Eurohealth RESEARCH•DEBATE•POLICY•NEWS Volume 14 Number 2, 2008

Pharmaceutical policy: cost containment and its impact

Pricing pharmaceuticals

Generic medicines: savings to health care systems?

Innovation and regulation in the pharmaceutical sector

Orphan drugs: challenges for economic evaluation • Public-private partnerships for health and development Pharmaceutical pricing in France • Parallel trade and cost control • Access to medicines in sub-Saharan Africa Ensuring affordability, safeguarding Eurohealth innovation LSE Health, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, United Kingdom C Health care systems are under continuous pressure to fax: +44 (0)20 7955 6090 www.lse.ac.uk/LSEHealth deliver high quality services that meet ever higher public expectations. They are also acutely aware of the Editorial Team need to contain costs. The direction of pharmaceutical EDITOR: policy is one challenge; for instance what pricing David McDaid: +44 (0)20 7955 6381 email: [email protected] mechanisms help facilitate greater value for money? As O FOUNDING EDITOR: Thomas Ceuni and Jim Attridge note in respective Elias Mossialos: +44 (0)20 7955 7564 articles in this issue of Eurohealth, the benefits of email: [email protected] pharmaceutical innovation to Europe are substantial; DEPUTY EDITORS: but in the prevailing economic climate how can Sherry Merkur: +44 (0)20 7955 6194 email: [email protected] Europe protect and nourish these industries and Philipa Mladovsky: +44 (0)20 7955 7298 M email: [email protected] safeguard innovation? Moreover, to what extent should restrictions be imposed on access to new EDITORIAL BOARD: Reinhard Busse, Josep Figueras, Walter Holland, medications? Julian Le Grand, Martin McKee, Elias Mossialos

SENIOR EDITORIAL ADVISER: Thus it is to these complex issues that we devote this Paul Belcher: +44 (0)7970 098 940 M issue of Eurohealth, bringing together perspectives email: [email protected] first aired at last year’s European Health Forum DESIGN EDITOR: Sarah Moncrieff: +44 (0)20 7834 3444 Gastein. One approach to cost containment is value email: [email protected]

based pricing (VBP) where price is dependent on the SUBSCRIPTIONS MANAGER effectiveness of medications in everyday practice. Champa Heidbrink: +44 (0)20 7955 6840 Although effective, as Philippe Sauvage points out, the email: [email protected] E impacts on overall health care costs in France are Advisory Board negligible. Alistair McGuire et al also note that while Anders Anell; Rita Baeten; Nick Boyd; Johan Calltorp; VBP may help reduce excessive profits for industry, Antonio Correia de Campos; Mia Defever; Nick Fahy; Giovanni Fattore; Armin Fidler; Unto Häkkinen; Maria this may also reduce future research investment or Höfmarcher; David Hunter; Egon Jonsson; Meri Koivusalo; imply that it this is concentrated in areas where the Allan Krasnik; John Lavis; Kevin McCarthy; Nata Menabde; Bernard Merkel; Stipe Oreskovic; Josef Probst; N greatest health gains can be predicted. Tessa Richards; Richard Saltman; Igor Sheiman; Aris Sissouras; Hans Stein; Jeffrey L Sturchio; Ken Thorpe; Miriam Wiley Such a policy might without careful consideration be short sighted and detrimental to investment in areas Article Submission Guidelines such as drugs for rare diseases. Michael Drummond see: www.lse.ac.uk/collections/LSEHealth/documents/ argues here that conventional approaches to cost eurohealth.htm effectiveness analysis will mean that such drugs, even if Published by LSE Health and the European Observatory T on Health Systems and Policies, with the financial support developed, are unlikely to be reimbursed. New of Merck & Co and the European Observatory on Health approaches that capture their social value are required. Systems and Policies. The parallel trade in drugs can generate a modest Eurohealth is a quarterly publication that provides a forum for researchers, experts and policymakers to express their downward impact on costs in recipient countries, as views on health policy issues and so contribute to a Panos Kanavos and Stacey Kowal illustrate, but it can constructive debate on health policy in Europe. also have an adverse impact on access to medications The views expressed in Eurohealth are those of the authors alone and not necessarily those of LSE Health, Merck & Co in exporting countries. Yet at the same time Elisabeth or the European Observatory on Health Systems and Seeley and Panos Kanavos indicate that across the EU Policies. governments continue to pay too much for generic The European Observatory on Health Systems and Policies is a partnership between the World Health Organization drugs. Clearly, there is much for health systems and Regional Office for Europe, the Governments of Belgium, the pharmaceutical industry alike to digest. Finland, Greece, Norway, Slovenia, Spain and Sweden, the Veneto Region of Italy, the European Investment Bank, the Open Society Institute, the World Bank, the London School David McDaid Editor of Economics and Political Science, and the London School Sherry Merkur Deputy Editor of Hygiene & Tropical Medicine. Philipa Mladovsky Deputy Editor © LSE Health 2008. No part of this publication may be copied, reproduced, stored in a retrieval system or transmitted in any form without prior permission from LSE Health.

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Printing: Optichrome Ltd

ISSN 1356-1030 Contents Eurohealth Volume 14 Number 2

Pharmaceutical Policy Jim Attridge is Visiting Fellow, Tanaka Bus- iness School, Imperial College, London, UK. 1 Editorial – Cost containment: impact and consequences Melinda Hanisch and Panos Kanavos Thomas B Cueni is Secretary General, Inter- pharma, the Association of Swiss Pharma- 3 Pricing pharmaceuticals: value based pricing in what sense? ceutical Research Companies, Basel, Alistair McGuire, Maria Raikou and Panos Kanavos Switzerland.

6 Pharmaceutical pricing in France: a critique Jillian Cohen-Köhler is Assistant Professor, Philippe Sauvage Leslie Dan Faculty of Pharmacy, University of Toronto, Canada.

8 Can Europe afford innovation? Michael F Drummond is Professor of Health Thomas B Cueni Economics, Centre for Health Economics, University of York and part-time Professor, 11 Innovation and regulation in the biopharmaceuticals sector LSE Health, London School of Economics Jim Attridge and Political Science, UK. 16 Challenges in the economic evaluation of orphan drugs Gavin George is Senior Research Fellow at Michael F Drummond the Health Economics and HIV/AIDS Research Division of the University of 18 Generic medicines from a societal perspective: KwaZulu Natal, Durban, South Africa. savings for health care systems? Melinda Hanisch is Director, Policy and Elizabeth Seeley and Panos Kanavos Alliances, Europe Middle East, Africa and Canada. 22 Does pharmaceutical parallel trade serve the objectives of cost control? Panos Kanavos and Stacey Kowal Panos Kanavos is Senior Lecturer in Interna- tional Health Policy, LSE Health, London School of Economics and Political Science, European Snapshots UK. 27 When will it happen? Paving the way for risk adjustment in Slovakia Lucia Kossarova is reading for a PhD, LSE Lucia Kossarova Health, London School of Economics and Political Science, UK.

Alistair McGuire is Professor of Health Health and Development Economics, LSE Health, London School of 29 The ‘Price is Right’? Promoting local production for ARVs in Economics and Political Science, UK. Sub-Saharan Africa Tim Quinlan is Research Director at the Kinsley Wilson, Jillian Cohen-Köhler and Alan Whiteside Health Economics and HIV/AIDS Research 33 Public-private sector partnerships as a means of development in Africa, Division of the University of KwaZulu Natal, in the context of HIV/AIDS Durban, South Africa. Gavin George and Tim Quinlan Maria Raikou is Research Fellow, LSE Health, London School of Economics and Political Science, UK. Evidence-informed Decision Making Philippe Sauvage is Deputy Head of the 37 “Myth Busters” We can improve quality one doctor at a time Cabinet of the Minister of Health, Ministry of Health, Youth Affairs and Sport, France. 39 “Bandolier” On limitations Elizabeth Seeley is Research Assistant in Health Policy, LSE Health, London School of Economics and Political Science, UK. Monitor Alan Whiteside is Director, Health Econom- 42 Publications ics HIV/AIDS Research Division, University of KwaZulu-Natal, Durban, South Africa. 43 Web Watch Kinsley Wilson is PhD candidate, Leslie Dan 44 News from around Europe Faculty of Pharmacy, University of Toronto, Canada. PHARMACEUTICAL POLICY Editorial: Cost containment: impact and consequences

Melinda Hanisch and Panos Kanavos

Pharmaceutical cost control measures are these are often used in an unpredictable latter part of the twentieth century.6 becoming more widespread and complex manner and their actual budgetary signifi- Restricting access to new medicines solely as national health systems are under cance may be limited. For instance, on the basis of containing static costs, then, continuous pressure due to ageing popula- Philippe Sauvage in this issue notes that in represents a short-termist perspective both tions, increasing incidence of chronic the case of France, rebates account for only from an economic and a public health disease, persistent inequalities, and rising about 1–2% of total annual pharmaceutical standpoint. citizen expectations of what their health expenditure.1 Consequently, while such systems should deliver. Often unpre- measures may allow governments to Reduced patient access dictable pricing and reimbursement redirect resources, they may not deliver In the broader context, varying and controls are employed at the national and, huge savings. complex pricing and reimbursement increasingly, regional levels in the name of policies in Europe can cause both signif- Ironically, some cost containment policies achieving value for money. icant overall delays in access to new medi- may result in not more but less efficient cines across the region, and also large Yet, current approaches to pharmaceutical use of limited health care resources. A disparities in access between citizens of cost-containment may not achieve long- prime example is reference pricing, which individual countries. Despite its limita- term health care cost savings. In fact, by rewards generics with higher prices than tions, the most recent European Federation discouraging health care innovation and they would have under competitive market of Pharmaceutical Industries and Associa- inhibiting access to innovative treatments conditions. Seeley and Kanavos in this tions WAIT (Waiting to Access Innovative for patients who need them, they may have issue demonstrate that in some European Therapies) Indicator Report showed that a negative impact on long-term costs, countries reference pricing produces rela- patients in some Member States may wait health outcomes, and the availability of tively low levels of competition in the more than a year longer than those else- new medical innovations. Articles in this generics sector and higher than average where for access to the same medicine.7 issue, based on presentations made at the prices for payers.2 In Germany, France, This is in conflict with EU Member State 2007 European Health Forum Gastein, Italy and Spain, prices for generics cluster commitments to address health inequal- provide evidence and argumentation that around the reference price, and decline ities. cost containment policies should be more slowly over time than in countries assessed in terms of their long-term effect where generics operate in more compet- In a similar vein, the current trend toward on budgets, health benefits and access to itive environments. As a result, govern- the use of health technology assessment care. They highlight the need for health ments that promote the use of generics in (HTA) in pricing and reimbursement deci- care systems to continuously monitor an effort to achieve savings in their phar- sions highlights the conflict between cost policy implementation and evaluate maceutical budget may actually spend effectiveness and societal values. Among performance of individual policy measures more than they might if free pricing were others, the case of orphan drugs demon- in a transparent and robust manner. allowed in that segment of the market. strates that cost-effectiveness alone cannot Thus fewer resources are available for determine when a new medicine provides Ambiguous budget impact payers to spend on innovative treatments. value for money.8 Using HTA to make With regards to their primary objective – decisions about access to treatment for There is a substantial body of evidence on lowering costs – it is hard to argue that on patients with unmet medical needs implies the favourable long-term economic a short term basis some supply and a trade-off between cost-effectiveness and benefits of innovative medicines and treat- demand measures such as volume or profit societal values which may or may not ments, which often offer the potential to controls, rebates or paybacks, can achieve coincide with citizen expectations. more efficiently manage disease. The use some degree of annual savings. However, of new medicines has been associated with Of course, from a financial standpoint the significant reductions in mortality, lost effect of this de facto restriction in patient Melinda Hanisch is Director, Policy and work days, and other health care costs, access to innovative treatments would be Alliances, Europe Middle East, Africa and resulting in a net reduction in the cost of to reduce the potential health gains such Canada, Merck & Co., Inc., New Jersey, treating a given condition.3–5 Other treatments might bestow, and the accom- USA. Panos Kanavos is Senior Lecturer in research has also confirmed that advances panying economic benefit. Therefore, any International Health Policy, LSE Health, in medical science and technology were short term budget savings would be London School of Economics and Political instrumental in the reduction of avoidable negated in the long term by increased Science. mortality in industrialised countries in the health care costs.

