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The public provision of pharmaceuticals: a synthesis of policies in ten developed countries Morgan, Steve; Thomson, Paige A.; Daw, Jamie Roberta; Friesen, Melissa K.; Dijkstra, Anna 2012

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       THE PUBLIC PROVISION OF PHARMACEUTICALS: A SYNTHESIS OF POLICIES IN TEN DEVELOPED COUNTRIES DECEMBER 2012 Steven G. Morgan Paige A. Thomson Jamie R. Daw Melissa K. Friesen Anna Dijkstra          1 TABLE OF CONTENTS INTRODUCTION ........................................................................................................................................................... 3 THE PUBLIC PROVISION OF PHARMACEUTICALS ............................................................................................................... 4 AUSTRALIA ................................................................................................................................................................. 5 Part I: Access ....................................................................................................................................................... 5 Part II: Policy ........................................................................................................................................................ 5 Part III: Distribution ............................................................................................................................................. 6 AUSTRIA .................................................................................................................................................................... 7 Part I: Access ....................................................................................................................................................... 7 Part II: Policy ........................................................................................................................................................ 8 Part III: Distribution ............................................................................................................................................. 8 CANADA .................................................................................................................................................................... 9 Part I: Access ....................................................................................................................................................... 9 Part II: Policy ...................................................................................................................................................... 10 Part III: Distribution ........................................................................................................................................... 10 FRANCE .................................................................................................................................................................... 11 Part I: Access ..................................................................................................................................................... 11 Part II: Policy ...................................................................................................................................................... 11 Part III: Distribution ........................................................................................................................................... 12 GERMANY ................................................................................................................................................................ 13 Part I: Access ..................................................................................................................................................... 13 Part II: Policy ...................................................................................................................................................... 13 Part III: Distribution ........................................................................................................................................... 14 NETHERLANDS .......................................................................................................................................................... 15 Part I: Access ..................................................................................................................................................... 15 Part II: Policy ...................................................................................................................................................... 15 Part III: Distribution ........................................................................................................................................... 16     2 NEW ZEALAND .......................................................................................................................................................... 17 Part I: Access ..................................................................................................................................................... 17 Part II: Policy ...................................................................................................................................................... 17 Part III: Distribution ........................................................................................................................................... 18 SWEDEN .................................................................................................................................................................. 19 Part I: Access ..................................................................................................................................................... 19 Part II: Policy ...................................................................................................................................................... 19 Part III: Distribution ........................................................................................................................................... 20 UNITED KINGDOM ..................................................................................................................................................... 21 Part I: Access ..................................................................................................................................................... 21 Part II: Policy ...................................................................................................................................................... 21 Part III: Distribution ........................................................................................................................................... 