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Advice to consumers on buying face masks. New Tech — new technological possibilities and medical devices. Currently, the Statutory Scheme includes the following features:. The revisions to the Statutory Scheme bring it more closely in line with the Voluntary Scheme, though there are some differences. Arguably, pricing arrangements for products containing new active substances are more straightforward under the VPAS than the alternative. In both schemes, the rebates that the industry must pay back to the Department of Health are broadly aligned and have fallen from initial projections.
A number of factors affect drug pricing in the UK, ranging from Government and NHS policies, commercial arrangements between companies and the NHS, and marketplace competition. Note, the UK list price is often a benchmark for countries that operate reference pricing systems. This can be an important consideration for companies, which encourages providing discounts to the NHS under agreements that do not affect the reference price. As noted above, companies must price branded products in accordance with the Voluntary or Statutory Schemes.
The schemes tightly control increases in the price of established branded medicines but provide more though unlikely complete flexibility when pricing new products.
If that is not feasible, companies often consider methods to provide better value for money to the NHS, such as through Patient Access Schemes or Managed Access Agreements. Even after companies have agreed a price under the Voluntary or Statutory schemes and a NICE appraisal has taken place, there are various forces within the NHS that can further reduce the price that a company actually charges for its products.
The importance of those aspects has grown in recent years, which reflects the increasingly multi-layered landscape for drug pricing in the UK. Often, the discounts that a company is prepared to offer the NHS will affect its level of uptake and use. For example, NHS Hospital Trusts, CCGs and other NHS bodies rely heavily on tenders, rebate agreements and other commercial arrangements to purchase generic and branded products with additional discounts.
The proposed changes could see certain types of purchases falling outside the need to tender, particularly in the health space. Recent years have witnessed the NHS in England adopting an increasingly centralised and joined-up approach to procurement and achieving lower medicines costs.
For example, the NHS has established several national and regional procurement groups to co-ordinate and support medicines procurement, sharing information and expertise. This may affect the ability to give local, volume-based discounts. Similar groups exist to align local formularies and prescribing policies to the most cost-effective options available, which can stimulate companies to offer keener prices to remain locally recommended or on a preferred formulary.
The NHS often has a complex internal system to incentivise hospitals and local commissioning bodies to adhere to centrally negotiated formularies and price structures, which again erodes local autonomy.
As in most other markets, competition from generic and biosimilar products also affects the price of innovator products on the market. These factors mean that once generic or biosimilar products enter the market, suppliers of innovative products can rapidly lose market share unless they reduce prices.
Note, that in general the UK prohibits generic or biosimilar substitution in pharmacies for a brand-name prescription. However, certain exceptions apply. For example, substitution may be permitted in hospitals in some cases. The NHS generally avoids intervening in the market for generic products, relying on market forces to regulate it.
However, over the last four years, the NHS has experienced severe shortages in the supply of certain generic medicines. Reportedly, Brexit-related uncertainty contributed to shortages, but a variety of other supply-side issues have persisted since the UK left the EU. These shortages have led to price increases and the NHS has, in some cases, reflected this by offering a higher reimbursement amount in the Drug Tariff, often on a temporary or ad hoc basis.
However, the funding invested to fight the pandemic, demographic change, an increase in spending on prescription medicines, and budgetary pressure, make it increasingly difficult to maintain this balance. In that time, the proportion of the population over the age of 65 in England would increase from The rising number of older people has increased the demand for healthcare and the volume of products dispensed, particularly those to treat age-related conditions, such as cardiovascular disease, diabetes and the unknown costs of Long COVID.
Population and demographic changes, as well as fighting the pandemic, are major contributing factors. Another reason is an increase in high-cost innovative medicines NHS, particularly those used in hospital and specialist settings. Historically, while the overall NHS budget continued to grow, this growth was outpaced by the rising cost of medicines both in terms of volume and price.
The Voluntary and Statutory Schemes have so far delivered savings to the public purse. Nevertheless, the NHS remains focused on delivering efficiencies and focusing on priority areas. The multi-layered landscape that affects drug pricing, uptake and procurement is likely to evolve and be further enhanced.
The pricing and reimbursement landscape in the UK is constantly evolving, with set to be a year of major change. We discuss some of the key aspects:. The following are some general points to consider:. The content of this website is for general information purposes only and does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. This material is intended to give an indication of legal issues upon which you may need advice.
