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Pricing & Reimbursement in Europe

Can the drive for cost effectiveness overcome cost containment?

Publication Date   October 2006
Publisher   Datamonitor
Product Type   Report
Pages   214
ISBN Number   not applicable
Product Code   DAT561
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Price £6,000.00

approximately: $10,594 | €7,608

Summary


Introduction

Combined drug sales in the five major European markets represent the second-biggest market globally after the US. Unlike the US, which is dominated by a wide range of private payers, governments are the major payers in Europe. The monopsonistic nature of these markets provides governments with significant leverage and they use extensive P&R controls to contain spiralling healthcare costs.

Scope

  • Evaluation of the pressures facing the drugs industry and how these pressures will impact P&R
  • Overview of global P&R controls, examining which are important in the European market both currently and in the future
  • In-depth analysis of each of the five major European markets, examining both the healthcare systems and the key P&R infrastructure
  • Identification of trends and recommendations shaping the European P&R environment

Highlights

Better dialogue between healthcare providers and drugs companies is vital; however, healthcare provider devolution has led to fragmentation of the key European markets, making it difficult to identify key P&R stakeholders

Many European governments profess to be willing to reward innovative drugs, however this is largely a smokescreen as debt-ridden governmental payers increasingly prioritize cost containment

European drug developers need to prioritize P&R as an important factor in drug development, and focus on securing strong P&R justification before green-lighting me-too drugs

Reasons to Purchase

  • Gain a clear understanding of the healthcare market dynamics and P&R environment within each of the five major European healthcare markets
  • Review P&R trends in Europe, based on our analysis and primary research conducted with key stakeholders in the industry
  • Gain insight into how P&R fits into company strategy and understand how specific P&R trends are shaping the European markets