1 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY

A damper on future medicines out, “the EU courts life sciences research arguments presented in this issue suggest The aggregate effect of national cost through the Innovative Medicines the need for additional consideration on containment policies in Europe may be to Initiative and other national programmes the intended and unintended impact of reduce the future availability of new medi- with one hand, and with the other hand policies, and for continued efforts to strike cines by failing to properly recognise the punishes the very products of this a balance between financial sustainability, value of new products and reward the risks research.”9 In the global competition for public health and continued investment in of pharmaceutical innovation. attracting high-technology investment, it innovation. Importantly, they also high- is almost self-explanatory that Europe can light the role payers can play in assessing As Jim Attridge notes in this issue, inno- hardly afford this paradox. the short and long-term effectiveness and vative pharmaceutical companies operate performance of their policies, strategically in a field of intense and increasing compe- In short, economic regulation of medicines (re)-deploying resources where they are tition, and must simultaneously deliver as it is pursued in Europe today often sends most needed and, as the Commission also value for money to their customers and the wrong signals to companies engaged in points out, treating health care as a wealth- sufficient levels of return to investors.9 the high risk endeavour of research and enhancing investment11 rather than an Research and discovery is not an entrepre- development of new medicines. As a result unavoidably rising cost. neurial activity but a long-term sustained of the unpredictability and complexity of process performed in the context of a port- many pharmaceutical cost containment folio of similar scientific efforts. Inno- measures, companies must bring new REFERENCES vation occurs in increments rather than products to market without definitive breakthrough events, and it is this incre- knowledge of the pricing and reim- 1. Sauvage P. Pharmaceutical pricing in mental innovation which drives the bursement environment. The uncertainty France: a critique. Eurohealth 2008;14(2):6–8. discovery process, builds scientific of return on investment in turn has a knowledge and leads eventually to new negative impact on decisions concerning 2. Seeley E, Kanavos P. Generic medicines waves of medical technology. Accordingly, the development of new treatments. from a societal perspective: savings for company decisions regarding the scope health care systems? Eurohealth and direction of pharmaceutical research Concluding remarks 2008;14(2):18–22. are also necessarily long term in nature. That pharmaceutical cost containment 3. Lichtenberg FR. Pharmaceutical Inno- This translates into huge risks if for some achieves its central mission – containing vation, mortality reduction and economic reason research outputs are not able to the rate of growth of health care costs – is growth. In: Murphy K, Topel R (eds) earn an appropriate return on investment. questionable. Individual policies, such as Measuring the Gains from Medical price freezes or price cuts, or broader Research: An Economic Approach. Cost containment policies can increase this strategies such as generic policies, may Chicago: University of Chicago Press, risk significantly. For example, therapeutic have only a small and temporary impact on 2003, pp. 74–109. (‘jumbo group’) reference pricing, by budgets. Health insurers may in fact incur 4. Lichtenberg FR. Are the benefits of grouping together patented and off-patent higher costs than needed – either by over- newer drugs worth their cost? Evidence medicines, and by not distinguishing paying for generics, or by being ‘penny from the 1996 MEPS. Health Affairs between the first and subsequent entrants wise and pound foolish’ in the way they 2001;20(5):241–51. in a therapeutic class, as a rule does not allow disease to be prevented or managed. recognise the value of any existing incre- 5. Cutler DM, Long G, Berndt ER et al. Market or competition-based pricing mental innovation and calls into question The value of anti-hypertensive drugs: A policies often seem to allow greater perspective on medical innovation. Health the benefits of new products. As a result, headroom for innovative medicines, Affairs 2007;26(1):97–110. the incentive for companies to continue allowing society to reap the benefits of other related avenues of research is 6. Nolte E, McKee M. Does Healthcare advances in medical technology. reduced. For instance, past major advances Save Lives? Avoidable Mortality Revisited. in medical technology which have been the Further, cost-containment often restricts London: The Nuffield Trust, 2004. product of incremental innovation, such as patient access to new treatments and 7. IMS Management Consulting. Patients the immunosuppressant cyclosporine, creates significant disparities in access WAIT Indicator Phase 8 Report. Brussels: might not have been available to patients if across Europe. This not only deeply EFPIA, 2007. incremental innovation had not been conflicts with Member States’ 8. Drummond MF, Wilson DA, Kanavos P, rewarded.10 Similarly, HTA as it is commitment to equity and solidarity and Ubel P, Rovira J. Assessing the economic currently applied to determine market addressing inequalities in access to health challenges posed by orphan drugs. Interna- access in several countries, has added to the care, but also denies society the long-term tional Journal of Technology Assessment in atmosphere of uncertainty for new medi- economic benefits of medical innovation. Health Care 2007;23(1):36–42. cines in that HTA processes may not be Lastly, by focusing on short term cost 9. Attridge J. Innovation and regulation in sufficiently transparent, and that HTA savings at the expense of long term savings the biopharmaceuticals sector. Eurohealth methodologies cannot accurately measure and health gains, and by denying recog- 2008;14(2):11–15. the true value of a new medicine before it nition and reward for innovation and its 10. Cueni T. Can Europe afford inno- reaches the market. associated risks, cost containment policies vation? Eurohealth 2008;14(2):8–10. discourage investment in and development The economic regulation of pharmaceu- of new medicines which can fulfil unmet 11. Commission of the European Commu- ticals also directly contradicts current medical need and curb health care cost. nities. Together for Health: A strategic efforts to stimulate economic competi- approach for the EU 2008–2013. Brussels: tiveness in Europe in the spirit of the While the use of cost containment policies Commission of the European Commu- Lisbon Agenda. As Jim Attridge points appears to be inevitable and unavoidable, nities, 27 October 2007.

Eurohealth Vol 14 No 2 2 PHARMACEUTICAL POLICY Pricing pharmaceuticals: Value based pricing in what sense?

Alistair McGuire, Maria Raikou and Panos Kanavos

Summary: Reimbursement of pharmaceuticals ought to provide both incentives for and reward innovation, as well as set a price which reflects the market value of the product. In other words reimbursement must reward both dynamic and static efficiency in the pharmaceutical sector. Within the UK a debate has emerged concerning whether the Pharmaceutical Pricing and Reim- bursement Scheme, a profits based regulatory scheme, should be replaced with a value based pricing scheme. This article defines these competing reim- bursement schemes and outlines their relative costs and benefits.

Keywords: Pharmaceutical Pricing, PPRS, Value Based Pricing, UK

The continuing debate over the pricing of vation as applied to future market condi- Indeed, patent protection is given as an pharmaceuticals has emphasised the rela- tions. Given the tensions in securing static incentive to invest in such high R&D costs, tionship of pricing to value. The recent UK and dynamic efficiency simultaneously thus protecting producer profits. While Office of Fair Trading report on pricing there may be an optimal trade-off in the such protection is offered against molecule within the UK1 recommends the pursuit of both goals. structure rather than specific products, replacement of the Pharmaceutical Pricing patent protection can co-exist with product Reimbursement Scheme (PPRS), essen- Background competition. Moreover, it can be noted that tially regulation through profit control The value derived from regulated products pure monopoly is never really consistent supplemented with ad hoc intervention on should reflect societal value. This is with investment in R&D. If monopoly prices through the imposition of price cuts normally presented as the aggregate of protection exists there is little incentive to if deemed necessary with a specific system producer and consumer surplus, defined as invest; investment in R&D is only pursued of value-based pricing (VBP). It begins by the welfare gain from consumers if there is potential future competition in defining the objectives of the regulatory purchasing products at the lowest possible the market, which leads to current compet- environment and follows with a discussion market price and producer gain in terms of itive strategies that manifest themselves in of the PPRS and proposed VBP structure, the fair market return achieved on sales. investments in R&D processes. with accompanying critical appraisal at Given the nature of pharmaceutical both the conceptual and practical levels. products and their reliance on high costs PPRS concentrated in the research and devel- Of course regulation can also reduce The aim here is neither to support, nor consumer surplus if it distorts the rate at reject either system, but rather to provide opment (R&D) process, there is an argued tendency towards monopoly production, which products bestowing health benefits a critical overview of both. In assessing the to individuals flow onto the market. The replacement of the PPRS with VBP a as these costs tend to prohibit entry into the market. existing form of regulation within the UK considered evaluation of the costs and is based on the PPRS which couples rate of benefits must be undertaken. Importantly, Monopoly is associated with the return control with price control. The two aspects of efficiency must be exploitation of consumer surplus through scheme imposes profit controls, through considered: static efficiency, which relates control over prices, with a monopolist setting maximum and minimum achievable to the pricing of a product about to enter gaining a higher return (profit) through profit levels for individual company sales or already on the market, and dynamic selling reduced quantity at higher price. to the National Health Service (NHS), efficiency which relates to product inno- Conversely, monopoly power could be coupled with price controls which allow associated with higher levels of innovation, initial price setting freedom on launch but Alistair McGuire is Professor of Health given the potential use of profits to protect then impose restrictions on subsequent Economics, Maria Raikou Research future market status. With an estimated ten price increases. Increasingly there have Fellow and Panos Kanavos Senior thousand molecules to be screened for also been price cuts on existing products Lecturer in International Health Policy, every product developed for the market, it when the PPRS has been renegotiated LSE Health, London School of Economics takes on average around £350 million (€443 every five years or so. Finally, price modu- and Political Science. million) to produce a pharmaceutical lation is allowed through firms altering Email:[email protected] product. prices within their product portfolio as

3 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY long as expected volume-weighted revenue bursement of pharmaceutical products in constraint across different products within remains constant. The price cutting aspects the UK has tended to support delivery of a firm’s portfolio. The cost-effectiveness of the scheme are arbitrary and open to producer surplus rather than protection of evaluation of some interventions then gaming; higher price setting in anticipation consumer welfare. The balance between ensures an implicit control on price, if not of cuts. dynamic and static efficiency has tended across the board, then at least through towards a regulatory environment that has threat. The role of NICE could, of course, The PPRS is often portrayed as being supported producers rather than be extended to further augment the PPRS dominated by the profit controlled consumers. without replacement. element, although it has been argued this has increasingly become less and less true This conclusion is consistent with the view Value Based Pricing as the profit rebate associated with PPRS that the PPRS does appear to provide VBP regulation has been suggested as a is implemented with less and less healthy incentives for R&D investment replacement for PPRS in the OFT report.1 frequency.2 It is well known that the rate through a profits allowance accompanied This would establish a maximum price for of return regulation that characterises the with pricing freedom for individual a pharmaceutical based on an ex ante eval- PPRS tends to over-capitalisation. Inter- products within the given profit level, uation for new products and a rolling ex pretation of the PPRS in this form could albeit moderated by the possibility of post evaluation of existing products. This lead to an argument that it supports imposed price cuts. These price cuts are might be supplemented by risk sharing possible subsidisation of R&D capital. somewhat inefficient as they are imple- contracts if there was insufficient evidence However, this is unlikely within the mented across the board and possibly with to allow a full ex ante appraisal, with the specific form of the PPRS as individual some time lag, depending on when the price being contingent on the realisation of companies are unlikely to over-estimate product is launched and PPRS negotia- treatment benefits. There would be non- costs, thus protecting profits, as costs are tions take place. A tentative conclusion is linear pricing arrangements for different subject to a form of benchmarking. that the PPRS provides incentives aimed at indications and sub-group applications, Of course, given the multinational domi- securing dynamic efficiency, indeed some with generic pricing once off-patent if a nance of the industry, internal cost shifting argue that such incentives are provided by generic was available. The evaluation remains a possibility. Indeed the lack of a scheme that featherbeds individual firms’ would be based on the existing NICE type payback within the PPRS over recent years dynamic efficiency, while at the same time cost-effectiveness evaluations. In other is consistent, as the OFT pointed out, with allowing considerable latitude with respect words VBP would appear to be an transfer pricing across different geographi- to static efficiency. extension of the type of evaluation already cal areas, leading to the PPRS being inef- conducted as part of the valuation of a fective. Moreover, even if Towse3 is correct The role of NICE range of therapies that NICE deems to be in suggesting that, as the PPRS is a profit PPRS regulation of price is currently cost-effective within the existing system. regulation rather than a regulation of complemented, although by no means The proposed system would retain patent economic return, with R&D merely being comprehensively, by the cost-effectiveness protection and combine this with a an expenditure, it remains the case that the analysis of specific interventions under- widened role for cost-effectiveness in allowance of relatively high rates of return taken by the National Institute for Health pricing to pursue VBP. The emphasis in the pharmaceutical industry may lead to and Clinical Evidence (NICE) in England, therefore moves towards static efficiency, an over-investment in R&D facilities Wales and Northern Ireland. While obvi- with the emphasis on value for money at coupled with high producer surplus. ously this is not a regulatory authority launch, and away from dynamic efficiency. dealing with pricing mechanisms per se, The “may” is emphasised to highlight the for those drugs which are assessed it does A number of problems exist in using cost- uncertainty that surrounds this issue. The imply some additional pricing constraints effectiveness analysis, pertinent to both its optimal degree of investment is of course if the product is going to be purchased by existing use and future role in establishing determined by the return in terms of social the NHS. In circumstances where a VBP. One major issue relates to the use of value. This depends on the combined value product is assessed by NICE, this weakens clinical trial data to establish effectiveness. of consumer and producer surplus. the ability of companies to modulate prices The objectives of such trials are normally Producers may acquire consumer surplus across products in their portfolios. The to establish safety, tolerability and efficacy through price differentiation with little complementary role of other regulators on within a tightly controlled population. impact on total surplus value. They may Such trials are normally short-term and the operation of the PPRS therefore ought also achieve excessive profits through therefore do not establish the long-term not to be overlooked. abuse of monopoly power and therefore health effects required for a comprehensive reduce total surplus or may influence The existing system, combining patent cost-effectiveness analysis. The results future producer and consumer surplus protection with the PPRS and occasional from such trials are currently aimed at a through investment decisions. The first NICE cost-effectiveness evaluations, different set of regulatory bodies than those two possibilities are associated with static could operate to underpin static and concerned with pricing and reimburse- considerations, the later with dynamic dynamic efficiency within the UK with ment. Modelling, based on increasingly considerations. There may also be equity respect to pharmaceutical products. Patent accepted methods, must therefore be concerns over who should realise any protection relates to molecule structure undertaken not only for this reason but surplus value; what share of the value and not product protection; for example, a also as health economic data on endpoints inherent in the R&D process should be number of statins remain under patent and resource use are not routinely incor- returned to consumers and producers? The protection competing with each other for porated within clinical trial studies. For motivation to move to a VBP regulation market share. The operation of the PPRS example, if Quality Adjusted Life Year appears to be that the current reim- allows free pricing within a profits (QALYs), the preferred outcome measure