Full legal advice should be taken from a qualified professional when dealing with specific situations. Please see our terms and conditions page for further details. Free Newsletter. About Us Contact Us Partners. Toggle navigation. Do pharmaceutical companies project about what they want the profits from a certain drug to be by the time its patent expires?
I have not seen that. There's no magic number stated at the outset. The typical approach is to estimate what they can charge for a drug based on its value to patients, how it compares to the competition and the other factors I mentioned above. How so? Drugs with a market of 10, or 20, people—that is, for a condition diagnosed in that many people—will be priced quite differently from a drug with a market of 1, patients.
And a drug with a 1,patient market will be more expensive because it results in fewer sales? I think that's generally fair to say.
That drug will not necessarily be 10 times more expensive than a drug for 10, patients. But it will cost more, because the company still had to spend a few hundred million dollars to create it. This is why some drugs for extremely rare diseases are incredibly expensive. Once a company sets the list price, what entity is the first to push back against it?
These days the push back seems to come from everywhere: insurers, policymakers, physicians and even patients to some extent, though less so. Patients are primarily concerned with access. So if they feel the price will lead their insurer to not cover the drug, they may push back against the cost.
The same is true for physicians, who are concerned about their patients having access to the most beneficial medications. Physicians also want to prescribe drugs without limitations imposed by the insurer. The majority of pushback directly against the pharmaceutical company's list price comes from the insurer and increasingly from policymakers.
Why do insurers fight the list price? Most insurance companies set a budget at least a year in advance. So for big insurance companies, the budget for pharmacy benefits was decided some time ago. If a new drug is likely to be hard for that budget, the insurer might try to insist on a lower price.
Some degree of push back is expected now, and we are seeing insurance companies managing prescriptions in different ways to control costs.
Some require prior authorization as a way to slow down the process. Some require step therapies, where an individual must try one drug before another is prescribed.
Sometimes that requirement is appropriate because it ensures that physicians are sticking to the FDA indication, but sometimes the purpose is to slow down the spending. Is that practice manipulative against patients? That's the unfortunate aspect in all of this. The patient, who is the user and who should have the loudest voice here, often doesn't. The patient isn't the decision-maker. In many cases, decisions are being made for patients. They wait to see what their physicians prescribe and what their insurance company will pay for.
But patients are paying for their drugs, even if that payment is indirectly through monthly insurance bills. Right, they're probably paying for their insurance. Many plans have significantly increased their monthly payments and deductibles. You don't feel the cost in the same way when you're not handing money across a counter. It's an interesting mindset.
When it comes to the point of sale on drug, we've already paid the insurance so often we are unaware of the actual cost. Does everyone pay a discounted prices? In a flow chart of this chain, the pharmaceutical company would be at the top.
The most common one is the remuneration by a regressive mark-up scheme, but a few countries have decided for the policy option of offering dispensing fees or charges for the services which a pharmacy performs Table 4.
Such a fee-for-service remuneration can be found in Croatia, the Netherlands, Slovenia, and the United Kingdom. In Croatia, the pharmacy service fee is calculated on granting specific points for different services eg, dispensing, accounting activities, preparation of antibiotics of oral use Pharmacists in Croatia are allowed to substitute a prescribed medicine with a product of the same or cheaper price if the prescribed one is not on the market.
However, the reference price system, which is in place in Croatia, might motivate patients to ask for the least expensive alternative, as the CIHI always pays the reference price.
In Croatia, the competent authority for reimbursement is the CIHI, which acts as major third party payer for medicines. Having been granted a marketing authorization, a pharmaceutical company may apply for reimbursement for its product at CIHI. In the reimbursement decision, the Reimbursement Committee acts as an advisory body that, following an evaluation of the application, recommends based on specified criteria if a medicine is eligible for reimbursement and on which of the two Croatian reimbursement lists it should be placed.
The final decision is taken by the board of the CIHI Such an approach is called product-specific reimbursement 48 , meaning that the third party payer either a social health insurance institution or a national health service decides about the reimbursement eligibility of a specific medicine. The reimbursement eligibility of medicines could also be linked to diseases eg, in the Baltic states, where the same medicine may be reimbursed at different rates depending on the indication or to population groups, which is the key reimbursement eligibility scheme in Cyprus, Ireland, and Malta.
In the EU countries, the key scheme, which is usually product-specific eligibility, might be supplemented by another scheme eg, population group-specific reimbursement, since higher reimbursement rates might be in place for vulnerable groups.
