2.14 Healthcare Costs Throughout the Developed World are Increasing

2.15 Drivers of Drug Expenditure

2.16 Restraints on Drug Expenditure

2.17 The US Spent the Highest Proportion of its GDP on Healthcare and Hungary Spent the Highest Proportion of its Healthcare on Pharmaceuticals

2.18 The UK had the Highest Health Expenditure Growth Rates

2.19 All Governments Want to Cut their Drug Bill and Drug Prices are an Obvious Method of Control

2.20 The Market and Company Factors that Influence Drug Pricing

2.21 OTC Drugs are Not Price Controlled

2.22 Generic Drugs Lower Healthcare Costs

2.23 Increase Use of Generic Drugs Will Create High Savings for Healthcare Systems

2.24 Price Controls May Affect Drug Launch

2.25 Cost Containment Methods have Limited Effects

2.26 US and Europe Drug Pricing Models Compared

2.27 The Future of Global Pricing and Reimbursement

3. Pricing and Reimbursement in the US: The Advent of Price Controls?

3.1 US and Europe Drug Pricing Models Compared

3.2 The US Healthcare System

3.3 Private Insurance through MCOs and the State Organise US Healthcare

3.4 The Development of Present-Day Managed Care in the US

3.5 Private Health Insurance Premiums are Beginning to Rise

3.6 Private Insurance through MCOs and the State Organise US Healthcare

3.7 The Managed Care System in the US

3.8 What are HMOs?

3.9 PPOs Plans

3.10 POS Plans

3.11 Different MCOs Compared

3.12 The Role of the Employer in the US Healthcare System: The Rise of PPO Health Plans

3.13 Health Insurance Options for the Unemployed: COBRA

3.14 The Uninsured Patient in the US

3.15 Medicaid: An Overview

3.16 Medicare: An Overview

3.17 Drug Reimbursement and MCOs and Medicare/Medicaid

3.17.1 Medicare/Medicaid

3.18 The US Spends Nearly 15% of its GDP on Healthcare

3.19 Private Insurance Pays for Less than Half of US Healthcare Needs

3.20 In 2003 US Drug Prescription Costs were 10.7% of Total Healthcare Spend But Hospital Care was Highest

3.21 US Healthcare Spending is Estimated to Increase by nearly 8% in 2005

Used on the Increases in Drug Price, 1997-2002

3.22 US Pricing and Federal Discounts

3.23 US Drug Prices are the Highest in the World

3.24 Prices for the Same Drug in the US also Vary Greatly

3.25 Medicare Prescription Drug Improvement and Modernization Act, 2003

3.26 Under the New Act Prescription Drug Savings for Seniors Seem Real

3.27 The Medicare Act 2003 Will Vastly Benefit Drug Companies

4. Pricing and Reimbursement in Europe: An Overview

4.1 Reference Pricing is a Common P&R Mechanism Throughout Europe

4.2 Reference Pricing will Always Cause Drugs to be Priced Below the Market Level

4.3 Price Differentials in the EU

4.4 Generic Prescribing and Substitution Varies in Europe

4.5 Generic Use Varies in Europe

4.6 EU Accession Will Encourage Price Differentials and Generic Usage

4.7 A Single European Price for Pharmaceuticals is Unlikely

4.8 European Hospital Drug Prices

4.9 Parallel Trade Is Used as Cost Containment Method

4.10 EU Accession Will Increase Parallel Trade

4.11 The Impact of the Euro on Drug Prices4.12 Different Forms of EU Health Care Financing

4.13 Single Payer

4.14 Social Insurance - Sickness Funds

4.15 Private Insurance

4.16 EU Accession Countries May Be Included in Reference Pricing Systems

4.17 The Payment of European Pharmacists

4.18 The Future of Drug Pricing and the Market for Drugs in Europe

5. Pricing and Reimbursement in the UK

5.1 Drug Approval Process

5.2 Health Care Coverage

5.3 Patient Co-payment

5.4 Pricing and the Pharmaceutical Price Regulation Scheme

5.5 New PPRS Regulations 2005

5.6 Pharmaceutical Companies and the Monitoring of Drug Profit

5.7 National Institute of Clinical Effectiveness (NICE) has Become an Instrument for Cost Enhancement and Not Containment

