Transcript A reference pricing system

LECTURE 8
MODERN ORGANIZATIONAL TECHNIQUES TO IMPROVE THE
PROFITABILITY OF PHARMACIES
 Plan
1. Use merchandising
 2. Product and pricing
 3. System of discounts
 4. Working with MPI and insurance companies
(PILOT PROJECT)
 5. Advising doctors and cosmetologists
 6. Risk Sharing
 7. cloud technology

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Pilot project for
antihypertensive drugs
1. concept of reference price
2. List
3. writing prescriptions
4. rules of dispensing pharmacies
5. important pilot project for
patients and health care system
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Introduction
A reference pricing system is a system that
establishes a reimbursement level or
reference price for a group of interchangeable
medicines. If a medicine is priced above the
reference price, the patient pays the difference
between the price of the medicine and the
reference price, in addition to any other copayments, e.g. prescription fee, percentage copayment [1].
Unlike its name suggests, a reference pricing
system is not a pricing system, but in fact a
reimbursement system.
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A reference pricing system sets a common
reimbursement level, i.e. reference price, for a
group of medicines, thereby generating savings
for the third-party payer.
Manufacturers are in principle free to set prices,
although medicines priced above the reference
price incur an additional patient co-payment and
generic medicines in some countries, e.g. Belgium,
need to be priced below the reference price in
order to be reimbursed.
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Reference pricing can help governments to
contain public pharmaceutical expenditure as it
controls the reimbursement level of medicines.
A reference pricing system may also promote
generic medicine use because originator
medicines priced above the level of the reference
price are likely to lose market share as a result
of the additional patient co-payment.
Many European countries have already
installed a reference pricing system, see Table
1. Sweden had adopted a reference pricing
system in 1993 but abandoned this in 2002 [2].
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In Norway, reference pricing applied from
1993 until the end of 2000. In 2003, the
Norwegian government installed a system
called ‘index pricing’ to a set of off-patent
medicines, which has many resemblances with
a reference pricing system [3, 4].
Reference pricing is in many European
countries combined with other policies such as
prescribing by international non-proprietary
name or generics substitution, as this
combination of policies seems to positively
influence each other
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Conclusion
Reference pricing is used by many European
countries as one element of governments’
strategies to contain public healthcare
expenditure. It puts pressure on
pharmaceutical companies to compete with
the reference priced product but also reduces
competition beyond this reference price. It
also makes patients sensitive of drug prices,
as an increased use of drugs priced at or
below the reference price level was observed.
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The introduction of reference
pricing generates a once-only
setback of expenditures but does
not affect the overall growth rate of
health expenditure in the long
term.
No association between reference
pricing and health outcome has
been observed.
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For patients
Over the last decades, European healthcare
budgets have been increasing. Therefore,
governments have implemented reference
pricing, amongst other measures, in order to
contain the pharmaceutical budget. In the
reference pricing system, a common
reimbursement level is set for a group of
comparable and interchangeable medicines.
The difference between this reimbursement
level and the actual price of the medicine is paid
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by the patient, a so-called co-payment.
This provides patients with a
financial incentive to opt for the
least expensive medicine.
Reference pricing seems to
reduce prices of medicines,
increases the use of cheaper
medicines, i.e. without copayment, generates savings for
healthcare budgets in the short
term and does not seem to have
a negative influence on the
health of patients.
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LIST of antihypertensive
drugs from the pilot project
1. Amlodipine
2. Bisoprolol
3. Enalapril
4. Lisinopril
5. Metoprolol
6. Nebivolol
7. Nifedipin
6. Enalapril and diuretics
7. Lisinopril and diuretics
8. Lisinopril and Amlodipin
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Pricing procedure:
1. Wholesale price must
be registered
2. By the wholesale price
is added up to 10% - the
purchase price
3. Purchase price plus
max 25% - retail price
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Price for the patient= retail price-reference price
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Rules prescription: F1
1 - INN
2 - only one drug
3 - the signature of the doctor and three
signet seal:
- doctor seal
- health care institution
- Red Seal "Cost be reimbursed“
Valid 1 month, kept in the pharmacy for 3
years
At the end of the month consists register
recipes in two copies, one remains at the
pharmacy, the other is fed into the regional
health department
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BACKGROUND
WHAT IS RISK SHARING?

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Risk sharing is a method in which the cost of the
consequences of a risk is distributed among
several participants in an enterprise, such as in
syndication.
And identification, analysis, assessment, control,
and avoidance, minimization, or elimination of
unacceptable risks. An organization may use risk
assumption, risk avoidance, risk retention, risk
transfer, or any other strategy (or combination of
strategies) in proper management of future
events.
