Pricing and paying for medicines

1. Pricing and paying for medicines Ad Antonisse AstraZeneca BV April 2005

2. Content • The Netherlands compared to other EU countries • What is the issue with medicines? • How does the Dutch system work • G10, OECD, WHO and US • How to solve the problem

3. Costs of medicines(% total healthcare - OECD)

4. Consumption of medicines(€/inh. - OECD)

5. Consumption of healthcare(% GDP - OECD)

6. Consumption of medicines(% GDP - OECD)

7. Consultations with prescription(% - OECD)

8. Delivery of medicines (SFK)

9. Price index medicines(1996 = 100)

10. What’s the issue? • Low prescription of medicines • Low consumption of medicines • High generic substitution • Average prices with decreasing trend • Increasing amount of regulations KNMG (March 2005): “ Often VWS proposes new regulations and policies in medicines on cost containment and safety, which are not always in line with each other”

11. The Dutch system • GVS list 1A • Clustering based on broad population/indication • Price based on € / DDD • Product form not of importance • GVS list 1B • Therapeutic added value for broad population against “golden standard” • “Free” pricing based on FE

12. This is the issue! • All products priced on 1A limit • No incentive for innovation in product form • No incentive for innovation for sub group • No incentive for incremental innovation • Long negotiations for 1B products

13. Incremental innovation

14. Recommendations G10(May 2002) • Rec 2: … improve the introduction to the market, in particular for innovative medicines. • Rec 3: … improving time taken between granting of MA and pricing and reimbursement decisions. • Rec 4: Competitive generic market • Rec 6: Price regulation only for those products purchased by or reimbursed by the State • Rec 7: Development of HTA including cost effectiveness • Rec 10: Information to patients

15. OECD - Health Project(2004) Pag 105: Socially optimally prices need to take into account not only the value of the specific medicine, but also the costs of research and development, if future innovation is to be sustained. Pag 106:… such (reference pricing) systems may reduce incentives for innovation.

16. OECD - Health Project(2004) Facilitating availability and use of generic alternatives can avert these negative effects by fostering price competition at the level of the molecule, rather than the therapeutic class. Employ pharmaceutical pricing systems and other policies that reward cost-effective choices among similar medications and encourage truly novel innovation in the pharmaceutical sector.

17. WHO priority medicines(November 2004) Pharmaceutical innovation in Europe could be improved through reforms of regulatory and pricing policies Therapeutics can be improved through the development of improved pharmaceutical delivery mechanisms Pharmaceutical innovation should also encompass special interest groups of patients

18. U.S. Department of Commerce (December 2004) As OECD countries individually seek to reduce spending on drugs through price controls, their collective actions reduce R&D that would provide substantial health benefits to all. Relaxation of foreign price controls, if coupled with appropriate reform of foreign generic markets, could potentially bring about much of these gains from the flow of new drugs, even without foreign spending on prescription drugs. …the increased revenues from decontrolling drug prices in OECD countries would, all things being equal, yield on average 2.7 to 4.1 new drugs per year.

19. How to maintain integrated care • See medicines as part of total health care • See medicines (and health care) as investment and not as costs • Value innovation in healthcare, also incremental and also in product form or sub group • Use HTA to value healthcare and the components • Make market access fast and without unneeded administration

20. “If you think healthcare is expensive, try disease”