How pharmaceutical pricing was changed in France : a lesson

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How pharmaceutical pricing was changed in France
a lesson
Annie CHICOYE A.C.E. - Neuilly-sur-Seine
France achicoye_at_ace-health.com A.C.E. is the
French Member of aegisnet, the International
Network for Health Care Research
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How pharmaceutical pricing was changed in France
a lesson

• The French Health Care System
• The French Pharmaceutical market
• Pharmaceutical prices control a long story
• A sophisticated tool box
• Short term issues and long term perspectives

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1. The French Health Care System

• 9,5 of the GNP dedicated to Health Care versus
  14 in US
• Expenditure in health care is 2 550 US (PPP)
  versus 4950 (PPP) in US
• The French Health Care system was ranked number 1
  by the WHO  efficiency of the health care
  systems  (2002 )

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1. The French Health Care System
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2
7
18
25
30
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1. The French Health Care System
gt 95 of population Mandatory Health Insurance
3 majors sickfunds Contributions from
Employers and Employees taxation based on
revenue (including assets)
85 of population Complementary Health
Insurances Profit and non profit Volontary
basis individual And collective
agreements Employees fiscal advantages
Access to Health Care is a priority
8 of the population Complementary health
insurance Paid through mandatory insurance
Management shared between parliament, government
and social partners (unions and employees)
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1. The French Health Care System
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2. The French Pharmaceutical market key
features

• France is the 4th pharmaceutical world market,
  after US, Japan and Germany, but represents only
  10 of the US retail pharmacy market
• (14,7 billions US versus 147,3 US Source IMS
  jan-dec 2002)
• Among the highest rate of pharmaceutical
  expenditure in total health care (21 ) and a
  high rate of increase of this share between 1990
  and 2001 24
• A low price country, in comparison with other
  European countries and a long  time to market 
  record 221 days in average for a new entity
  between application for reimbursment and decision
  (Source CEPS report 2003)

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2. The French Pharmaceutical market key
features

• However low prices are compensated by volumes in
  turn-over, with worldwide records in a range of
  pharmacological classes
• Antibiotics, anxyolitics
• Vasodilators, veinotonics, mucolytics, homeopathy
  
• Prescribers highly receptive to innovations (eg
  Cox-2 inhibitors)
• A decreasing growth rate for the retail market
  now among the lowest of the  big 5  in Europe
  (2 in 2002/2001, according to IMS, 3,8
  according to GERS )
• Direct Public support to RD very limited (lt 2
  of total expenditure)

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2. The French Pharmaceutical market key features

• Reimbursement rates by mandatory insurances for
  reimbursable drugs are 100 , 65 and 35 but
  the overall reimbursement rate is 75
• The co-payment is virtual and prescribed
  reimbursable medications are almost free
• Patients suffering chronic / severe disease
  benefit a 100 reimbursement rate for their
  medication
• Complementary insurance pays for the co-payment
  for the majority of other citizens
• Self medication is poorly developed with
  promotion severely restricted
• DTC is not allowed

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3. The French Pharmaceutical market key
features

• Reimbursable drugs in
• retail pharmacies
• Including
• pain relief medications
• Veinotonics and
• vasodilators
• Anxyolitics
• Nasal and dermatologic
• medications etc..
• 78 - gt 16 billions E
• in 2002

Hospital Drugs 16
Non reimbursable (OTC or X) Including
cold preparations, some vitamins Viagra and
Xenical 6
Hospital only 70
out-patient delivery 30
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3,8
Segment Growth rate (2001/2002) in (PTW)
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3. Pharmaceutical prices control a long story

• Since 1945 pharmaceuticals prices control, in
  all markets (hospital, OTC, reimbursable)
  similar to prices of many other essentials goods
  (bread, energy )
• Up to 1980 a cost plus formula
• In 1980, a new pricing system  improvement of
  medical benefit  versus existing therapies -
  still implemented
• In 1986, prices for non reimbursable drugs
  (including OTC) and hospital only drugs became
  free

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3. Pharmaceutical price regulation a long story

• A low price policy
• Prices cuts as a remedy for social security
  deficits, although adjustements within the
  portfolio could be negotiated (end of 80s, early
  90s)
• No alignement with inflation rate price
  erosion, creating further discrepancies with high
  price European countries and increasing parallel
  trade
• No incentives to develop the generic market as
  fixed prices for branded drugs were almost at
  generic prices by European standards

