LECTURE 8 modern organizational techniques to improve the profitability of pharmacies

1. LECTURE 8modern organizational techniques to improve the profitability of pharmacies

2. Plan • 1. Use merchandising • 2. Product and pricing • 3. System of discounts • 4. Working with MPI and insurance companies (PILOT PROJECT) • 5. Advising doctors and cosmetologists • 6. Risk Sharing • 7. cloud technology

3. Pilot project for antihypertensive drugs • concept of reference price • 2. List • 3. writing prescriptions • 4. rules of dispensing pharmacies • 5. important pilot project for patients and health care system

4. Introduction A reference pricing system is a system that establishes a reimbursement level or reference price for a group of interchangeable medicines. If a medicine is priced above the reference price, the patient pays the difference between the price of the medicine and the reference price, in addition to any other co-payments, e.g. prescription fee, percentage co-payment [1]. Unlike its name suggests, a reference pricing system is not a pricing system, but in fact a reimbursement system.

5. A reference pricing system sets a common reimbursement level, i.e. reference price, for a group of medicines, thereby generating savings for the third-party payer. Manufacturers are in principle free to set prices, although medicines priced above the reference price incur an additional patient co-payment and generic medicines in some countries, e.g. Belgium, need to be priced below the reference price in order to be reimbursed.

6. Reference pricing can help governments to contain public pharmaceutical expenditure as it controls the reimbursement level of medicines. A reference pricing system may also promote generic medicine use because originator medicines priced above the level of the reference price are likely to lose market share as a result of the additional patient co-payment. Many European countries have already installed a reference pricing system, see Table 1. Sweden had adopted a reference pricing system in 1993 but abandoned this in 2002 [2].

8. In Norway, reference pricing applied from 1993 until the end of 2000. In 2003, the Norwegian government installed a system called ‘index pricing’ to a set of off-patent medicines, which has many resemblances with a reference pricing system [3, 4]. Reference pricing is in many European countries combined with other policies such as prescribing by international non-proprietary name or generics substitution, as this combination of policies seems to positively influence each other

9. Conclusion Reference pricing is used by many European countries as one element of governments’ strategies to contain public healthcare expenditure. It puts pressure on pharmaceutical companies to compete with the reference priced product but also reduces competition beyond this reference price. It also makes patients sensitive of drug prices, as an increased use of drugs priced at or below the reference price level was observed.

10. The introduction of reference pricing generates a once-only setback of expenditures but does not affect the overall growth rate of health expenditure in the long term. No association between reference pricing and health outcome has been observed.

11. For patients Over the last decades, European healthcare budgets have been increasing. Therefore, governments have implemented reference pricing, amongst other measures, in order to contain the pharmaceutical budget. In the reference pricing system, a common reimbursement level is set for a group of comparable and interchangeable medicines. The difference between this reimbursement level and the actual price of the medicine is paid by the patient, a so-called co-payment.

12. This provides patients with a financial incentive to opt for the least expensive medicine. Reference pricing seems to reduce prices of medicines, increases the use of cheaper medicines, i.e. without co-payment, generates savings for healthcare budgets in the short term and does not seem to have a negative influence on the health of patients.

13. LIST of antihypertensive drugs from the pilot project 1. Amlodipine 2. Bisoprolol 3. Enalapril 4. Lisinopril 5. Metoprolol 6. Nebivolol 7. Nifedipin 6. Enalapril and diuretics 7. Lisinopril and diuretics 8. Lisinopril and Amlodipin

14. Pricing procedure: • Wholesale price must be registered • 2. By the wholesale price is added up to 10% - the purchase price • 3. Purchase price plus max 25% - retail price

15. Price for the patient= retail price-reference price

16. Rules prescription: F1 • 1 - INN • 2 - only one drug • 3 - the signature of the doctor and three signet seal: • doctor seal • health care institution • Red Seal "Cost be reimbursed“ • Valid 1 month, kept in the pharmacy for 3 years • At the end of the month consists register recipes in two copies, one remains at the pharmacy, the other is fed into the regional health department

17. BackgroundWhat is Risk Sharing? • Risk sharing is a method in which the cost of the consequences of a risk is distributed among several participants in an enterprise, such as in syndication. • And identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks. An organization may use risk assumption, risk avoidance, risk retention, risk transfer, or any other strategy (or combination of strategies) in proper management of future events.

