Strategic Overview of Pricing and Reimbursement in the Major Markets

Published by: Decision Resources

Published: Feb. 12, 2009 - 368 Pages

Table of Contents

Executive Summary

Strategic Considerations in the Major Markets

United States

France

Germany

Italy

Spain

United Kingdom

Japan

International Outlook

Health Technology Assessment

Generics and Biosimilars

Specialty Pharmaceuticals

Flexible Pricing Arrangements

Evidence of Innovation

1. Introduction

2. United States

Overview

Organization and Funding of the U.S. Healthcare System

Private Insurance

Medicare

Medicaid

Military and Other Federal Healthcare Programs

Pharmaceutical Prices in the United States

Prices Relative to Other Major Markets

Pricing in the Public Sector

Pricing in the Private Sector

Generics Pricing

Provider Reimbursement

Medicare

Hospital Inpatient Treatment

Hospital Outpatient Treatment

Office-Based Physicians

Commercial Insurers

Coverage Decision Making

Public Sector

Private Sector

Cost-Containment Measures

Multitier Formularies

Patient Copayments and Coinsurance

Use of Generics

Therapeutic Substitution

Prior Authorization and Step Therapy

Specialty Pharmacy

Health Technology Assessment in the United States

Academy of Managed Care Pharmacy

Agency for Healthcare Research and Quality

Drug Effectiveness Review Project

Medicare

HTA Outlook

Outlook for the U.S. Pharmaceutical Market

Market Slowdown

Impact of Recession on the Pharmaceutical Market

Increased Focus on Cost Containment

Changing Political Environment

Wider Access to Health Insurance

Negotiation of Medicare Part D Drug Prices

Reduced Subsidies for Medicare Advantage Plans

Drug Reimportation

Promoting Greater Use of Generics and the Approval of Biosimilars

Comparative Effectiveness Research

3. France

Overview

Organization and Funding of the French Healthcare System

Pharmaceutical Prices in France

Pricing and Reimbursement of Outpatient Medicines

Standard Procedure for Setting Reimbursement Prices

Transparency Commission (CT)

Economic Committee for Healthcare Products (CEPS)

Price Setting for Innovative Drugs

Admission to Reimbursement

Renewal of Pricing and Reimbursement

Cost-Containment Measures

Supply-Side Restrictions

Sales Growth Limits

General Price Cuts

Individual Price Cuts

Reference Pricing

Taxation

Controls on Detailing Visits to Physicians

Demand-Side Restrictions

Prescribing Restrictions

Physician Prescribing Audits

Medical Control Strategy

Personal Medical Dossiers

Patient Copayments

Reimbursement Restrictions for Drugs of Limited Effectiveness

Potential Changes to the Management of Chronic Disorders

Promoting Increased Use of Generic Drugs

Parallel Imports

Pricing and Reimbursement of Hospital Medicines

Price Setting

Temporary Authorizations for Use

Hospital Prescribing to Outpatients

Prospective Payment

National Frame of Reference for the Appropriate Use of Expensive and

Innovative Drugs

Health Technology Assessment

Outlook for the French Pharmaceutical Market

4. Germany

Overview

Organization and Funding of the German Healthcare System

Pharmaceutical Prices in Germany

Reimbursement of Outpatient Medicines

Cost-Containment

Reference Pricing

Extension of Reference Pricing to Patent-Protected Drugs

Sidebar: The Impact of Reference Pricing on the German Statin Market

A More Aggressive Reference Price Method

Market Impact

Incentives to Undercut Reference Prices

Price Freeze

Mandatory Rebates

Voluntary Rebate Contracts, Cost-Sharing Deals, and Risk-Sharing Agreements

Prescribing Budgets

Daily Cost-of-Therapy Limits

Prescribing Guidelines

Use of Generic Drugs

Market Dynamics

Pricing Trends and Generic Erosion

Generics Substitution

Parallel Imports

Patient Copayments

Negative List

Dereimbursement of Nonprescription Medicines

Health Technology Assessment

Role of the Institute for Quality and Efficiency in Healthcare (IQWiG)

