Formulary Committee

1
Formulary Committee  of Russian Academy of
Medical Sciences Professor Pavel Vorobyev

• Economy of equivalence
• new challenge 

2
ALMOST INSOLUBLE PROBLEM 

• To contain budget expenditures on health care
  system while improving the results

3
Remember it is not an end in itself

• Cost containment  is limited by necessity to
  follow  the principle of equity in providing
  medical care
• ensuring its accessibility,
• including vulnerable groups

4
INCREASING CONTROLLABILITY OF THE MARKET OF
DRUG CIRCULATION

• One should recognize market failure in medicine
  in general and particularly  in drug supply!
• Uncontrolled market relations lead to the
  development  of perverted, vicious schemes of
  making money patient's life becomes worthless 
• Regulatory mechanisms of this market keep on
  improving in all developed countries 
• Significant differences in regulation are
  determined by the lobbying of medical community
  by Big Pharma

5
WHO

• The specific nature of drugs requires a special
  approach from the State and persons involved in
  its selling, which differs from principles of
  selling commercial products and consumer goods
• For instance, Government agencies should be
  responsible for the regulation of manufacturing,
  import, export, storage, distribution   and sales
  of drugs

6
Opinions diverged 

• Some experts insist that
• State regulation of the pharmaceutical market 
  reduces price competition
• In terms of full liberalization this market would
  function "correctly",  like other consumer
  markets 
• Supporters of the market do not notice the
  existence of fundamental factors which provide
  singularity  of the drug market - its social
  orientation 
• Experience of many countries including Russia
  shows  that unregulated "market" harms interests
  of poor  people with rare diseases and members of
  vulnerable groups 

7
IT IS POSSIBLE TO CONTAIN DRUG COSTS  INFLUENCING
ON

• Medical care recipient - patient
• Health-care provider - physician
• Providers of medicines pharmacy, distributors
• Manufacturers of medicines 

8
GENERAL MECHANISMS OF CONTAINING DRUG COSTS

• Constraint of budget subsidies  financial path 
• Demand management  administrative path
• Price (and allowances) control financial and
  administrative path

9
DIRECT MECHANISMS OF COST CONTROL

• Direct price control
• Negotiating prices at the national level
• Reference prices using comparison with
  therapeutic analogues, generics and prices
  abroad 
• Forced price cuts  
• Conditions for facilitating the replacement of
  brand-name products by generics

10
Indirect mechanisms of cost control   

• Increased burden of co-payment for patient (for
  example, program of self-treatment)
• Restrictions of consumption  using lists of
  subsidized (compensable) drugs and exclusion of
  unworthy drugs
• Transferring the responsibility to the physician
  budget keeper - (budget of prescription
  physician has a certain amount of money for all
  drugs, subsidized by the State, and he ought to
  prescribe it for a certain period)
• Transferring the responsibility both for
  financing and price negotiation on insurance
  companies 

11
PRICE CONTROL

• It is the most common way to limit the cost of
  drug procurement that is widely used by the
  Authorities 
• Very often the list of essential medicines  was
  considered as a basis for the policy of drug
  price control
• Direct mechanisms are used to monitor
  expenditures 

12
Pricing approaches at the level of distributors
and pharmacies 

• Restricting trade allowances (wholesale and
  retail ) product-oriented allowance (reduction
  of allowance on more expensive drugs), fixed
  allowance, maximum allowance (either without
  separation on wholesale and retail, or separate
  one regional authorities)
• Co-payment (fixed payment for prescription of any
  medication, payment of cost interests  50
  benefit, defined sum of co-payment max 1000
  EURO, further - free of charge)
• Per capita payment to the pharmacy from the
  State (it was implemented in the 7 nosologies
  system )

13
Generics

• Substitution of brand-name drugs on generics is
  regulated at the legislative level in many
  countries
• In the USA legal protection of generics is
  provided by the Drug Price Competition Act
  (Waxman-Hatch Act, 1984)
• WHO supports the focus on generics 
• In the Netherlands, France, Italy, Spain and the
  UK state authorities use motivation for
  prescription and administration of generics
• German pharmacists had a daily norm of generics
  prescription.
• In Denmark rules of trade markup for pharmacies 
  have come into force since April 1, 2005, they
  are intended to eliminate the motivation to
  release more expensive drugs 

14
There are differences between generics

• Identical molecules obtained by the same chemical
  methods but using different technologies
• Bioequivalence studies are held when registering
• We compare two similar chemicals  in the same or
  insignificantly different dosage forms for oral
  administration 
• The curves for the compared drugs  should be
  similar, equivalent  (but without coincidence )
• Generics with intramuscular, subcutaneous,
  intravenous or other routes of administration are
  not tested for bioequivalence only concentration
  of substances in product  and its chemical
  composition (impurities) are studied, sometimes
  pharmacokinetics is compared.