5.8 Pharmacy Payments

5.9 The Criteria for Reimbursement

5.10 The Size of Reimbursement

5.11 Doctor's Budgets are Unpopular with Some But Reduced Drug Expenditure

5.12 Generic Use is Increasing

5.13 Drug Prices are Reduced in the UK Market

5.14 Doctor's Budgets the Most Successful Aspect of UK's Pricing and Reimbursement System

6. Pricing and Reimbursement in France

6.1 The Price of Drugs in France Matches the European Average

6.2 The French Healthcare System

6.3 Health Care Coverage

6.4 The French Healthcare System

6.5 Voluntary Health Insurance

6.6 Out-Of-Pocket Payments

6.7 French Drug Pricing is Tightly Regulated

6.8 An Informal Reference Pricing System Exists in France

6.9 Wholesale and Pharmacy Prices

6.10 The Criteria for Reimbursement

6.11 The Size of Reimbursement

6.12 The Nature of the Drug Price Agreements Between the Pharmaceutical Industry and the CEPS

6.13 Generic Substitution as an Attempt to Curb Drug Costs

6.14 French Health System Reform has Largely Failed

7. Drug Pricing and Reimbursement in Germany

7.1 The German Pharmaceutical Market

7.2 German Health Care System is Characterised by Financial Shortfall

7.3 The German Response to its Healthcare System Shortfall

7.4 The Effect of Reunification on the German National Health System

7.5 The German Drug Approval's Process is the Fastest in Europe

7.6 German Drug Prices are Higher than the European Average

7.7 The German Reference Price System Now Includes Patented Drugs7.8 Reference Pricing

7.9 Criteria for Reimbursement and Negative Lists

7.10 The Limits on Co-Pay

7.11 Generic Substitution is Allowed in Germany

7.12 Doctors Budgets Imposed in An Attempt to Cut Drug Costs

7.13 German Government Imposes 16% Drug Discounts on Mnaufacturers

7.14 Conclusion: Drug Regulations are Lenient in Germany

8. Pricing and Reimbursement in Spain

8.1 The Spanish National healthcare System

8.2 Reimbursement Levels

8.3 The Criteria for Reimbursement and Negative Lists

8.4 Drug Authorisations and Other Bodies

8.5 The Pricing of Drugs in Spain

8.6 Reference Pricing Comparisons are Only Used with Generic Drugs

8.7 The Penetration of Generics is Low in Spain

8.8 Spanish Parallel Trade and Dual Pricing

8.9 The Price of Drugs in Spain

8.10 Spain Practices Generic Substitution

8.11 The Distribution of Drugs

8.12 Cost Containment and Doctor Budgets

8.13 Conclusion: Spain Uses Price Freeze as Main Cost Containment Method But Will Use Saparingly in the Future

9. Pricing and Reimbursement in Italy

9.1 The Italian HealthCare System

9.2 Drug Reimbursement

9.3 Authorities in Reimbursement Decision Making

9.4 The CIPE: Setting the Drug Price

9.5 Italian Pharmacies

9.6 Italian Pharmaceutical Law

9.7 Changes in Distribution Margins

9.8 The Introduction of Generics

9.9 Influencing the Prescriber

9.10 The Effect of Drug Pricing Strategies on Italian Drug Spend

9.11 Italy's Generic Use May Increase

10. Pricing and Reimbursement in Japan

10.1The Japanese Healthcare System

10.2 Revisions to the Health Insurance Law Saw an Increase in Co-Pay

10.3 Japanese Drug Pricing

10.4 The Japanese Reference System

10.5 The Reexamination and Reevaluation Drug Systems are Used to Predict Drug Safety

10.6 Japan Has Reduced Healthcare Spending Including Drugs

10.7 Generic Drug Prices are Set at 70% of the Original Drug Price

10.8 There is No Generic Substitution in Japan

10.9 The Japanese Wholesale Market in Consolidation

10.10 Bungyo: the Separation of Dispensing and Prescribing is Rapidly Increasing

10.11 Bungyo Separation Has Dramatic Effect on Retail Pharmacies

10.12 New Developments: Contract Manufacturing Will Increase

10.13 New Drug Approval and License System Will Cut Drug Approval Time

10.14 Changes in Approval Times Will Aid Foreign Company Entry into the Japanese Pharmaceutical Market

10.15 Conclusion: The Japanese Government Directly Controls Drug Prices through Price Cuts

11. Canada and US Drug Reimporatation: A Revolution by the Consumer

11.1 Drug Reimportation from Canada Will Not Affect US Drug Prices

11.2 Drugs are Not Always Cheaper in Canada Compared to the US

11.3 Generic Drugs Cheaper in the US than Canada

11.4 It is Legal for the US to Import Drugs from Canada but only if the Drugs are Proven Safe

11.5 The US States Currently Active in US/Canada Drug Reimportation

11.6 Why are Pharmaceutical Prices Lower in Canada?

11.7 Reimportation is a Form of Price Control which may have Poor Financial Consequences for the Pharmaceutical Industry

11.8 The Response of the Major Drug Companies on Drug Reimportation from Canada

11.9 The Response of the Canadian Pharmacies to Drug Reimportation

11.10 The Overall Savings from Drug Reimportation for the Consumer and the US Government is Small

11.11 Drug Reimportation Will Never Work on a Large Scale

11.12 The New Medicare Act 2003 Will Slow Down Drug Reimportation

12. Parallel Trade and Its Effect on Drug Prices

12.1 Parallel Trade is Predominantly a European Activity

12.2 The UK is the Largest Importer of Parallel Traded Drugs