Eurohealth Vol 14 No 2 4 PHARMACEUTICAL POLICY for NICE, are to reflect outcomes over report, given circumstances where there is tation, it would have to start collecting data which the surplus is to be evaluated, then a lack of data available to perform an ex at a late stage of development. most products will have to transform ante analysis (for example, with chronic While such data constraints are not insur- clinical trial outcome measures into disease treatments), sub-group analysis mountable, they are substantial and have QALYs. Given that pricing and reimburse- will be even more unlikely as the risk to be faced as an additional investment to ment is required on launch, the ex ante fast transfer to companies increases with an secure value for money pricing. It would track appraisal method envisaged by the increasing number of sub-groups. It can seem of doubtful regulatory efficiency to OFT will place heavy demands on evalu- also be noted that such risk sharing allow firms to pursue extensive ex post ation data. This is not impossible to schemes erode patent protection in any evaluations or risk-sharing agreements on achieve, but it is open to uncertainty; hence case as the length of time required to the basis of non-linear pricing proposals. the combination of ex ante and ex post eval- establish regulatory worth is increased. uations. Investment in R&D Challenges Currently, NICE uses the Single Tech- Most of the discussion above relates to It is clear that both the PPRS and the nology Appraisal Process (STAs) as a issues of static efficiency. The impact of envisaged VBP schemes have drawbacks. means of assessing comparator products VBP has been less discussed with respect The efficiency of their implementation is within a limited time period.4 If used as the to dynamic efficiency. The envisaged regu- largely concerned with the relative costs of basis for VBP, as envisaged by the OFT, latory environment is one where implementation. VBP essentially drops the the data would have to be available companies would pursue investment over PPRS and considers an extended role for quickly. This would, in principle, require a long time frame, given that there is a NICE type evaluations. This is supple- head-to-head studies or indirect compar- chance of reward based on a product price mented with sub-group and risk-sharing isons through some form of meta-analysis set in accordance with achieved health analysis. Data availability is the major of a new product with existing comparator benefit. It is envisaged that firms will have constraint. Ex post risk-sharing is only therapies. It is unlikely that this infor- an incentive to invest in areas where envisaged as a means of supporting situa- mation would be readily available in all achievable health benefits are greatest. tions where there is not enough available situations or clinical trials, increasingly Areas of high disease prevalence where data for an ex ante consideration. The lag designed with a global perspective, tapered there is unmet need are obvious areas for time for the implementation of ex post to fulfil regulatory criteria in one market high returns. However, investment in risk-sharing is of obvious interest. Too for pricing purposes. There may, in any R&D may be mitigated if these are also short a lag will not overcome data case, be different standard comparator areas characterised by a long lag between constraints and will not provide much therapies in different geographical research and product development or by incentive to participate; too long could markets. Data limitations will therefore be high risks to individual firms. Firms may lead to distortion of the perceived gains in inevitable, as within the current STA place a lower value on R&D projects than static efficiency with firms gaining undue assessments, where there is already great society in some areas leading to general producer surplus. pressure given the objective of realising a under-investment. market price to ensure access to the Non-linear pricing within a VBP envi- Even if VBP leads to a firm adopting a product under evaluation. NICE however, ronment relies on the greater availability of concentration of investment in those areas currently lives within these data data and a greater willingness of companies where there is perceived to be greatest constraints, so it may not be impossible for to accept risky pricing strategies. It is health gain, this may result over time in a VBP to tolerate such constraints. unlikely that non-linear pricing could narrowing of the general R&D base, with result in perfect price discrimination,5 NICE allows a considerable threshold of subsequent loss in the external economies given the data requirements on sub-groups between £20,000 (€25,000) and £30,000 of scale which tend to characterise larger which would necessarily have to support (€37,500) per QALY gained for acceptable R&D establishments. A narrow based pursuit of such a policy. Indeed, given that treatment up-take. If this form of analysis focus may tend to cause risk-avoidance VBP is premised on an incentive with is to be used for VBP a stricter threshold within firms, without the broad base to respect to dynamic efficiency that is meant value, based on the changing opportunity spread risk, which may lead to a lower to persuade firms to invest in those areas cost of new treatments, will be required.5 valuation of research projects, in the where health benefit is greatest, it is not This would only not be the case if sub- absence of external economies, than in clear that non-linear pricing will neces- group analysis and non-linear pricing, as society at large. Large R&D programmes sarily work towards this objective. proposed in the OFT report, were permis- in the pharmaceutical sector may have sible. While this could lead to a more Long lead time mitigates against a firm ex inherent advantages through economies of scale and scope that are difficult to identify flexible regulatory pricing mechanism, and ante considering non-linear pricing as a but are nonetheless present.6 in the extreme giving perfect pricing strategy, unless pursuing from the discrimination with all surplus being beginning of their investment a very The size of a firm may itself encourage acquired by the company, in most circum- sophisticated data collection and pricing innovation and a wide range of potential stance this is very unlikely given the data strategy. As investment progresses the firm products. In this sense VBP seems required to substantiate such claims under would have to pursue evidence on sub- consistent with a narrowing of firms’ tech- the proposed VBP system. Even substanti- groups and a range of indications, nological capacities as they become more ating claims across a small number of sub- assuming that it had the foresight to see the specialised in those areas with the greatest groups would be highly data intensive. aggregate rewards early in the investment potential health gain for their investment Moreover, if VBP is attached to a risk- cycle. Alternatively if a firm became aware portfolio. This seems to undermine one sharing analysis, as allowed in the OFT of potential benefits of market segmen- aspect of a productive R&D capability; the

5 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY ability to maintain a broad technological base which would otherwise provide a Pharmaceutical pricing in form of insurance against inevitable research dead-ends. Within the context of VBP this occurs not only within but also France: a critique potentially across companies as they will have an incentive to compete for areas of highest health gain.

Conclusion Philippe Sauvage The design of optimal regulation is not straightforward. The current discussion of how to regulate pharmaceutical prices in the UK highlights this. The existing UK Summary: In France, pharmaceutical pricing relies on an ex ante regulatory environment has been voluntary evaluation of the medical value of drugs. Prices are negotiated on the and has allowed high rates of return as an basis of an industry-wide contract between drug manufacturers and incentive to motivate R&D. The proposed the Health Products Pricing Committee (Comité Economique des system emphasises that the presumed high Produits de Santé). Together the Committee and the drug companies prices consistent with these returns have sign a number of contractual agreements, which give the national eroded consumer surplus. Such a debate health system a variety of flexible means to monitor prices and drug brings a clear perspective to the tensions use, also ensuring that public resources are properly allocated. Some associated with the pursuit of static and drugs have different levels of therapeutic value, depending on who dynamic efficiency concerns. With either regulation there is a trade-off; with the takes them. These products in particular need close monitoring. PPRS the trade-off is that static efficiency Rebate policies are one of the tools available to control such spending. concerns are relaxed to allow the pursuit of The economic efficiency of such rebates should not be overestimated; dynamic efficiency through the provision in practice they do not significantly decrease spending. of incentives for R&D investments and, hopefully, a quick rate of market launch of Keywords: Pharmaceutical Policy, Reimbursement, Rebates, Evalu- beneficial products. Under the proposed ation, Added Therapeutic Value VBM the trade-off would be to tighten static efficiency concerns against the cost of potentially reduced incentives for R&D. The actual judgement regarding which is, A few words on pricing and the drug. Although a drug’s therapeutic of course, an empirical one. reimbursement value does not impact on pricing, it helps Pricing and reimbursement decisions in determine its reimbursement rate. The France are taken on a step by step basis. added therapeutic value of a drug is a REFERENCES Firstly there is the market authorisation of relative notion, as it is measured through a 1. Office of Fair Trading. The Pharmaceu- a drug at a national or European level. The comparison with the clinical benefits of tical Pricing and Reimbursement Scheme: product is then evaluated by an inde- existing drugs or therapies. Thus, it repre- An OFT Market Study. London: Office of pendent scientific committee, prior to sents the ‘added health gain’ or the ‘relative Fair Trading, 2007. Available at price negotiations. This Transparency effectiveness’ of a drug, compared to its http://www.oft.gov.uk/shared_oft/reports/ Committee, named after the European alternatives. The main problem in comp_policy/oft885.pdf Transparency Directive, assesses the ther- assessing this added therapeutic value is 2. Thornton S. Drug price reform in the apeutic value, or clinical benefits of a drug, the time it takes, as well as the lack of UK: Debunking the myths. Health and proceeds to compare it with existing proper clinical trials against alternative Economics 2007;16:981–92. therapies. Drugs are evaluated against two products on the market. sets of complex criteria: their therapeutic 3. Towse A. If it ain’t broke, don’t fix it: Nonetheless, such evaluations are value (service médical rendu) and added The OFT and the PPRS. Health Economics necessary and need to take place prior to therapeutic value (amélioration du service 2007;16: 653–65. any decision on reimbursement. They médical rendu). 4. National Institute for Health and should also fit within the timeframe Clinical Excellence. Guide to the Single Therapeutic value takes into account the (normally ninety days) to reach a decision Technology Appraisal Process. London: severity of the illness and the efficacy of on reimbursement set out in the 1989 NICE, 2006. Available at Transparency Directive (Directive http://www.nice.org.uk/nicemedia/pdf/ST 89/105/EEC). The duration of such eval- A_Process_Guide.pdf uations have in fact decreased in recent Philippe Sauvage is Deputy Head of the years and now meet this requirement, 5. Claxton K. OFT, VBP; QED? Health Cabinet of the Minister of Health, while fast track procedures were also Economics 2007;16:545–58. Ministry of Health, Youth Affairs and introduced to help assess those drugs of 6. Sutton J. Technology and Market Sport, Paris, France. great significance. Structure. Theory and History. Cambridge: Email: Philippe.SAUVAGE@sante- MIT Press, 1998. jeunesse-sports.gouv.fr

Eurohealth Vol 14 No 2 6 PHARMACEUTICAL POLICY

There are five levels of added therapeutic rates (so called “k-rates”) for each category products are used by their intended value (ATV) that may be assigned to a drug of expenditure. When the increase in phar- targeted populations. after comparison assessing the degree of maceutical expenditure exceeds the Take a product that was recently included improvement against existing therapies: respective k-rate, the manufacturer must in the reimbursement list. It provides a contribute via a rebate scheme. I – major improvement; very high level of improvement for a small II – significant improvement; Rebates are calculated for each company population (population A). Its market III – moderate improvement ; on the basis of how innovative their authorisation is also valid for a much larger products are, i.e. their ATV levels and their population (population B), even though it IV – minor improvement; and share of the increase in expenditure does not provide them with any health V – no improvement. (orphan drugs are exempt). Rates are gain, compared to existing, very cheap ATV is the most influential factor in drug subdivided by category and homogenous therapies. It would obviously have been pricing. It is re-evaluated every five years groups of products within each category, wrong to ban access to this product for or earlier, if the committee chooses. In for example, statins. The pharmaceutical population B. But why should the health most cases, a re-evaluation includes addi- industry contribution can represent a large care system pay a premium on a product tional assessment of the drug’s therapeutic part of the excess, often 40% or more. that does not give most people any added value under real life conditions. 65% of rebate payments are proportional medical value? to turnover and 35% to growth. It should also be noted that evaluation and There are two options. One can either price negotiation is carried out before any The rationale for rebates devise a reimbursement scheme for reimbursement schemes are devised. In In recent years, the pharmaceutical everyone, defining a ‘median price’ most cases this is before the drug is industry has undergone great change. between the innovative part and the launched in the market. There are also Manufacturers now tend to develop more ordinary part of a product, or one could specific procedures that allow a drug to be complex products, targeted at very specific limit drastically the use of this product put on a temporary reimbursement list in sub-groups of the population, or some- beyond the small target population. the case of interventions for life threat- times even sub-groups of a specific disease. Nevertheless, both options call for ening diseases. These procedures are Now that the most simple of ailments can scrupulous monitoring. Depending on however used prudently, reflecting the fact be cured by drugs that are becoming ever market share and prices, rebate rates can be that once an individual is placed on a cheaper (for example, generic drugs), adjusted according to the terms of course of therapy it then becomes very companies need to find new, often biotech- contracts. Furthermore, rebates are difficult to interrupt such treatment. Thus oriented solutions, in order to address expected when a manufacturer’s adver- without care these procedures might more complex medical conditions. tising campaign is not in line with a provide pharmaceutical companies with product’s characteristics. considerable leverage in subsequent nego- One consequence is that the characteristics The rebate scheme for drugs has recently tiations on the longer term use of a drug. of the target populations of many important drugs are becoming ever more grown more complex. Increased access to hospital drugs has been granted through General agreements and rules similar to those for orphan drugs. The the creation of an ‘additional list’. It Following the determination of added sheer cost of many of these drugs makes it registers expensive and innovative hospital therapeutic value, the Health Product crucial for the public health authorities to drugs that may be reimbursed by hospitals, Pricing Committee negotiates with the ensure that they are prescribed only to on top of diagnostic-related group drug manufacturer. The Committee those who can benefit from their use. payments. The reason for this scheme is follows a number of guidelines defined Physicians, of course, play a crucial role that it is necessary to provide general either by law or by general agreement with when it comes to ensuring that these new access to expensive drugs. Yet such drugs the pharmaceutical industry. All negotia- drugs are prescribed correctly. France has may be used for very different purposes tions are contractual and may include devised a number of schemes to encourage from one hospital to the other, depending provisions regarding volume limitations, appropriate prescribing practices. Yet drug on the nature of patients being treated. For rebates and price re-evaluations. manufacturers also play a large part in how their products will be used. That is why example, a world-renowned cancer There are, however, two main rules: (1) the agreements they conclude with the specialist may need to resort to more ATV level V drugs can only be added to Pricing Committee can include provisions expensive drugs for complex cases, the reimbursement list if they allow on the volume of prescriptions, dosages compared with an oncologist in a less savings for the social security system; and and advertising campaigns. Companies are specialised hospital. If both hospitals (2) prices of drugs which offer consid- also held accountable for the correct use of receive the same level of funding the more erable improvement over existing therapies their products. difficult cases will not necessarily get what (levels I to III) must remain stable for the they need. And if both hospitals are given Interestingly, French physicians tend to be subsequent five years, and in line with the same access to expensive drugs, they heavier prescribers of drugs than most of other major European markets. will not have incentives to control their their European counterparts. France’s costs. The agreement between the pharmaceu- pharmaceutical history and culture, as well tical industry and the Pricing Committee as the comparatively low price of many To go back to the earlier example, if a given also includes a general payback procedure. widely used drugs (i.e. aspirin and parac- drug is more expensive than its competitor Every year, parliament votes to approve a etamol), have led to a situation where 90% in the B market, so much so that its prospective budget for the public health of doctor-patient appointments end with a competitor does not feature in the addi- insurance system, defining target increase- prescription. It is critical therefore that all tional list, hospitals would have an

