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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
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
Power and
business and
drug benefit
tools and
Information /
n tools
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
 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
Difference between reimbursed price and full market price of selected
 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?