Introduction of Health Economic Evaluation

Regulatory Framework

Opposition from Health Economists and the Pharmaceutical Industry

Response of the GBA and IQWiG to Criticism

Draft Methodology for Health Economic Evaluation

Future Focus on Costly New Therapies

Reimbursement of Hospital Medicines

Pricing and Reimbursement

Prospective Payment

Pharmacy Decision Making

Monitoring Pharmaceutical Use and Spending

Interaction Between Hospitals and Primary Care

Disease Management Programs

Off-Label Prescribing

Outlook for the German Pharmaceutical Market

5. Italy

Overview

Organization and Funding of the Italian Healthcare System

Pharmaceutical Prices in Italy

Price Setting

Reimbursement of Outpatient Medicines

Cost-Containment Measures

Pharmaceutical Budget

Price Controls

Reference Pricing

Price Ceilings for Patent-Protected Drugs

Prescribing Restrictions

Promoting Greater Use of Generics

Regional Patient Copayments

Promoting Good Prescribing Practice

Reimbursement of Hospital Medicines

Health Technology Assessment

Outlook for the Italian Pharmaceutical Market

6. Spain

Overview

Organization and Funding of the Spanish Healthcare System

Pharmaceutical Prices in Spain

Combating Parallel Trade—A Contentious Issue in Spain

Pricing and Reimbursement of Outpatient Medicines

Price Setting

Price Markups

Reimbursement of Outpatient Medicines

Cost-Containment Measures

Negative Lists

Reference Pricing

Introduction of Reference Pricing

Suspension and Overhaul of the Reference Pricing System

Potential Five-Year Exemption

Further Reference Pricing Modifications

Industry Response

Price Cuts

Sales Tax

Prescribing Controls

Patient Copayments

Prior Authorization

Promoting Greater Use of Generics

Government Measures to Stimulate Greater Use of Generics

The Spanish Market for Multisource Pharmaceuticals: A Complex Picture

Widespread Acceptance of Generics

Exclusion from Substitution

Reimbursement of Hospital Medicines

Court Ruling Strengthens Intellectual Property Protection

Cost-Containment

Hospital Formularies

Health Technology Assessment

Outlook for the Spanish Pharmaceutical Market

7. United Kingdom

Introduction

Organization and Funding of the U.K. Healthcare System

Pharmaceutical Prices in the United Kingdom

Pricing of Outpatient Medicines

Pricing of Branded Drugs Based on New Active Substances

Pricing of Branded Drugs Based on Established Active Substances

Pricing of Generic Drugs

Reimbursement of Outpatient Medicines

Cost-Containment Measures

Price Cuts and Freezes

Reimbursement Restrictions

Prescribing Budgets, Audits, and Incentive Schemes

Local Formularies

Use of Generics

Parallel Imports

Patient Copayments

Pricing and Reimbursement of Hospital Medicines

Health Technology Assessment

Creation of the National Institute for Health and Clinical Excellence

Industry Criticisms of NICE

Government Response to Parliamentary Review of NICE

Oncology: The Focus of NICE’s Activity—and of National Concern About Rationing

Risk-Sharing and Cost-Sharing Agreements—Creative Responses to Rejection by NICE 302