7 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY incentive to use the drug in both A and B markets, since they do not need to pay for Can Europe afford innovation? it. Resources, in such a case, are not effi- ciently allocated. The solution is to restrict access to the additional list as much as possible, and monitor the use of the product. Thomas B Cueni Let us complicate things a bit further and consider that one such drug shares the A market with another expensive drug. If both drugs are authorised for the whole Summary: Finding a balance between reward for innovation, improved patient target population, they will spill into the B access to innovative medicines and controlling budgets remains a challenge for market without their manufacturers decision-makers, patients and industry in Europe. The industry has a clear pref- having to face any rebates. This is the erence for market-based pricing, yet, the predominance of administered pricing in reason why it was recently made possible most European countries, given, alternatives need to be explored. Today, Europe to limit use to a given volume of products. sees health care innovation too much as a cost rather than an asset. There is a need for constructive dialogue on what constitutes the value of new medicines Conclusion and how added therapeutic value should be rewarded. These examples demonstrate that rebate schemes are necessary to limit price increases in France and to monitor drug Keywords: Innovation, Value Based Pricing, Pricing, Reimbursement, Added use. However, their impact should not be Therapeutic Value overestimated. Prices are essential in any regulated market to send the right message. Many factors in the system may lead to Pricing – an unpredictable lottery? by each country, often in a black box spontaneous price adjustments without the Finding a consensus among different fashion where country reimbursement need to resort to rebates. stakeholders on what constitutes ‘value of authorities set prices to ensure access and innovation’ is almost like squaring a circle. control costs. This results in an unpre- All in all, rebates in France do not account From an industry perspective, it appears dictable lottery for companies who have for more than 1% or 2 % of the total that payers are primarily interested in brought a product to market through a expenditure on pharmaceutical products in controlling costs, are unwilling to grant series of regulatory hurdles and still do not any given year. This is somewhere in the premiums for innovative new medicines know what the final reimbursed price will range of €500 million per annum, a sum and are delaying patient access to thera- be.”1 Now, the question of what consti- which seems considerable in its own right. peutic advances. From a payer perspective, tutes a “just price” has been debated since But it is still small, compared with the €25 it may look as if pharmaceutical companies Saint Augustine but it is interesting to note billion that France spends on drugs every expect to recoup their investments into a statement from Vice-President year. Such a modest share in the total research and development (R&D), irre- Verheugen, Commissioner in charge of health care budget means that one cannot spective of added therapeutic value, want DG Enterprise, who said, “to begin with, accuse rebate schemes of distorting prices. to meet or better exceed shareholder the pricing for innovative products in Yet rebates still represent a crucial tool to expectations for hefty profits, and are not Europe…needs to be improved.”2 control the use of very specific products. concerned about escalating health care In some cases, the fact that they potentially costs. Innovation – driver of economic growth may be used is more important than their The underlying problem is that the actual use. They allow the public health The truth may be somewhere in the European health care debate focuses too care system to monitor marketing, adver- middle and the problem for companies is much on regarding innovation as a cost tising and use. less the requirement to justify higher factor. Medical progress is seen as burden prices with added value than the lack of In conclusion, rebates do play a part in the rather than an asset, and the concern is predictability and erratic changes in correct allocation of health-insurance often about the high cost of new medicines national pricing and reimbursement resources. The general rebate also helps to rather than about the burden of disease. systems. This is reflected in the World devise a more accurate estimate of annual Such an approach is short sighted. In Health Organization’s report on Priority pharmaceutical expenditures. An emphasis modern economies, innovation, i.e. tech- Medicines for Europe and the World: “at should be placed on the importance of the nological progress, is the most important present, reimbursed prices are determined ex ante evaluation of any drug: it provides driver of competitiveness and economic the health care system with a large number growth. The effect of R&D activities on of tactics to control drug spending. Thomas B Cueni, is Secretary General, economic growth and productivity gains Moreover, it also facilitates access to very Interpharma, the Association of Swiss has been proven by numerous empirical innovative drugs by those patients in most Pharmaceutical Research Companies, studies. The main difference between the need. Basel, Switzerland. He is also Chair of the success story of market economies and all European Federation of Pharmaceutical other economic systems “is free-market Industries and Associations Economic and pressures that force firms into a continuing Social Policy Committee. process of innovation, because it becomes Email: [email protected] a matter of life and death for many of

Eurohealth Vol 14 No 2 8 PHARMACEUTICAL POLICY them…It seems indisputable that inno- people from industry are impatient with and Japan. This method not only creates vation accounts for much of this enviable the slow process of implementation of the controversies about the measurement of growth record,” is how William J Baumol, recommendations of the G10 Medicines costs but is neither efficient, nor effective. the eminent US economist, put it.3 High Level Group5 or the Pharmaceutical Cost-based pricing rewards input (invest- Forum, legislative measures such as the ments) rather than outcomes (better cures). We live longer and in better health Supplementary Protection Certificate Whereas market-based pricing rewards the The crux of today’s health care debate is (SPC) restoring lost patent term, the successful innovator handsomely and that pharmaceutical innovation focuses on setting up of an efficient European market penalises failure, cost-plus pricing inher- the needs of the patients whereas the health approval system with the European Medi- ently favours risk-averse research and can policy debate is dominated by numbers cines Agency (EMEA), improved regula- lead to perverse results. tions for data exclusivity, incentives for and cost containment. Today, we can Other methods to value new medicines research into orphan diseases, better incen- expect to live thirty years longer than one include therapeutic comparison (value tives for research into paediatric medicines hundred years ago. Huge reductions in based pricing), where clinical relevance and as well as the most recent Innovative Medi- mortality (for example, in HIV/AIDS, cost effectiveness are taken into consider- cines Initiative (IMI) all aim to make many cancers or cardiovascular diseases) ation, or country baskets (price comparison Europe more innovation-friendly for and a significant progress in the quality of with certain reference countries). Such patients and industry alike. However, the life are the results of some big and many country baskets are primarily driven by predominance of Member States’ more small steps in biomedical research. political considerations, since a serious concerns about health care budgets Contrary to common belief, higher life comparison with prices in other countries has limited the positive impact of some of expectancy does not inevitably lead to is always a comparison of different pricing these EU-driven industrial policy initia- degenerative disease and ever longer stays and reimbursement policies based on the tives, which explains why the EU was in nursing homes because we cannot only concern that a country does not want to unable to regain relative attractiveness for expect to live longer but we get older in pay more than a neighbour or an econom- pharmaceutical R&D investments over the better health. Higher blood pressure and ically comparable country. Companies past decade. cardiovascular disease can be controlled naturally adjust to pricing signals. If they with antihypertensive drugs and choles- know, for example, that rich countries are No progress on pricing and terol-lowering drugs, knee or hip replace- unlikely to accept a higher price than poor reimbursement ments keep us from wheelchairs, and some countries, they will adjust their European Whereas progress in the regulatory area is cancers can be controlled or even cured price bands accordingly. This also leaves undeniable, the main issue impacting the thanks to newer targeted medicines. Yet, open the question of how to determine economics of the industry has not been there remain huge challenges in areas such prices in the ‘first’ Member States that will addressed. In many instances, pricing and as Alzheimer’s disease, multiple sclerosis, serve later as the reference point. many cancers or orphan diseases. reimbursement still remains an “unpre- dictable lottery”. The debate on an indus- Accepting the reality of administered Cost containment, however, dominates the trial policy for the pharmaceutical industry pricing in most European countries, value- debate in a majority of countries. in Europe has led to a broad agreement based pricing, i.e. reimbursement on the Reference pricing, budget ceilings, tough that inadequate reward for innovation and basis of comparative effectiveness is generics policies and price cuts are the significant delays in patient access to new certainly the most interesting and politi- most widely used cost containment medicines play a major role in Europe’s cally relevant approach. Criteria which measures. Often, new policy measures are declining competitiveness as a location for should be considered when assessing value initiated before the success or failures of pharmaceutical R&D. However, it is include: their predecessors are evaluated. Indeed, obvious that progress will only be possible – Does the innovation address a high Jaime Espin and Joan Rovira recently if a balance can be struck between the unmet medical need? concluded that it was difficult to assess the objectives of rewarding innovation, effectiveness of many of these policies improving patient access to innovative – Does it reflect a major, important or since the (positive) impact on budgets has medicines and controlling health care moderate clinical improvement? to be weighed against the (negative) impact budgets. – Is there an alternative treatment on patient access to innovative treatments.4 available and if so, is the superiority of The first issue is how to put value to a new the new treatment plausibly demon- Nonetheless, it would be unfair to state medicine? In principle, market-based strated? that the picture is all bleak. Many govern- pricing is the most efficient way to allocate ments are trying to square the circle resources and reward innovation. – Is there sufficient choice to allow all between rewarding innovation and However, where there is a single patients to be treated? improving patient access while main- government payer, there is no functioning – Is there a favourable cost-benefit ratio? taining budget control. In a number of market. Thus, alternatives to market-based European countries such as Ireland, France pricing are needed. To an economist the – What is the impact on public health? and the UK, framework agreements recurrent theme of cost-based pricing is – What is the broader societal benefit and between the government and industry amazing. Critics of the industry ask how cost? have been signed, and the EU can we put a price on a product if one does Commission’s agenda has generally been not know the cost of manufacturing, or the Added value merits reward driven by an attempt to find a good cost of research and development? Cost- The pharmaceutical industry has to accept balance between health policy and indus- plus pricing was used historically in a that it can only receive a higher price for trial policy objectives. Although some number of countries such as Spain, Italy better value. Whereas a patent, by defi-

9 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY nition, equals an innovation from a tech- study? It may be a subjective view but if I comes to pricing decisions. Value-based nical perspective, a patent is not necessarily were a patient, I would not want to wait pricing means a significant reward for equivalent for added therapeutic value. A until somebody has proven the Karolinska breakthrough innovation and an incre- consequence of therapeutic comparison study with epidemiological and statistical mental reward for incremental innovation. and value-based pricing is that major data beyond doubt. Personally, I believe A common understanding of what consti- reward will be limited to significant inno- that the Eurocare data on cancer survival8 tutes value will remain a challenge. vation. However, the industry concern do show significant differences in survival However, it was a comforting experience today is probably less the reward for rates across European countries. There for an industry participant in the High breakthrough innovation which tends to may be multiple factors but access to inno- Level Pharmaceutical Forum’s Pricing receive a market price within a fairly vative treatments is most likely one of Working Group that agreement on fairly narrow global band but the unwillingness them. broad “characteristics of innovation” was in some countries to acknowledge incre- reached without much controversy. mental innovation. Medical progress rarely Guiding principles – a fair balance occurs in big leaps, small steps are the Industry is aware that finding solutions to norm rather than the exception. Whereas the questions of value and affordability of References the immunosuppressant Cyclosporine was innovation needs a willingness for dialogue 1. Kaplan W, Laing R. Priority Medicines a historic breakthrough for transplant from all stakeholders. While emphasising for Europe and the World. Geneva: World surgery, the tremendous progress in trans- the need for reward and patient access to Health Organization, 2004. Available at plant surgery since the first application of innovation, the budgetary implications and http://mednet3.who.int/prioritymeds/repo cyclosporine in 1978, was the result of constraints cannot be ignored. The Pricing rt/final18october.pdf many small steps in surgery as well as Working Group of the High Level Phar- 2. Verheugen G. Interview in Annual pharmaceutical research. maceutical Forum has worked out a set of Report 2005, Berlin: Schering AG, 2005. guiding principles which demonstrate that Without the acceptance of reward for 3. Baumol WJ. The Free-Market Inno- dialogue between Commission, Member incremental innovations, patients might vation Machine: Analysing the Growth States and multiple stakeholders is not have received the benefits of step-by- Miracle of Capitalism. Princeton: Princeton possible. These guiding principles attempt step medical progress so important in University Press, 2002. a fair balance trying to meet the needs of many disease categories. However, patients, payers and industry alike. In 4. Espin J, Rovira J. Analysis of Differences negative examples of how innovation is particular, the principles recognise the need and Commonalities in Pricing and Reim- valued in Europe today include the mixing bursement Systems in Europe. Brussels: to not only reward breakthrough inno- of patented and off-patent products under Commission of the European Commu- vation but to also reward incremental reference price systems (‘Jumbo’ groups in nities, 2007. Available at innovation. The problem of uncertainty at Germany) which by definition pull up the http://ec.europa.eu/enterprise/phabiocom/ the time of market approval is acknowl- price of generics and penalise patented docs/study_pricing_2007/andalusian_ edged and patient-friendly solutions are medicines. Furthermore, in some cases school_public_health_report_pricing_2007 advocated. Furthermore, the paper health technology assessment is not used _incl_annexes.pdf contains an important conclusion to identify value but to put up new 5. High Level Group on Innovation and regarding national pricing policies. In hurdles. And in some countries with arbi- Provision of Medicines. G10 Medicines short, it states that national price controls trary budget thresholds or payback mech- Report: Recommendations for Action. are not meant to have an extraterritorial anisms, the pharmaceutical industry is Brussels: Commission of the European impact and that affordable prices for often seen as the lender of last resort. Communities, 2002. Available at different countries in Europe should allow http://ec.europa.eu/health/ph_overview/D differentiation. The consensus on the Huge differences in patient access ocuments/key08_en.pdf ‘guiding principles’ was only possible Valuing and rewarding innovation does 6. Jonsson B, Wilking N. A global because participants in the dialogue knew not mean much if patients have no access comparison regarding patient access to that they had to look for a fair balance to innovative medicines. In reality, not cancer drugs. Annals of Oncology between the potentially conflicting objec- only costs vary from country to country, 2007;18(9):1585–87 tives of reward for innovation, improved but also access to new drugs is subject to patient access and the need for sustainable 7. IMS Global Consulting. PATIENTS substantial differences. For example, the funding. More of this kind of dialogue is W.A.I.T. Indicator: Phase 8 Report. Karolinska report6 shows that the uptake London: IMS Global Consulting, 2007 needed, in particular at Member States’ of new cancer drugs is above average in level, to find new solutions to old 8. Richards M. EUROCARE-4 studies Switzerland, Spain, Austria, and, more problems. bring new data on cancer survival. The recently also in France, but is below Lancet Oncology 2007;8(9):752–53. average in countries such as UK, Norway Innovation is crucial to Europe and its 9. High Level Pharmaceutical Forum. or Poland. The IMS/EFPIA Patients economy. Pharmaceutical innovation Guiding Principles for Good Practices W.A.I.T. Indicator7 shows that patients in brings benefits to patients and wealth to Implementing a Pricing and Reim- some countries have to wait more than a society. A balance between industrial bursement Policy: Second Progress Report. year longer than patients in other policy and health policy needs to be main- High Level Pharmaceutical Forum, June European countries before they have tained. In this respect, pricing is an indi- 2007. Available at access to new medicines. Do such differ- cator of society’s willingness to pay for http://ec.europa.eu/enterprise/phabiocom/ ences matter given that there are critics health benefits. Dialogue, openness and docs/pf_20070626_progr_report.pdf from epidemiology who challenge the more flexible arrangements are required statistical approach of the Karolinska from governments and industry when it

