Year: 2010'
Publisher: GBI Research
Delivery: PDF
Published Date (dd/mm/yyyy): '01/02/2010
Pages: 83
Country:

Pharmaceutical Pricing and Reimbursement - Reference Pricing and Economic Evaluations Will Dominate Future Pricing and Reimbursement Strategies

Summary

GBI Research, the leading business intelligence provider, has released its latest research, ''Pharmaceutical Pricing and Reimbursement - Reference Pricing and Economic Evaluations Will Dominate Future Pricing and Reimbursement Strategies''. It provides key data, information and analysis of the major issues affecting the pricing and reimbursement decisions across the globe. It discusses the major changes that have been observed in the pharmaceutical and healthcare industry at the global level. The report also covers issues specific to particular geographies. The geographies covered include the US and countries within Western Europe, Asia-Pacific, Central and Eastern Europe, and Scandinavia. It covers pricing and reimbursement mechanisms in different countries as well as the impact of issues on the key stakeholders. The report puts a special emphasis on orphan drugs since the pricing and reimbursement patterns for orphan drugs are different from the traditional mechanisms.

This report is built using data and information sourced from proprietary databases, primary and secondary research and in house analysis by GBI Research's team of industry experts.

Scope

The scope of this report includes:
- Identification and analysis of major issues that are affecting the pricing and reimbursement decisions across five different geographies. These include North America, Western Europe, Asia-Pacific, Central and Eastern Europe and Scandinavia
- Analysis of the issues and potential impact of pricing and reimbursement decisions on the key stakeholders
- Study of the pricing and reimbursement mechanisms in different countries and the identification of trends in the context of a particular geography as a whole
- Qualitative analysis of the forces that are driving and restraining the prices and reimbursements within a particular geography
- Future outlook of the pricing and reimbursement patterns for geographies under consideration

Reasons to buy

The report will enhance your decision making and will enable you to:
- Build understanding of the major issues in the pricing and reimbursement landscape
- Identify the impact of each issue on your business and develop solutions for adverse impacts
- Negotiate better with the government agencies to maximize the reimbursement on the drugs by understanding the pricing and reimbursement mechanism
- Develop effective business strategies for pricing a drug which is to be launched in any of the markets considered in this report
- Identify and exploit the factors that could help to maximize returns on the drugs for a particular geography in future