Content


  • Chapter 1 Executive Summary
    • Scope of the report
    • Key findings
  • Chapter 2 Overview Of The Drugs Market: Identifying Why Pricing And Reimbursement Is Important And Where It Fits In
    • Introduction: why is drug pricing and reimbursement important?
    • Pharma is facing a reduction in productivity
    • R&D spend is rising
    • The number of approvals is falling
    • There are delays in P&R assessment
    • Biotech is more productive and is set to have a correspondingly higher growth rate
    • Blockbuster patent expiries are also damaging Big Pharma
    • Pharma pipeline strategy needs to adjust to market demands
    • Globally, public and private payers exert pressure on profit margins
    • Pressures on drug developers rise because healthcare expenditure is set to continue to increase
    • Although drugs make up a relatively small percentage of healthcare spending, they are a highly visible target
    • Spending on drugs is set to rise
    • The drugs industry is being squeezed on drug pricing and reimbursement
  • Chapter 3 Global Overview Of P&r Tool Implementation
    • Introduction
    • Price setting mechanisms are used to set the initial theoretical price
    • The initial theoretical price is then modulated by a range of factors
    • A key factor impacting pricing is the broad range of pricing controls used globally
    • An overview of government-led price controls
    • Profit controls are used in some European countries such as the UK
    • Reference pricing is used extensively across Europe
    • Price cutting and price freezing play a central role in European cost containment
    • Linking pricing with the Consumer Price Index
    • The use of pharmacoeconomics in pricing controls: using healthcare economics, outcomes research and pharmacoeconomics to justify pricing
    • Discounts and rebates play a role in European drug pricing
    • A single European drug price has been discussed as a possible cost containment tool
    • A range of factors impact the drug price only once the drug has been launched
    • Parallel importation can reduce profit margins for drugs companies
    • Health informatics may lead to increased cost containment
    • DTC marketing cannot be used in Europe to support higher drug pricing
    • Generic incursion reduces profit margins for drugs
    • Key global reimbursement mechanisms
    • Reimbursement favours innovation-focused drug development
    • Spending on sales and marketing is prioritized over seeking innovation
    • The focus on sales and marketing encourages the development of me-too drugs, although healthcare providers are penalizing me-too development
    • A wide range of factors influence reimbursement
    • Controlling doctors' budgets is used more widely in Europe than in the US
    • Volume and expenditure limitations play a role in Europe
    • Although tiered co-pay and formularies play an extensive role in the US, they are not used in Europe, and most patients pay a low co-pay in a flat-fee form
    • Formulary access and Positive/Negative lists play a more significant role in the US compared to Europe
    • Taxes on reimbursed drugs
    • Some countries require drugs to be included on reimbursement lists of a number of countries before reimbursement is granted
    • Pharmacoeconomics and risk-sharing agreements are increasingly important in Europe
    • Step therapy or fail first plays a key role in the US, but is not widely used explicitly in Europe
    • Prior authorization
    • Pharmacist substitution
    • Enforcing a switch to OTC status is another reimbursement restriction tool in both the US and some European countries
  • Chapter 4 Pricing & Reimbursement In France
    • Healthcare in France: high debts increase the focus on P&R
    • An overview of the French healthcare system
    • Private healthcare is increasingly used to support public healthcare
    • French healthcare provision can be split into PCP-dominated community healthcare and hospital-based healthcare
    • The creation of the HAS has significant impacts on healthcare provision in Europe
    • A range of other stakeholders impacts on healthcare provision
    • Recent changes affecting the pricing and reimbursement environment in France
    • The Transparency Commission determines the SMR and the ASMR
    • The SMR and the ASMR are used as a basis for P&R in France
    • The unification of a range of P&R functionalities under HAS is set to transform P&R in France
    • P&R mechanisms used to contain costs in France
    • A range of reforms have been instituted to boost cost containment
    • Recent co-payment reforms help drive healthcare cost containment
    • The 'Mdecin Traitant' scheme drives adoption of a gatekeeper system in France
    • There has been considerable consolidation across a range of healthcare stakeholders to help contain costs
    • A range of P&R tools are being used to support healthcare reforms in the fight to contain costs
    • Volume limitations are an important restrictor of strong sales growth
    • The focus on utilizing and incorporating reference pricing is increasing
    • The market profile of drugs companies and their products is limited by restricting salesforce activity and physician contact
    • Taxes and levies make the environment harsher for drug developers
    • Generic usage and prescription is the most important macroeconomic factor modulating pricing once the drug is on the market
