Public health cost containment

This book consists of a series of works that evaluate various aspects related to the public financing of pharmaceuticals. In all health systems with majority public funding, the financing of pharmaceuticals constitutes one of the key factors in reform policies and health cost containment measures. This importance of pharmaceutical spending can be explained by both its relative size (its share within health expenditure as a whole), and its rapid growth, which is closely related to the constant incorporation of therapeutic innovations. 

In the analysis of health care the price of care is often confused with the level of expenditure, particularly so in the analysis of the cost of pharmaceuticals. Pharmaceutical cost containment should never be the exclusive goal of public policies emphasis on costs without paying attention to the value of the products may lead to inefficient policies. The value of a new pharmaceutical resides in its ability to improve health, not just in its contribution to the decrease or increase of health care costs. Increased spending on health care and pharmaceuticals is therefore compatible with a reduction in their price, if the resulting value increases more than the expenditure. 

In Chapter 7, professor B. Gonzalez Lopez-Valcarcel of the University of Las Palmas de Gran Canaria analyses the participation of the insuree in the payment of the price of the pharmaceutical. In spite of the widespread application of pharmaceutical co-payment in European health systems, the author observes that this mechanism does not appear to have been very effective in cost containment. Co-payments represent a way of making the user share the burden of the cost rather than an essential source of income for the public system. Theory and comparative experience of the system alike indicate that the indiscriminate application of co-payments is a source of inequalities, and that in any event its effects on consumption depend largely on prescriber incentives. For this reason the author recommends that co-payments should not be uniform for different population groups, and that they should not be applied in isolation, as their effectiveness is enhanced in combination with other instruments. 

Since 1990, responsibility for containing the public pharmaceutical bill in Spain has fallen to a variety of instruments, none of which has proved particularly effective at cost containment, as can be seen from Table 6.1. These instruments have included stricter control over the National Health Service (NHS) (Sistema Nacional de Salud or SNS) budget for pharmaceuticals, modifications to the co-payment rates for certain drugs for chronic diseases, the exclusion of certain drugs from public financing (negative lists) and agreements with laboratories and pharmacies.1... 

Although this measure was first introduced in Germany in 1989, constraints on public drag spending and the creation of incentives for cheaper alternatives are not new to cost containment policies, especially in public health systems. Several forms of public financing of pharmaceuticals based on comparison (yardstick competition) have been used in some countries by public and private insurers. Public financing mechanisms that pursue a similar strategy to that of RP include the maximum allowable cost (MAC) applied by the... 

However, the extensive and varied experience undergone in Europe and its trend towards greater participation by the user in the financing of pharmaceuticals does not seem to have made any substantial contribution to cost containment. Practically all European countries use drag co-payment with the imphcit objective of making the user jointly responsible for the cost, but not as an essential source of revenue for the public health care system, nor has it proved to be a political instrument with the ability to contain costs or substantially improve efficiency. 

Third, more sophisticated products and the public expectations of zero risk are driving up the cost of state-of-the-art medicines. At the same time, health care cost containment and demands for better access to pharmaceutical products from an aging population and from third world countries are forcing prices downward. 

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). This is an attempt to deal with the many waste sites that exist across the nation. It covers remedial action, including the establishment of a National Priorities List to identify those sites that should have a high priority for remediation. This act authorizes the cleanup of hazardous waste sites, including those containing pesticides, that threaten human health or the environment. If they can be identified, the US EPA is authorized to recover cleanup costs from those parties responsible for the contamination. CERCLA provides a fund to pay for the cleanup of contaminated sites when no other parties are able to conduct the cleanup. The Superfund Amendments and Reauthorization Act (SARA) (1986) is an amendment to CERCLA that enables the US EPA to identify and cleanup inactive hazardous waste sites and to recover reimbursement of cleanup costs. One section of CERCLA authorizes the EPA to act whenever there is a release or substantial threat of release of a hazardous substance or any pollutant or contaminant that may present an imminent or substantial danger to the public health or welfare into the environment. 

While health care accreditation organizations have existed for quite a while, quality data were not readily available to the general public until recendy. These quality measurements (sometimes called report cards ) make health care quality indicators readily available to the public. This encourages health care organizations to compete on the basis of quality and creates markets where quality, not just cost containment, is rewarded (Blumenthal and Kilo, 1998 O Malley, 1997). 

Tires are difficult to landfill. Whole tires do not compact well, and they tend to work their way up through the soil to the top. As a result, tire stockpiles, which cost less thsm landfills, have sprung up all over the country. It is estimated that between 2 and 3 billion tires are stockpiled in the U.S. at present, with at least one pile containing over 30 million tires. Tire stockpiles are unsightly and are a threat to public health and safety. Not only are tire piles excellent breeding grounds for mosquitoes, but they are also fire hazards. 

Among the elements which must be included in the revised NCP under this section are methods and criteria for determining the appropriate extent of either removal or remedial measures (Section 105(3)). The NCP must also contain means for assuring that "remedial" action measures, as distinct from the short-term "removal" measures, are "cost-effective" (Section 105(7)). Finally, Section 105(8)(A) requires criteria for determining priorities which are "based upon relative risk or danger to public health or welfare or the environment," and Section 105(8)(B) requires that such criteria be used to develop a national priority list of 400 sites. 

Section 104 of Superfund authorizes the President to remove or remedy any release or threatened release to the environment of any hazardous substance, as defined in Section 101(14) of the Act, or any other containment which may present an "imminent and substantial danger" to the public health or the environment. He may accomplish this by removing the hazardous substance, or by taking "any other response measure," unless he determined that such removal or remedy will be done by some responsible person. Regardless of which course the President chooses, Section 104(a)(1) states that it must be "consistent with the national contingency plan." Section 111(a) directs that the costs of such federal response be borne by the response fund created by the Act. 

These laws illustrate the lack of understanding and support among part of the public for many of the pharmacy benefit management strategies now taking place. Such restrictions and disclosure requirements can be expected to continue and to become more widespread if the pubhc perceives PBM and payer activities as being motivated more by cost containment than by health care quahty considerations. 

Constraints on Innovation Cost Containment - Public Health and Public Benefits Collide... 

The model is not without its detractors, particularly in areas where profit and public health can find little common ground. Cost containment issues in Europe aside, there is little inherent motivation for private enterprises to develop therapeutics for malaria which affects a significant number of people in Africa and Asia each year, or other tropical diseases that have minimal impact on the public health of the U.S., Europe or Japan. This problem has not gone unnoticed even by the pharmaceutical manufacturers who recognize that a different model is required to address this enormous need (87). 

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