Download International reference pricing

Health Intervention and Technology Assessment Program
Price control policy
for patented medicines
Adun Mohara
Health Intervention and Technology Assessment Program
Agenda Setting Model (Kingdon, 1984)
PROBLEM
STREAM
Window of opportunity
POLITICAL
STREAM
POLICY
STREAM
Health Intervention and Technology Assessment Program
PROBLEM STREAM
Existence evident of problem
Pharmaceutical high price in Thailand
(Chaonsin, 2009)
The public sector procured innovator brands at 4.36 MPR
 The private sectors procured innovator brands at 11.6 MPR

Occurrence of prominent focusing events
 Thai’s government decision to grant CL
 Feedback of stakeholder from the grant of CL:


Positive feedback from patient and NGOs in support to access to drug
Negative feedback from PReMA and USTR in protest of IP infringement
Health Intervention and Technology Assessment Program
POLITICAL STREAM

National Mood: the public debates and conflicts over CL policy
Visible
participant
Ministry of public health
Ministry of commerce
Hidden
participant
NGOs
PReMA?
Electoral
politics
National strategy for
access to drug
9th June 2009
National strategy for
intellectual property
9th July 2009
Content of
strategies
Solution?
Increase access to drug
IP protection
 Affordable drug price, TRIPS
 Patent Act revision
 Support R&D, generic policy
 DIP exclusive dealing
 Support Drug Act (draft)
 Patent information
Alternative measure for reduce drug price
without infringement intellectual property
and also achievement of industry incentives.
Health Intervention and Technology Assessment Program
Agenda Setting Model (Kingdon, 1984)
PROBLEM
STREAM
Window of opportunity
POLITICAL
STREAM
POLICY STREAM
• Feasibility of policy
• Impact of policy
Health Intervention and Technology Assessment Program
Objectives
General objective of study

To analyze mechanism for pharmaceutical price regulation
based on the lowest possible price at the level of a cost
containment and also achievement of industry incentives.
Specific objective of study
1. Feasibility analysis for introducing alternative effectively
policies
2. Assessing implication of selected feasible alternative
policies : Case study of seven issuing compulsory licensing
3. Formulating mechanism for pharmaceutical price
regulation to be an alternative pricing policy in Thailand.
Health Intervention and Technology Assessment Program
POLICY STREAM
What is a readiness measure for
implementing appropriately
(policy package) in Thailand ?
How much impact will occur if
the measure implement based
on the lowest possible price and
also achievement of industry
incentives ?
How does implement the
measure in to practical practices
?
1. Feasibility analysis