22 UNITED STATES ......................................................................................................................................................... 23 Part I: Access ..................................................................................................................................................... 23 Part II: Policy ...................................................................................................................................................... 23 Part III: Distribution ........................................................................................................................................... 24      3 INTRODUCTION Health systems around the world share common objectives. They aim not only to promote the health of populations but to ensure the provision of high quality of care in a way that is sustainable, accessible and equitable. Despite sharing consistent goals, health systems – and in particular systems for the public provision of pharmaceuticals – work to accomplish these goals in varied ways.  Though it is commonly understood that such variation exists, succinct summaries which compare pharmaceutical systems across a standardized template are limited. While the Pharmaceutical Pricing and Reimbursement Information (PPRI) website provided short country summaries on this topic, the website is no longer maintained as of October 2011. Therefore, in order to facilitate high-level comparisons of systems, promote understanding of similarities and differences between countries, and enable further study and/or policy development, we have prepared a collection of pharmaceutical systems summaries for ten developed countries: Australia, Austria, Canada, France, Germany, Netherlands, New Zealand, Sweden, the United Kingdom and the United States.  In order to conduct a systematic international comparison, we developed a conceptual framework to delineate the various stages of the public provision of pharmaceuticals. These stages can be grouped into three main processes: access, policy, and distribution. Various actors intersect at each stage, including patients, pharmaceutical firms, public payers, regulators, pharmacists, wholesalers, and health technology assessment (HTA) organizations.  We used this framework as a template to construct detailed summaries for each system examined. Information was gathered from PPRI country summaries, reports, government websites, and academic papers. Draft summaries were prepared and circulated to appropriate experts in advance of a June 2012 meeting held Amsterdam, Netherlands (NL) with high-level policy makers representing each country and the World Health Organization. The final summaries presented in this report were validated by the experts in attendance and thus are current as of June, 2012.     4 THE PUBLIC PROVISION OF PHARMACEUTICALS   5 AUSTRALIA Overview: Australia’s public health insurance system includes universal coverage for pharmaceuticals. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 22.0M $40,800 $3,445 (8.7%) $502.8 (14.6%) *2008 data Part I: Access Contributions  to the public Medicare system are largely generated through general tax revenues   Private health insurance, a voluntary supplement to Medicare, has community rated premiums   Coverage of the Pharmaceutical Benefit Scheme (PBS) is universal   The  PBS subsidizes around 80% of all dispensed prescriptions Physician rational prescribing is aided through education and restrictions   Three levels of restriction are used on drugs: unrestricted, restricted benefit (which limits usage to specific contexts), and authority required (which requires prior approval to prescribe)  Prescribing software and the PBS schedule highlight bioequivalent medicines Co-payments exist for PBS drugs, based on the beneficiary’s status   In 2012, general beneficiaries paid up to AU$35.40 per prescription with a threshold per patient/family of AUS$1,363.30, after which the concessional rate applies  Concessional cardholders pay AUS$5.80 per prescription, with a threshold of AUS$348.00 Part II: Policy Licensing  (registration) is carried out by the Therapeutic Goods Administration (TGA)   Medical products to be imported into, supplied in, or exported from Australia must be included in the Australian Register of Therapeutic Goods (ARTG)  In order for this to occur, a sponsor is required to submit an application accompanied by scientific data to support the quality, safety and efficacy of the product for its intended use  The TGA reviews the data and will usually seek the advice of an independent expert advisory committee, before making a decision to approve or reject a new product  The Government is not able to compel a sponsor to submit an application to register a medicine Assessment  determines whether a drug is included within the PBS   6  A sponsor (not necessarily the manufacturer) may apply to have a drug listed on the PBS  A PBS application can occur in parallel to TGA submission, but listing cannot occur until the drug is registered for the relevant indication  The final decision rests with the Minister of Health & Ageing; however, the Minister cannot list a drug without a positive recommendation from the Pharmaceutical Benefits Advisory Committee (PBAC) Contracts  are sometimes negotiated for drugs which are not cost effective   Australia has used rebates, price-volume agreements, utilization-based agreements, and some health outcomes-based agreements  For example, if the drug is likely to be cost effective only in a limited subset of the treatment population or significant use outside the target population is anticipated, a risk sharing arrangement such as a price volume agreement or expenditure cap may be negotiated Reimbursement  levels for PBS drugs are based on prices proposed by spon sors  A drug proposed for PBS listing must demonstrate comparative effectiveness and comparative cost effectiveness relative to the therapy most likely to be replaced in practice  If the sponsor cannot show increased benefit but can demonstrate that the proposed drug is no worse than the comparator, the drug may be listed at the price of the comparator  If the PBAC is satisfied that the new drug offers improved efficacy or reduced toxicity (or both) over the comparator, then a determination is made as to whether the drug is cost effective at the price proposed; if not considered cost effective the sponsor may make a resubmission   For drugs with multiple brands, the reimbursement price is that of the lowest-priced brand; for drugs in Therapeutic Groups, the price of the lowest-priced member is the benchmark Once a drug is listed it is subject to a number of additional  price levers over time  Prices for drugs proposed for listing on the PBS are initially proposed by the sponsor  Listing of the first generic brand of a molecule triggers a 16% reduction in all brands of that molecule  Statutory price-reductions apply to some off patent drugs as well as negotiated rebates  Part III: Distribution Parallel imports  are not allowed in Australia  Wholesaler  markups are 7.52%, with digressive margins and an AUS$69.94 cap   The Community Service Obligation Funding Pool ensures  all Australians have ongoing and timely access to the full range of PBS Medicines, regardless of pharmacy location and the relative cost of supply Pharmacists may substitute drugs, and also face regulated digressive margins   The retail markup is 15% over the drug price with digressive margins capped at AUS$70, plus a dispensing fee (AUS $5.15)  Pharmacists can substitute identical generics unless the physician has indicated otherwise, and may be awarded an incentive payment of AUS$1.50 for some brands  7 AUSTRIA Overview: The Austrian social health insurance system includes comprehensive drug coverage through a positive list of reimbursed drugs, provided by non-competing sickness funds. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 8.4M** $44,342** $4,289 (11.0%) $536.7 (12.5%) *2009 data     **2011/Quelle Statistik Austria Part I: Access Contributions  are income based and split between employers and employees   Individuals belong to social insurance funds based on occupation or geography  Contributions to mandatory non-competitive social health insurance are based on income; most groups contribute 7.65% (funded by employees and employers) with a maximum contribution ceiling and preferential tax treatment  Specific individuals (e.g., dependents) have no contribution rates; pensioners contribute a lesser amount subsidized by their pension fund Coverage is nearly universal, with under 0.5% of the population legally choosing not to join social health insurance by a voluntary agreement  Physicians’ prescribing is monitored and basically restricted on the positive list   Prescribing restrictions are placed on new drugs and those with essential therapeutic benefits for some indications and patients; physicians must obtain authorization to prescribe these drugs  Prescribing is monitored by funds, and physicians who exceed the average sums of their colleagues may be subject to different levels of consequence (e.g. reimbursing the difference in cost)  Prescribing of the most cost-effective medicines (e.g. generics) is strongly encouraged by sickness funds Co-payments  are fixed, with exemptions for the indigent or chronically ill   General beneficiaries are charged a fixed prescription fee of €5.15 (US$6.39) (data for 2012)  Low-income exemptions for fees are based on monthly incomes: below € 937,04(US$ 1.161,66) for singles with higher demand of pharmaceuticals; and,  € 1.404,93 (US$ 1.740,99) for couples with higher demand of pharmaceuticals (data for 2012)  Exceptions exist for people who have spent over 2% of income on prescription fees per annum and also for specific notifiable communicable diseases    8 Part II: Policy Licensing  occurs through the national system or the European Medicines Agency   Drugs are licensed by the Federal Office for Safety in Health Care within the Federal Ministry of Health  European Medicines Agency (EMA) centralized and decentralized licenses are acceptable  Assessment  determines inclusion of a drug on a positive list for reimbursement   Assessment begins with an application by the pharmaceutical sponsor  The Main Association of Austrian Social Security Institutions (MASSI)  evaluates drugs based on three pillars: innovation, medical benefits, and pharmacoeconomics  Based on the results of this evaluation, the Medicines Evaluation Board (MEB) makes a reimbursement recommendation recommend MASSI to include the medicine in the positive list (Erstattungskodex)   Recommendations are made to MASSI for inclusion in reimbursement categories  Contracts are not used in Austria because of transparency requirements   Physicians are obliged to prescribe the most economical drug, which would not be possible if the final price negotiated with manufacturers was confidential Reimbursement  involves statutory prices and limitations on use   The MASSI decides on the reimbursement of the costs of licensed medicines, supported by MEB advice   The Price Commission within the Ministry of Health calculates the average EU ex-factory price for refundable medicines using international price comparisons  New medicines remain in a ‘red box’ for up to 180 days using the average EU price while evaluations are conducted and prices set  Drugs categorized as innovative can receive a 5-10% price bonus over therapeutic comparators, or more if the company submits pharmacoeconomic evidence  Non-innovative medicines must lower prices by 10% compared to equivalents  For multisource medicines, prices of the original drug must fall by 30%; the first alternative (normally a generic) must be 48% below the original price, subsequent generic followers also must reduce prices by a substantial amount  Once prices are set, medicines where there is a risk of misuse are placed in a ‘yellow box’ where prescribing is controlled; items in the ‘green box’ may be freely prescribed  Part III: Distribution Parallel imports  are legal, but Austria mainly deals with parallel exporting  Wholesalers  face digressive mark-ups  The majority of reimbursed medicines (found in the yellow or green box) face digressive markups ranging from 15.5% of the ex-factory price down to 7%, with a cap of €23.74 (US$31.80) Pharmacists  face digressive mark-ups and may not substitute generics   Pharmacists may retain a digressive mark-up ranging from 37% of the wholesale price down to 3.9%   9 CANADA Overview: Pharmaceuticals consumed outside hospitals are not part of Canada’s universal health insurance system; drug coverage varies by province and involves a mix of private and public plans. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 34.3M $40,300 $4,963 (11.4%) $743.7 (17%) *2009 data Part I: Access Contributions  for prescription drug financing come from a mix of private and public sources  38.2% of prescription drug costs are financed through provincial governments, 2.5% through the federal government, 37.7% through private insurance, and 17.9% directly by patients   Government revenues are collected through taxation systems that are mildly progressive  Premiums for voluntary, employment-based drug plans are paid by employers as part of (taxable) employment compensation packages   Coverage from public programs varies, but generally focuses on  low-income individuals and either the elderly or those with high drug costs   The federal government runs drug plans for specific people (e.g., registered First Nations, military, and veterans) regardless of their province of residence  Some provinces offer drug benefits for vulnerable populations (e.g., the elderly and social assistance recipients); others provide coverage with income-based deductibles to