Outlook for the U.K. Pharmaceutical Market

Growing Industry Disillusionment with the U.K. Market

Promise of Reform in Draft NHS Constitution

Improving Patient Access to Innovative Medicines

Implications for the Pharmaceutical Industry

8. Japan

Overview

Organization and Funding of the Healthcare System

Healthcare Expenditures

Pharmaceutical Prices in Japan

Price Setting

Initial Pricing of Branded Prescription Drugs

Similar-Efficacy Comparison Methods

Price Comparators

Price Premiums

“Me-Too” Drugs

Cost Calculation Method

Foreign Price Adjustment Rule

Postmarketing Price Changes

Biennial Price Revision

Price Cuts for Long-Listed Drugs

Repricing in Response to Market Expansion

Promoting the Use of Generics

Evolution of the Japanese Generics Market

Recent Changes in the Generics Market

Generics Substitution

Use of Generics in Hospitals

Measures to Improve the Generics Supply

Increasing Competition in the Japanese Generics Market

Health Technology Assessment

Outlook for the Japanese Pricing and Reimbursement Environment

Appendix A. Glossary of French Terms

Appendix A. Glossary of German Terms

Tables and Figures

Table ES-1. Targets of Key Cost-Containment Measures in the Major Markets

Table 1-1. Multilateral Comparison of Average Ex-Manufacturer Prices of Branded Medicines in Select Markets as a Percentage of U.K. Average Ex-Manufacturer Prices, 1992-2004

Table 1-2. Prices of Leading Biologics in the Major Markets as a Percentage of U.S. Prices

Table 2-1. Health Insurance Coverage of the U.S. Population, 1999-2006

Table 2-2. Medicare Part D: Key Parameters of the Standard Drug Benefit Design, 2006-2008

Table 2-3. U.S. Prices of Select Drugs as a Percentage of Average Prices in Six Other Major Pharmaceutical Markets, 2006

Table 2-4. Pricing Benchmarks in the United States

Table 2-5. Technologies That Have Pass-Through Status in the Medicare Outpatient Prospective Payment System, 2008

Table 2-6. Key Features of Medicare Inpatient and Outpatient New-Technology Payment Mechanisms

Table 2-7. Frequency with Which Pharmacy and Therapeutics Committees Consider Select Drug Attributes in Formulary Decision Making (%)

Table 2-8. Frequency with Which Pharmacy and Therapeutics Committees Consider Select Drug Attributes in Formulary Decision Making (mean scores)

Table 2-9. U.S. Employers’ Views on Strategies to Increase Prescription Drug Benefit Value, 2005

Table 2-10. Bills Introduced in the 110th U.S. Congress to Promote Comparative Effectiveness Research

Table 2-11. Key Trends of Change in the U.S. Prescription Drug Market: Implications for the Pharmaceutical Industry

Table 3-1. French Prices of Best-Selling Drugs as a Percentage of U.S. and European Average Prices, 2006

Table 3-2. Relationship Between SMR Ratings and Reimbursement Rates by Disease Severity

Table 3-3. Targets of Key Pharmaceutical Cost-Containment Measures in France

Table 3-4. Key Trends in the French Prescription Drug Market: Implications for the Pharmaceutical Industry

Table 4-1. Statutory Health Insurance Receipts and Expenditures, 1991-2006

Table 4-2. German Health Care Reforms of Particular Significance to the Pharmaceutical Industry, 1988-2007

Table 4-3. German Prices of Best-Selling Drugs as a Percentage of U.S. and European Average Prices, 2006

Table 4-4. Maximum Wholesalers’ Margins on Ex-Manufacturer Prices of Prescription-Only Medicines

Strategic Overview of Pricing and Reimbursement in the Major Markets

Table 4-5. Maximum Pharmacists’ Margins on Pharmacy Acquisition Prices of Drugs That Are Not Subject to Prescription-Only Status But Are Prescribed and Reimbursed by the GKV

Table 4-6. Average Composition of Retail Pharmaceutical Prices in Germany, 1990-2007

Table 4-7. Targets of Key Pharmaceutical Cost-Containment Measures in Germany

Table 4-8. New Reference Pricing Groups Implemented in Germany Effective January 1, 2008

Table 4-9. 2007 Retail Prices and New Reference Prices of Largest Pack Size of Nebilet

Table 4-10. Evolution of Savings from Reference Pricing in Germany, 1989-2007

Table 4-11. Reference-Priced Drugs’ Place in the German Pharmaceutical Market

Table 4-12. Out-of-Pocket Payments for Reference-Priced Drugs in Germany

Table 4-13. Select Rebate, Cost-Sharing, and Risk-Sharing Agreements on Branded Drugs