15
It remains outside the scope

• Products of biological origin their effect may
  be related with development of primary product 
  from some substrate, its further refine
• Major groups coagulation factors  VIII, insulin,
  heparins, anticytokine drugs, antibiotics

16
Generics

• Comparison of analogues is topical generics,
  therapeutic analogues (including biologicals )
• Effects may depend on the shell or the filler 
• All the studies should be done in actual practice
• It is necessary to provide an independent public
  examination of effectiveness, safety and
  pharmacoeconomics data of the product

17
Economic effect  of the generic substitution
(HIV/AIDS annual triple therapyStavudine
Lamivudine Nevirapine)
Medecins Sans Frontier (2001) A matter of life
and death The role of patents in access to
essential medicines
18
In Russia there are no such differences in the
cost!

• Cellcept and its generic Maycept differ in 15
• Velcade and its generic Milanfor differ in 30
• Enalapril prices in Moscow pharmacies differ from
  ? 4 rubles to 120 rubles (2 times!)
• The allowable difference in bioequivalence and
  pharmacokinetics  between brand-name drug and
  generic product is 15

19

• Reference prices  are opposed to the free market
  price 

20
System of reference prices (contract, agreed,
calculated prices)

• Tool for measuring the maximum compensation for
  medicines based on the availability of similar
  drugs  in the market
• Covering the cost of medicines by manufacturer 
• It may cover trade allowances partially or
  completely
• Preferable and the most common way to control
  costs of drug provision 

21
The effect of the reference pricing introduction
  Cochrane systematic review

• 10 studies (most from Canada)
• Application of drugs increased by 60 - 196 (5
  studies)
• Application of co-payment drugs decreased by
  19 - 45 (4 studies)
• There were no harm to health or increased
  consumption of health resources 

Aaserud M, Austvoll-Dahlgren AAA, Kösters JP,
Oxman AD, Ramsay C, Sturm H. Pharmaceutical
policies effects of reference pricing, other
pricing, and purchasing policies. Cochrane
Database of Systematic Reviews 2006, Issue 2.
Art. No. CD005979. DOI 10.1002/14651858.CD005979
.
22
Studying different methods of reference pricing
 

• COMPARISON OF TWO SYSTEMS OF REFERENCE PRICES
• 1-st method one price for the various NSAIDs 
  with unique INN
• 2-nd method one price for NSAIDs  with
  different INN
• RESULT
• 1-st method saving 5.7 million dollars
• 2-nd method saving 22.7 million dollars
• The position of health is not clear

Health Serv Res. 2005 October 40(5 Pt 1)
12971317.
23
Alberta (Canada) since 1995 uniform price equal
to the price of Cimetidine has been introduced
CMAJ. 1999 August 10 161(3) 286288.

• Cimetidine, Ranitidine, Famotidine, Nazatidine,
  Omeprazole 
• Proportion of prescriptions for all drugs
  decreased by 43-65 , cimetidine prescriptions
  increased by 410
• The total number of prescriptions decreased by 5
• The cost of all drugs decreased  by 33-75, the
  cost of cimetidine increased by 392
• Total costs decreased by 37 

24
Models of reference pricing (The European
experience of the common market)

• Formal model  of establishing reference prices
  foreign drug prices are accepted as comparison
  prices.   This approach allows to achieve lower
  prices in all groups of drugs. To tell the truth
  it is not clear  what we would do if prices in
  all countries became the same and there were
  nothing to compare.
• Semi-formal model  - analysis of drug prices in
  neighboring countries is used in pricing
  negotiations with the manufacturer 
• Informal model, when international prices are
  taken into account in individual cases, for
  individual drugs, as in the case of setting the
  reference price, so in case of pricing
  negotiations with the manufacturer   

25
Options  of reference pricing

• Comparison of generic costs to establish
  reference prices is used in France, Italy and
  Spain 
• Prices of therapeutic analogues are used in
  Germany, it allows to include several active
  substances of one therapeutic class  in the price
  comparison group to establish reference prices. A
  single cluster of therapeutic analogues  which
  includes both generic and brand-name products  is
  made, and the unique reference price is
  established for the entire cluster 
• It is possible to carry out the analysis of
  generic internal market in Russia our situation
  is significantly different from European  - drugs
  in the "free sale" and its prices actually  are
  not regulated

