Formulary Committee of Russian Academy of Medical Sciences

Professor Pavel Vorobyev Economy of equivalence: new challenge

ALMOST INSOLUBLE PROBLEM

To contain budget expenditures on health care system while improving the results

Remember – it is not an end in itself

Cost containment is limited by necessity to follow the principle of equity in providing medical care: ensuring its accessibility, including vulnerable groups

INCREASING CONTROLLABILITY OF THE “MARKET OF DRUG CIRCULATION”

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One should recognize “market failure” in medicine in general and particularly – in drug supply!

Uncontrolled development market relations lead to making money: patient's life becomes worthless the of perverted, vicious schemes of Regulatory mechanisms of this “market” keep on improving in all developed countries Significant differences in regulation are determined by the lobbying of medical community by “Big Pharma”

WHO

The specific nature of drugs requires a special approach from the State and persons involved in its selling, which differs from principles of selling commercial products and consumer goods For instance, Government agencies should be responsible for the regulation of manufacturing, import, export, storage, distribution and sales of drugs

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Opinions diverged

Some experts insist that : State regulation of the pharmaceutical market reduces price competition In terms of full liberalization this market would function "correctly", like other consumer markets

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Supporters of the market do not notice the existence of orientation fundamental factors which provide “singularity” of the drug “market” - its social Experience of many countries including Russia shows that unregulated "market" harms interests of poor people with rare diseases and members of vulnerable groups

IT IS POSSIBLE TO CONTAIN DRUG COSTS INFLUENCING ON:

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Medical care recipient - patient Health-care provider - physician Providers of medicines – pharmacy, distributors

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Manufacturers of medicines

GENERAL MECHANISMS OF CONTAINING DRUG COSTS

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Constraint of budget subsidies – financial path Demand management administrative path – Price (and allowances) control – financial and administrative path

DIRECT MECHANISMS OF COST CONTROL

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Direct price control Negotiating prices at the national level Reference prices using comparison with therapeutic analogues, generics and prices abroad Forced price cuts Conditions for facilitating the replacement of brand-name products by generics

Indirect mechanisms of cost control

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Increased burden of co-payment for patient (for example, program of self-treatment) Restrictions of consumption using lists of subsidized (compensable) drugs and exclusion of unworthy drugs Transferring the responsibility to the physician – budget keeper - (budget of prescription– physician has a certain amount of money for all drugs, subsidized by the State, and he ought to prescribe it for a certain period) Transferring the responsibility both for financing and price negotiation on insurance companies

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PRICE CONTROL

It is the most common way to limit the cost of drug procurement that is widely used by the Authorities

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Very often the list of essential medicines was considered as a basis for the policy of drug price control

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Direct mechanisms are used to monitor expenditures

Pricing approaches at the level of distributors and pharmacies

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Restricting trade allowances (wholesale and retail ) – product-oriented allowance (reduction of allowance on more expensive drugs), fixed allowance, maximum allowance (either without separation on wholesale and retail, or separate one – regional authorities )

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Co-payment (fixed payment for prescription of any medication, payment of cost interests – 50% benefit , defined sum of co-payment – max 1000 EURO, further - free of charge)

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Per capita payment to the pharmacy from the State (it was implemented in the “7 nosologies” system )

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Generics

Substitution of brand-name drugs on generics is regulated at the legislative level in many countries In the USA legal protection of generics is provided by the Drug Price Competition Act (Waxman-Hatch Act, 1984) WHO supports the focus on generics In the Netherlands, France, Italy, Spain and the UK state authorities use motivation for prescription and administration of generics German pharmacists had a daily norm of generics prescription.

In Denmark rules of trade markup for pharmacies have come into force since April 1, 2005 , they are intended to eliminate the motivation to release more expensive drugs

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There are differences between generics Identical molecules obtained by the same chemical methods but using different technologies Bioequivalence studies are held when registering We compare two similar chemicals in the same or insignificantly different dosage forms for oral administration The curves for the compared drugs should be similar, equivalent (but without coincidence ) Generics is compared.

with intramuscular, subcutaneous, intravenous or other routes of administration are not tested for bioequivalence; only concentration of substances in product and its chemical composition (impurities) are studied, sometimes pharmacokinetics

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It remains outside the scope

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Products of biological origin: their effect may be related with development of primary product from some substrate, its further refine Major groups: coagulation factors VIII, insulin, heparins, anticytokine drugs, antibiotics

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Generics

Comparison of analogues is topical: generics, therapeutic analogues (including biologicals ) Effects may depend on the shell or the filler All the studies should be done in actual practice It is necessary to provide an independent public examination of effectiveness, safety and pharmacoeconomics data of the product

Economic effect of the generic substitution (HIV/AIDS – annual triple therapy Stavudine + Lamivudine + Nevirapine)

Medecins Sans Frontier (2001) ‘A matter of life and death: The role of patents in access to essential medicines’

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In Russia there are no such differences in the cost!