If in Croatia a medicine is considered eligible for reimbursement, it will be put on one of the two positive lists:. All EU countries have reimbursement lists. Positive lists, which include medicines that may be prescribed at the expense of a third party payer, are very common and are in place in 23 EU Member States all but Germany, Greece, Spain, and the United Kingdom.
Four countries Germany, Hungary, Spain, and the United Kingdom have negative lists which explicitly exclude medicines from reimbursement 18 , 30 , 32 , Greece has provided a legal basis for negative lists, but has not implemented this measure yet. Indeed, Greece is currently considering the re-introduction of the positive list, which had been abolished in Table 5.
Currently, the re-introduction of positive list is ongoing. Being included in the positive list does not automatically mean that the cost of the medicine will be fully covered by the third party payer. In most European countries, the criteria for the decision on the inclusion of a medicine into reimbursement and the reimbursement rates are health-economic parameter. Usually the cost-effectiveness of a medicine, the medical need, the therapeutic value, in particular the relative effectiveness in case of medicines with no new, but added therapeutic value , and — increasingly, the budget impact eg, in the Central and Eastern European countries — are assessed 18 , 25 , 34 - In Croatia, a key criterion for inclusion into reimbursement is clinical effectiveness, which is defined as allows: importance of the medicine from a public health perspective, its therapeutic importance and its relative therapeutic value, ethical aspects and its quality, the reliability of data, and assessment from reference sources.
All reimbursement applications for original medicines must contain a budget impact analysis in line with the ISPOR guidelines A reference price system is a pharmaceutical reimbursement element in which identical or similar products are clustered in so-called reference groups. For each cluster, a maximum amount reference price to be covered by the third party payer is decided.
The patient must pay the difference between this reference price and the actual pharmacy retail price of the medicine, in addition to any other co-payments. In Croatia, the clustering is done based on a broad definition of a reference group, taking into consideration identical and similar products at ATC 5, 4, and 3 level Most EU countries apply a rather strict understanding of a cluster, which is built on products with the same active ingredient ATC 5 and even the same pharmaceutical form 57 , Fifteen EU Member States reimburse at the level of the lowest price as well, while the remaining countries define the maximum reimbursement amount around and above the average of the prices of medicines in the group Table 6.
The reference price system is regularly updated in Croatia. Frequent adaption to changes is also the case in many EU countries.
Most of them update on a quarterly level, some even on a monthly level, and Denmark updates every two weeks Patients have to pay out of pocket for pharmaceutical expenditure that is not covered by the state. This concerns private expenses for self-medication, but also any kinds of co-payments.
In Croatia, co-payments for medicines on the positive list B are applied. Finally, due to the reference price system, co-payments may also occur if the patient opts for a product on List B with a price above the reference price Percentage co-payments are also the most common co-payment in the EU countries 21 EU Member States , as most countries apply different reimbursement rates for the products on the positive list.
Prescription fees are in place in 10 EU countries Table 5. No co-payments at all apart from those applicable under the reference price system are charged in some regions in Italy, in the public sector in Malta, and in the Netherlands 18 , 30 , 32 , 51 , 59 , Usually, EU Member States have mechanisms for vulnerable groups eg, low income people, people with chronic diseases, etc.
In Croatia, specific medicines in particular some orphan medicines are excluded from co-payments, since the government runs a special budget for these medicines. The practice of having specific budgets for orphan medicines or cost-intensive medicines, usually used in hospital settings, is also known from a few EU Member States eg, France, the Netherlands This study offers updated information on key features of the pharmaceutical pricing and reimbursement systems of 28 European countries.
We consider this piece of work to be of added value, since we provide not only recent information on Croatia, whose pharmaceutical sector has been reformed substantially during the last two years, but also a complete and updated picture of all EU Member States. Evidence, in particular peer-reviewed literature, is often limited to a few EU countries, mostly large Western European countries. There have been in-depth overviews and analyses of pharmaceutical pricing and reimbursement regulation in several EU countries around the millennium 20 , 21 , 23 , 24 , 26 , but these pieces of information have become out-dated following reforms which countries have undertaken, and the EU has meanwhile been enlarged by 12 further countries.
A highly appreciated exemption is some work on the generics sector which addresses the Central and Eastern European countries 28 , 29 , This study was performed for the out-patient sector. This is in line with most evidence in the literature 20 , 21 , 23 , 24 , 26 , where the in-patient sector is disregarded completely or only few elements are considered. We believe that more attention should be placed on the in-patient sector since the start of a treatment with a specific medicine has a major impact on the further use in the out-patient sector.