  • Chapter 5 Pricing & Reimbursement In Germany
    • Healthcare in Germany: the need for cost containment
    • An overview of the German healthcare system
    • Public healthcare insurance covers the vast majority of German patients
    • Ambulatory care is highly regulated and is dominated by reimbursement controls
    • A range of stakeholders impact healthcare provision in Germany
    • The limited control that governmental bodies exert on healthcare provision is primarily mediated through the Federal Ministry of Health and the 16 Lnder
    • Sickness funds are the key healthcare provider
    • Physician and pharmacist committees exert significant influence on prescription
    • A range of organizations represent industry interests
    • A number of reforms shape the evolution of the German healthcare market
    • IQWiG is helping to introduce cost effectiveness and evidence-based healthcare
    • Recent changes affecting the pricing and reimbursement environment in Germany
    • Reference pricing is a key cost-containment tool but the inclusion of patented drugs in the scheme is highly contentious
    • The evolution of jumbo reference pricing
    • Reference price levels are calculated by the Federal Committee of Physicians and Sickness Funds
    • German pharmaceutical companies are fighting jumbo reference pricing
    • Jumbo reference pricing is affecting an increasing number of drugs
    • The requirement for innovation is steep and many drugs are not sufficiently innovative
    • Pharmacy substitution: a cost-saving idea in principle but it has yet to show significant savings
    • Restrictors of aut idem substitution
    • Incentives for aut idem substitution
    • The impact of aut idem substitution on the German drugs market
    • Pharmacy and pharmaceutical company rebates are used in cost containment
    • The high number of patients exempt from co-payment is being reduced
    • Historically, budgets and spending caps have restricted Germany's pharmaceutical market
    • Ambulatory physician budgets have been successful at reining in drug expenditure
    • Hospital budgets are being reshaped by DRGs
    • Despite several initiatives over the last 15 years, there are no plans to introduce a positive list
    • Germany lacks a positive list
    • Payers are restricting the number of reimbursable drugs by placing them on negative lists in Germany
    • Additional factors impact on drug prescription guidelines
    • Discounts and rebates increasingly shape profit margins in the German hospital markets
    • Parallel importation and generic competition impact on drug price following launch
    • A reduction in the parallel importation quota is set to reduce the damage to pharmaceutical company profit margins
    • Generic penetration in Germany is relatively high
    • Healthcare informatics is playing an increasingly important role in German healthcare provision
  • Chapter 6 Pricing & Reimbursement In Italy
    • The Italian healthcare system is racked by debt and it is very difficult for drugs companies to generate a profit in this market
    • An overview of the Italian healthcare system
    • Private healthcare is used to replace public service with better provision
    • Italian healthcare provision is increasingly decentralized
    • The Italian national health service
    • Reimbursement is still assessed on a national level
    • AIFA dictates drug reimbursement in Italy
    • Although there is a formalized reimbursement structure, reimbursement is based on negotiations
    • Drugs are grouped into classes to determine reimbursement levels
    • Class C drugs still face cost containment pressures
    • Healthcare delivery is the responsibility of regional and local healthcare bodies
    • ASLs provide primary and secondary care in Italy
    • Italian reforms have shaped healthcare provision significantly in the last two decades
    • Recent changes affecting the pricing and reimbursement environment in Italy
    • Patient co-payment is making a re-emergence on a local level
    • Drugs companies help fund the Italian healthcare system through levies
    • Price cuts are part of price manipulation, and are used to contain costs in Italy
    • Pharmacist substitution has been introduced but has historically had slow adoption
    • Reference pricing is a key cost-containment tool in Italy
    • Drug monitoring and risk-sharing agreements have been introduced in Italy
    • Parallel importation and generic competition impact on drug price following launch
    • Generic drugs have historically made a limited impact but are now being increasingly utilized
  • Chapter 7 Pricing & Reimbursement In Spain
    • An overview of the Spanish healthcare system
    • Spanish healthcare has become increasingly devolved to the Autonomous Communities
    • Public healthcare dominates healthcare provision
    • Inpatient and outpatient healthcare is provided on a devolved regional basis
    • The introduction of the Medicines Bill in July 2006 revolutionizes healthcare provision in Spain
    • Recent changes affecting the pricing and reimbursement environment in Spain
    • Reference pricing, price cuts, price freezes, discounts, rebates and taxes are all used in Spain to limit drug company profit margins
    • Reference pricing has evolved significantly with the introduction of the new medicines bill