Table 4-14. Generics’ Share of the Potential Generics Market and the Total GKV Prescription Market, 1981-2006

Table 4-15. Average Percentage Price Difference Between Median Prices of Generic and Branded Versions of Off-Patent Drugs, 1981-2006

Table 4-16. Key Trends in the German Prescription Drug Market: Implications for the Pharmaceutical Industry

Table 5-1. Italian Prices of Best-Selling Drugs as a Percentage of U.S. and European Average Prices, 2006

Table 5-2. Pharmaceutical Reimbursement Categories in Italy

Table 5-3. Targets of Key Pharmaceutical Cost-Containment Measures in Italy

Table 5-4. Key Trends in the Italian Prescription Drug Market: Implications for the Pharmaceutical Industry

Table 6-1. Average Prices of Innovative Medicines in 15 European Countries as a Percentage of Average Spanish Prices

Table 6-2. Spanish Prices of Best-Selling Drugs as a Percentage of U.S. and European Average Prices, 2006

Table 6-3. Drugs Excluded From Generics Substitution

Table 6-4. Key Trends in the Spanish Prescription Drug Market: Implications for the Pharmaceutical Industry

Table 7-1. U.K. Prices of Best-Selling Drugs as a Percentage of U.S. and European Average Prices, 2006

Table 7-2. Targets of Key Pharmaceutical Cost-Containment Measures in the United Kingdom

Table 7-3. Non-Tariff Drugs in the Payment-by-Results System, 2008-2009

Table 7-4. Key Trends in the U.K. Prescription Drug Market: Implications for the Pharmaceutical Industry

Table 8-1. Japanese Prices of Best-Selling Drugs as a Percentage of U.S. and European Average Prices, 2006

Table 8-2. Changes to the Hierarchy of National Health Insurance Price Premiums in Japan

Table 8-3. Price Premium Trends, June 2004-December 2007

Table 8-4. Comparison of Average Foreign Prices with Japanese List Prices Using the Cost Calculation Method, April 2006-December 2007

Table 8-5. Drugs Repriced in Response to Market Expansion, 2000-2008

Table 8-6. Key Trends in the Japanese Prescription Drug Market: Implications for the Pharmaceutical Industry

Figure 1-1. Average Prices of Leading Biologics, Small-Molecule Drugs, and Pharmaceuticals Overall in the Major Markets as a Percentage of U.S. Prices, 2006

Figure 2-1. Percentage of the U.S. Population Covered by Various Forms of Health Insurance

Figure 2-2. Percentage of Covered Workers Enrolled in Various Types of Health Plan, 1998-2007

Figure 2-3. Medicare Beneficiaries’ Sources of Health Care Coverage, January 2007

Figure 2-4. Standard Medicare Part D Drug Benefit Design, 2008

Figure 2-5. Annual Deductible Policies of Standalone Medicare Prescription Drug Plans and Medicare Advantage Plans, 2008

Figure 2-6. Detailed Coverage Gap Policies of Standalone Medicare Prescription Drug Plans, 2008

Figure 2-7. Detailed Coverage Gap Policies of Medicare Advantage Plans, 2008

Figure 2-8. Medicaid Pharmaceutical Federal Health Care Programs

Figure 2-9. Comparison of Prices of Select Branded Medicines and Generics for Customers With and Without PBM Membership, 2002

Figure 2-10. Average Rebates Per Prescription Received by U.S. Employers, 2007

Figure 2-11. Employers’ Perceptions of Pharmacy Benefit Management Companies’ Impact on Their Overall Drug Costs, 2002 and 2005

Figure 2-12. Average U.S. Price of Brands and Generics as a Percentage of Respective Brands’ Price Prior to Generic Entry

Figure 2-13. National Coverage Determination Process of the Centers for Medicare and Medicaid Services

Figure 2-14. Important Factors for Making Reimbursement Decisions

Figure 2-15. Percentage of Covered Workers in Formularies of Various Structures, 2000-2007

