Formulary Committee of Russian Academy of Medical Sciences Professor Pavel Vorobyev

1. Formulary Committeeof Russian Academy of Medical SciencesProfessor Pavel Vorobyev Economy of equivalence: new challenge 

2. ALMOST INSOLUBLE PROBLEM  To contain budget expenditures on health care system while improving the results

3. Remember – it is not an end in itself Cost containmentislimited by necessity to followthe principle of equity in providing medical care: ensuring its accessibility, including vulnerable groups

4. INCREASING CONTROLLABILITY OF THE “MARKET OF DRUG CIRCULATION” • One should recognize “market failure”in medicine in general and particularly – in drug supply! • Uncontrolled market relations lead to the developmentofperverted, vicious schemes of making money: patient's life becomes worthless • Regulatory mechanisms of this “market”keep on improving in all developed countries  • Significant differences in regulationaredetermined by the lobbying of medical community by “Big Pharma”

5. 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

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

7. IT IS POSSIBLE TO CONTAIN DRUG COSTS  INFLUENCING ON: • Medical care recipient - patient • Health-care provider - physician • Providers of medicines – pharmacy, distributors • Manufacturers of medicines

8. GENERAL MECHANISMS OF CONTAINING DRUG COSTS • Constraint of budget subsidies– financial path  • Demand management– administrative path • Price (and allowances) control – financialand administrative path

9. DIRECT MECHANISMS OF COST CONTROL • Direct price control • Negotiating pricesat 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

10. Indirect mechanisms of cost control    • Increased burden of co-payment for patient (for example, program of self-treatment) • Restrictions of consumptionusing 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 negotiationon insurance companies

11. PRICE CONTROL • It is the most common way to limit the cost of drug procurement that is widely used by the Authorities • Very often the list of essential medicines was considered as a basis for the policy of drug price control • Direct mechanisms are used to monitor expenditures

12. Pricing approaches atthe level of distributors and pharmacies  • Restricting trade allowances (wholesale and retail ) –product-oriented allowance (reduction of allowanceon more expensive drugs), fixed allowance, maximum allowance (either without separation on wholesale and retail, or separate one – regional authorities) • 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) • Per capita payment to the pharmacy from the State(it was implemented in the “7 nosologies” system )

13. Generics • Substitution of brand-name drugs on generics is regulated at the legislative level in many countries • In the USA legal protection of genericsis 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 

14. 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 drugsshould be similar, equivalent (but without coincidence ) • Generics with intramuscular, subcutaneous, intravenous or other routes of administration are not tested for bioequivalence; only concentration of substances in productand its chemical composition (impurities) are studied, sometimes pharmacokinetics is compared.

15. It remains outside the scope • Products of biological origin: their effect may be related with development of primary productfrom some substrate, its further refine • Major groups: coagulation factorsVIII, insulin, heparins, anticytokine drugs, antibiotics

16. Generics • Comparison of analoguesis 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 examinationof effectiveness, safety and pharmacoeconomics data of the product

17. Economic effect  of the generic substitution (HIV/AIDS – annual triple therapyStavudine + Lamivudine + Nevirapine) Medecins Sans Frontier (2001) ‘A matter of life and death: The role of patents in access to essential medicines’

18. In Russia there are no such differences in the cost! • Cellceptand its generic Mayceptdiffer in 15% • Velcadeand 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 pharmacokineticsbetween brand-name drug and generic product is 15%

19. Reference prices  are opposed to the free market price 

20. System of reference prices(contract, agreed, calculated prices) Tool for measuring the maximum compensation for medicinesbased on the availability of similar drugs in the market • 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

21. The effect of the reference pricing introduction   Cochrane systematic review • 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.

22. Studying different methods of reference pricing   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 NSAIDswith different INN RESULT: • 1-st method – saving 5.7 million dollars • 2-nd method – saving 22.7 million dollars • The position of health is not clear Health Serv Res. 2005 October; 40(5 Pt 1): 1297–1317.

23. 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%

24. Models of reference pricing (The European experience of the common market) • 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 clearwhat we would do if prices in all countries became the sameand there were nothing to compare. • Semi-formal model- analysis of drug prices in neighboring countriesis used in pricing negotiations with the manufacturer • 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

25. Options  of reference pricing • Comparison of generic coststo 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 classin the price comparison group to establish reference prices. A single cluster of therapeutic analogues which includes both generic and brand-name productsis 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 actuallyare not regulated

26. Comparative evaluation of the cost of medicines , rub. Formulary Committee Report, 2008

27. DDDprice on ACE inhibitors and sartans(Drug Reference Book of the Formulary Committee RAMS, 2009) INNDDD(mg)Цена DDD (RF – GB )(rub.) Captopril 50 0,6 – 0,8 Perindopril 4 9,2 – 16,4 Fozinopril  15 6,8 – 10,5 Hinapril 15 8,1 Enalapril 10 0,17 - 3,5 Valsartan80 27,4 – 87,4 Irbesartan 150 20,3 – 30,1 Losartan50 50,0 – 58,4

28. Drug Reference Book of the Formulary Committee RAMS, 2009 It contains comparison of pricesfor all essential drugs: ONE STEP TO REFERENCE PRICES  

29. 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 shortageetc.)

30. 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 yearwas too low to influence on prescribing costs

31. The level of co-payment is very important • Excessively highlevel 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 drugsled to the reduction of their consumptionin the U.S.A. These effects have not been observedin Australia since the introduction of solid commission; reduction did not extend to essential medicinesand was limited by additional drugs

32. 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 systemconsumption of drugs paradoxically increased in patients with worse health(they “take" a lot of drugssimultaneously)

33. 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 dispenseddrugs (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

34. Difficulties and problems of co-payment • 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 of drugs (chronic diseases), epidemically significant diseases (for example, tuberculosis, HIV) - subsidies • Simplicity and convenience of the system • Struggle against the problem of excessive consumption  (?) • Incitementof “supply of goods”in patients (purchasing drugs for a long time or in large quantities) • Inconvenient system of personified accounting for sums ”subjected to annual deduction”

35. The effect of the reference pricing introduction   (Cochrane systematic review) • 30 comparisonswere 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.

36. CONCLUSION • 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