Technical feasibility

Political feasibility

Economical feasibility
2. Scenario analysis

Demand and supply analysis

Monopoly market equilibrium

Budget Impact Analysis
3. Policy analysis

Content analysis

Stakeholder analysis
Affordable prices can be
pursued through the mechanism
• Generics policies
Reference pricing
• Equitable pricing
• International reference
• Price competition
• Therapeutic reference
(2)
• Reduce profit/mark-ups
• Control price structure
(3)
• Bulk procurement
• Regional bulk purchase
• Taxes elimination
• Taxes elimination
• The WTO/TRIPS
agreement defines
(1)
(5)
• Parallel import (6)
• Compulsory licensing
(7)
DRUG ACT (draft)
• Price information
Affordable pricing
• Reasonable price
• Cost effective
• Transparency
Strategy for
access to drug
(4)
PATENT ACT
Health Intervention and Technology Assessment Program
Global direction for
access to medicines
Appropriate
implementation of
TRIPS agreement
8
Strategies of policy affecting on price
Health Intervention and Technology Assessment Program
“7 candidates” Feasibility analysis for a readiness policy
Pricing
strategies
Technical
aspect
Economic
aspect
1. International reference
with equity pricing base
Working group for price
study (Strategy plan)
Reduce household exp
Reduce Gov’t budget
National strategy of
access to drug BE 2552
2. Therapeutic reference
Pharmaco-economic
Working group for price
study & Sub-committee
of pharmaco-economic
Reduce household exp
Reduce Gov’t budget
National strategy of
access to drug BE 2552
3. Reduction or
elimination of duties
and taxes
Thai tariff on medicine
was reduced lower than
10, some almost 0.
Reduce household exp
4. Control price structure
(cost-plus, profit control)
No information on price
structure of medicine
product?
Reduce household exp
5. Regional bulk
purchasing
No information on
regional demand for
drug?
Reduce household exp
Reduce Gov’t budget
ASIAN collaborations
on medical pricing?
6. Parallel import
No information on price
of medicine in other
countries?
Reduce drug exp (G&H)
Thai patent Act BE 2522
Shift of manufacturing
based & employment rate
No information of legal
allowed in other countries?
Insufficient information on
generic version of medicine
across the world
Reduce Gov’t budget
Thai patent Act BE 2522
9
Political sanction/PWL
7. Compulsory Licensing
Loss of Gov’t revenue
Reduce Gov’t budget
Economic retaliation
Political
aspect
Thai tariff Act BE 2549
Price of good &
services Act BE 2542
Intervention frame for pricing control of patented drug
Registration process
(at reasonable price)
Price structure
Reasonable price
Direct price structure control
- Profit control
- Cost plus/ mark-up control
International reference pricing (Equity price)
Pharmaceutical
tax elimination
Therapeutic reference pricing/ Pharmacoeconomic
Rational selection for including essential drug in NEDL
Reimbursement process
(at affordable price)
Patented drug in NEDL
Reimbursement
Pharmaco-economic evaluation
Price Negotiation
Breakthrough
product
<100,000 ฿ /QALY (Including in National Essential Drug List)
100,000-300,000 ฿ /QALY (In-depth study for increasing accessibility)
Failed
Volume Agreement (regional bulk purchasing)
Adopting TRIPS agreement for increase accessibility
Parallel import
Voluntary / Compulsory licensing
Health Intervention and Technology Assessment Program
POLICY STREAM
What is an readiness measure
for implementing appropriately
(policy package) in Thailand ?
How much impact will occur if
the measure implement based
on the lowest possible price and
also achievement of industry
incentives ? (Pros & Cons?)
How does implement
the measure in to practical
practices ?
Result from part 1 : The readiness
policy package for implementing
appropriately as drug price control
measure in registration process is
1) International reference pricing and
2) Therapeutic reference pricing/
Pharmacoeconomic.
Input
1. International reference pricing
•International drug price indicator guide
(supplier) + shipping cost + Tariff + VAT
•BNF(12.5% margin)* PPP + shipping cost
+ Tariff + VAT
2. Pharmacoeconomic
(Therapeutic reference pricing )
• Incremental cost effectiveness ratio/ICER,
• ICER /QALY gained < 3 times of
GDP/capita (WHO recommented)
Health Intervention and Technology Assessment Program
Price estimation
1. International reference pricing

International drug price indicator
guide (supplier) + shipping cost
+ Tariff + VAT

BNF(12.5% margin)* Purchasing
power parity (PPP)+ shipping
cost+Tariff + VAT
2. Pharmacoeconomic pricing


Price at market equilibrium (Pe : Cutoff price)
Demand side (assumed as linear demand fn)
QM : Demand at the time prior issuing CL
PM : Price at the time prior issuing CL
QA : Demand at maximize accessibility (CL)
PN : Negotiation price (5% over generic version)
Supply side (assumed as linear supply fn)
QM : Supply at the time prior issuing CL
Incremental cost effectiveness ratio Po : Supply price (MC=MR) at optimum level
ICER, WHO recommendation for QA : Supply at maximize accessibility (CL)
Ps : Supply price at negotiated price
developing countries,
the ICER per QALY gained not
more than 3 times of GDP per
capita (not cost effective)
3. Price at market equilibrium
The welfare economic was applied for
estimating of price at equilibrium
market
P = βO + β1 Q
Note: Marginal Cost = Market price* cost/price ratio
(Ref: AIDS, 2006 and PPRS, 2006)
AR, AC, P
S = MC
M
PM
PS
Pe
PO
O
QM
PN
MR
QA
13
D = AR
Health Intervention and Technology Assessment Program
The Welfare Economics of Monopoly
for estimating market equilibrium
AR, AC, P
Estimated price based on lowest possible
price and maintain industry incentive
A
PM
Pe
M
B
D
E
C
Drugs
P original
PCEA
P comp
P eq
EFV
23,991
CE
5,245
9,264
LPV/r
149,818
N/A
19,805
32,894
S= MC
Clopidogrel
27,375 15,475
11,299
10,684
Docetaxel
175,908 121,950
N/A
47,961
Letrozole
85,950 80,648
26,613
53,277
Erlotinib
330,000
N/A
157,7081 129,014
Imatinib
1,338,455
N/A
479,110 575,899
D = AR
O
QM
MR
Qe
Health Intervention and Technology Assessment Program
Parameters for scenario analysis
No. of patients
Drug price
Patients live with HIV/AIDS
No measure
Total Number of patient access to ARV drug (2008)