1 Table of Contents
1 Table of Contents 4
1.1 List of Tables 6
1.2 List of Figures 7
2 Introduction 8
2.1 GBI Research Report Guidance 8
3 Pharmaceutical Pricing & Reimbursement Issues at Global Level - Innovative Mechanisms To Decrease the Healthcare Costs 10
3.1 Introduction 10
3.2 Issues at Global level 12
3.2.1 Value Based Pricing and Risk-Sharing Models 12
3.2.2 Increased Focus on Evidence-based Medicine and Health Technology Assessment (HTA) 14
3.2.3 Role of Pharmacoeconomics in Pricing and Reimbursement 16
3.3 Conclusion 19
4 Pricing and Reimbursement Issues in US - Government's Cost Rationalization Efforts Will Make Future Tough for Big Pharma 21
4.1 New Nationwide Database to Set Healthcare Reimbursement Rates 22
4.2 Medicaid Pricing for Dual Eligibles of Medicare Part - D 24
4.3 New ICD-10 (International Classification of Diseases - 10) Coding System 26
4.4 Generic Price War at Retail Sector 28
4.5 MIPPA (Medicare Improvement for Patients and Providers Act), the AMP Rule Litigation 30
4.6 First DataBank/Medi-Span Settlement and the Impact on AWP 31
4.7 Conclusion 32
5 Pricing and Reimbursement Issues in Western Europe - Cost-Effectiveness is the Key to Success 34
5.1 Parallel Trade 34
5.2 EU Single Pricing - Still an Issue 36
5.3 International Price Referencing 38
5.4 Status quo of P&R in Western Europe 40
5.4.1 UK 42
5.4.2 France 42
5.4.3 Germany 42
5.4.4 Italy 43
5.4.5 Spain 43
5.5 Conclusion 43
6 Pricing and Reimbursement Issues in Central & Eastern Europe (CEE) and Scandinavia - Reference Pricing and Centralization Proves Detrimental for High Price Drugs 45
6.1 Central & Eastern Europe - Cost-Effectiveness is of Paramount Importance 45
6.1.1 Czech Republic 47
6.1.2 Poland 48
6.1.3 Austria 48
6.1.4 Romania 49
6.1.5 Hungary 50
6.2 Scandinavia - Moving Towards Centralized Healthcare Regime 51
6.2.1 Denmark 53
6.2.2 Norway 54
6.2.3 Sweden 54
6.2.4 Future Landscape 55
6.3 Conclusion 55
7 Pricing and Reimbursement Issues in Asia-Pacific - Negative Pricing Pressures Leaves Less Hope for Expensive Medicines 57
7.1 DPC (Diagnosis Procedure Combination) Reimbursement System in Japan - Immense Savings for the Government 57
7.2 Reforms in Chinese Pharmaceutical Market: Tougher Landscape for Generic and Off-Patent Brands 58
7.2.1 Active Ingredient Based Reimbursement: Restricted Market for Original Branded Products 59
7.2.2 New Regulatory Reforms: Stricter Rules for Innovation Seal 61
7.2.3 Price Cuts and Hospital Tendering Process: Erosion of Generic Margins 61
7.2.4 Future Scenario: Innovation is the Key for Western Pharmaceutical Companies 62
7.3 Transparency Issues with PBS in Australia 62
7.3.1 AUSFTA (Australia-United States Free Trade Agreement) - Boon for Branded Pharma 63
7.3.2 Access Issues for HCM (High Cost Medicines) and Controversial Selection Criteria 64
7.3.3 Consumer Participation in the PBS Drug Listing - A Move towards Greater Transparency and Cost-Efficiency 65
7.4 Conclusion 65
8 Pricing and Reimbursement Issues for Orphan Drugs - Excessive Prices of Orphan Drugs Increasing Financial Pressures on Government 67
8.1 Exploiting Orphan Drug Act: Maximizing Revenues 68
8.1.1 Ovation's Indocin and Questcor's H.P. Acthar Gel 68
8.2 Pricing of an Orphan Drug 69
8.3 Price Control Measures 71
8.3.1 Global Approach for Orphan Drug Development 71
8.3.2 Introducing Sales Ceiling and Flexible Market Exclusivity 71
8.3.3 Price Revisions 72
8.4 Conclusion 73
9 Key Takeaway 74
10 Appendix 75
10.1 Market Definitions 75
10.2 Key Support Data 75
10.3 Abbreviations 78
10.4 Research Methodology 80
10.4.1 Coverage 81
10.4.2 Secondary Research 81
10.4.3 Primary Research 81
10.4.4 Expert Panel Validation 82
10.5 Contact Us 82
10.6 Disclaimer 82
10.7 Sources 82

1.1 List of Tables
Table 1: Examples of Pharmacoeconomic Evaluations in Ireland 18
Table 2: Drug Manufacturers Receiving Largest Windfalls, ($m), 2006-2007 25
Table 3: Pricing and Reimbursement Mechanisms in Western European countries 41
Table 4: Pricing and Reimbursement Mechanisms in Czech Republic, Romania, Austria, Poland and Hungary 46
Table 5: Different Pricing Mechanisms used in Czech Republic, Poland, Austria, Romania and Hungary 47
Table 6: Box Model for Reimbursement in Austria 49
Table 7: Comparative Analysis of Per Capita Healthcare Expenditures in the Scandinavian Countries, 2006 51
Table 8: Pricing and Reimbursement Mechanisms in the Scandinavian Countries 53
Table 9: Norway - Step Price System, 2008 54
Table 10: Trend in the Revision Rates of Reimbursement Prices in Japan, 1992-2008 57
Table 11: Sales in Pharmaceutical Industry, China, $bn, 1998-2008 59
Table 12: Increase in the Per Capita Expenditure for Medical Services in the Urban and Rural Households, China, $m, 1990-2006 60
Table 13: Ratio of Retail v/s Wholesale Price in Eight European Countries and China, 2005 61
Table 14: Definition and Incentives for Orphan Drugs in US, EU, Japan and Australia 67
Table 15: Average Annual Premiums for Family and Single Coverage. US, ($), 1999-2009 76
Table 16: Australia Drug Price Components and Payment Structure 77
Table 17: GDP (Nominal) Comparison Between Western Europe and Central & Eastern Europe, ($bn), 2008 78