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3. Pharmaceutical price regulation a long story

• Inefficient control of offer
• Procedure for admission to reimbursment not
  selective - almost 100 admitted
• Informal volumes commitments in relationships
  with price cuts threats frequent by the end of
  the 80s, early 90s, although not always
  respected
• Large investments by companies in promotion,
  hardly discouraged by increasing taxation and
  opposed by demand regulation
• Confusion between cost containement policy,
  industrial policy and public opinion expectations

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3. Pharmaceutical price regulation a long story

• No control on demand
• Open access to primary care for any covered
  citizen
• No budget pressure on physicians all attempts
  were blocked
• Co-payments have been steadily decreasing, due to
  electronic payment and third party payor
• Hospital care expenditure is controlled through a
  global budget, including pharmaceuticals, which
  is exceeded every year

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4. A sophisticated tool box the present
situation
Reimbursable drugs in retail pharmacies 77
Hospital Drugs 16
Non reimbursable (OTC or X) 7
Hospital only
out-patient Delivery
Positive list Free prices Public tenders
Positive list Fixed prices
Free prices

Global budget
Ambulatory budget
Out of pocket
Price control status and funding budgets
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4. A sophisticated tool box

• Regulation is managed through regulatory
  statements, completed by the  Accord-Cadre 
  concluded for 4 years between the LEEM and the
  government, by which mutual comitments are made
• Admission and maintenance - to national
  formularies (hospital and retail market) is
  submitted to a Technical assessment by the
  Transparency Committee, based on a series of
  sophisticated technical concepts, currently under
  review
• Prices of reimbursable retail market
  pharmaceuticals only are negotiated between the
  company and the CEPS (Economic Committee)

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4. A sophisticated tool box

• Regulation is managed through regulatory
  statements, completed by the  Accord-Cadre 
  concluded for 4 years between the LEEM and the
  government, by which mutual comitments are made
• A two steps procedure
• Admission and maintenance - to national
  formularies (hospital and retail market) is
  submitted to a Technical assessment by the
  Transparency Committee, based on a series of
  sophisticated technical concepts, currently under
  review
• Prices of reimbursable retail market
  pharmaceuticals only are negotiated between the
  company and the CEPS (Economic Committee)

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4. A sophisticated tool box
Prices are set in reference with several
variables, with potential prices cuts or
paybacks
Price of comparators
Sales forecasts and Budget impact
Improvement in medical service
Target population, Conditions for use
Average daily dosage, treatment duration
Post-marketing Studies
Prices in Europe (Ger, UK, Italy, Spain)
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4. A sophisticated tool box
Usual procedure 180 days in theory, over 220 in
practice
Pricing negotiations
Technical assessment
6 to 12 weeks (or more)
8 to ? weeks
3 to 4 weeks
Aproval of CT opinion
Convention signed
Publication in OJ
Reimburs. Application
1 to 4 weeks
2 weeks
Fass track procedure
2 days
 Dépôt de Prix 
CEPS OK ?
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4. A sophisticated tool box

•  Dépôt de prix  or fast track reimbursement
  procedure
• Principle was settled in the financial law for
  Social Security 2003 and details are settled
  within the  accord cadre 
• It can apply only to medication with  a
  particular benefit for public health  (as graded
  by the Transpaency committee)
• Price to be  in line  with accepted prices
  proposed by the company
• A commitment package to be proposed by the
  company sales forecasts for 4 years (if
  exceeded, paybacks), post marketing studies,
  treatment scheme, targeted subgroup of population
  etc..
• In 2002 lt 26 products would have been concerned
  (Source CT report 2003)

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4. A sophisticated tool box

• Global regulation in complement to product/per
  product regulation
• An objective for pharmaceutical expenditure
  growth rate funded by the Mandatory Insurance is
  set every year through the Social Security
  Financial Law (3 target in 2001 and 2002
  respectively 7,2 and 4,2 performed 4 in
  2003, 3 expected for 2004)
• Excessive expenditures generate a partial payback
  by companies either through a taxation either
  through an individual agreement passed in line
  with the  accord cadre . (183 millions euros
  2001, 129 millions euros 2002)

