The public financing of pharmaceuticals

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. 

The Public financing of pharmaceuticals an economic approach / edited by Jaume Puig-Junoy. p. cm. 

The purpose of this chapter is to present the main economic characteristics of reference pricing (RP) as a system for the public funding of pharmaceuticals financed by the public sector. The following sections deal with the definition and objectives of RP and analyse the features of the various reference pricing systems that are applied internationally. This is followed by a look at the justification for RP from the economic point of view. We then go on to analyse the impact of RP policies, especially with regard to expenditure, consumption and drag prices. In the final section we discuss what can be expected from the application of RP to the Spanish health system. 

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... 

In the case of countries with public financing of pharmaceuticals, these two systems can in practice be veiy similar. This is so because at the moment of consumption users normally only pay a percentage of the price. Therefore, setting prices according to the average cost and subsidizing the consumer heavily may be equivalent to a two-tariff system, with a variable tariff equivalent to the percentage paid by the patient. 

The move towards selection in the latest decree on public financing of pharmaceuticals (1998) and as a result from a new RP system due to start in 2004... 

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. 

We consider that working towards a stable framework for the sector in Spain is one of the main challenges for the evolution of public financing of health expenditure. The necessary consensus to achieve this could be built on the discussion already formalized in parliament around a broad agreement for the pharmaceutical sector, although we are very much afraid that in the end electoral issues will outweigh what is advisable and rational. 

Callejon and Ortiin37 discuss the social utility of pharmaceuticals, an allocation criterion introduced by the Law on Pharmaceuticals for public financing or insurance. They defend an extended concept of welfare whereby the variable to be maximized is health, which depends on health services and other factors. The benefits of the pharmaceutical alternative are not only therapeutic... 

Germany None. Elat rate of co-payment for the first 14 days per year of hospitalization, after which there is no cost sharing of any sort Variable co-payment. RP system. No coverage is applied to those pharmaceuticals on public financing negative lists... 

The second series of contributions focus on the analysis of the application and effectiveness of the main instruments public financing agencies use to regulate pharmaceutical expenditure, on both the demand side and the supply side. 

European pharmaceutical markets are strongly regulated as regards the introduction of new products onto the market (through authorization and patents) and also as regards prices and consumption (medical prescription and public financing). However, the way in which entry, prices and consumption of pharmaceuticals are regulated varies enormously from country to country. 

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... 

As a system of public financing, the most immediate goal of RP is to control public pharmaceutical expenditure, independently of the trend in total pharmaceutical expenditure. It is based on the assumption that the moderation of public spending should be achieved through the reduction of the price paid for products submitted to RP in view of the greater cost they may entail for users who choose a product with a higher price than the RP. 

There are three levels of equivalence for classifying products, each submitted to an identical maximum level of public financing chemical equivalence, pharmacological equivalence and therapeutic equivalence. The first level entails establishing groups for the same active ingredient, which at the same time include both generics and brand-name pharmaceuticals whose patent has expired. This is the system applied in Sweden, Denmark, Norway and Spain. It encompasses bio-equivalent products with identical qualitative or quantitative composition, pharmaceutical form, dose, administration method and presentation . 

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