18. In some cases the discount as such is not mentioned in the text of the contract, and in the process of negotiating the final price is determined by taking into account discounts, and the price fixed in the text of the contract.

19. Background GOVERMENTS Control expenditure Accessibility PHARMA INDUSTRY Patents Profits EUROPEAN UNION Free movement of goods Competitiveness

20. OBJECTIVES • This presentation is proposed to encourage Risk Sharing in Ukraine and other Eastern European Countries. As we can see that the larger the degree of risk-sharing in a health financing system, the less people will have to bear the financial consequences of their own health risks, and the more they are likely to have access to needed care.

21. Physicians National Health Service (NHS) Patients  Consume  Prescribe  Pay  Consume  Pay  Prescribe  Prescribe  Pay  Consume OBJECTIVESThe RS was introduced to address a complex principal/agent relationship The stated objectives of the RS • To secure the provision of safe and effective medicines for the NHS at reasonable prices • Promote a strong and profitable pharmaceutical industry to ensure sustained R&D and subsequently development of new medicines • Encourage the efficient and competitive development and supply of medicines

22. Risk-Sharing agreement reality in Russia • Is the RSA effective new drug X? • Can I use RSA experience in other cis most acceptable to the Russian Federation? ountries for drug X? • Whose experience and approach • What are the steps for RSA Drug X? • Federal or regional level? • Who is the payer and who negotiator? Development of RSA • What is the most appropriate scheme for the implementation of RSA for Drug X? • Expected outcomes of therapy with X RSA (including financial and clinical) should be evaluated? • How to implement RSA for Drug X will be monitored? • What is the cost of implementation and economic outcomes for its implementation? • What are the risks for the implementation of RSA for Drug X? Implementation of RSA • How to "convince" the state?

23. METHODS Two major methods to implement risk-sharing: • General tax revenue may be a main source of financing health services, Or • Social health insurance may be established. It is noted that 55% of some countries still has to introduce risk sharing in the aspect of social health insurance which is still the most common method perceived. In recent times some developing countries have indicated interest such as Ukraine, Russia, Cyprus, Côte d'Ivoire, Indonesia, Iran, Nigeria, Kenya and Ghana.

24. Under traditional contracts, the firm’s revenue does not depend on the realisation of the success rate. Once the medicine is accepted on the positive list, the company is guarantue revenue of π* per-unit sold, independently of the actual performance/outcome of the drug.

25. Incentives under traditional and risk sharing contracts (II) Under risk sharing scheme, if the success rate is zero, the firm does not receive any money. But if the actual success rate is far above expectations, the per-unit profit π exceeds the π* level

26. An intermediate solution (dotte line) is the risk sharing scheme where the firm is guaranteed some small fee per unit sold and a “bonus” per every successful treatment.

27. THE PPRS IS A PROFIT CONTROL SCHEME, BASED ON RETURN ON CAPITAL In principle voluntary, in practice all suppliers participate (over 200 companies) Companies choosing not to join are subject to an alternative statutory scheme Prices increase are controlled post-launch (incl. line extensions after the first 5 years Contract) • A price cut of 4.5% was imposed in 1999; 7% in 2005; and 3.9% in 2009 • This is now a routine part of the renegotiations • The 2009 price cut may be extended, depending on savings achieved elsewhere e.g. generic substitution • Free pricing for innovative products (defined as new active substances) at launch Based on a company’s total sales of branded products to the NHS • Companies with sales to the NHS in excess of £35m per annum (about 35 companies) must submit detailed annual financial returns (AFRs) to Department of Health • AFRs are subject to negotiation and agreement • The outcome of the AFR negotiation is assessed in terms of a return on capital (ROC) target of 21%, with a margin of tolerance from 40% to 140% • Companies with little or no UK capital may opt for return on sales assessment with rates set by dividing the ROC by 3.5 (i.e. ROS of 6%, with a range from 4.96%)

28. RESULT A number of risk sharing schemes had already been introduced • Treatments for multiple sclerosis (2002) • An example (the only one?) of a true risk sharing scheme • Patient outcomes to be monitored over a ten year period, and prices adjusted according to the outcomes achieved in practice • Lucentis (2008) • Novartis agreed with NICE to pay for the drug cost of treatment beyond 14 injections per patient • Tarceva (2008) • Following initial rejection by NICE, Roche announced 27.5% interim price cut to make it equivalently priced with competitor pending results of appeal • Tarceva accepted by NICE on appeal at discounted price • Velcade (2008) • Janssen renegotiated with NHS to refund cost of the first 4 cycles if there is no clear patient benefit • If there is benefit, a patient can continue with next 4 cycles