Eurohealth Vol 14 No 2 10 PHARMACEUTICAL POLICY Innovation and regulation in the biopharmaceuticals sector

Jim Attridge

Summary: The innovative performance of the biopharmaceutical sector has weakened over recent years, most noticeably in Europe. This article summarises research on models of the innovation process and uses them to analyse the impact of various forms of regulation and incentives on this performance.

Keywords: biopharmaceuticals, innovation, regulation, Europe

This paper addresses two questions. How 1. Bioscience and medical knowledge product, culminating in a market license does biopharmaceutical innovation work? creation, ranging from fundamental to sell it. How do changes in EU market regulation advances in our understanding of 4. The innovation diffusion process, impact upon the processes involved? molecular and cellular structures and whereby patients benefit from processes in living organisms, through improved therapy and companies Innovation processes to improved clinical knowledge of achieve a return on their investment. Investment in, and the output of the disease aetiology. biopharmaceutical sector is a function of The term ‘innovation’ is best defined as a 2. Discovery of molecular entities, which three areas of decision-making: (1) indi- process. Sustainable innovation is one in in principle can disrupt or block these vidual product life cycle economics; (2) which incentives exist for it to be continu- disease processes, and can be patented market and Research and Development ously repeated in a cyclical manner. as inventions. (R&D) product portfolio risk and return Commonly, individual products are called assessments; and (3) sustainable business 3. Product development processes, which innovations if they have passed through investment models. through laboratory and clinical work the complete process and have been widely translate the molecular entity into a adopted in clinical practice. Individual product life cycle models Basic models of product innovation propose a coupling process between two Figure 1: A linear model for an individual new medicine forces: ‘technology push’ based upon the creation of new scientific knowledge and ‘market pull’, based upon a societal need Research clusters and Product Market Market or opportunity.1 Pharmaceutical inno- networks development approval diffusion vation has been dominated by ‘technology push’, involving waves of parallel, incre- Higher technical demands mental innovations in physiology, Bigger/better units medicine, diagnostic techniques and drug USA therapies, underpinned by advances in biology, chemistry and other basic sciences. Up until recently the existence of Hospitals EU a strong ‘market pull’ force, in the form of pre-clinical FDA, EMEA demand for better treatments has been pre-clinical clinical approval Asia development development package largely taken for granted.2,3 Pacific contractors CROs reimb./price Latin Am. This model has four sequential compo- nents as shown in Figure 1:3 RoW

Payers power over Univeristies doctors enforces Market Jim Attridge is Visiting Fellow, Tanaka SoS/SMEs strong cost controls globalisation Business School, Imperial College, London, UK. Email: [email protected]

11 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY

Experience shows that it takes a new technically approvable products; and (c) major players, albeit operating in limited medicine five to ten years and costs many The ‘commercial race’ to achieve rapid disease segments. In response, leading hundreds of millions of euros to meet the international uptake of the product for the companies have adapted both their high, legally enforced standards for benefit of patients and to reward the inno- strategies and organisational forms and efficacy, safety and quality.4 This feature of vator. currently are competing to collaborate the medicines innovation process distin- with or acquire biotech-based SME For the most part as a consequence of the guishes it from most other high tech- companies that have sound patent posi- patent disclosure system and largely trans- nology sectors. Thus a classical economic tions.6 parent clinical research methods, compe- model of innovation suggests that the first tition in development is conducted in a Efficiency in the development race benefits innovator to bring a new type of product remarkably open manner at all stages from highly competitive investment and gets a substantial ‘first mover’ advantage compared to other industrial sectors. In the organisational capabilities of large over any following competitors in the biopharmaceuticals there is little scope for companies. The lead in the race to market same field of innovation. However those gaining competitive advantage by main- for a new class of medicines may change that follow after the first entrant with taining high levels of secrecy. Insofar that a hands many times. Also there is little incremental improvements will probably ‘break-though’ or radical step can be iden- correlation between the order of market have the advantage of lower risks and tified, it comes at the invention or patent entry and the combination of benefit and lower development costs. In the biophar- stage and many academic and industrial maceutical sector, because of the dominant risk attributes that individual products individuals and centres may claim to have concern with safety, incremental followers offer. Thus in the light of mature expe- made a contribution to it. The patent in a class of medicines must perform rience in deploying a new therapeutic class system provides the currency through exactly the same tests and trials required of products, it may be the third, fourth, or which inventors can sell their knowledge by the regulators for all medicines, fifth entrant which offers the best and get rewarded for their contribution. 6 incurring essentially the same costs and treatment for a typical patient. However, requiring much the same timescale.5 Over the past decade, a shift in the balance others may offer the optimal treatment for of the technology base of the sector has more precisely defined patient sub-sets. Over the past decade, two significant occurred – from chemical to biological – The order of market entry, often seen as a changes have occurred. At the front end of largely led by the USA. This is a long and sign of priority or leadership in achieving the process, more complex geographical complex transition, which has been success in innovation to the casual clusters of academic centres, research insti- underway for over twenty years and is still observer, is as likely to be a consequence tutes, ‘spin-off’ companies (SoS), small and continuing today. Its significance lies in a of relative competitiveness in the devel- medium sized enterprises (SMEs) and change in the first phase of the innovation opment race, as a measure of inventiveness global pharma research centres have processes in the form of a more profound or inherent originality of the product emerged, which create and trade understanding of disease processes in active ingredient per se. knowledge. At the back end, there is terms of molecular biology and genetic increasing competition between large Therefore simple classifications of new processes. This has created a dramatic companies, whose core capabilities are medicines within a class as either ‘break- increase in novel bio-markers or bio- 8 their efficient parallel development through’ or ‘me-too’, based upon the targets; new starting points from which processes and their ‘global reach’ – the order of market entry is inconsistent with research can begin to find molecular ability to achieve timely market diffusion numerous studies of the clinical value of entities that can interfere with disease 9,10 across developed countries. individual products. Hence, also the processes in quite new ways. The distinction between radical and incre- In general innovation theory, it has proved molecular agents that are emerging from mental innovation can be potentially useful to distinguish between major, or this new era of research may be small misleading when applied to this sector, radical innovations and small, or incre- molecules, proteins, or biological entities where it might be best to reserve the term mental ones. At first sight, for biopharma- such as monoclonal antibodies. As with all ‘radical’ for the class as a whole and to ceuticals this can be interpreted as the first step changes in technology, although regard all products within it as incremental of a new class of medicines, based upon opening up new vistas for research, it is in alternatives. new understanding of disease processes itself highly disruptive of the entire process and a new mode of action (a radical inno- of development and the economics of Market and R&D portfolio models vation) and follow-on products, which act innovation. It continues to offer previ- Creating and sustaining a portfolio of in a similar way (incremental ones). ously unimaginable opportunities to create R&D projects, which will feed through However, closer inspection of the new therapies to address unmet medical into a market product portfolio, is a crucial processes outlined in Figure 1, which lead need in some of the most intractable issue in sustaining innovation as a routine, to the sequential evolution of new product diseases. Some evidence suggests that the industrial process as opposed to a discon- classes, suggests that the reality is more very wide scope of new options that have tinuous, entrepreneurial one.11 The overall complex and variable.6 opened up at this early stage, with little R&D strategy defines the allocation of experience as to which avenues of research Biopharmaceuticals innovation at the investments to disease areas. These might be most attractive, has of itself product level consists of a sequence of strategic decisions are long-term because contributed to the lower productivity of three competitive races: (a) The ‘research building the necessary capabilities to R&D in recent years. race’ to translate original knowledge with compete effectively in a given disease useful potential applications into patents; It has led to the emergence of specialised, sector takes many years. It requires teams (b) The ‘development race’ to convert the biotechnology based companies, a few of with diverse scientific skills, facilities and patented molecules or bio-entities into which have grown entrepreneurially into external relationships, which cannot easily

Eurohealth Vol 14 No 2 12 PHARMACEUTICAL POLICY be replicated or transferred. pharmaceutical companies are less prof- overlooks the fact that product devel- itable than their US counterparts. opment costs and risks continue at a high Companies continuously review the scien- level into the market diffusion phase. tific, medical and commercial viability of a The spread of cheap generics across world However, it offers a useful framework portfolio of around fifty to one hundred markets has greatly reduced life cycle within which to assess the impact of projects and must select those that go revenues over the past decade. A combi- changing patterns of technical and market forward and those that are terminated. nation of improved cost efficiency through regulation in EU countries. Some of these are high-risk, with a low mergers and acquisitions and partial probability of commercial success, while restoration of revenues by global Recent studies18,19 indicate that as part of others offer more immediate prospects of a expansion has stabilised the biopharma- the change to a biological basis for R&D return. Some projects will be in the earliest ceutical business model in the face of this two important new patterns are emerging stages of the six to ten year time-line from challenge. But, currently revenues are in the innovation process. Firstly, the more early research to market approval, while coming under renewed pressure due to a promising bio-targets are resulting in new others will be closer to market entry. combination of lower prices for both off- medicines that may prove useful over a Managing the balance of this portfolio over and on-patent products and the sustained more diverse range of diseases than in the time requires a sophisticated mix of project period of low R&D productivity.13 Projec- past. This represents a greater challenge in evaluation techniques, experience and risk- tions over the next five years11 suggest that deciding which of many options to pursue taking judgements. As a very broad gener- if this trend continues, when taken in into the expensive clinical phases. Secondly alisation, there is a direct correlation conjunction with a series of major product this multiplicity of possible uses is pushing between the risk of failure in translating a patent expiries, it will require companies an even higher proportion of the clinical project into a clinically approvable and to radically re-think their business models, work to explore them in the period after saleable product and its innovativeness, i.e. reducing costs further to sustain acceptable the products launch for its first indication. the more original the potential product returns to investors. This latter trend further exacerbates the concept, the greater the risk of failure. serious problem now faced in the EU in The value of innovative medicines and the use of ex-ante health technology For leading companies at any given point how it is shared assessment (HTA) methods to assess the in time 70–80% of total revenue comes Innovation creates social and economic added value of new products as a basis for from no more than three to five patented value which is shared between stake- determining prices and reimbursed access products and correspondingly the holders. Teece14 observed that over the to national markets. It appears likely that prospects for new products emerging from long run, four parties share the value in future the full therapeutic potential of R&D into the market over the next five generated by innovations: customers, the many new products will not be realised or years will also depend upon no more than innovator, imitators and other suppliers. In assessable with any degree of accuracy three to five key late stage development practice, defining value and estimating until many years after they first enter the projects. Hence the rapid failure of just shares is very difficult. market. one major late stage development project or an important in-market product can However, recent studies suggest that the Figure 2 juxtaposes the three phases of seriously destabilise the business of the share of value created which accrues to innovative activity with the four main company concerned. medicines innovators may be lower than is areas of government regulation and incen- commonly believed. In a 25 year retro- tives, which affect each of them, i.e. science Sustainable business models spective analysis of the use of innovative and medicines public policy and funding, Biopharmaceutical companies are private classes of medicines in the USA for patent law and exclusivity regulations, sector entities which have a responsibility HIV/AIDS, Philipson and Jena15 assessed EMEA (European Medicines Agency) to provide both value for money to their a societal benefit of US$ 1,330 billion development regulations, and member customers and a level of return to their compared to only US$ 63 billion for inno- state market regulations. We now consider investors commensurate with the asso- vative companies. This is rather less than these combinations. ciated risks of loss. Investors constantly 5% of the estimated societal gain. They In the race to create new knowledge and switch their investments between indus- conclude, “despite the high annual costs of invent patentable biologics or chemical trial sectors based on their prospects. For these drugs to patients, the low share of entities, global investment continues apace higher risk, higher return, technology- social surplus going to innovators raises driven by government public sector faith based industries there is a strong emphasis concerns about advocating cost-effec- that bioscience will deliver both health and on evaluating the long-term sustainability tiveness criteria that would further reduce other social benefits and an industrial of each sectors’ business models. For this share, and hence reduce incentives for platform for competitive economic biopharmaceuticals, the contents of R&D innovation”. growth. The EU Commission funding pipelines, flows of innovative new Similar, recent research by Garrison et al.16 through its framework research products into the market, and the decline on trastuzumab for breast cancer, and programmes for bioscience continues to and effective ‘death’ of established Parvinen17 on schizophenia medicines, grow and a new ‘government-industry’ products at patent expiry are all scrutinised broadly support this thesis. collaboration, the Innovative Medicines in sophisticated models.11 Initiative (IMI), has been approved, which Recent work by Porter12 shows that over Changing patterns of regulation in will give further impetus to ‘academic- the period 1992–2006 major US pharma- Europe and their impact on innovation industry’ collaborations across the EU. ceuticals ranked fourth amongst industry processes However, similar levels of investments by sectors in terms of profitability (return on The ‘three sequential races’ model, countries as diverse as Australia, South invested capital). On average European outlined above has limitations, notably it Korea, China and Brazil indicate the