everybody; and one province (Quebec) mandates that all persons purchase premium based insurance  Voluntary private drugs plans vary in structure  Physicians  receive information on best-practices from various provincial educational initiatives, some of which use information from a national program   Provinces have implemented various prescribing education programs, including academic detailing   A national program (Canadian Optimal Medication Prescribing and Utilization Service) helps to generate materials for promoting best practices in prescribing  Private insurers have few policies to influence prescribing; provinces focus on formulary management restrictions, and some provide feedback to physicians on prescribing  Co-payments  vary significantly based on the insurer   Public plans have varying deductibles and co-insurance rates; most offer special terms for people with low income  Employees with private plans generally pay coinsurance, and all or part of the dispensing fee  10 Part II: Policy Licensing  is performed by the federal Therapeutics Products Directorate   The regulation of consumer products is a matter of federal jurisdiction in Canada  Health Canada conducts regulatory reviews of prescription drugs  Priority reviews are available for promising drugs used for life-threatening conditions, and conditional approvals may be granted while further testing takes place  Assessment  occurs centrally, though formulary decisions lie with each insurer   Each province and private insurer determines their respective formularies (positive lists)  The Common Drug Review (CDR) coordinates the evaluation of applications for coverage of new chemical entities for all public drug plans aside from Quebec  The CDR makes recommendations for formulary inclusion but provinces retain final decision-making authority; some have their own complementary review panels  Pricing  is influenced by provincial  listing decisions and federal price ceilings   Drug pricing in Canada is determined, in part, by formulary listing decisions of provinces; cost-effectiveness is considered and processes increasingly involve direct price/discount negotiations  The Patented Medicine Prices Review Board (PMPRB) sets price ceilings for patented drugs that are based on international comparisons of ex-manufacturer prices  There are no formal price ceilings for off-patent drugs in Canada   Many provinces are increasingly using contracts prior to listing  While the majority of Canadian provinces are now using some form of contract, the frequency and type of contracts used vary by jurisdiction  Few provinces have used health outcomes-based contracts; most contracts are structured around financial terms such as discounts, rebates, price-volume agreements, and utilization-based agreements Reimbursement pricing for patented drugs is based on formulary decision -making processes that are unique to each province   Private plans tend to reimburse goods at manufacturer prices Part III: Distribution Parallel Imports  flow primarily from Canada into the United States   Historically low use of negotiated discounts in Canada has resulted in lower list prices than in the US, where list prices are nominally higher to allow for rebates and price discrimination; the result is extensive arbitrage Wholesalers  face regulated mark-ups in some provinces, and unregulated in others  Pharmacists  receive a range of dispensing fees and margin s, varying by province  Pharmacists may substitute generics, usually based on a list published by the province  Wholesalers and manufacturers offer significant rebates (where legal) to pharmacists   11 FRANCE Overview: France’s mandatory national health insurance system provides universal coverage for pharmaceuticals. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 65.6M $35,000 $3,978 (11.8%)* $ 640.2 (16.1%) *2009 data Part I: Access Contributions are made primarily through employer and employee payroll taxes and income tax  Coverage for healthcare is universal, and the public health insurance scheme covers prescription drugs  Complementary health insurance is subscribed to by the majority (around 90%) of the population. It is provided either by not-for-profit mutual associations or by private insurance companies. It covers partly or totally the co-payments. Pharmaceuticals are in most cases fully reimbursed by the combination of the mandatory and complementary health insurances.  Physicians  Various programs and actions tend to promote good and rationale prescribing practices  Cost-sharing varies based on the effectiveness of the drug   Reimbursement rate depends on the effectiveness of the drug and the severity of the disease, ranging from 15% to 65%. Some costly drugs are fully reimbursed by the National Health insurance.   There is a copay of EUR$0.50 (USD$0.65) with exemptions for people  with low income   There is a list of 30 long-term conditions for which there is no co-payment for the treatment related to a condition. Treatments for symptoms or concomitant conditions are not exempted from co-payment.  Part II: Policy Licensing occurs through the European Medicines Agency (EMA) or the French Medicine Agency  Assessment is conducted by the Transparency Commission (TC), one of the specialist committees of the French National Health Authority    The TC provides advice on new drugs, providing recommendations for reimbursement, the reimbursement rate, and information on the comparator drug prices and the target population  12  The TC gives a new drug a level of importance (major, important, moderate, weak, insufficient to justify a reimbursement) which is based on five criteria (efficacy/safety, existence of therapeutic alternatives, severity of disease, type of treatment, impact on public health)  The TC also evaluates the level of added therapeutic benefit (amélioration du service médical rendu, ASMR) brought by the new drug, as compared to existing therapies. This additional benefit is rated from level V (no additional benefit) to level I (major additional benefit).   The final decision to list a drug on the formulary is made by the Health Minister  Prices  are set by the Economic Committee of Health Products (CEPS)  Contracts  are sometimes used, including price-volume agreements, price reductions, and conditional reimbursement    The Primary considerations of the CEPS when setting prices: are additional medical benefit  provided (ASMR) according to TC evaluation, prices of comparators, forecast sales volumes,   Drugs that provide no added medical benefit (‘ASMR’ level V) can be reimbursed only if they bring savings on medical treatment costs.   As a result of recent legislative changes, economic evaluation will now be performed by HAS for some new drugs, either at the time of initial evaluation or after some time on the market, and be taken into consideration by the CEPS for price setting or price adjustment.   