Access generic drugs under CL policy (NHSO, 08)

Access original drugs before CL policy (FDA, 07)
 Public 82% : UC73%, Other 18% (NPA,06)
 Private 9% (DDC, 06)

PLWHA denied access to ARV
Price in public sector
Patients with CHD
Total Number of patient access to clopidogrel (2008)

Access generic drugs under CL policy for
2ndprevention of ischemic heart disease (Estimated, 08)

Access original drugs before CL policy (FDA, 07)
 Public 18% to prevent stent thrombosis (MOHP,06)
 Private 82%
Patients with cancer
Total Number of patient access to 4 cancers (2008)

Access generic drugs under CL policy (NCI, 08)

Access original drugs before CL policy (FDA, 07)
 Public 64%, Private 36% (NHA, 05)
Original price (DMSIC,06,07)
Price in private sector
Original patient price
(private Hospital 06,07)
+ Mark up 20-30% (Chaoncin,06)
Negotiation price
International comparison
(IPIG,09/BNF,09 adjusted PPP)
Pharmacoeconomic
(3 times GDP/QALYs gain)
market equilibrium (cut point)
(Price negotiation, 06,07)
CL policy
Generic price (MOPH,06,07)
------------------------------------------
Price of ARV, CHD; 2006
Price of clopidogrel; 2006
Price of cancer drug; 2007
Health Intervention and Technology Assessment Program
Scenario Analysis
Total direct medical cost was forecasted during next five
years (discounted by 3%) to estimate budget impact
compared in four scenarios as follows:
(1) Without pharmaceutical price control measure
(2) With pharmaceutical price control measure only for public sector
(3) With pharmaceutical price control measure in registration
process (for both public and private sectors)
(4) With CL policy implementation
Health Intervention and Technology Assessment Program
Scenario Analysis
Budget impact analysis of 4 comparative scenarios (million baths)
Scenario
Assumption
Budget 5 yrs
1. No measure
All patients who need the drug will get original
drugs at conventional price
35,527
2. Control price in
public sector
All patients in public sectors who need the drug will
get original drugs at negotiated price
All patients in private sectors who need the drug
will get original drug at conventionally private price
21,684
3. Control price in
registration process
All patients who need the drug in both public and
private will get original drugs at negotiated price.
15,740
4. Issuance CL policy Patients who have already accessed to drugs get
original drug at conventional price. (public/private)
Patients who access to generic drug under CL
policy will get drugs at generic version. (public)
15,986
Positive impact from price regulation
Health Intervention and Technology Assessment Program
The policy for price regulation at launch has resulted in positive effect.
 Health expenditure of the whole society would be reduced into 19,787
million baths (comparable to compulsory licensing 19,541 million baths).

Government and household expenditure would be reduced into 13,843
and 5,944 million baths (5 years) respectively, by using a medicine at
reasonable price.
Negative impact from price regulation
The policy has result in negative effect (less seriously than CL policy).