13 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY

discrimination in favour of innovative Figure 2: The interplay of regulation and innovative processes products in allocating scarce funding. Activity However, the close linkage of decision making to vague notions of health system Academic, Lab. preclinincal Reimbursement, affordability, which has led to the intro- cluster development, Clinical I, II, III pricing, duction of an upper limit cost per quality SMEs, Manufacture market access, multinationals promotion, adjusted life year (Qaly) threshold for distribution access to reimbursement, suggest that contrary to this aim, it may well discrim- EU, national, public and industry Research inate against the most innovative leading funding of bioscience and medicine edge advances.24

European patent law, Regardless of the mechanism, the supplementary protection inescapable consequence of many such Product Patents initiatives, across the twenty-seven GLP, GCP, GMP, animal regulation, development Member States, has been to achieve short- EMEA approved dossier and licensing term cost savings for the health systems & continuing and reduce revenues for suppliers of inno- National reimbursement and pricing development Regulations and incentives Global market regulations, budgetary constraints, vative products. This, by definition, diffusion premium pricing and rapid access reduces the dynamic efficiency of the markets and the incentives to invest in GLP – good laboratory practice; GCP – good clinical practice; GMP – good manufacturing practice R&D. The rationale for such policies is rooted in a belief that the need for health growing intensity of global competition by suggest that the potential of biologics has services to contain costs is very great and governments to achieve a stake in these been much overestimated.21,22 the innovative industry is robust and can high-tech industry sectors, but overall the easily sustain its modus operandi, despite Currently, a joint FDA-EMEA review prospects for the EU in this area look the cumulative impact of such interven- process is underway aimed at further good.20 tions. The analysis in this paper suggests unifying and streamlining the development that, certainly for some EU companies, In the field of European patent and data requirements. Obviously the incentive to this premiss will not hold good for much exclusivity law, the cornerstone of the invest in R&D will improve if this can longer. incentive system for investment and result in lower costs and shorter devel- reward in this sector, useful progress has opment time. It may also improve EU Conclusions been made in harmonising and codifying competitiveness and limit the haemor- To summarise, there is good growth in exclusivity criteria and terms. rhaging away of development activities to research funding and incentives to invest at low cost Asian markets. In the race to develop products, there has the front end of the innovation process, been a high profile debate as to whether In the final phase of the innovation process but market opportunities for innovative the multiple requirements of agencies, such – market diffusion – the race to achieve new products are ever more severely as the US FDA (Food and Drug Adminis- reimbursement at mutually acceptable constrained in EU countries at the other tration) and EMEA, were stifling inno- prices and acceptance by doctors and end of the process. While the downward vation because they were too demanding patients the situation also looks less prom- pressures on off-patent sectors through or whether in the light of some late failures ising. Over recent years, many initiatives generic competition is a perfectly valid approach, the current trend to then use of new products in the market phase, that have been taken by Member States to market regulation to formally link these they were too lax and should be contain annual expenditure growth in low generic prices to the prices of inno- strengthened, regardless of the cost and medicines to ‘affordable’ levels. Many of vative patented products, forcing them time implications for innovators. An EU these have just cut prices on all products down to close to generic levels is simply sponsored study in 200413 took the opti- on a force majeure basis. Others have incompatible with sustaining a viable EU mistic view that if one examined the sought to improve the static efficiency of innovative sector over the long-term. The progression of projects through the devel- markets through engendering more 23 tension between these two conflicting opment phases, there were grounds for competition between suppliers. By far forces is at the heart of the stress, if not optimism that ‘a bulge’ of successful the most damaging to the innovative sector distress, observed in phases II and III of projects was working its way down has been the initiative pioneered in clinical development decision-making pipelines and would restore the output of Germany, therapeutic reference pricing where many projects are now terminated. products entering the market to former which in effect cuts the prices of all inno- vative patented products in a class to the levels. More recent assessments of FDA The new HTA methods offer some scope level of the cheapest generic in that class.5 and EMEA product approvals suggest that for customers and suppliers to go forward although this has not happened yet, The National Institute for Health and together in a rational manner, but recent neither has there been any further decline Clinical Excellence (NICE) operating in English and German experience indicates in product output and it can be argued that England and Wales, has led what is the that the application of ‘thresholds’, the quality, or added value of products latest popular approach based upon HTA reducing to just another cost containment now coming to the market is higher than in some EU markets. This in principle this tool appears to be proving irresistible. In in the recent past. However, sceptics holds out some prospect to innovators of the light of this analysis of the innovation

Eurohealth Vol 14 No 2 14 PHARMACEUTICAL POLICY process, the incentive for innovation is coeconomics 2004;22:1. 17. Parvinen P. Productivity of pharmaceu- only likely to be restored, if short-term, 10. Schumpeter JA. Capitalism, Socialism ticals in society: a disease specific research budget driven ex-ante assessments are and Democracy. New York: Harper & approach. EFPIA presentation, October abandoned and the emphasis placed upon Low, 1963. 2007. Available from [email protected] a judgemental approach to giving inno- 11. Adkins S, Smith I, Walton J. 18. Calfee JE. White Paper on Pharmaceu- vative products the ‘benefit of the doubt’ PharmaPipelines. Lehman Brothers, 2007. tical Market Competition Issues. Wash- at launch, by allowing rapid access to reim- ington D.C: American Enterprise Institute, bursement at a reasonable price, followed 12. Porter M. The five competitive forces June 2008. Available at http://www.aei.org by a rigorous assessment three to five years that shape strategy. Harvard Business Review 2008; January:82–83. 19. Said M, Brouwsers C-A, Tollman P. later with a re-negotiation of prices and, if Continued Development of Approved necessary, the terms for reimbursement. 13. Charles River Associates. Innovation in Biological Drugs. Boston: Boston the Pharmaceutical Sector: A study under- From a global industry and consumer Consulting Group, 2007. Available at taken for the European Commission;2004. www.bcg.com perspective generally, the fact that only Available at: circa 25% of industry revenues come from http://pharmacos.eudra.org/F2/phar- 20. OECD. Innovation in Pharmaceutical the EU, whereas around 45% comes from macos/docs/Doc2004/nov Biotechnology: Comparing National Inno- the USA may offer a degree of comfort vation Systems at the Sectorial Level. Paris: 14. Teece DJ. Profiting from Technological that the latter will continue to provide the OECD, 2006. Available at: Innovation. In Teece DJ (ed.) The Compet- bulwark for sustaining industry business www.oecd.org/sti/innovation itive Challenge: Strategies for Innovation models and innovative output. However, and Renewal. Cambridge USA, 1987. 21. Nightingale P, Martin P. The myth of the continuation of such a situation does the biotech revolution. Trends in Biotech- not augur well for EU industrial policy 15. Philipson TJ, Jena AB. Who Benefits nology 2004;22:564. aspirations to be a world class competitor from New Medical Technologies? Esti- mates of Consumer and Producer 22. “Beyond the Pill” New York: Econ- in this sector in the future. Surpluses for HIV/AIDS Drugs. Forum for omist print edition, 25 October 2007. Health Economics & Policy 23. Docteur E. Pharmaceutical Pricing 2006;9(3):article 3. Policies in a Global Market. Paris: OECD, REFERENCES 16. Garrison LP, Veenstra DL. Innovation 2008. 1. Tidd J, Bessant J, Pavitt K. Managing and economic value over the product life 24. Moran N. Priced out of the UK Innovation: Integrating technological, cycle: the case of trastzumab for breast Market. Nature Biotechnology market and organizational change. Third cancer in five European countries. Dublin: 2008;26(2):151–154. edition. New York: Wiley, 2005. ISPOR European Conference, 2007. 2. Achilladelis B, Antonakis N. The Dynamics of technological innovation: the case of the pharmaceutical industry. Research Policy 2001;30:535–42. New publication 3. Attridge CJ. Innovation models in the Assuring quality of health biopharmaceutical sector. Int. J. Inno- vation Management 2007;11(2)215–43. care in the European Union 4. DiMasi JA, Hansen RW, Grabowski A case for action HG. The price of innovation: new esti- mates of drug development costs, Journal This book now examines, for the first time, the of Health Economics 2003;22(2):151. systems that have been put in place in all of the 5. Attridge CJ, Sheridan D. The impact of European Union’s twenty-seven Member States. therapeutic reference pricing upon inno- The picture it paints is mixed. Some have well vation in cardiovascular medicine. Pharma- developed systems, setting standards based on coeconomics 2006;24(Suppl. 2):35–54. the best available evidence, monitoring the care Helena Legido-Quigley, 6. Rothearmel FT, Deeds DL. Exploration provided, and taking action where it falls short. Martin McKee, Ellen Nolte, and exploitation alliances in biotechnology: Others need to overcome significant obstacles. Irene A Glinos a system of new product development. The European Union has only a limited ability to Strategic Management Journal Observatory Study Series No. 12 take action on health care but if free movement 2004;25:201–21. Copenhagen: World Health of Europe’s citizens is to become a reality, an 7. Morgan SG, Bassett KL, Wright JM, et Organization on behalf of the essential measure would be to ensure that al. Breakthrough drugs and growth in European Observatory on appropriate systems are in place to ensure high expenditure on prescription drugs in Health Systems and Policies, quality care, even if the approaches taken will Canada. BMJ 2005;331:815–16. 2008 vary according to local circumstances. This 8. Gelijns AC. Capturing the unexpected requires a dialogue between those responsible ISBN 978 92 890 7193 2 benefits of medical research. NEJM for funding and providing health care in Europe. 1998;339(10):693. 241 pages This book contributes to this important process. 9. DiMasi JA, Paquette L. The economics of follow on drug R&D – Trends in entry Freely available at http://www.euro.who.int/document/E91397.pdf rates and timing of development. Pharma-

15 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY Challenges in the economic evaluation of orphan drugs

Michael F Drummond

Summary: Increasing pressures on health care budgets have led to a growing interest in the use of economic evaluation in reimbursement decisions for drugs and other health technologies. Although economic evaluation methods are becoming more established internationally, doubts have been raised about their use in drugs for rare diseases (often known as ‘orphan drugs’). This paper discusses the potential deviation between social value and cost- effectiveness, the impact of rarity on the estimation of the cost-effectiveness ratio and the key questions surrounding the economics of orphan drugs.

Keywords: cost-effectiveness analysis, health policy, resource allocation.

Increasing pressures on health care gained.1 Health technologies with an Potential deviation between social value budgets have led to a growing interest in incremental ratio of less than £20,000 per and cost-effectiveness the use of economic evaluation in reim- QALY gained are highly likely to be reim- As mentioned above, the denominator in bursement decisions for drugs and other bursed; those with a ratio in excess of the cost-effectiveness ratio is usually a health technologies. Under this approach, £30,000 would require other arguments in measure of health gain, typically the an assessment of value for money is under- order for them to be funded. QALY. In addition, QALYs in the calcu- taken by comparing the incremental costs lation are normally equally weighted; that NICE is unusual in being so specific about of the new technology (with respect to is, a gain of one QALY is considered to be its decision-making threshold. Most reim- relevant existing technologies) with the the same no matter to whom it accrues. bursement agencies do not reveal their incremental benefits. The incremental thresholds and, in the case of agencies not However, an analysis of decisions by the benefits are normally defined in terms of using a generic measure like the QALY, Pharmaceutical Benefits Advisory health gain, either by use of a generic such thresholds would be hard to infer. Committee (PBAC) in Australia6 showed measure such as the quality-adjusted life- that, while decisions followed a general year (QALY), or by use of a relevant Although economic evaluation methods cost-effectiveness logic, it was clear that clinical outcome for the disease area are becoming more established interna- other factors were taken into account. concerned. tionally,2 doubts have been raised about George et al give several reasons for the their use in drugs for rare diseases. Most of The economic evaluations do not, of them- apparent deviation from the cost-effec- the orphan drugs appraised to date have selves, determine whether a given health tiveness criterion. These include the lack or cost-effectiveness thresholds well in excess technology gives good value for money. inadequacy of alternative treatments for of the ‘accepted’ level and would not be This has to be judged against an external the disease concerned, perceived need in reimbursed according to conventional standard, such as the cost-effectiveness of the community, seriousness of the patient’s criteria. McCabe et al 3,4 argue that this is interventions that are already funded in the condition, pursuit of equity, the rule of not an argument for treating orphan drugs health care system, or an explicit rescue, as well as access and affordability any differently from pharmaceuticals in benchmark (or threshold) of willingness- from the patient perspective and financial general and question whether there should to-pay for a unit of health gain. For implications for the government. be any premium for rarity. On the other example, in England and Wales, the hand, Drummond et al 5 argue that there The extent to which these factors do, or National Institute for Health and Clinical may be more to assessing the social value should, impact on health care decision- Excellence (NICE) operates a threshold of health technologies than the estimation making is a matter for discussion and range of £20,000–£30,000 per QALY of the incremental cost-effectiveness ratio. debate. However, it is clear that most Therefore this paper discusses (i) the orphan drugs are for serious conditions, Michael F Drummond is Professor of potential deviation between social value for which other treatments may not be Health Economics, Centre for Health and cost-effectiveness (ii) the impact of available. Orphan drugs also tend to be Economics, University of York and part- rarity on the estimation of the cost-effec- expensive on a per patient basis, but have time Professor, LSE Health, London tiveness ratio and (iii) the key questions limited impact on the health care budget as School of Economics and Political Science. surrounding the economics of orphan a whole, as there are so few patients with Email: [email protected] drugs. these health conditions.