There is a framework in place to guide use of contracts based on financial terms, but this does not include contracts that aim to address clinical uncertainty  The reimbursement  rate is set by the National Union of Health Insurance Funds (UNCAM) within certain limits   There is a list of reimbursable drugs for dispensing by pharmacies and a list for drugs that can be used in hospitals. In hospitals, drugs are generally paid for within the DRG allocation. However, there is a list of expensive drugs that are fully reimbursed to the hospitals by the NHI on top of the DRG allocation.   For a drug to be reimbursed by a national health insurance fund, the reimbursement status is proposed by the Transparency Commission. The decision is taken by the NHI funds association, which can modulate (by ± 5%) the reimbursement level proposed by the TC. Part III: Distribution France tends to be a parallel exporter  as it typically has lower prices than other European countries  Wholesalers’ margins are regulated Pharmacists are able to prescribe medicines and give medical advice to patients   13 GERMANY Overview: Germany’s mandatory social insurance system includes standard benefits including pharmaceuticals, provided by competing sickness funds. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 81.3M $37,900 $4,218 (11.6%) $628.1 (14.9%) *2009 data Part I: Access Contributions  to sickness funds are split between employers and employees and are based on income   The employer to employee contribution ratio is 47:53 and the contributor’s family is covered  A central fund collects the contributions and distributes them to sickness funds based on the health risk of their populations  The wealthy, self-employed, or public employees may opt for private insurance Coverage is almost universal  Physicians  face targets for prescribing and get individualized feedback   Physicians must inform patients about price supplements for drugs over the reference price  Physicians who exceed negotiated target budgets by 15% are warned; by 25% they must explain their prescribing and may be required to pay part of the excess back to the system Co-payments  exist for prescriptions, but extensive exemptions exist   Co-payments of 10% exist, with a minimum of €5 (US$6.83) to a maximum of €10 (US$13.66)  Exemptions are granted to children under the age of 12, and adolescents with serious illnesses  Partial or full exemptions are granted to low income beneficiaries once 2% of gross income per annum is spent on co-payments (or 1% for individuals with a serious chronic illness) Part II: Policy Licensing  is performed within Germany or the European Medicines Agency (EMA)   The Federal Institute for Pharmaceuticals and Medical Devices (BfArM) licenses within Germany by testing efficacy, safety, and quality; authorization may be time-limited if concerns arise   EMA centralized or decentralized (mutual recognition) licensing schemes are acceptable   14 Assessment  results in reimbursement or placement on a negative list   The Federal Joint Committee (G-BA) assesses drug reimbursement based on an assessment of benefit and a commissioned economic evaluation by the Institute of Quality and Efficiency in Healthcare   If the price of the drug is not reasonable, the Federal Association of Sickness Funds can set a maximum reimbursed price Regulation for pricing was introduced in 2011, with the maximum prices for new drugs set federally  Free market access for innovative products is maintained; however, all medicines must undergo an early benefit assessment by the G-BA which is the basis for price negotiations  Reference pricing is used for drugs demonstrating no added value compared to alternate treatments  High levels of rebates for generics negotiated with sickness funds nullify the effect of the actual price Contracts  and/or pricing discounts are sometimes negotiated between the federal sickness funds and manufacturers for generic drugs   An early benefit assessment leads to negotiations about the price of generic medicines  Currently there are very few negotiated agreements on brand name  drugs  Reimbursement  occurs through a reference pricing system for on and off -patents  Reference pricing provides incentives for pricing at or below the reference price, particularly since a 30% discount below the reference price eliminates the patient co-pay  Reference prices for a group cannot exceed the highest price within the lower 1/3 of drugs; the patient pays any excess amount above the reference price  Manufacturers must offer a 6% rebate to Statutory Health Insurance (SHI) funds Part III: Distribution Parallel imports  make up a significant proportion of dispensed medicines   Pharmacist are encouraged to generate at least 7% of their turnover through parallel imports  Prices have not been affected since manufacturers prefer to keep German prices high due to international referencing by other nations Wholesaler  margins are digressively scaled, and include a rebate to SHI funds   Markups range from 15% for drugs under €3 (US$4.10), to 6% for drugs over €1,200 (US$1,639.30), with a ceiling of €72 (US$98.36) Pharmacists  have substitution rights, and a mixed flat -fee plus margin system  Pharmacists receive €8.10 (US$11.06) plus a fixed margin of 3% on the pre-tax drug price  Pharmacies must give a negotiated rebate to SHI funds of €2.30 (US$3.14) for prescription drugs  Pharmacists are required to substitute contracted products, unless physicians note otherwise, and must dispense parallel imports when their price is 15% or €15 (US$20.49) lower   15 NETHERLANDS Overview:  The Netherlands social health insurance system includes comprehensive drug coverage through a positive list of reimbursed drugs, provided by competing private insurers. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 16.7M $42,300 $4,914 (12.0%) $472.5 (9.6%) *2009 data, estimates Part I: Access Contributions  to the privately managed SHI scheme are split between employers and employees   All residents are obligated to purchase insurance  Contributions include a 6.5% employer contribution plus an enrollee flat premium which varies by insurer and can include discounts for group enrollment  Half of the employer contributions are used by the Health Care Insurance Board (CVZ) to redistribute funds to insurers based on their insurees’ health risk via risk adjustment   Contributors may choose their insurer and insurance plan every year; insurers must accept all applicants and provide a basic standard package which includes pharmaceuticals  Tax-funded financial assistance is available to low-income residents to pay their premiums Coverage is universal  Physician incentives and regulations on prescribing are minim al  Physicians are encouraged to prescribe cost-effectively, and inform patients about the value of generics  Some insurers offer GPs financial incentives for cost-effective prescribing, and monitor physician prescribing