1.2 List of Figures
Figure 1: Comparison of Per Capita Expenditure on Health at Average Exchange Rate ($) v/s Life Expectancy, 2006 10
Figure 2: Comparison of CAGR of R&D Expenditure v/s Turnover Over the Last Five Years for the Top 5 Companies, 2003-2008 11
Figure 3: Value Based Pricing - Concept and Process 12
Figure 4: Impact Analysis: Value Based Pricing 14
Figure 5: Drivers and Restraints for EBM (Evidence Based Medicine) 15
Figure 6: Impact Analysis: Evidence Based Medicine 16
Figure 7: ISPOR 33 Guidelines for Pharmacoeconomics Assessment 17
Figure 8: Impact Analysis: Pharmacoeconomics 19
Figure 9: Average Annual Percentage Change in Manufacturer Prices for Most Widely Used Prescription Drugs in US 21
Figure 10: Case: An Example Of Data Tampering To Provide Artificially Low Reference Prices For Reimbursements Of Out-Of-Network Medical Expenses 22
Figure 11: Impact Analysis: New Database for Reimbursement Rates of Out-of-Network Medical Expenses 23
Figure 12: Comparison of Medicare Part D and Medicaid Discounts 24
Figure 13: Impact Analysis: Medicaid Pricing for Dual Eligibles in MPD (Medicare Part D) 26
Figure 14: ICD-10 Coding System: Features and Benefits 27
Figure 15: Impact Analysis: ICD-10 Coding System 28
Figure 16: Impact Analysis: Generic Price War 29
Figure 17: Impact Analysis: MIPPA (Medicare Improvement for Patients and Providers Act) 31
Figure 18: Impact Analysis: First DataBank/Medi-Span Settlement 32
Figure 19: Parallel Import Market Break-down, Europe, 2007, Total Size = $7.5bn 34
Figure 20: Impact Analysis: Parallel Trade 35
Figure 21: Price Level Indices for Pharmaceutical Products, EU25 = 100, 2005 37
Figure 22: Impact Analysis: EU Single Pricing 38
Figure 23: Impact Analysis: International Reference Pricing 39
Figure 24: Overshooting Actual Budget Expenditure, Hungary,(%), 1994-2005 51
Figure 25: Impact Analysis: P&R Issues in CEE and Scandinavia 56
Figure 26: Impact Analysis: DPC (Diagnosis Procedure Combination) Reimbursement System 58
Figure 27: Sales in Pharmaceutical Industry, China, $m, 1998-2008 59
Figure 28: Increase in the Per Capita Expenditure for Medical Services in the Urban and Rural Households, China, ($m), 1990-2006 60
Figure 29: Impact Analysis: Reforms in Chinese Pharmaceutical Market 62
Figure 30: Arguments For and Against the AUSFTA 63
Figure 31: Impact Analysis: AUSFTA 64
Figure 32: Number of Orphan Drugs Approved by FDA, 2000-2009 68
Figure 33: Factors Influencing the Pricing of an Orphan Drug 69
Figure 34: Correlation Between the Prevalence and the Annual Cost of Therapy for Orphan Drugs 70
Figure 35: Impact Analysis: Price Control Measures on Orphan Drugs 73
Figure 36: The US Healthcare Expenditure, Historical, $tn, 1980-2008 75
Figure 37: The US Healthcare Expenditure, Projections, ($tn), 2009-2018 76
Figure 38: GBI Research Methodology 80

Pharmaceutical Pricing and Reimbursement - Reference Pricing and Economic Evaluations Will Dominate Future Pricing and Reimbursement Strategies

Description

GBI Research, the leading business intelligence provider, has released its latest research, ''Pharmaceutical Pricing and Reimbursement - Reference Pricing and Economic Evaluations Will Dominate Future Pricing and Reimbursement Strategies'' that provides key data, information and analysis of the major issues affecting the Pricing and Reimbursement decisions across the globe. It discusses the major changes that have been observed at the global level. The report also covers the issues specific to particular geographies as well. The geographies covered include the US and countries within Western Europe (the UK, France, Germany, Spain, Italy), Asia-Pacific (Japan, Australia, China), Central & Eastern Europe (Czech Republic, Poland, Austria, Hungary, Romania) and Scandinavia (Norway, Sweden, Denmark). It provides a comprehensive view of the best practices followed by the governments in these countries with respect to pricing and reimbursement of the prescription as well as generic drugs. The report also provides the impact analysis of each of the issue on the four key stakeholders concerned with the pricing and reimbursement practices that is pharmaceutical companies, payers, regulatory agencies and patients/doctors. The report puts a special emphasis on the orphan drugs since the pricing and reimbursement patterns for orphan drugs are different from the traditional mechanisms.