29. Without the patient access scheme ustekinumab could not be considered a cost-effective use of NHS resources Without the patient access scheme the ICERs for ustekinumab would be £41,000 per QALY gained compared with supportive care, £102,000 per QALY gained compared with intermittent etanercept 25 mg, and £300,000 per QALY gained compared with adalimumab • The Committee concluded that ustekinumab could not be considered a cost-effective use of NHS resources without the patient access scheme • The manufacturer proposed that the patient access scheme is to remain in place until either a review of the guidance by NICE or the introduction of any new formulations that would render the scheme obsolete, and that it would not be withdrawn without the agreement of NICE and the Department of Health The estimates of cost effectiveness that included the patient access scheme were considered as reasonable • In the manufacturer’s base-case analysis (including the patient access scheme) ustekinumab had an ICER of £29,600 per QALY gained compared with supportive care, an ICER of £27,100 per QALY gained compared with etanercept 25 mg given intermittently

30. Potential patient numbers in each Patient Access Scheme

32. SUMMARY OF RESULT

33. discussion • Studies should focus on the total value provided by the drug (economic, humanistic, and operational value) and not just cost. • The use of prices during studies should be both correct and consistent.

34. Transparency is a major issue • For agreed deals, the terms will be publicly available • This may have implications for other markets • For proposed deals, there is no transparency • We will know about deals proposed but rejected (and why they were rejected) only if the company decides to reveal that information There appears to be a limit in terms of patient numbers • A recent application for a patient access scheme was rejected partly on the grounds that 3,000 new patients a year would have significant operational implications There appears to be an “unmet need” hurdle • Sutent vs other products in mRCC • A new product competing with three established products • It appears that the scheme is virtually limited to oncology products

35. conclusion • Profits and price controls do not reflect the value of drugs • The PPRS does not benefit patients • The PPRS does not encourage investment

36. Implications for companies with innovative products Risk-sharing will remain the exception, not the rule, for most products • But may become the preferred pricing mechanism for high priced products with small patient populations and limited evidence of efficacy or cost-effectiveness • IF current schemes prove successful to the DoH. • Should current schemes become too difficult or costly to manage, or show no appreciable impact on cost, risk-sharing will be supplanted by another cost-control mechanism • No systematic evaluation of the impact of risk-sharing has yet been conducted • A review is promised after two years The onus is on companies to decide whether to propose risk sharing schemes, and what kinds of scheme to propose • The scheme must • Reflect the characteristics of the product and therapy area • Offer benefits to the payer • Be workable within the context of the NHS • Where there are (or will be) competing products, a well-designed risk sharing scheme may provide a competitive advantage

39. Cloud computing is an expression used to describe a variety of computing concepts that involve a large number of computers connected through a real-time communication network such as the Internet.[1] In science, cloud computing is a synonym for distributed computing over a network, and means the ability to run a program or application on many connected computers at the same time

40. The phrase also more commonly refers to network-based services, which appear to be provided by real server hardware, and are in fact served up by virtual hardware, simulated by software running on one or more real machines. Such virtual servers do not physically exist and can therefore be moved around and scaled up (or down) on the fly without affecting the end user - arguably, rather like a cloud. The popularity of the term can be attributed to its use in marketing to sell hosted services in the sense of application service provisioning that runclient serversoftware on a remote location.

41. CLOUD TECHNOLOGIES The problem of purchasing and maintenance of expensive equipment, software and staff, there is not only to health care, but also to many companies in other industries. In this cost-effective solution to this problem is the technology of distributed cloud computing - the main advantage of this model to the consumer is the absence of costs associated with the installation, upgrade, and support of the equipment and operating software on it.

42. Modern virtualization technologies allow you to run a medical information system in multiple servers, providing fault tolerance. Thus cloud technologies in medicine, you can: - reduce the cost of purchasing equipment and software; - ensure the protection of personal data from unauthorized access, according to FL-152; - ensure smooth operation of the information system protect against data loss; - implement a system scalability by increasing the volume of stored data; - combine several clinics single secure information system; reduce the cost of technical support; increase the speed of response to your customer service requests (no need to go to the client in case of failure)

43. THANK YOU FOR YOUR ATTENTION