Cellcept and its generic Maycept differ in 15% Velcade and its generic Milanfor differ in 30% Enalapril prices in Moscow pharmacies differ from в 4 rubles to 120 rubles (2 times!) The allowable difference in bioequivalence and pharmacokinetics between brand-name drug and generic product is 15%

Reference prices are opposed to the free market price

System of reference prices (

contract, agreed, calculated prices) Tool for measuring the maximum compensation for medicines based on the availability of similar drugs in the market

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Covering the cost of medicines by manufacturer It may cover trade allowances partially or completely Preferable and the most common way to control costs of drug provision

The effect of the reference pricing introduction Cochrane systematic review

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10 studies (most from Canada) Application of drugs increased by 60% - 196% (5 studies) Application of “co-payment” drugs decreased by 19% - 45% (4 studies) There were no harm to health or increased consumption of health resources

Aaserud M, Austvoll-Dahlgren AAA, Kösters JP, Oxman AD, Ramsay C, Sturm H. Pharmaceutical policies: effects of reference pricing, other pricing, and purchasing policies. Cochrane Database of Systematic Reviews 2006, Issue 2. Art. No.: CD005979. DOI: 10.1002/14651858.CD005979.

Studying different methods of reference pricing

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COMPARISON OF TWO SYSTEMS OF REFERENCE PRICES: 1-st method – one price for the various NSAIDs with unique INN 2-nd method – one price for NSAIDs with INN different

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RESULT: 1-st method – saving 5.7 million dollars 2-nd method – saving 22.7 million dollars

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The position of health is not clear

Health Serv Res. 2005 October; 40(5 Pt 1): 1297–1317.

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Alberta (Canada): since 1995 uniform price equal to the price of Cimetidine has been introduced

CMAJ. 1999 August 10; 161(3): 286–288.

Cimetidine, Ranitidine, Famotidine, Nazatidine, Omeprazole Proportion of prescriptions for all drugs decreased by 43-65% , cimetidine prescriptions increased by 410% The total number of prescriptions decreased by 5% The cost of all drugs decreased by 33-75%, the cost of cimetidine increased by 392% Total costs decreased by 37%

Models of reference pricing (The European experience of the common market)

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Formal model of establishing reference prices: foreign drug prices are accepted as comparison prices.

This approach allows to achieve lower prices in all groups of drugs. To tell the truth it is not clear what we would do if prices in all countries became the same and there were nothing to compare.

Semi-formal model neighboring countries is used in pricing negotiations with the manufacturer - analysis of drug prices in Informal model, when international prices are taken into account in individual cases, for individual drugs, as in the case of setting the reference price, so in case of pricing negotiations with the manufacturer

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Options of reference pricing

Comparison of generic costs to establish reference prices is used in France, Italy and Spain Prices of therapeutic analogues are used in Germany, it allows to include several active substances of one therapeutic class in the price comparison group to establish reference prices. A single cluster of therapeutic analogues which includes both generic and brand-name products is made, and the unique reference price is established for the entire cluster It is possible to carry out the analysis of generic internal market in Russia – our situation is significantly different from European - drugs in the "free sale" and its prices actually are not regulated