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 In
some cases the discount as such is
not mentioned in the text of the
contract, and in the process of
negotiating the final price is
determined by taking into account
discounts, and the price fixed in the
text of the contract.
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Background
GOVERMENTS
Control expenditure
Accessibility
PHARMA INDUSTRY
Patents
Profits
EUROPEAN UNION
Free movement of goods
Competitiveness
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OBJECTIVES

This presentation is proposed to encourage Risk
Sharing in Ukraine and other Eastern European
Countries. As we can see that the larger the
degree of risk-sharing in a health financing
system, the less people will have to bear the
financial consequences of their own health risks,
and the more they are likely to have access to
needed care.
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OBJECTIVES
The RS was introduced to address a complex principal/agent
relationship
National
Health
Service
(NHS)
Physicians
 Consume
 Prescribe
 Pay
 Consume
 Pay
 Prescribe
Patients
 Prescribe
 Pay
 Consume
The stated objectives of the RS
● To secure the provision of safe and effective medicines for the NHS at
reasonable prices
● Promote a strong and profitable pharmaceutical industry to ensure
sustained R&D and subsequently development of new medicines
● Encourage the efficient and competitive development and supply of
medicines
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Risk-Sharing agreement reality in Russia
• Is the RSA effective new drug X?
• Can I use RSA experience in other cis most acceptable to the Russian
Federation?
ountries for drug X?
• Whose experience and approach • What are the steps for RSA Drug X?
• Federal or regional level?
• Who is the payer and who negotiator?
Development of RSA
• What is the most appropriate scheme for the implementation of RSA for
Drug X?
• Expected outcomes of therapy with X RSA (including financial and clinical)
should be evaluated?
• How to implement RSA for Drug X will be monitored?
• What is the cost of implementation and economic outcomes for its
implementation?
• What are the risks for the implementation of RSA for Drug X?
Implementation of RSA
• How to "convince" the state?
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METHODS
Two major methods to implement risk-sharing:
General tax revenue may be a main source of
financing health services, Or
Social health insurance may be established.
It is noted that 55% of some countries still has to
introduce risk sharing in the aspect of social health
insurance which is still the most common method
perceived. In recent times some developing countries
have indicated interest such as Ukraine, Russia,
Cyprus, Côte d'Ivoire, Indonesia, Iran, Nigeria,
Kenya and Ghana.
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Under traditional contracts, the firm’s revenue does not
depend on the realisation of the success rate. Once the
medicine is accepted on the positive list, the company is
guarantue revenue of π* per-unit sold, independently of the
actual performance/outcome of the drug.
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Incentives under traditional and risk sharing
contracts (II)
Under risk sharing scheme, if the success rate is zero, the
firm does not receive any money. But if the actual success
rate is far above expectations, the per-unit profit π
exceeds the π* level
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An intermediate solution (dotte line) is the risk sharing
scheme where the firm is guaranteed some small fee per
unit sold and a “bonus” per every successful treatment.
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THE PPRS IS A PROFIT CONTROL SCHEME, BASED ON
RETURN ON CAPITAL
In principle voluntary, in practice all suppliers participate (over 200 companies)
Companies choosing not to join are subject to an alternative statutory scheme
Prices increase are controlled post-launch (incl. line extensions after the first 5
years Contract)
● A price cut of 4.5% was imposed in 1999; 7% in 2005; and 3.9% in 2009
 This is now a routine part of the renegotiations
 The 2009 price cut may be extended, depending on savings achieved elsewhere e.g. generic
substitution
● Free pricing for innovative products (defined as new active substances) at launch
Based on a company’s total sales of branded products to the NHS
● Companies with sales to the NHS in excess of £35m per annum (about 35 companies)
must submit detailed annual financial returns (AFRs) to Department of Health
 AFRs are subject to negotiation and agreement
● The outcome of the AFR negotiation is assessed in terms of a return on capital (ROC)
target of 21%, with a margin of tolerance from 40% to 140%
● Companies with little or no UK capital may opt for return on sales assessment with
rates set by dividing the ROC by 3.5 (i.e. ROS of 6%, with a range from 4.96%)
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RESULT
A number of risk sharing schemes had already been introduced
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Treatments for multiple sclerosis (2002)
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An example (the only one?) of a true risk sharing scheme
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Patient outcomes to be monitored over a ten year period, and prices adjusted
according to the outcomes achieved in practice
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Lucentis (2008)
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Novartis agreed with NICE to pay for the drug cost of treatment beyond 14 injections
per patient
Tarceva (2008)
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Following initial rejection by NICE, Roche announced 27.5% interim price cut to make it
equivalently priced with competitor pending results of appeal
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Tarceva accepted by NICE on appeal at discounted price
Velcade (2008)
● Janssen renegotiated with NHS to refund cost of the first 4 cycles if there is no clear