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Rarity and the cost-effectiveness ratio these additional elements would need to be stopping rules have been combined with The most obvious impact of rarity on cost incorporated into the assessment process. risk-sharing schemes, whereby the manu- is that, because the patient population for A different way of weighting QALYs, facturer gives the payer a rebate in cases most orphan drugs is very small, the costs either by use of the PTO approach or where the patient’s therapeutic response of research and development (R&D) need another set of equity weights, would be does not reach a pre-defined level. to be recovered by charging a much higher one option. The other main approach However, such schemes are not simple to cost per patient than for drugs with large would be a structured discussion, whereby devise or monitor. They do not represent a sales potential. Although there is some the various identified factors (for example, ‘magic bullet’ for payers concerned about evidence of a relationship between the size condition seriousness) would be discussed the high cost of orphan drugs. of the population and annual treatment alongside data on cost-effectiveness. cost,7 the pricing of all drugs (including Conclusions The latter approach is already used to orphan drugs) is rather opaque.4 Orphan drugs present several challenges, some extent by NICE.1 More research is Therefore, it is not surprising that decision- both in the assessment of cost-effectiveness required on the pros and cons of the makers have some doubts about prices and in the development of appropriate different approaches to introducing the charged. The only audited public statement funding mechanisms. As illustrated in this consideration of social value into the tech- about the costs of R&D of an orphan drug, article, manufacturers and policy makers nology assessment process. in the annual accounts of the Genzyme might adopt new ways of working Corporation, suggests that development How can we ensure that the returns from together in order to tackle these challenges. costs are substantial, although a little lower investment in orphan drug development than the cost of a mainstream pharmaceu- are reasonable? tical (mainly because the clinical devel- REFERENCES The European Union, the USA and Japan opment programme involves smaller 1. Rawlins MD, Culyer AJ. National have offered incentives (such as tax rebates patient numbers). Institute for Clinical Excellence and its and market exclusivity) to companies value judgements. British Medical Journal The main impact of rarity on the esti- willing to invest in clinical research into 2004;329:244–27. mation of effectiveness is that, given the treatments for rare diseases. However, small patient population, it is difficult to these incentives are meaningless if the 2. Drummond MF, Grubert N. Interna- tional Trends in the Use of Health enrol sufficient numbers of patients in drugs, once developed, are not reimbursed. Economic Data. Waltham MA: Spectrum clinical studies. Also, because of small Therefore, there is an urgent need to Report, Decision Resources, 2007. numbers, the epidemiology of rare diseases harmonise incentives for research with the is less well understood, making the projec- potential for market access. In many ways, 3. McCabe C, Claxton K, Tsuchiya A. tions of long-term benefit, beyond the end offering incentives for R&D is like putting Orphan drugs and the NHS. British of the trial, or from surrogate markers to the cart before the horse. The appropriate Medical Journal 2005;331:1016–19. final clinical outcomes, more speculative. way to tackle the problem is to be clearer 4. McCabe C, Tsuchiya A, Claxton K, This greatly increases the uncertainty on what, if anything, society is willing to Raftery J. Assessing the economic chal- facing the decision-maker when consid- pay for these treatments. Then manufac- lenges posed by orphan drugs: a comment ering orphan medicines. turers would then be able to assess on Drummond et al. International Journal whether levels of reimbursement offered of Technology Assessment in Health Care 2007;23(3):397–404. Key questions surrounding the provide adequate incentives for investment economics of orphan drugs in the research required. 5. Drummond MF, Wilson DA, Kanovos P, How much efficiency is the public willing Ubel P, Rovira J. Assessing the economic How can we ensure that funds devoted to challenges posed by orphan drugs. Interna- to trade for access to orphan drugs? the reimbursement of orphan drugs are tional Journal of Technology Assessment in Given their lack of cost-effectiveness, the used appropriately? Health Care 2007;23(1):36–42. funding of orphan drugs can only be It was pointed out that, because of the 6. George B, Harris A, Mitchell A. Cost- justified if the public is willing to give up small number of people with rare diseases, effectiveness analysis and the consistency some of the overall health gain produced there is often more uncertainty about the of decision-making: evidences from phar- by the health care system, because access to clinical benefits from treatment. The best maceutical reimbursement in Australia treatments for rare diseases is perceived to way to deal with this uncertainty is to (1991 to 1996). Pharmacoeconomics be a socially valuable objective. More collect more long-term data on the clinical 2001;19:1103–9. exploration of this issue is required, either outcomes for patients receiving treatment, 7. Alcimed. Study on Orphan Drugs. Paris: by surveying members of the public, or by through the establishment of registries. Alcimed; 2005. using the ‘person trade-off’ (PTO) Given the small number of patients in indi- 8. Nord E. The trade-off between severity approach to estimating QALYs. This vidual countries, there would be a role for of illness and treatment effect in cost-value approach,8 estimates QALYs by asking international collaboration, through analysis of health care. Health Policy respondents how many individuals, with a organisations like the EU. 1993;24:227–38. given disease receiving treatment, would be equivalent to saving one healthy life. Another step towards securing value for money would be to target therapy to How can social value best be introduced patients achieving substantial clinical into the technology assessment process? benefit. Therefore, it may be necessary to If there is, indeed, more to the assessment establish stopping rules for patients failing of social value than cost-effectiveness, to respond to therapy. In some cases, such

17 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY Generic medicines from a societal perspective: Savings for health care systems?

Elizabeth Seeley, Panos Kanavos

Summary: Despite the emphasis placed on generic policies, as a means of creating savings to health insurance budgets, there seems to be a lack of robust evidence on their effectiveness. By studying generic policies in seven OECD countries (USA, UK, Germany, France, Italy, Spain, Canada) and for a number of drugs, we find that generic penetration varies significantly among them and could be enhanced further, particularly in France and Italy, but also Spain and Canada. We also find that generic price decline post patent expiry is variable and that countries regulating generic prices, e.g. through price capping or reference pricing, display significantly lower price declines over time compared with countries that do not. As generic savings are influenced by the combined effect of genericisation and price reduction post-patent expiry, we conclude that significant additional savings to health insurance can be realised – up to 43% of current generic sales – if generic purchasing and gener- icisation improve further.

Keywords: Generic medicines, pharmaceutical policy, competition, efficiency

Background and conventional thinking consumers.1,2 As a result, health insurers, resources to invest in new treatments, Given the intense debate surrounding both public and private, have been eager to creating headroom for innovation. health care cost containment and efficiency promote generic drug use, with a view to Despite the emphasis on generic policies,3 in health care resource allocation, it is not reducing off-patent drug costs. Failure to there is a lack of robust evidence on their surprising that generic policy has received do so implies that health insurance will actual effectiveness in different environ- much attention in Organisation of continue to pay premium prices for ments, whether they indeed result in high Economic Co-operation and Devel- products whose patents have expired. rates of generic penetration, and whether opment (OECD) countries. Generic medi- There are significant differences in regu- they encourage sustainable price reduc- cines are both chemically equivalent and latory frameworks for generic medicines tions. In this article we briefly address bioequivalent to their branded equivalents, across OECD countries and North three questions: but can be significantly cheaper since they America. In France, Italy and Spain, for do not have to recoup large R&D costs instance, regulators have implemented How does generic penetration compare and are protected by a patent. In general, reference pricing for generics as well as across countries? originator drug prices may not decline generic substitution, in addition to Are generic prices influenced downwards significantly after patent expiry, but rather promoting generic prescribing. In other by the entry of new competitors? pursue a market harvesting strategy that countries, generic prescribing and focuses on the brand loyal, price insen- dispensing have been key features of phar- How do price regulation and market sitive portion of the market, leaving their maceutical policy for decades (for example, structure affect generic competition and lower priced generic equivalents to the USA and the UK). Table 1 provides an savings to health insurance? compete for the more price sensitive overview of supply and demand side generic policies across the EU-G5 (UK, Generic penetration and price Elizabeth Seeley is Research Assistant in Germany, France, Italy, Spain), the USA competition in off-patent markets Health Policy and Panos Kanavos is and Canada. These policies may help to We empirically examined aspects of Senior Lecturer in International Health improve generic substitution as well as competition in the market for relatively Policy, LSE Health, London School of spur generic price competition. To the established drugs in seven OECD coun- Economics and Political Science. extent that generic savings are achieved, tries (USA, EU-G5 and Canada) and used Email: [email protected] policy makers may then have more a panel of twelve products (shown on

Eurohealth Vol 14 No 2 18 PHARMACEUTICAL POLICY

Table 1: Generic policies in EU-G5, USA and Canada

Measure UK Germany France Italy Spain USA Canada

Proxy demand-side

Promoting generic prescribing √ √ √ √ √

Compulsory generic prescribing √

Generic substitution √ √ √ √ √ √

Flat or regressive margin √ √ √ √

Discounting allowed officially √ √ √ √

Clawback √

Demand-side

Differential co-payments √

Supply-side

Price cap √ √ √ √

Reference Pricing √ √ √ √ √

Source: Kanavos, Costa-Font, Seeley4

Figure 1: Generic sales as a proportion of total sales, 2005, twelve molecules difference between countries for the same molecule. In addition to comparing prices at one point in time, the evolution of prices over time must also be compared across 80% countries. Figure 2 shows that, in general, 70% US and UK generic prices decline faster 60% post-patent expiry than other countries, 50% while French, Canadian and Italian generic 40% prices are the most rigid downwards. 30% In looking at Figure 3, we see that prices 20% range very little among generics in coun- tries with reference pricing, (such as 10% Germany, France and Italy) suggesting a 0% lack of price competition in reference Italy France Spain Canada USA Germany UK pricing countries. This is not surprising. Under a reference price scheme, patients are made to pay the difference between the Table 2) subjected to generic competition While generic penetration may be a reference price and the price of the product post-patent expiry, and accounting for necessary condition for the creation of in the form of a co-payment. Moreover, 19% of the off-patent market by value in savings to health care systems, it is not reference prices are usually pegged to some these countries. sufficient, as savings are greatly affected by of the lowest generic prices in the market. price levels and in particular, the price As a result, if companies were to price We find that generic penetration varies differential between originator and generic above the reference price, they would significantly among countries and that it drug, as well as the speed with which likely experience a collapse in market could be enhanced further in most coun- generic prices decline. It is therefore share, whereas if they were to price below tries, especially in France and Italy, which necessary to take a closer look at generic the reference price, this would further appear to have the lowest generic pene- prices in order to better evaluate the degree drive down the reference price itself, tration. Spain and Canada exhibit average of savings national generic policies are forcing other companies to follow suit or levels of generic penetration, while the US, achieving. Our study shows that there is health insurance to adjust reference prices Germany and the UK exhibit the highest significant variability in generic prices downwards. The result is a clustering of levels of generic penetration for these which sometimes result in a fifteen-fold prices around the reference price, rather products (Figure 1).