12.3 The Method of Parallel Trade Importing into the UK

12.4 The Regulation of UK Parallel Trade

12.5 Price is Not the Only Factor in Determining the Parallel Trade Potential of a Drug

12.6 The Repackaging of Pharmaceuticals is an Important Aspect of Parallel Trade

12.7 The Exhaustion of IPR Allows for the Importation of Drugs

12.8 Current EU Case Law on Parallel Imports of Pharmaceutical Products

12.9 EU Free Pricing is a Myth

12.10 The Arguments For and Against Parallel Trade

12.11 The Savings from Parallel Trade are Small

12.11.1 Denmark

12.11.2 Germany

12.11.3 Sweden

12.11.4 The Netherlands

12.11.5 United Kingdom

12.12 York Study Did Show that PT Did Reduce Healthcare Costs Albeit by Small Amounts

12.13 Swedish Study Confirms Price Competitive Effect of Parallel Traded Drugs

12.14 LSE Publication Contradicts EFPIA Financed Study

12.15 EU Drug Price Harmonisation Is Unlikely

12.16 The Drug Company's Arguments Against Parallel Trade are Weak

12.17 Different Organisational Positions on Parallel Trade

12.18 Visiongain Questionnaire on Parallel Trade: A Surprising Consensus Between Both Big Pharma and the W&D Industry

13. Conclusion: Drug Pricing Control Will Become Ever More Stringent

List of Tables

Table 2.1 Comparative Drug Prices in Selected Developed Countries, 2005

Table 2.2 Percentage Excess in Drug Prices in the US Compared to Selected Countries, 2003

Table 2.3 Drug Purchase Decision Making

Table 2.4 Healthcare Spending by Country, 2002

Table 2.5 Total Health Spending ($) and Drug Expenditure per Patient ($), 2002

Table 2.6 The Top Five Countries by Public Expenditure on Health (% GDP), 2002

Table 2.7 The Top Five Countries by Total Expenditure on Health (% GDP), 2002

Table 2.8 The Top Five Countries by Total Expenditure on Drugs as % Total Expenditure on Health, 2002

Table 2.9 Top Five Countries by Total Health Spending Per Capita ($ PPP), 2002

Table 2.10 Annual Average Growth Rates (%) in GDP, Total and Public Health Expenditure of Principle Countries, 1997-2002

Table 2.11 All Factors that Influence Drug Prices

Table 2.12 Generic Market Share in Selected Countries, 2004

Table 2.13 Current Practices in the Development of Increased Generic Use, 2004

Table 3.1 Annual Growth in Private Health Insurance Premiums (%)

Table 3.2 A Comparison in Plan Cost Between Several Different Californian HMOs, 2004

Table 3.3 Monthly Insurance Premiums (Single and Family Enrollee in Group Health Plans), 2004

Table 3.4 The US Spend on Healthcare 2002

Table 3.5 Sources of US Health Payments (%), 2003

Table 3.6 Distribution of Spending (%): Public Vs. Private, 2003

Table 3.7 US Healthcare Spending by Category ($bn) (%), 2003

Table 3.8 Annual Growth Rates by Health Spending Categories, 2003

Table 3.9 US Healthcare Spending ($) 2000-2005

Table 3.10 The Relative Contributions of Price, Utilisation and Types of Prescription Drugs

Table 3.11 A Comparison of Prescription Drug Prices For a 30-day supply: US and Europe

Table 4.1 Price Control or Drug Supply Control Mechanisms as Part of P&R Systems

Table 4.2 The Different Pricing and Reimbursement Systems of Selected European Countries, 2005

Table 4.3 The Two Broad P&R Systems within Europe, 2005

Table 4.4 EU Countries and Reference Pricing, 2005

Table 4.5 Price Differences per unit ($) in some EU Countries DDD-adjusted, 2002

Table 4.6 Generic Use in Europe, 2004

Table 4.7 Generic Market Share in Selected Countries, 2004

Table 4.8 The Advantages and Disadvantages of a Single European Price for All Drugs

Table 5.1 Different Aspects of UK Healthcare Spending, 1997-2002

Table 6.1 Different Aspects of French Healthcare Spending, 1997-2002

Table 7.1 Different Aspects of German Healthcare Spending, 1997-2002

Table 8.1 Different Aspects of Spanish Healthcare Spending, 1997-2002

Table 9.1 Different Aspects of Italian Healthcare Spending, 1997-2002

Table 9.2 Different Reimbursement Classes of Drugs in the Italian Market, 2005

Table 10.1 Different Aspects of Japanese Healthcare Spending, 1997-2002

Table 10.2 Classification and Rate of Japanese Drug Pricing Premiums

Table 11.1 Comparison of Drug Prices Between the USA and Canada (as of June 15, 2004)

Table 11.2 Comparison of Generic Drug Prices Between the USA and Canada (October 2004)

Table 12.1 World Differential Prices for Branded Amoxil 250mg, 2004

Table 12.2 Major Parallel Exporters of Drugs in the EU, 2003

Table 12.3 Retail Pharmaceutical Penetration by Parallel Imports, 2002

Table 12.4 Direct Savings ($m) from Use of Parallel Sourced Drugs, 2002

Abstract

• US
• Japan
• UK
• Germany
• France
• Italy
• Spain

• Parallel trade
• The re-importation of drugs into the US from Canada
• The countries with the quickest time for drug approvals
• The possibility of a single European price for pharmaceuticals
• The effect of EU expansion on the drug prices
• The increasing control governments are exerting over drug pricing
• The future of drug pricing

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