Figure 2-16. Percentage of Employers Using Formularies of Various Structures, 2007

Figure 2-17. Percentage of Medicare Standalone Prescription Drug Plans Offering Formularies of Various Designs, 2006-2007

Figure 2-18. Percentage of Medicare Advantage Plans Offering Formularies of Various Designs, 2006-2007

Figure 2-19. Importance of Clinical and Nonclinical Factors to Tier Placement

Figure 2-20. Ranking of Clinical and Nonclinical Factors as Influences on Tier Placement

Figure 2-21. Importance of Cost Attributes to Tier Placement

Figure 2-22. Evolution of Mean Patient Copayments for Generics, Preferred Branded Medicines, Nonpreferred Branded Medicines, and Fourth-Tier Drugs, 2000-2007

Figure 2-23. Evolution of Average Retail Copayments for Generics, Preferred Branded Medicines, and Nonpreferred Branded Medicines, 2000-2007

Figure 2-24. Evolution of Average Mail-Order Copayments for Generics, Preferred Branded Medicines, and Nonprefered Branded Medicines, 2002-2007

Figure 2-25. Percentage of Covered Workers Required to Pay Copayments and/or Coinsurance by Formulary Tier, 2007

Figure 2-26. Evolution of Mean Patient Coinsurance Rates for Generics, Preferred Branded Medicines, Nonpreferred Branded Medicines, and Fourth-Tier Drugs, 2000-2007

Figure 2-27. Leading PBMs’ Generic Dispensing Rates, 2002 and 2006

Figure 2-28. Percentage of Employers That Permit Therapeutic Substitution for Select Chronic Disorders

Figure 2-29. Percentage of Employers That Permit Step Therapy and Prior Aurthorization for Select Chronic Disorders

Figure 2-30. Employers’ Specialty Pharmacy Policies

Figure 2-31. Main Sources of Funding for Prescriptions Dispensed in the United States, 2005-2007

Figure 2-32. Sales of Prescription Drugs in the United States, 2003-2007

Figure 2-33. Prescriptions Dispensed in the United States, 2003-2007

Figure 2-34. HMO Pharmacy Directors’ Views on Main Drivers of Biosimilars Use in the United States

Figure 2-35. HMO Pharmacy Directors’ Views on Likely Strategies for Promoting Biogenerics Use

Figure 3-1. Percentage of Drugs Awarded Various Medical Benefit (SMR) Ratings

Figure 3-2. Percentage of Drugs Awarded Various Improvement in Medical Benefit (ASMR) Ratings

Figure 3-3. Average Duration of Pricing Process for Branded and Generic Drugs, 2006

Figure 3-4. Structure of the Pharmaceutical Market by Drug Reimbursement Rate, 2006

Figure 3-A. Ten Most Common Registered Chronic Diseases in France, 2006

Figure 3-5. Generics’ Share of the Pharmceutical market, 1999-2006

Figure 3-6. Generics Penetration Rates for Select Compounds, June 2007

Figure 4-1. Evolution of Average Drug Prices in the Statutory Health Insurance Pharmaceutical Market, 1983-2007

Figure 4-2. Percentage of Reference-Priced Drugs with Retail Prices Above, in Line with, or Below Their Respective Reference Prices, January 1, 2008

Figure 4-A. Consumption of Statins in the Statutory Health Insurance Market, 2001-2006

Figure 4-3. Reference-Priced Drugs’ Share of the German Statutory Health Insurance Pharmaceutical Market, 2004-2007

Figure 4-4. Evolution of Retail Prices in the German Pharmaceutical Market, June 2006- December 2007

Figure 4-5. Reasons Given to Statutory Health Insurance Patients for a Change of Prescription Drugs, 2007

Figure 4-6. Reactions of Statutory Health Insurance Patients Whose Prescriptions Were Changed, 2007

Figure 4-7. Structure of the German Pharmaceutical Market, First Half of 2007

Figure 4-8. Percentage Decrease in Weighted Average Retail Prices of Eight Best-Selling Off-Patent Drugs in Germany, March 2006 Through April 2007

