Pharmaceutical 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?