patient benefit
● If there is benefit, a patient can continue with next 4 cycles
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Without the patient access scheme ustekinumab could
not be considered a cost-effective use of NHS resources
Without the patient access scheme the ICERs for ustekinumab would be £41,000
per QALY gained compared with supportive care, £102,000 per QALY gained
compared with intermittent etanercept 25 mg, and £300,000 per QALY gained
compared with adalimumab
● The Committee concluded that ustekinumab could not be considered a cost-
effective use of NHS resources without the patient access scheme
● The manufacturer proposed that the patient access scheme is to remain in
place until either a review of the guidance by NICE or the introduction of any
new formulations that would render the scheme obsolete, and that it would not
be withdrawn without the agreement of NICE and the Department of Health
The estimates of cost effectiveness that included the patient access scheme were
considered as reasonable
● In the manufacturer’s base-case analysis (including the patient access
scheme) ustekinumab had an ICER of £29,600 per QALY gained compared
with supportive care, an ICER of £27,100 per QALY gained compared with
etanercept 25 mg given intermittently
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Potential patient numbers in each Patient Access Scheme
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SUMMARY OF RESULT
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DISCUSSION
Studies should focus on the total value provided
by the drug (economic, humanistic, and
operational value) and not just cost.
 The use of prices during studies should be both
correct and consistent.
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Transparency is a major issue
● For agreed deals, the terms will be publicly available
 This may have implications for other markets
● For proposed deals, there is no transparency
 We will know about deals proposed but rejected (and why they were rejected) only
if the company decides to reveal that information
There appears to be a limit in terms of patient numbers
 A recent application for a patient access scheme was rejected partly on the
grounds that 3,000 new patients a year would have significant operational
implications
There appears to be an “unmet need” hurdle
● Sutent vs other products in mRCC
● A new product competing with three established products
● It appears that the scheme is virtually limited to oncology products
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CONCLUSION
Profits and price controls do not reflect the value
of drugs
 The PPRS does not benefit patients
 The PPRS does not encourage investment
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Implications for companies with innovative products
Risk-sharing will remain the exception, not the rule, for most products
● But may become the preferred pricing mechanism for high priced products with small
patient populations and limited evidence of efficacy or cost-effectiveness
● IF current schemes prove successful to the DoH.
 Should current schemes become too difficult or costly to manage, or show no appreciable
impact on cost, risk-sharing will be supplanted by another cost-control mechanism
● No systematic evaluation of the impact of risk-sharing has yet been conducted
 A review is promised after two years
The onus is on companies to decide whether to propose risk sharing
schemes, and what kinds of scheme to propose
● The scheme must
 Reflect the characteristics of the product and therapy area
 Offer benefits to the payer
 Be workable within the context of the NHS
● Where there are (or will be) competing products, a well-designed risk sharing scheme
may provide a competitive advantage
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Cloud computing is an expression used
to describe a variety
of computing concepts that involve a
large number of computers connected
through a real-time
communication network such as
the Internet.[1] In science, cloud
computing is a synonym for distributed
computing over a network, and means
the ability to run a program or
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application on many connected
computers at the same time
The phrase also more commonly refers to network-based
services, which appear to be provided by real server
hardware, and are in fact served up by virtual hardware,
simulated by software running on one or more real
machines. Such virtual servers do not physically exist and
can therefore be moved around and scaled up (or down) on
the fly without affecting the end user - arguably, rather
like a cloud.
The popularity of the term can be attributed to its use in
marketing to sell hosted services in the sense
of application service provisioning that runclient
server software on a remote location.
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CLOUD TECHNOLOGIES
The problem of purchasing and maintenance of
expensive equipment, software and staff, there is
not only to health care, but also to many
companies in other industries.
In this cost-effective solution to this problem is
the technology of distributed cloud computing the main advantage of this model to the
consumer is the absence of costs associated with
the installation, upgrade, and support of the
equipment and operating software on it.
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Modern virtualization technologies allow you to run
a medical information system in multiple servers,
providing fault tolerance.
Thus cloud technologies in medicine, you can:
- reduce the cost of purchasing equipment and
software;
- ensure the protection of personal data from
unauthorized access, according to FL-152;
- ensure smooth operation of the information system
protect against data loss;
- implement a system scalability by increasing the
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volume of stored data;
- combine several clinics single secure information
THANK YOU FOR YOUR ATTENTION
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