activities  The Dutch College of General Practitioners (NHG) provides pharmaceutical guidelines Co-payments  are low, with fiscal arrangements for low -income groups  Co-payments only apply if the reimbursement (reference) price is below the actual price  This is rare and only a few types of medicines (e.g., some drugs for ADHD) have co-payments Part II: Policy Licensing  occurs either through the federal agency, or through the EMA   The Medicines Evaluation Board (CBG) licenses pharmaceuticals  EU-level centralized or decentralized (mutual recognition) licensing schemes are acceptable Assessment  may result in placement on a positive list   16  The national formulary contains more than 95% of licensed drugs  Suggestions to include a drug on the positive list (GVS) by the Ministry are strongly based on advice from the Pharmaceutical Aid Committee (CFH)   The CFH assesses efficacy, cost-effectiveness, safety, budget impact and severity of disease  Data on cost-effectiveness and expected budgetary impact of “innovative” drugs must be submitted by manufacturers looking to avoid reference pricing Pricing  is free within set limits established by the Ministry   There is no central pricing authority  The Ministry sets maximum prices for pharmaceuticals based on the average prices set in Germany, France, Belgium and the UK  Prize cuts and freezes of 10-50% have been implemented in 2004, 2005 and 2008  Drugs are grouped into a cluster system which influences the maximum reimbursement limit  Contracts  are not used for extramural drugs (drugs prescribed in the community setting) but are sometimes used for intramural drugs (drugs prescribed in -hospital) Reimbursement  negotiations have reduced Dutch drug prices substantially   The formulary is split into 1A (therapeutically interchangeable drugs which are subject to reference pricing), 1B (innovators) and 2 (conditionally reimbursed 1A and 1B drugs)  Innovator drugs are reimbursed at manufacturer-set prices (1B and In hospital)  Reference pricing applies to about 85% of  1A drugs, with limits calculated at the average price of drugs within the therapeutic cluster; few drugs are priced above the reference price  The ‘preference policy’ allows insurers to provide any one of the 1A drugs within a therapeutic cluster  A tendering process for one 1A drug within each cluster, launched collectively by multiple insurers, has reduced reimbursement prices substantially   Physicians may prescribe a more expensive (non-tendered) drug when necessary   Some supplemental drug insurance plans cover OTC drugs, or drugs not on the formulary  Expensive in-hospital drugs and orphan drugs are conditionally reimbursed through a separate research fund for first three years of use while proof of value is established Part III: Distribution Parallel imports primarily involve exporting from the Netherlands  Wholesalers’ margins are unregulated Pharmacists  receive fixed fees as well as retain margins minus claw -back  Generic substitution is allowed in most cases, with financial incentives for cheaper dispensing  Fixed fees for dispensing formulary drugs are negotiated every year for pharmacists by the Health Charges Board, currently a maximum of €7.28 (US$9.81)  Pharmacists must provide a 6.82% discount on the margin between the list (reimbursement) price and the procured price through a claw-back program  Pharmacist claw-backs are no longer considered significant since negotiations for drug prices occur at the insurer level through tendering, rather than by pharmacies with wholesalers  17 NEW ZEALAND Overview: New Zealand’s public health insurance system provides universal coverage for pharmaceuticals. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 4.3M $27,900 $2,983 (10.3%) $275.9 (9.3%) *2009 data Part I: Access Contributions  are funded through taxation, and as such are based on wealth, not health   Funding is not earmarked for pharmaceutical care, and supports all governmental services  Supplementary insurance is provided by the private market Coverage is universal  The national Pharmaceutical Schedule reimburses about 80% of pharmaceutical expenditures to all New Zealanders  Physicians’ access to drugs may be limited to ensure rational prescribing   The Pharmaceutical Schedule may limit access to some drugs under Special Authority criteria, or Exceptional Use Programs, both requiring prior authorization for reimbursement Co-payments  are limited, with further concessions for some beneficiaries   Drugs have a copayment of NZ$3 (US$2.15) (increasing to NZ$5 from 1 January 2013), and are free for children under six  Co-payments are lower for holders of the Community Services Card (which involves means-testing incomes) and for those with a High Use Health Card (for those with significant health spending)  Prescription Subsidy Cards can be used to reduce co-payments to NZ$0 after the 20th subsidized prescription in a given year.  Some supplementary insurance schemes cover prescription co-payment charges Part II: Policy Licensing  is carried out by MedSafe, based on safety, efficacy and quality   MedSafe is influenced by other licensing authorities, including Australia’s TGA and the European Medicines Agency (EMA)  Post-marketing surveillance monitors safety and results in removal of unsafe products, and updates prescribers of new safety-related information  18 Assessment  determines listing on the subsidized Pharmaceutical Schedule   The Pharmaceutical Management Agency (PHARMAC) board determines which drugs will be listed based on advice from the Pharmacology and Therapeutics Advisory Committee (PTAC)  Clinical effectiveness, safety, budget impact, cost-effectiveness and availability of alternatives is evaluated; economic assessments vary from high level to very detailed Pricing  is free, subsidies are strongly affected by negotiations for reimbursement  Contracts  and/or price negotiations are used for every new medicine   Rebates are provided by manufacturers to District Health Boards, particularly in conjunction with expenditure caps and sales volume targets in the form of risk-sharing agreements   Multi-product agreements with manufacturers are also in place which ensure price discounts on older medicines in exchange for reimbursement of newer medicines  Contracts often included clauses to guarantee supply   Reimbursement  through the Pharmaceutical Schedule is based on negotiations wit h PHARMAC  Negotiations can involve therapeutic group reference pricing, set price contracting, rebates or tendering  Reimbursement levels for reference-priced drugs are set at the price of the lowest-cost drug in the therapeutic reference group, as determined by PHARMAC  Patients who want more expensive drugs pay in the order of 186% of the difference, to cover the product, the pharmacist’s markup and tax – this mark-up is not fixed by regulators  Generics are extensively tendered for low-cost procurement, typically in the form of one brand being listed per chemical (sole supply) Part III: Distribution Parallel imports are legal, but difficult to import due to informational requirements  Wholesaler  margins are not regulated Pharmacies ’  fees are primarily based on a flat rate, plus a small margin   Pharmacy services are remunerated based on a complex formula which includes a fixed fee of NZ$5.30 (US$3.79) which is higher for some drugs,  a margin of 4-5% of the drug price, and a special GST subsidy (changing in July 2012 to a capped agreement with a low handling fee and patient-based service payments)    19 SWEDEN Overview: Sweden’s public health insurance system provides universal coverage for pharmaceuticals. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 9.1M $40,600 $ 3,722 (10.0%) $ 465.5 (12.5%) *2009 data Part I: Access Contributions are primarily public and are divided between the central government and county councils   The public health system is financed largely through proportional taxes levied by 21 county councils, while the central government subsidizes the cost of drugs through state aid to the county councils Coverage is universal Physicians have some incentives to  control pharmaceutical expenditure   In several county councils, physicians have a budget for prescription drugs  A national drug register records drug usage and expenditure, demographic information about patients, and information about the prescriber; therefore, all prescriptions are matched to a patient and prescriber  Co-payments for pharmaceuticals vary depending on patients’ expenditure   Patients pay the first SEK 1,100 (US$147) for reimbursed outpatient pharmaceuticals, after drugs costs are subsidized (at 50%, 75%, 90% or 100%) based on the level of out-of-pocket expenditure.  The maximum annual amount that a citizen will have to pay out-of-pocket for reimbursed pharmaceuticals is SEK 2,200 (US$295)  Costs for siblings under the age of 18 are counted together and the total maximum amount paid for all children in a family is SEK 2,200 per year Part II: Policy Market approval is granted by the Medical Products Agency (MPA) or the European Medicines Agency (EMA) The Dental and Pharmaceuticals Benefits Board (TLV) conducts  the assessment  to provide decisions on prices and reimbursement for prescription drugs based on cost-effectiveness analysis and using value-based pricing   20 Pricing  for reimbursed drugs is regulated by  TLV  Prices for pharmaceuticals must be deemed to be a ‘cost-effective price’ to be covered under the public system  The TLV sets the pharmacy purchase price and the pharmacy margin for publicly reimbursable pharmaceuticals  Non-reimbursed and over-the-counter pharmaceuticals are freely priced by manufacturers  Sweden has some experience  with contracts , primarily in the form of coverage with evidence development and some price caps   TLV does not contract drugs or negotiate prices.  However the county councils frequently do this, one by one or some of them together, on hospital drugs. Recently procurement has also been completed by a county council for a drug used in primary care.   TLV makes mandatory decisions which can be general or limited and, in both cases, conditional or not. TLV works actively with follow up.  The final reimbursement decision is made by the TLV, which must approve a medicine for it to be placed on Sweden’s positive list  Part III: Distribution Parallel imports are permitted since 1995  Wholesalers and retailers have relatively low margins compare d to other EU countries Pharmacists must use generic substitution, but the patient may choose to pay the additional cost to receive the brand name  Competition on the generic market is promoted by the TLV choosing  “the product of the month” – the product that all pharmacies in Sweden shall offer their customers when they substitute medicines exposed to generic competition and it is the cheapest drug in each group within the package size that the product belongs to    21 UNITED KINGDOM Overview: Prescription drugs for all Britons are covered by the tax-financed National Health Service (NHS); however, Scotland, Wales, and Northern Ireland use different systems of financing, planning, and policy, including those for health technology assessment, appraisal, and reimbursement decisions. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)** 63.0M $35,900 $ 3,281 (8.8%)* $ 381.4 (11.6%) *2008 data Part I: Access Contributions  to the NHS are based on taxable wealth, not health risk   Private comprehensive insurance is available; insurers defer to the NHS for most drug decisions  Contributions are not earmarked for pharmaceutical spending  Coverage is universal Physicians  face a range of incentives and regulations to govern prescribing behaviour  Physicians are encouraged to prescribe generics (using the international nonproprietary names)  Guidelines for rational use are provided by the General Medical Council and the National Institute for Health and Clinical Evidence (NICE) Medicines and Prescribing Centre   Incentives for physicians are run locally by the territorial NHS boards Co-payments in England are fixed, and include exemptions for vulnerable groups . There are no prescription charges in Scotland, Wales, and Northern Ireland.   In England, the NHS prescription fee is £7.65 per prescription (exemptions may apply for certain populations based on age, income, or student status, as well as exemptions for pregnancy).  Since 2011, prescription charges have been abolished in Scotland, Wales, and Northern Ireland   Part II: Policy Licensing  occurs either nationally or through the European Medicines Agency (EMA)  The Medicines and Healthcare Products Regulatory Agency (MHRA) approves drugs at a national level; EMA’s centralized or mutual recognition processes are also acceptable and extensively used Assessment  occurs through an independent agency  NICE provides guidance on the use of new and existing medicines in England and Wales  22  Topics for assessment are determined by burden of disease, resource impact, policy importance, whether there is inappropriate variation in practice across the country, and timeliness or urgency   Drugs which are accepted for use may be optimized for particular groups or prescribers  The NHS operates a negative list which includes drugs that are excluded from the NHS subsidy  The Secretary of State has directed that the NHS is required to provide funding and resources for medicines and treatments recommended by NICE through its technology appraisals work program.  It normally has three months from the date of publication of each technology appraisal guidance to provide funding and resources.   