26
Comparative evaluation of the cost of medicines ,
rub. Formulary Committee Report, 2008
INN Registered price according to List of essential medicines  Registered price according to the DLO  Pharmacy price (Moscow) Price of the British National Formulary 
Captopril  Tab. 25 mg ?20 from 6,00 t? 26,37 from 7,30 t? 10,00 from 4,22 t? 39,00 (Capoten from 57,00 to 160,00) Capoten 164,00
Enalapril  Tab. 2,5 mg ?20 from 3,89 to 47,99 12,54 from 4,09 t? 125,10 43,26
Atenolol  Tab. 50 mg ? 30 from16,50 t? 48,00 from 8,40 t? 13,00 from 5,10 t? 50,00 55,20
Formoterol  Caps. for ing. 12 mcg, ?30 825,35 488,73 from 611,50 t? 1098,48 602,14
Amoxicillin  Caps. 250 mg ?20 46,25 from 13,50 t? 16,50 from 12,14 t? 45,00 57,68
Azithromycin Caps. 250 mg ?6 from 78,53 t? 220,00 from 75,00 t? 100,00 from 79,50 t? 590 553,32
Co-trimoxazole Tab. 480 mg ?20 from 10, 20 t? 39,91 from 9,20 t? 11,00 from 7,00 t? 25,90 271,92
27
DDD price on ACE inhibitors and sartans(Drug
Reference Book of the Formulary Committee RAMS,
2009)

• INN DDD (mg) ???? DDD (RF GB ) (rub.)
• Captopril 50 0,6 0,8
• Perindopril 4 9,2 16,4
• Fozinopril  15 6,8 10,5
• Hinapril 15 8,1
• Enalapril 10 0,17 - 3,5
• Valsartan 80 27,4 87,4
• Irbesartan 150 20,3 30,1
• Losartan  50 50,0 58,4

28
Drug Reference Book of the Formulary Committee
RAMS, 2009

• It contains comparison of prices  for all
  essential drugs
• ONE STEP TO REFERENCE PRICES  

29
Co-payment

• Promotes the use of cheaper generics 
• Increases the responsibility of the medical care
  customer for excessive consumption and impacts on
  cost reduction
• Psychological aspects, marketing technology play
  significant role  (for example, intimidation,
  creating artificial shortage  etc.)

30
The level of co-payment is very important

• The low co-payment level does not influence on
  the excessive consumption
• Savings are covered by higher administrative
  costs 
• In the Netherlands the 20 level of co-payment
  with maximum payment of 91 EURO per year  was too
  low to influence on prescribing costs
•  

31
The level of co-payment is very important

• Excessively high  level of co-payment leads to
  the reduction in application of essential
  medicines 
• It was found out that the limits in the number of
  subsidized prescription drugs led to the
  reduction of their consumption  in the U.S.A.
• These effects have not been observed  in
  Australia since the introduction of solid
  commission  reduction did not extend to
  essential medicines  and was limited by
  additional drugs

32
The level of co-payment is very important

• The influence of co-payment is different in
  different groups of patients in terms of
  universal co-payment system  consumption of drugs
  paradoxically increased in patients with worse
  health  (they take" a lot of drugs 
  simultaneously)

33
Co-payment

• Transferring part of the burden from the State to
  the patient  (mostly trade allowances)
• Basic approaches
• (1) Fixed fee for each prescription
• (2) The percentage of the cost of dispensed drugs
  (excluding expensive drugs  and special cases)
• (3) Combination  of (1) and (2)
• (4) Establishing of an annual sum, higher costs
  are compensated, population groups without
  co-payment

34
Difficulties and problems of co-payment

• In the system "with percents" - co-payment of
  expensive drugs (?)
• Access of vulnerable groups of patients to drugs
  is provided by the state subsidies  
• Constant consumption of drugs (chronic diseases),
  epidemically significant diseases (for example,
  tuberculosis, HIV) - subsidies
• Simplicity and convenience of the system
• Struggle against the problem of excessive
  consumption  (?)
• Incitement of supply of goods in patients
  (purchasing drugs for a long time or in large
  quantities)
• Inconvenient system of personified accounting for
  sums subjected to annual deduction

35
The effect of the reference pricing introduction
  (Cochrane systematic review)

• 30 comparisons were found (in 21 studies)
• The widespread decline in public spending on
  drugs  was showed
• Along with other drugs, there is reduced
  consumption of essential drugs 
• The influence on health and consumption of health
  resources  is poorly investigated 
• One study found out an increase in consumption of
  health resources after the introduction of
  co-payment in vulnerable group 
• In other words there is no delight about
  co-payment 

Austvoll-Dahlgren AAA, Aaserud M, Vist GE, Ramsay
C, Oxman AD, Sturm H, Kösters JP, Vernby Å.
Pharmaceutical policies effects of cap and
co-payment on rational drug use. Cochrane
Database of Systematic Reviews 2008, Issue 1.
Art. No. CD007017. DOI 10.1002/14651858.CD007017
.
36
CONCLUSION

• There is no evidence that any method is more
  efficient  in reduction of public spending on
  drugs than the other  one
• Formal measures do not always as effective as
  Government  would like it to be
• The search for optimal solutions for problems of
  limiting growth of the health budget continues 
• We need a comprehensive solution including the
  following approaches reference prices price
  controls generics forced price cuts 
  partial co-payment of drug provider spending by
   consumers