Figure 4-9. Average Brand Market and Unit-Volume Share for Products That Have Lost Patent and Exclusivity Protection

Figure 4-10. Average Price of Brands and Generics As a Percentage of Respective Brand’s Price Prior to Generic Entry

Figure 4-11. Correlation Between Generic Price Erosion and Competitive Intensity

Figure 5-1. Retail Prices of 300 Best-Selling Italian Prescription Medicines in Leading Markets as a Percentage of Italian Prices, 2006

Figure 5-2. Comparative Timetables for Pricing and Reimbursement Before and After 2004

Figure 5-3. Average Duration for Pricing and Reimbursement of Select Drug Categories, 2006

Figure 5-4. Annual Sales of Drugs Facing Patent Expiration in Italy in 2008

Figure 6-1. February 2007 Pricing of Drugs Subjected to Reference Pricing Effective March 1, 2007

Figure 6-2. Contribution of Changes in Prescribing Volume, Drug Price, and Product Mix to Overall Pharmaceutical Sales Trends, 2001-2007

Figure 6-3. Spanish Pharmaceutical Market Trends by Product Price Range, 2001-2006

Figure 7-1. Generics’ Share of the English Prescription Drug Market, 1997-2007

Figure 7-2. Generics Prescribing and Dispensing Rates for Key Therapeutic Areas in England, 2007

Figure 8-1. Annual Growth Rates in Japanese Healthcare Expenditures and Gross Domestic Product, 2000-2005

Figure 8-2. Japanese Population Trends, 2000-2050

Figure 8-3. Pharmaceutical Spending as a Percentage of Total Healthcare Expenditures, 1991-2004

Figure 8-4. Procedure for Setting National Health Insurance Reimbursement Prices for New Prescription Drugs

Figure 8-5. Methods Used for Pricing New Drugs in Japan, June 2002-December 2007

Figure 8-6. Criteria for Determining the Pricing Method Used for New Prescription Drugs

Figure 8-7. Percentage of New Drugs Awarded Price Premiums for Therapeutic Advances, June 2002-December 2007

Figure 8-8. Average Biennial Price Revisions, 1994-2008

Figure 8-9. Price Adjustment Range, 1994-2008

Figure 8-10. Generics’ Share of the Japanese Pharmaceutical market, 2002-2006

Figure 8-11. Generics’ Impact on Hospital Drug Expenditures, 2004-2006

Abstract

• In November 2008, the U.S. presidential elections yielded a new Democratic administration and Congress. What are the healthcare goals of the new administration? What progress has been made thus far? What are the implications for the biopharmaceutical industry?
• Also in November 2008, the U.K. Department of Health announced a series of key reforms. How will drug prices be affected? What are the newest NICE-related adjustments?
• Use of lower priced generics is a well-established cost-containment measure. How great is the presence of generics in each major market? How are countries prompting increased use of generics? When and how will generic versions of biologics (biosimilars) affect the sales of branded pharmaceuticals?
• In a cost-conscious environment, drug prices are under scrutiny. What are the key pricing trends in the major markets? How are prices set and adjusted in each market? What strategies are healthcare authorities and pharma companies using in their pricing negotiations?

• Major markets: United States, France, Germany, Italy, Spain, United Kingdom, Japan.
• Infrastructure: health system organization, funding sources, reform trends.
• Drug pricing and reimbursement: price-setting policies, price control measures, prices by major market, prices by drug type, outpatient drug pricing approaches, hospital drug approaches.
• Cost-control measures: biosimilars, dereimbursement, generics, flexible pricing contracts, formularies, health technology assessment, importation, incentive programs, multitier formularies, parallel imports, patient copayment and coinsurance, prescribing budgets, price controls, prior authorization, quantity limits, reference pricing, step therapy, therapeutic substitution.
• International trends: health technology assessment, generics and biosimilars, specialty pharmaceuticals, flexible pricing arrangements, evidence of innovation.

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