    • Price cuts and price freezes are used in Spain to contain costs
    • Despite their unpopularity, discounts, rebates and taxes are used by the Spanish government
    • Positive/negative lists and prior authorization are used to limit physician prescription
    • Positive/negative lists have met with limited success in Spain
    • Despite issues raised by the EC, prior authorization exists in Spain
    • Additional tools are used in cost containment, including pharmacist substitution and patient co-payment, although these have a limited role in P&R in Spain
    • Pharmacist substitution is allowed on a relatively restricted basis
    • Patient co-payment is low in Spain
    • Generic competition is having an increasing role affecting drug prices following launch
    • The profile of generics is being raised
    • A range of strategies have been used by Big Pharma to restrict parallel importation of drugs out of Spain
    • Healthcare informatics helps to promote the rational use of medicines
  • Chapter 8 Pricing & Reimbursement In The Uk
    • An overview of the UK healthcare system
    • Governmental spending on healthcare in the UK has risen significantly in the last five years
    • A range of trusts, authorities and NHS plans increase the complexity of healthcare provision in the UK
    • A range of trusts and authorities are involved in healthcare provision in the NHS
    • PCTs dominate healthcare provision in the UK
    • PCTs and SHAs shape prescription in the primary care setting and beyond
    • A number of plans and publications are shaping the evolution of the NHS
    • Additional initiatives impact on NHS evolution
    • A range of schemes and bodies impact on drug prescription in the UK
    • NICE is a key P&R stakeholder in the UK
    • NICE and HTAs
    • HTA bodies are becoming more homogeneous, however significant differences still exist between them
    • The government has thrown significant power behind the adoption of NICE recommendations
    • The postguidance and preguidance effects are a significant concern
    • Accelerated assessments via the STA route will help to reduce the preguidance effect, although there are also concerns over how the shortened timeframe will impact assessment and approval
    • There are concerns that NICE and more specifically the new STAs are shaped by politics
    • A range of schemes also impact on drug prescription
    • Recent changes affecting the pricing and reimbursement environment in the UK
    • Direct pricing and reimbursement mechanisms in the UK
    • The PPRS is the principal method of governmental P&R regulation in the UK
    • Patient co-pay, hospital discounts and pharmacist clawback are also used to contain costs, however they are not key P&R tools
    • Parallel importation and generic competition impact on drug price following launch in the UK
    • The UK has a strong generics market and increased switching to generics is set to make it stronger
    • Parallel importation
  • Chapter 9 Key P&r Trends And Recommendations Across The Five Major European Countries
    • European P&R is a difficult environment to generate a strong ROI
    • There is slow uptake of new drugs in the European market
    • Governments need to clarify their P&R strategy, making it more transparent and remove conflicting policies
    • Governments are incentivizing increased generic prescription and setting quotas for parallel trade
    • The drugs industry is being pressed into helping to fund healthcare provision
    • Identifying and targeting the right stakeholders is increasingly difficult in the various European markets
    • The mix of P&R tools used by governments depends on other European countries and constantly fluctuates
    • The regulator and the P&R bodies have different goals
    • The definition of innovation is making the European P&R environment difficult
    • Innovation is the key to securing strong pricing and reimbursement, however, is it being adequately rewarded?
    • Do governments recognize the argument of incremental innovation?
    • How to best identify innovation? It is based on whether a drug improves quality and/or quantity of life
    • Me-too drugs, together with non-essential drugs are being strongly discriminated against from a reimbursement perspective
    • What will happen if innovation is marginalized?
    • The use of PE in Europe is evolving
    • The use of PE in Europe is increasing
    • The way that PE analysis is being used and analyzed is evolving
    • Drugs companies need to determine which bodies want which types of analysis
    • Payer HTAs are increasingly based on in-house analysis using company clinical data and peer-reviewed PE analysis
    • P&R bodies want simpler PE models, although not at the expense of a confused message
    • There is increased sharing of information between the main HTA bodies
    • Key recommendations: ways that drugs companies can build up skills to optimize European P&R strategy
    • Negotiation skills are highly important
    • Drugs companies need to be better at communicating
    • Internal communication is vital in ensuring a strong ROI
    • External communication is vital in ensuring a strong price and adequate reimbursement
    • It is vital for drugs companies to have a clear P&R strategy
    • It is important to integrate P&R analysis into the clinical trial process
    • The remit of PE analysis should be broadened and shifted into earlier-phase clinical trials