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4. A sophisticated tool box

• How to control expenditure growth while
  admitting higher prices for new and  good
  medical value  medication and meeting ?
• Excluding medications from the formulary
• Reducing reimbursement rates
• Promoting generics
• Increasing taxation on pharmaceutical industry
• PR campaigns to insured to reduce their
  consumption

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4. A sophisticated tool box

• Excluding medications with  insufficient medical
  service rendered  - 835 presentations
  representing 7 of the reimbursment expenditure
  by mandatory insurance (Source MEDICAM, 2003) ie
  gt 1 billion Euros
• Technical review initiated in 1998
• Imposed / negotiated price decreases
• First delistings (voluntary basis) 2000
• Imposed delisting 2003 2005
• Expected payback
• Reducing reimbursement rates homeopathy and
  others ..

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4. A sophisticated tool box

• A generic policy promoted only by the late 90s
• Regulatory definition of generics
• Setting up a  répertoire  of authorized
  generics (http//afssaps.sante.fr)
• Substitution by retail pharmacists allowed, with
  financial incentives
• Prices are in average 30 to 40 inferior to
  branded drugs prices
• A agreement between the office-based physicians
  unions, the Mandatory Insurance (CNAMTS) and the
  government in 2002 to encourage generics and ICD
  prescription in exchange of visits fees tariff
  increase (2002)

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4. A sophisticated tool box

• Completed (disrupted ? ) by the adoption of
  reference prices in 2003 for products enlisted on
  the repertoire
• First trend October 2003 29 entities, 71
  groups of generics
• 70 of brand-named products decrease their price
  to the reference price
• The others maintained their price
• One product had a price increase
• Future developments to be expected but concerning
  only products coming off-patent

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4. A sophisticated tool box the near future ?
Reimbursable drugs in retail pharmacies
Hospital Drugs
Non reimbursable (OTC or X)
out-patient delivery
New and costly hospital Only
Hospital only
Positive list
Positive list Fixed prices
Free pricing
Price control

Fees Per case
Ambulatory care budget
Out of pocket
Price control status and funding budgets
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4. A sophisticated tool box the near future ?

• A limit to free pricing for hospital only drugs ?
  A bill is presently discussed in Parliament
• For costly innovative in-patient hospital drugs
  and hospital drugs delivered to out-patients ,
  companies required to declare the price to the
  Economic Committee, who can oppose to it and fix
  a tariff for reimbursement
• Financial incentives for hospital to be commited
  to appropriate use of these medications

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5. Short term impact and long term perspectives

• The trend is more in reinforcing price control,
  than granting price freedom for pharmaceuticals,
  despite the adoption of the  dépôt de prix 
• Overall paybacks and specific taxation rose from
  1,8 of global turn-over of publicly funded
  markets in 1997 to 5,2 in 2001 (0,9 billions
  euros ) .
• Generics are still representing a marginal part
  of the retail market (lt 10 in volumes, lt 5 in
  value) although growing

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5. Short term impact and long term perspectives
Price control is efficient in keeping
pharmaceutical reimbursable prices down
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5. Short term impact and long term perspectives
but not pharmaceutical expenditure funded by
Mandatory Insurance
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5. Short term impact and long term perspectives
because other components are driving the
growth of Pharmaceutical expenditure
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5. Short term impact and long term perspectives

• The convergence of prices with European countries
  will overall increase provided a control on the
  expenditure is maintained
• The adoption of the  Depôt de prix  procedure
  for innovative / patented products is the sign
  that the French Government is not hostile to
  grant prices in line with European prices
• but paybacks and taxation can significantly
  reduce profitability
• Is attractivity of France for pharmaceutical
  industry is declining ?
• Investments to be reduced ?
• RD activities transferred ?
• Long term consequences
• Reduced accessibility to innovation for patients
  ?

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5. Short term impact and long term perspectives

• Price control per se is not an effective way to
  control expenditure, if not addressing volumes
• Volumes / prescriptions cannot be regulated
  through action only on offer, but also on demand
  
• Price control can be damageable to local
  pharmaceutical industry
• No incentives for true innovation
• Encouragement to generate profits by high volumes
  and intensive promotion
• Overuse of drugs can be damageable to public
  health
• Dependance upon US based industry a threat ?

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Thank you for your attention