Pharmaceutical benefit management under health insurance – common issues in emerging economiesPharmaceutical benefit management under health

insurance – common issues in emerging economies

Zagreb, January 19, 2010

Andreas Seiter

World Bank

Navigating between two extremes

Political death if drug coverage becomes too

skimpy

Bankruptcy if drug coverage is

too generous

Sustainable path

Common Features

Insurance funds cover majority or all of population Insurance “drug benefit” = coverage for drugs is major enabling

factor for drug market Coverage based on positive list (formulary) Two challenges for suppliers:

• Getting on the list

• Once on the list, sell as much as possible

Two intervention points for insurance funds to control costs• Decide what is covered, at which price, under which conditions

• Control/manage consumption

Sleeping giants?

Bureaucratic tradition, but have to endure increasingly tough negotiations with stakeholders

Politicized governance: mixed signals are common due to high sensitivity of coverage decisions

Status and credibility gap to providers (doctors) Technical challenges: many drugs and formulations, difficulty to get

reliable data on clinical benefit and pricing Millions of transactions to be monitored

What happened in “Old Europe”?

Insurance funds were ahead of the curve – total coverage in the 60s and 70s was affordable (young population, rapid growth)

Systems, tools and skills could emerge over time Financial room to maneuver is significantly greater Significant power shift to insurance funds over time

Key success factors

Clear laws and

regulations

Power and accountability

aligned

Confidence; business and negotiation

skills

Analytical tools and

data

Good decision-making

processes

Technical know-how

Information / communicatio

n tools

Successful drug benefit management

Reimbursement decisions

Principles:

• Only cost-effective choices should be reimbursed

• Reimbursement should be sufficient to ensure access without discriminating against low-income groups or chronically ill patients

Cost control from an insurer and patient perspective

Cost = price x volume Insurance funds often look at reimbursement rates as proxy for price, but

this is not fair to patients Two types of co-payments:

• Statutory as fixed amount or percentage of a theoretical reimbursement price

• Difference between reimbursed price and full market price of selected product

When products are being clustered for reimbursement purposes, choices made by doctors, pharmacists, patients can lead to significant variations of out-of-pocket payments

Tolerance for co-payment varies based on patient experience

Brand loyalty is a hurdle

More relevant in markets with traditionally high co-payments Usually “brokered” by doctor or pharmacist in response to incentives Patients are rarely loyal* to a specific drug (even chronic patients go

through frequent changes in their medication), but easily scared by remarks made by experts on quality, strength

*except in cases where there is a “stand-alone treatment” like in certain cancers, immunological diseases, transplantation etc. – here switching to a generic or alternative, cheaper treatment may require appropriate consultation to ensure patient compliance

Neutralizing incentives that work against policy

Generic prescribing should be the rule Pharmacist’s income based on flat dispensing fee rather than

percentage of sales Prescribing targets and monitoring for physicians; feedback, ranking,

academic detailing, incentives, fines Measures to stimulate price competition within clusters, for example

“preferred brand” status with lower co-payment

Variations of clustering

Same molecule (example all simvastatin products) - with adjustments for strength and formulation

Same chemical class as long as effects and tolerability are similar (example all statins) – with adjustment for different per-mg activity

Equivalent clinical efficacy and tolerability without chemical class limit

How manufacturers fight clustering

Same molecule: special formulations, packaging variations, shift to other, more expensive drugs in the same class (example esomeprazole instead of omeprazole)

Same class: shift to other classes (example from ACE inhibitors to ARBs), clinical differentiation in head-to-head trials or large scale trials to establish long term outcomes

Across classes: ?

Questions to be answered

Scientific criteria for clustering beyond “same molecule” category? Adequate decision making process? Expected budget impact – is it worth the fight? Is know-how from other countries transferrable? Should patented drugs get a special status / be exempt from clustering? Are there good alternatives that are easier to implement? What is the “maintenance” process, for example if a manufacturer

launches a variation of a clustered product? Which other measures are necessary to achieve the desired impact

without exposing patients to higher co-payments?