This report is built using data and information sourced from proprietary databases, primary and secondary research and in house analysis by GBI Research's team of industry experts.
Innovative Pricing and Reimbursement Mechanisms Due to Financial Pressures Will Continue to Exert Downward Pricing Pressures in Future

Major Pricing and Reimbursement Strategies Employed Across the Globe

Source: GBI Research

Twin pressures of global economic meltdown and spiraling healthcare costs have forced several countries to adopt a conservative approach towards pricing and reimbursement of the cost of drugs. The rising cost of medicines, along with an unhealthy lifestyle of people in a number of countries, particularly developed countries, the burden on the healthcare systems to provide quality healthcare to each citizen is increasing. This increase directly impacts the governments' ability to provide quality healthcare to its citizens, especially in countries where the healthcare system is largely government funded.

Different mechanisms, including reference pricing, cost-benefit analysis, health technology assessments and many others are being employed to bring down the price of prescription, as well as generic drugs. In addition, innovative pricing mechanisms, such as the Step Price System will continue to exert downward pricing pressure on pharmaceutical companies in the future.
Reimbursement Agencies have Increased Sensitivity for High Price Drugs

Governments, across the world, are moving towards economic evaluations as a tool to measure the economic impact of the drug. In the last few years, the pressure from various reimbursement groups, such as managed care organizations, pharmacy benefit managers, payers and government reimbursement agencies have increased due to rising costs and evidence of few medicines charging premium pricing despite the absence of equivalent therapeutic benefits.

Economic evaluation helps the government agencies to examine the price of drugs with respect to the therapeutic benefits they provide and reimburse the cost of the drug accordingly. These evaluations also help the pharmaceutical companies to get their innovative drugs listed in the formularies, justify the premium pricing and also provide substantial data to help their sales force influence the physicians. While such evaluations prove to be beneficial for the innovative drugs that can receive favorable reimbursements, it could prove economically unfavorable for the drugs that do not provide substantial benefits compared to its costs. However, economic evaluations have enabled significant cost rationalization for the developed, as well as developing countries.

Excessive Pricing of Orphan Drugs by the Pharma Companies Demands Measures for Greater Price Control

Pharmaceutical companies that manufacture orphan drugs have been leveraging the government benefits provided to them under the Orphan Drug Act 1983, which mainly revolve around greater pricing freedom and lenient reimbursements for the drugs. While orphan drug companies argue that due to small patient population they charge high prices, it has been observed that some drugs have blockbuster status and have been generating substantial revenues for their companies. In addition, some companies such as Ovation Pharmaceuticals (now Lundbeck) and Questcor Pharmaceuticals have increased the price of their drugs exponentially to reap maximum revenues. All these examples suggest that pricing for orphan drugs are extraordinarily high compared to conventional pharmaceutical pricing.

Some of the possible solutions to reduce the price of orphan drugs include developing a global agency for orphan drug development, introducing sales ceiling and flexible market exclusivity period and periodic price revisions. These measures can not only save government funds but also reduce the co-payment for patients.

Innovation will be the Key for Premium Pricing in Major Markets including the Emerging Markets

Impact Analysis: Pricing and Reimbursement Issues Across the Globe

Source: GBI Research

In future, negative pricing pressures from various payers would force companies to justify the premium pricing for their products. While the new processes such as ICD-10 and HTA will help the pharmaceutical companies to provide better evidence to prove the therapeutic superiority of their drugs, ''me-too'' and generic drugs will experience significant challenges to obtain better pricing and reimbursements. With increased scrutiny from payers to ensure cost-effectiveness of the drugs, only truly innovative products would be in a position to charge premium price for the drugs.

There has been an increase in the amount of supporting evidence required to prove a drug's novelty to the reimbursement agencies. Besides the developed markets, in the emerging markets, such as China, the requirements for proving innovativeness of the medicine is becoming more and more stringent. This poses a great challenge to the companies that might incur extra costs in gathering evidence to prove their drug's therapeutic superiority. However, innovation is sure to remain the key for premium pricing in future, even in the emerging markets.