Nonetheless, in this article we addressed only the out-patient sector in order not to overload this study. We took this decision in the light of the fact that pricing and procurement policies and reimbursement strategies in the in-patient sector differ considerably from the out-patient sector Why is it of such relevance that the information is updated? While between and an increase in CIHI expenditure for prescription medicines was observed for each year, Croatia succeeded in generating some savings in and Figure 1.
At the same time, EU Member States have also been struggling with growth rates in public pharmaceutical expenditure Table 1. Cost-containment has been a major motivator for policy reforms in pharmaceutical pricing and reimbursement in the EU Member States 20 , 21 , This appears to be a good preparation for future action within the EU regulatory framework.
On the pricing side, Croatia applies price regulation for reimbursable medicines at manufacturer level, as do many EU countries. A pricing procedure which has been increasingly applied for regulating prices is external price regulation international price comparison.
The updated information in the article shows that today this procedure is used in 22 countries, some of which introduced it in the course of the last years 18 , 23 , European countries have increasingly opted for implementing this tool in spite of criticism. International price comparisons are considered extremely sensitive to choices made about certain key methodological issues, such as sample selection, unit of measurement for price and volume, the relative weight given to consumption patterns in the countries being compared, and the use of exchange rates or purchasing power parities for currency conversion 63 , It has been suggested that prices should be weighted by consumption when being used for international price comparison.
However, this is not the case in any European country. It would probably entail a lot of administrative work including high costs for acquiring the consumption data. Given the provided information and the design of this study, we cannot assess if this has been or will be problem for Croatia.
In any case, we have not been made aware of such problems in Croatia yet. An analysis 18 of external price referencing in Europe revealed that countries tend to focus on a rather small basket of reference countries, and they tend to chose neighboring countries, countries with which they have historical links and economic relationships and — in particular if they themselves rank among middle- or low-income countries — countries with a more or less low pharmaceutical price level.
Some countries have a rather well-defined methodology in the legal framework, while others allow some flexibility. Analyzing the methodology applied for external price referencing, similarities of the Croatian system to the EU countries were identified: Croatia has a quite small basket of reference countries, however allowing the inclusion of a few further countries, and it focuses on low-price countries.
The current framework of external price referencing in Croatia appears to offer a greater potential for savings. In the field of distribution, the Croatian regulatory framework is partly similar to the EU countries, with regulated maximum allowed remuneration for both wholesalers and pharmacies. While regulated mark-ups and margins continue to be the major form of regulating pharmacy remuneration in Europe, performance-based remuneration might be one option which EU countries could consider and implement when re-organizing the pharmacy sector.
This is also reflected in the current reimbursement legislation in Croatia in which, for instance, a budget impact analysis is asked for. A key element in the Croatian reimbursement system is a reference price system, which has been introduced in more and more countries The rather late introduction of a reference price system in some EU countries can be attributed to the fact that for building clusters in the reference price system a sufficient number of generics has to be on the market In several, in particular Western European, countries it took some years until, due to the expiry of patents, this critical number became available, while Central and Eastern European countries, including Croatia, have always had a stronger generics market 18 , There is evidence that the existence of rather broad clusters combined with low reference prices contributes to optimizing savings In fact, Croatia applies a broad definition of a reference group whereas most EU countries opted for sticking to a rather strict scope of a cluster.
A reference price system is usually seen as one policy option within the bundle of measures for generic promotion 68 , 69 , since it is a tool, if well designed, for developing and promoting a generics market A study 18 provided evidence that in Europe the instruments of generic substitution and reference price system usually go hand in hand because these two tools influence each other positively.
Croatia also opted for this approach and implemented both tools. Nonetheless, generic substitution in Croatia is neither mandatory nor motivated by a financial incentive that could serve as a positive factor for increasing generic uptake However, in Croatia incentives for generic promotion are not considered necessary since the Social Insurance pays the reference prices, and as a consequence most manufacturers lower their prices to avoid co-payments.
This paper presents an analysis at macro level, ie, based on benchmarks for describing a pharmaceutical pricing and reimbursement system. It might be limited in its conclusions, since for performing a comparison of nearly 30 countries we needed to compromise in some cases and simplify the presentation of data in order to achieve clarity. The study does not provide answers on the success and failure of specific policy measures implemented in Croatia. There are indications of a positive impact of the recent pharmaceutical pricing and reimbursement reform on public pharmaceutical expenditure, but the middle- and long-term effects on expenditure, and also on accessibility and affordability for the patients can be only be assessed in the coming years.
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