Pricing  is generally free, but subject to price holds and price cuts to reduce NHS expenditure  The Pharmaceutical Price Reimbursement Scheme (PPRS) was introduced in 2009 to achieve balance between reasonable prices and fair return for industry   Free pricing is strongly influenced by reimbursement (profit) controls  Each manufacturer’s return on capital (profits minus allowable cost) is limited to 21%; significant excess (nearly 30% of return on capital) requires an excess payback or reduced price Contracts  are sometimes used in the form of patient access schemes (PASs)   The PPRS of 2009 includes PASs — financial or outcome-based — meant to allow early access to medicines that are not initially found to be cost and clinically effective by NICE  Flexible pricing schemes allow a company to amend initial list prices based on new evidence   Approximately 12 PASs are considered each year — 27 in total since 2007  Reimbursement  is valued at 100% of the price of the drug, within profit regulations   For generics, the drug tariffs are set based on information received from pharmacies about rebate and price levels; tariffs are regularly modified and differ between Scotland and the rest of the UK Part III: Distribution Parallel imports  are marketed in the UK.  Because of the recent fall in the UK currency, parallel exports from the UK are increasingly significant  Wholesalers  have fixed margins and offer extensive rebates to pharmacists   Manufacturers have imposed quotas to pharmacies in order to reduce parallel exports  Wholesalers pass most of their margins on to pharmacies as a discount based on their bargaining power  Pharmacists receive a flat fee plus margins on drugs   Pharmacists may not substitute products, although the new PPRS allows for generic substitution  Remuneration is composed of a fixed fee-for-service, plus margins through the difference between reimbursement prices and purchase prices from wholesalers.   Pharmacies also contribute a claw-back (a proportion of drug margins) as part of their community services contract  23 UNITED STATES Overview: Health insurance in the US is provided primarily through private employer-based insurance plans and public plans which cover vulnerable populations; new regulations are ushering in universal coverage. Population GDP US$ PPP/capita Health Expenditure US$/capita (% GDP)* Pharmaceutical Expenditure  US$/capita (% health expend.)* 313.8M $48,100 $7,960 (17.4%) $956 (12.0%) *2009 data Part I: Access Contributions  for private plans are based on health risk; within public plans, payments are based on income  Contributions to employer-based programs are based on the health risk of the employees  Financial assistance is available to those with low incomes attempting to purchase individual insurance, and to small businesses to cover their employees  Seniors contribute to Medicare according to income  Part D covers prescription drugs for seniors; premiums for drug insurance increase over time for those who choose to remain without Part D drug coverage or an actuarial equivalent  Means-testing allows individuals and families to join Medicaid, and low-income children into the Children’s Health Insurance Program (CHIP); premiums are set by states based on income Coverage from public plans covers the elderly and those on social assistance, employer-based plans currently cover part of the remaining population   A significant population is covered by employer-based plans; public plans include Medicare (seniors), Medicaid (low-income beneficiaries), Veterans Affairs, Public Health Service (Indian Health Services), and Department of Defense plans.   Individuals are required to purchase health insurance with penalties beginning in 2014 Physicians  are often incentivized by insurers to prescribe within formulary or by patient preferences due to a tiered pharmacy copay plan   Capitated payments and compliance with practice guidelines affects prescribing behavior  Co-payments vary by benefit plan but may consist of a three-tier design (e.g., low co-pay for generics, medium co-pay for preferred brand-name drugs, and high co-pay for non-preferred brand name drugs) Part II: Policy Evaluation and  approval  of medicines is performed by the Food and Drug Administration (FDA), based on clinical efficacy, safety, and quality of manufacturing practices Formulary assessment  is conducted separately by each insurer   24 Pricing is unregulated and the pricing environment is highly var iable  Price concessions exist for the Medicaid and the Veterans Affairs (VA) programs: Medicaid utilizes a rebate system and the VA’s standard price reduction is mandated with additional changes/reductions in the form of contract agreement   Uninsured individuals pay high prices; prices for insured individuals are much lower due to reimbursement incentives Reimbursement  depends on individual insurers placing drugs on their formulary   Insurers often negotiate discounts and rebates for formulary inclusion; this task is often outsourced to a Pharmacy Benefit Manager (PBM), a third party administrator of prescription drug programs  Many insurers subscribe to guidelines for formulary inclusion by the Academy of Managed Care Pharmacy (AMCP), which include requirements for pharmacoeconomic data submission Contracts  are used extensively by the Veterans Affairs (VA) program, which negotiates with manufacturers on all new drugs   The VA has a single national formulary, with all decisions made centrally by the Pharmacy Benefits Management Services Group  Contracts with manufacturers are required by the VA as per the Federal Supply Schedule Part III: Distribution Parallel import  of medicines into the U.S. is forbidden but individual buyers a re not typically prosecuted  Canadian provincial authorities exert influence through formularies in exacting low prices, which extend to all buyers (whether they are insured or not), whereas US prices are nominally much higher with many rebates due to price discrimination; the result is extensive arbitrage Wholesalers  are unregulated and capture margins between manufacturers and pharmacies  The ‘big three’ dominate the wholesale industry: Cardinal Health, AmerisourceBergen and McKesson, and are responsible for over 90% of manufacturer sales  Wholesalers receive volume discounts, prompt-pay discounts and other discounts from manufacturers  Where pharmacies receive discounts which are more substantial than the wholesaler’s costs, the wholesaler ‘charges back’ the manufacturer the difference  PBMs process prescriptions for the groups that pay for drugs and act as an intermediary between the payer and others in the health care system   Pharmacies negotiate with manufacturers and/or wholesalers for discounts and rebates, and negotiate with PBMs for inclusion in networks and reimbursement due to cost cutting incentives  PBMs offer a guaranteed reimbursement formula to pharmacists, which includes some reimbursement for the drug place plus a dispensing fee  Smaller pharmacies purchase directly from wholesalers and set their own margins 

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