Price regulation delays drug launches, distorts consumer choices
toward less innovative drug. (Danzon, 1997)
Price regulation can lead to cost-shifting to other population segments.
(Daniel, 2003)
Price regulation reducing manufacturers’ revenues will affect future
innovation. These innovation effects could hurt consumers. (Sood, 2008)
Health Intervention and Technology Assessment Program
POLICY STREAM
What is an readiness measure
for implementing appropriately
(policy package) in Thailand ?
How much impact will occur if
the measure implement based
on the lowest possible price and
also achievement of industry
incentives ? (Pros & Cons?)
Result of part 1: The readiness strategies
for control price of medicine in Thailand is
1) International reference pricing and
2) Therapeutic reference pricing/
Pharmaco-economic.
Result of part 2: Price control policy in
registration process can cause
Pros: provide significant positive impact on
budget saving to society 19,787 Mil ฿
(Saving cost nearly to CL policy/ societal perspective) .
Cons: delay product launch into the market
( Political & economic sanction less than CL policy)
Input
How does implement
the measure in to practical
practices ?
Part 3: Policy analysis for making policy
of price control measure in registration
process practical in Thai’s context.
Health Intervention and Technology Assessment Program
Flow of drug control at launch
Registration
Drug regulation
committee
Act: Classify drug into
3 groups and identify its
comparable product
- Group 1
• Breakthrough
• Therapeutic
improvement
- Group 2
• Technical improvement
• Slightly therapeutic
improvement
- Group 3
• Me-too drug
• No improvement
- Therapeutic classification
- Identify new product for
patent registration
Price regulation
Reimbursement
Working group for
price study (MOPH)
NLEM selection
committee
International reference
15 sub Committee
International drug price
Data based
Group 1 and 2
Therapeutic reference
Group 3
Pharmacoeconomic
Group 1 and 2
The price should not higher
than 3 times/GDP
Price regulation
committee (DIT)
Price regulation at launch
High price
High effectiveness
Economic committee
Pharmacoeconomic
<100,000B/QALYs : Accept
>300,000B/QALYs : Reject
100,000 - 300,000B/QALYs
Budget Impact Analysis
(Price volume agreement)
Demand for drug data based
Price for reimbursement
International reference pricing
Health Intervention and Technology Assessment Program
(Equity pricing)
Important factors for international price comparison

Prices at different points in the
supply chain
Ex-manufacturer price
 Wholesale*
 Public price


Parameters for adjusting price index
- Volume weights (in case information available)
- Purchasing Power Parity /PPP*
Methodology used to make the
comparison
Bilateral comparisons
 Multilateral comparisons


Pharmaceutical characteristics
Active ingredients*, Strength*
 Trade name, Manufacturer*
 Dosage form* and Package size
 Salt or ester

Source: The Pharmaceutical Price Regulation Scheme, 2005
Health Intervention and Technology Assessment Program
Therapeutic reference pricing and
Pharmacoeconomic pricing
Important factors for recommending the level of
therapeutic improvement compare to its alternatives
Factors of therapeutic advance

Factors of technical advance
Increase efficacy
Reduction in adverse reactions
 Route of administration
Below 1 time of GDP per capita is very
cost effective,
Between 1 and 3 times of GDP per
capita may be cost-effective*
More than 3 times is not cost effective
 Therapeutic reference+ co payment


 Pharmacoeconomic pricing

In developing countries, WHO
recommended that the ICER per QALY 

gained of medical interventions




ICER = (C1-C2)/(E1-E2)
Patient convenience
Compliance improvements
Caregiver convenience
Time to the optimal effect
Duration of treatment cause
Me-too product
 Salt, ester
23
 Therapeutic reference pricing
Health Intervention and Technology Assessment Program
Flow of drug regulation at launch
Registration
Drug regulation
committee
Act: Classify drug into
3 groups and identify its
comparable product
- Group 1
• Breakthrough
• Therapeutic
improvement
- Group 2
• Technical improvement
• Slightly therapeutic
improvement
- Group 3
• Me-too drug
• No improvement
- Therapeutic classification
- Identify new product for
patent registration
Price regulation
Reimbursement
Working group for
price study (MOPH)
NLEM selection
committee
International reference
15 sub Committee
International drug price
Data based
Group 1 and 2
Therapeutic reference
High price
High effectiveness
Economic committee
Pharmacoeconomic
Group 3
Pharmacoeconomic
Group 1 and 2
The price should not higher
than 3 times/GDP
<100,000B/QALYs : Accept
>300,000B/QALYs : Reject
100,000 - 300,000B/QALYs
Budget Impact Analysis
Price regulation
committee (DIT)
Demand for drug data based
Price regulation at launch
Price for reimbursement
(Price volume agreement)
Health Intervention and Technology Assessment Program
Conclusion


Pharmaceutical products has special characteristics
over other products. Consumers have insufficient
knowledge for making decision to choose the products
by themselves. The asymmetric information may cause
unreasonable pricing system occur in monopoly
market of patented drugs.
New direction of consumer protection in area of health
product should be pay attention to making
pharmaceutical pricing system transparent for
consumer in the whole society.