    • Drugs companies should know which markets to launch in first
    • Drugs companies should consider adopting certain US-focused P&R strategies
    • Consider using political lobbying and legislation to change the P&R environment
    • Carry out more effective targeting of healthcare professionals as part of the allowance for providing information
  • Chapter 10 Glossary
    • Glossary of terms
  • Chapter 11 Bibliography
    • Publications and online articles
    • Datamonitor resources
    • Conference literature
    • Online resources
  • List of Tables
    • Table 1: HAS has taken over a number of healthcare P&R stakeholders
    • Table 2: Examples of additional stakeholders that affect healthcare provision and P&R in France
    • Table 3: The range of ASMR levels used to determine reimbursement in France
    • Table 4: Key reforms shaping the German healthcare system
    • Table 5: Key drug reforms in Italy, 1993-2005
    • Table 6: Examples of discounts on drug prices for high-volume drugs (statins, PPIs), 2003-05
    • Table 7: Trusts and authorities involved in UK healthcare provision
    • Table 8: Key plans and publications shaping NHS evolution
  • List of Figures
    • Figure 1: Key pressures facing drugs developers in the US market, 2006
    • Figure 2: Key P&R cost-containment tools in EU5
    • Figure 3: NME & BLA approvals, compared to PhRMA company R&D spend, 1990-2004
    • Figure 4: Average time delay between marketing authorization and effective market access, using products from June 2000- June 2004
    • Figure 5: Biotechnology companies are set to show a stronger CAGR than pharmaceutical companies for 2004-10
    • Figure 6: The percentage of BLAs approved is falling, while the percentage of NMEs is rising, 1990-2004
    • Figure 7: Generic risk facing leading pharmaceutical and biotech companies is rising through to 2010
    • Figure 8: Average EU5 healthcare spending has risen steadily between 1990 and 2003
    • Figure 9: Spending on pharmaceuticals as a percentage of total healthcare spending is higher in the EU5 than the US, although some European markets have lower spending than Japan
    • Figure 10: The UK has the highest CAGR increase in healthcare spending for 1990-2003
    • Figure 11: Factors affecting drug pricing, 2006
    • Figure 12: Key pricing controls used globally, 2006
    • Figure 13: Globally, a number of factors can affect the price of a drug following launch
    • Figure 14: Examples of reimbursement controls used globally, 2006
    • Figure 15: Estimated cost-containment savings in France, 2003-05
    • Figure 16: Reimbursable drugs provided by retail pharmacies account for three-quarters of drug provision, 2003
    • Figure 17: Both the SMR and the ASMR rating are required to determine the reimbursement rate
    • Figure 18: Key cost-containment P&R tools used in Germany
    • Figure 19: Estimated cost-containment savings in Germany, 2003-05
    • Figure 20: There are few major differences between public and private healthcare insurance in Germany
    • Figure 21: A number of governmental bodies, physician and pharmacist associations, and industry associations impact healthcare provision in Germany
    • Figure 22: Pfizer's evaluation of Sortis' therapeutic benefit did not match the assessment of the drug
    • Figure 23: Pfizer's atorvastatin sales in Germany fell significantly after being removed from the reference pricing list
    • Figure 24: AstraZeneca's Nexium generates strong sales and volume growth, after drug prices fall to the reference level
    • Figure 25: Parallel importation penetration in Germany increased from 1997-2002 before falling slightly through to 2004
    • Figure 26: Key cost-containment P&R tools used in Italy
    • Figure 27: Estimated cost-containment savings in Italy, 2003-05
    • Figure 28: The Italian healthcare system is highly decentralized
    • Figure 29: AIFA acts as an umbrella to a range of commissions and observatories
    • Figure 30: Reimbursement depends on the level of therapeutic advantage offered by a new drug
    • Figure 31: Key cost-containment P&R tools used in Spain, 2006
    • Figure 32: Estimated cost-containment savings in Spain, 2003-05
    • Figure 33: Spain's healthcare provision is largely decentralized with provision made by ACs
    • Figure 34: There are a range of incentives and disincentives impacting generic prescription in Spain
    • Figure 35: An overview of the UK healthcare system
    • Figure 36: A range of bodies impact drug prescription in the UK
    • Figure 37: There are more advantages than disadvantages to the PPRS system
    • Figure 38: There are a number of incentives for generic prescription in the UK
    • Figure 39: Drugs companies must overcome a range of hurdles to generate a strong ROI
    • Figure 40: European markets are complex and involve a number of bodies, complicating the task of identifying key P&R stakeholders
    • Figure 41: The battle between cost-containment and cost-effectiveness determines whether drugs companies stay in the European market or decide to exit
    • Figure 42: Although a greater priority is being placed on PE analysis, it has a relatively low profile in Germany and France
    • Figure 43: The optimal launch across Europe takes place over three waves
    • Figure 44: Estimated cost-containment savings in the five major European markets, 2003-05