INN Comparative evaluation of the cost of medicines , rub. Formulary Committee Report, 2008 Registered price according to List of essential medicines Registered price according to the DLO Pharmacy price (Moscow) Price of the British National Formulary Captopril Tab. 25 mg №20 Enalapril Tab. 2,5 mg №20 Atenolol Tab. 50 mg № 30 Formoterol Caps. for ing. 12 mcg, №30 Amoxicillin Caps. 250 mg №20 Azithromycin Caps. 250 mg №6 Co-trimoxazole Tab. 480 mg №20 from 6,00 tо 26,37 from 3,89 to 47,99 from16,50 tо 48,00 825,35 46,25 from 78,53 tо 220,00 from 10, 20 tо 39,91 from 7,30 tо 10,00 12,54 from 8,40 tо 13,00 488,73 from 13,50 tо 16,50 from 75,00 tо 100,00 from 9,20 tо 11,00 from 4,22 tо 39,00 (Capoten from 57,00 to 160,00) from 4,09 tо 125,10 from 5,10 tо 50,00 from 611,50 tо 1098,48 from 12,14 tо 45,00 from 79,50 tо 590 from 7,00 tо 25,90 Capoten 164,00 43,26 55,20 602,14 57,68 553,32 271,92

DDD price on ACE inhibitors and sartans (Drug Reference Book of the Formulary Committee RAMS, 2009) INN Captopril Perindopril Fozinopril Hinapril Enalapril Valsartan Irbesartan Losartan DDD (mg) 50 4 15 15 10 80 150 50 Цена DDD (RF – GB ) (rub.) 0,6 – 0,8 9,2 – 16,4 6,8 – 10,5 8,1 0,17 - 3,5 27,4 – 87,4 20,3 – 30,1 50,0 – 58,4

Drug Reference Book of the Formulary Committee RAMS, 2009

It contains comparison of prices for all essential drugs:

ONE STEP TO REFERENCE PRICES

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Co-payment

Promotes the use of cheaper generics Increases the responsibility of the medical care customer for excessive consumption and impacts on cost reduction Psychological aspects, marketing technology play significant role (for example, intimidation, creating artificial shortage etc.)

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The level of co-payment is very important The low co-payment level does not influence on the excessive consumption Savings are covered by higher administrative costs In the Netherlands the 20% level of co-payment with maximum payment of 91 EURO per year was too low to influence on prescribing costs

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The level of co-payment is very important Excessively high level of co-payment leads to the reduction in application of essential medicines It was found out that the limits in the number of subsidized prescription drugs led to the reduction of their consumption in the U.S.A.

These effects have not been observed in Australia since the introduction of solid commission; reduction did not extend to essential medicines and was limited by additional drugs

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The level of co-payment is very important The influence of co-payment is different in different groups of patients: in terms of universal co payment system consumption of drugs paradoxically increased in patients with worse health (they “take" a lot of drugs simultaneously)

Co-payment

Transferring part of the burden from the State to the patient (mostly – «trade allowances») Basic approaches : (1) Fixed fee for each prescription (2) The percentage of the cost of dispensed drugs (excluding expensive drugs and special cases) (3) Combination of (1) and (2) (+4) Establishing of an annual sum, higher costs are compensated, population groups without co payment

Difficulties and problems of co-payment

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In the system "with percents" - co-payment of expensive drugs (?) Access of vulnerable groups of patients to drugs is provided by the state subsidies Constant consumption HIV) - subsidies of drugs (chronic diseases), epidemically significant diseases (for example, tuberculosis, Simplicity and convenience of the system Struggle against the problem of excessive consumption (?) Incitement of “supply of goods” in patients (purchasing drugs for a long time or in large quantities) Inconvenient system of personified sums ”subjected to annual deduction” accounting for

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The effect of the reference pricing introduction (Cochrane systematic review) 30 comparisons were found (in 21 studies) The widespread decline in public spending on drugs was showed Along with other drugs, there is reduced consumption of essential drugs The influence on health and consumption of health resources is poorly investigated One study found out an increase in consumption of health resources after the introduction of co-payment in vulnerable group In other words – there is no delight about co-payment

Austvoll-Dahlgren AAA, Aaserud M, Vist GE, Ramsay C, Oxman AD, Sturm H, Kösters JP, Vernby Å. Pharmaceutical policies: effects of cap and co-payment on rational drug use. Cochrane Database of Systematic Reviews 2008, Issue 1. Art. No.: CD007017. DOI: 10.1002/14651858.CD007017.

CONCLUSION

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There is no evidence that any method is more efficient in reduction of public spending on drugs than the other one Formal measures do not always as effective as Government would like it to be The search for optimal solutions for problems of limiting growth of the health budget continues We need a comprehensive solution including the following approaches: reference prices + price controls + generics + forced price cuts + partial co payment of drug provider spending by consumers