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Figure 2: Generic price evolution over time (2000–2005) Figure 3: Impact of reference pricing on generic prices and competition, 2005 (prices in Euros per pack) Omeprazole France Originator and generics prices: Germany, Omeprazole 20mg/30 Canada

Germany 60 50 Spain 40 US 30 UK 20 10 -60% -50% -40% -30% -20% -10% 0% 0 Originator Generics Paroxetine France Italy

Spain Originator and generics prices: Italy, Lisinopril 20mg/28 Canada 34 UK 33 Germany 32 US 31 -60% -50% -40% -30% -20% -10% 0% 30 29 28 Clavulanic Acid France 27 Originator Generic UK

Germany

Canada Originator and generics prices: Germany, Simvastatin 10mg/30

Spain 25 US 20 -60% -50% -40% -30% -20% -10% 0% 15

Metformin 10 France Italy 5 Canada 0 Spain Originator Generics US UK Germany Originator and generics prices: France, Lisinopril 20mg/28 -20% 0% 20% 40% 60% 80% 100% 30

Amoxicillin France 25 Canada 20

Italy 15

Spain 10 Germany 5 US 0 UK Originator Generics -60% -40% -20% 0% 20% 40% 60% 80% 100%

Eurohealth Vol 14 No 2 20 PHARMACEUTICAL POLICY

Table 2: Proliferation of generic firms in European Countries, 2004

Molecule Germany Italy France UK Spain Total EU-5 Canada USA

Amoxicillin 45 41 17 15 64 182 11 48

Clavulanic Acid 16 6 10 4 20 56 3 7

Hydrochlorothiazine 60 6 8 9 28 111 15 80

Iron ferrous 126 34 31 30 22 243 48 144

Lisinopril 24 1 7 3 13 48 1 16

Mesalazine 19 16 3 5 3 46 5 6

Metformin 49 10 16 7 2 84 17 25

Methylphenidate 4 0 1 4 2 11 5 19

Omeprazole 24 0 14 6 44 88 1 6

Paroxetine 24 5 7 4 15 55 8 7

Salbutamol 27 6 6 13 5 57 13 52

Simvastatin 33 1 N/A 5 27 66 10 N/A

than price reductions over time, as would existing may not be linked directly to price Savings for payers be expected in a price competitive market. reductions. For prices to be impacted by As a result of the above it looks as though generic entry, there may need to be a governments, particularly in Europe, may Generic prices seem to remain relatively significant increase in the number of not be realising the full benefits of generi- stable in countries with reference pricing generic entrants. It seems, therefore, that cisation and are even wasting resources by and decline slowly, whereas a significant entry by generic producers is in itself a overpaying for generic products. The reduction in prices is seen in countries necessary but not sufficient condition for a potential savings to health care systems without reference pricing, such as the USA sustainable reduction in generic drug could improve significantly, provided and the UK. prices for payers and that (generic) price generic penetration increases through Finally, it is important to understand the regulation may have an adverse effect on improved generic prescribing and effect that the number of generic firms (i.e. generic price reduction irrespective of the dispensing practices and provided generics generic entry) has on generic price compe- number of players entering the market. are available at competitive prices. This tition. In a competitive market, price requires greater competition in this In summary, competition in the off-patent premiums should attract new competitors, segment. In total, we estimate potential market seems to be variable and country- which should, in turn, result in price savings to be in the vicinity of $3 billion, dependent. The countries showing little competition that leads to lower prices. The or 43% of current sales of generic medi- evidence of downward price trends within analysis of competition patterns within the cines in our sample, as depicted in Figure 4. the generic segment following generic generic segment suggests that the number These foregone savings, if realised, could entry are France, Italy, Spain and Canada, of generic entrants is not a predictor of be invested in novel treatments that whereas in Germany generic prices lower generic prices in most study coun- improve quality of life and offer significant respond to generic entry weakly. Whilst tries. For example, Table 2 shows that for health gains. the results were expected for France, Italy many products, Germany and the USA and Spain, three countries that have only To achieve more efficient generic have the largest number of generic in recent years introduced measures to purchasing, countries need to revise some competitors, despite Germany exhibiting promote generic drug use and have smaller of their generic policies. For example, in slow price reduction and the USA rela- generic penetration levels and high order to reduce price rigidity where it tively faster price reduction over time. generics prices, they were not in Germany, exists and achieve greater price respon- Thus, the effect of the number of generic given its overall market size (in monetary siveness to competitive forces, it may be firms on price competition seems muted in terms), the level of generic penetration (in necessary to introduce policy changes that Germany, as the reference price incentives terms of generic market share for patent would promote the latter; potential discussed above would predict. expired molecules) and depth (in terms of options could include the abolition of Meanwhile, the UK has relatively few the number of generic firms active on each reference pricing as a factor that stifles generic competitors, despite showing signs product market). In short, current regu- price competition over time, or intro- of relatively fast price declines. This latory frameworks may encourage high ducing ‘managed competition’ through suggests that the off-patent market prices for generics and limit potential gradual stepwise price reductions by displays non-linearities such that the savings for health insurers. payers once off-patent product markets addition of a new firm to those already mature further. In order to encourage

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Figure 4: Total effect of efficient generic purchasing in EU-G5, Canada and USA REFERENCES 1. Grabowski H, Vernon J. Brand loyalty Million USD and price competition in pharmaceuticals 8,000 after the 1984 Drug Act. Journal of Law 7,000 and Economics 1992;35(2):331–50. 6,000 2. Caves RE, Whinston ME, Hurwitz MA. 5,000 Patent expiration, entry, and competition 4,000 in the US pharmaceutical industry: an 3,000 exploratory analysis. Brookings Papers on 2,000 Economic Activity: Microeconomics. Wash- ington D.C: Brookings Institute, 1991. 1,000 0 3. De Joncheere K, Rietveld AH, Huttin ACTUAL IDEAL Potential saving to C. Experiences with generics. International cost of generics cost of generics health insurance Journal of Risk and Safety in Medicine 2002;15(1–2):101–9. greater generic penetration, generic hurdles such as price setting and capping 4. Kanavos P, Costa-Font J, Seeley E. prescribing should be encouraged further should be eliminated, so that the generics Competition in off-patent drug markets: through financial and non-financial incen- market can acquire depth. Where elimi- issues, regulation and evidence. Economic tives that target physicians, and cost nating regulations appears difficult for Policy 2008; July: 499–544. sharing strategies that target patients, such several reasons a system of ‘managed as co-payments. Finally, in terms of further competition’ could help to achieve price encouraging generic entry, regulatory reductions over time.

Does pharmaceutical parallel trade serve the objectives of cost control?

Panos Kanavos and Stacey Kowal

Summary: The extent to which pharmaceutical parallel trade can contain pharma- ceutical costs has been debated intensely. Although parallel import penetration is significant in many EU countries, parallel trade generates at best moderate savings to health insurance, is not necessarily associated with sustainable long-term price compe- tition and can lead to product shortages in exporting countries and, recently, a higher probability of counterfeiting. Parallel distributors emerge as the key beneficiaries from this practice. The high transaction costs associated with parallel trade, the lack of sustainable long-term price competition and the lack of tangible benefits to patients make this practice an inefficient means of containing costs.

Keywords: pharmaceutical parallel trade, efficiency, cost containment, single market

Background constitutes a form of arbitrage, or the Panos Kanavos is Senior Lecturer in Parallel trade refers to the “legal importation purchase and sale of identical products from International Health Policy, LSE of a patented product from one country different markets for the purpose of gaining Health, London School of Economics where it is legally marketed into a second a profit from unequal prices.2 While parallel and Political Science. Stacey Kowal is country where the patent holder also trade is illegal in many parts of the world, it a consultant with IMS. E-mail: markets that product but without authori- is legal within the European Union (EU) [email protected] sation of the patent holder”.1 Therefore, it after the move to a single market for phar-

Eurohealth Vol 14 No 2 22 PHARMACEUTICAL POLICY

Table 1: Policies to promote the use of parallel imported drugs in key importing countries in the European Union (2004)

Policy to promote use of parallel imported drugs Denmark Germany Netherlands Norway Sweden United Kingdom

Pharmacy required to inform patient of availability of parallel X X X imported products

Pharmacy quota on parallel import dispensing rates X

Financial incentives for pharmacy to dispense parallel imported drugs X X X

Financial incentives for dispensing lower-price drugs in general, X X including parallel imported drugs

13 Source: Kanavos P, Gross D, Taylor D, 2005.

maceuticals. Within the single market, key themselves registered wholesalers, increase traded goods. Table 1 outlines policies used changes in the harmonisation of regulation their profit potential by acquiring products to promote the use of parallel imported under the EU’s mutual recognition from low priced countries and selling such drugs in key destination countries. The procedure, and Articles 28–30 governing goods to pharmacies in countries with table illustrates that most countries aim at the free movement of goods have fostered higher drug prices. influencing the behaviour of pharmacies to an environment where parallel trade can some degree. Views on the impact of parallel trade in the capitalise on pharmaceutical price differ- EU are highly polarised. Proponents claim Despite the proliferation of policies ences across countries.3,4 that parallel trade offers savings to health promoting the use of parallel imported insurers and patients by increasing the medicines, empirical work suggests that affordability of high priced drugs.6 They these savings are very small in relation to “Views on the impact of also claim that affordability may be further the size of the pharmaceutical market and increased by manufacturer responses to disproportionately small in relation to the parallel trade in the EU are parallel trade, suggesting that the threat of penetration of parallel imports in indi- parallel trade may cause manufacturers to vidual countries and product markets. highly polarised” lower prices.7 Conversely, opponents Ganslandt et al empirically demonstrated claim parallel trade will have long term that parallel imports were associated with negative implications in discouraging a reduction in prices for the top fifty Parallel trade comprises a growing share of research and development, thus potentially selling drugs in Sweden.2 Kanavos et al the pharmaceutical retail market and a reducing product quality and impairing discuss the potential savings to health significant share of pharmaceutical expen- future research.8 insurance but empirically find that little diture. Its presence is the result of differ- savings were gained by health insurance ential country regulation and weak control How are individual stakeholders for nineteen high volume, high cost drugs over the pharmaceutical distribution affected? in Germany, Sweden, Norway, Denmark, chain.5 Community exhaustion within the The implications of parallel trade, the UK and the Netherlands between 1997 EU dictates that a drug approved for however, are contingent upon the view- and 2002.1 human use in one EU member state must points of the stakeholders involved, be granted authorisation in all other In addition to incentives from health namely health insurers, pharmacy, parallel member states unless the concerned insurance, pharmacists may have reim- distributors, patients and the pharmaceu- member state objects through a formal bursement related incentives that promote tical industry. process. However, drug companies must the use of parallel imported goods. Many still negotiate with individual countries Health insurance has the potential to pharmacies are reimbursed on a fixed over pricing and reimbursement. benefit from parallel trade if the retail margin, which offers no additional incen- prices of parallel traded drugs are lower tives to dispense parallel traded goods. Parallel trade in the EU is further fuelled than the locally sourced identical However, policies rewarding the use of by the structure of the distribution chain products.9 In order to increase savings, it lower priced drugs may lead to benefits for (wholesale and retail). The large number of is in the interest of health insurance to pharmacists for the dispensing of parallel players in the pharmaceutical distribution encourage pharmacies to dispense parallel traded goods where parallel imports are chain prevents total vertical control by any imported medicines. Given this perception less costly than locally sourced products. one stakeholder.4 In the presence of phar- of potential savings, many health insurance maceutical price differences across coun- Several countries offer explicit incentives, organisations have been either directly or tries, parallel distributors, who are such as sharing the savings from the price indirectly promoting the use of parallel

23 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY

Figure 1: Parallel trade penetration in destination countries from using lower priced parallel imports. However, price differences between parallel imports and locally sourced drugs Parallel Import Penetration (%) in destination countries are generally very small, suggesting that, even in those cases, 35 savings to patients are negligible.1,2 30 For the pharmaceutical industry, the growing presence of parallel trade presents 25 a challenge as it reduces potential profits 20 and mitigates the ability of manufacturers to recoup research and development 15 costs.4 Parallel trade is most pervasive in 10 the on-patent market given limited competitors and high drug prices. 5 However, manufacturers rely on the 0 market exclusivity granted under patents 2003 2004 2005 2006 to recoup their research and development costs.10 The movement of parallel UK Germany Sweden Denmark imported goods from low price countries Norway Netherlands All Six Countries to high price countries causes a reduction in manufacturer profits as the volume of higher priced products in destination Source: The authors from IMS. countries decreases. Pharmaceutical manu- facturers have taken steps to reduce the potential for parallel trade by working to difference between the locally sourced and Sustainability is complicated as parallel improve control over the distribution parallel traded goods with pharmacies. In distributors are reliant on locating suffi- chain.3 However, these efforts require Norway savings are split equally between cient supplies of desired products in low additional resources which may also health insurance and pharmacies and the priced countries. This has often led to reduce profits. Netherlands offers a similar practice but product shortages in source countries, with a 66-33 split.1 Finally, some countries such as Spain and Greece, as available Is parallel trade an effective method of may penalise pharmacists if parallel import quantities to service the local market are pharmaceutical cost control? quotas are not met. While these incentives siphoned off for exportation. When addressing the question of whether may encourage the use of parallel traded The effects of pharmaceutical parallel trade pharmaceutical parallel trade is an effective products, the continued use of a fixed on patients are contingent upon a method of cost control one needs to margin for reimbursement may not country’s co-payment structure and extent consider (a) entry and penetration, (b) translate into the use of cheaper drugs and of exemptions. In many countries, competition in markets characterised by subsequent savings to health insurance. universal coverage shields patients from parallel imports, (c) savings to payers, and Parallel distributors, as licensed whole- the full cost of pharmaceuticals. In the UK (d) safety and quality of parallel imported salers, are profit maximisers and are inter- and the Netherlands, co-payments are not medicines. ested in acquiring drugs at the lowest related to the cost of the dispensed Entry and penetration possible prices and selling them at the medicine and therefore patients do not highest price in the importation country. gain direct benefits from price differences Eighteen products across six therapeutic Given increasing product homogeneity between the cost of the parallel import and categories* were used to investigate the under the harmonisation of EU drug regu- the locally sourced product. overall penetration of pharmaceutical lations and allowances for the sale of parallel trade in key importing countries Germany uses a structured payment parallel imported goods in packaging from (UK, Germany, Sweden, Denmark, system which blends co-insurance with a the source country, it is suggested that Norway and the Netherlands) and, in pre-determined minimum and maximum many of the potential barriers to moving particular, to identify the benefits accruing range for patient contribution, creating the products across countries are negligible. to health insurance from this practice over potential for benefits to patients within the However, a pervasive concern is the the period from 2003–2006. This builds on co-insurance range, although this may be sustainability of supply for parallel distrib- previous work conducted in this area, up limited. Finally, Denmark, Norway, and utors. In order to maintain purchasing to 2002.1 Sweden have, among others, co-insurance relationships with pharmacies, parallel for out-patient pharmaceuticals up to a The penetration of parallel imports in the distributors must ensure a sustainable maximum ceiling, which theoretically six destination countries under investi- supply of parallel imported goods. enables patients to gain a marginal benefit gation is depicted in Figure 1. The overall

*Namely, statins (atorvastatin, pravastatin, simvastatin), ACE (angiotensin-converting enzyme) I inhibitors (captopril, enalapril, quinapril, ramipril), ACE II inhibitors (losartan, valsartan), atypical antipsychotics (clozapine, olanzapine, risperidone), proton pump inhibitors (lansoprazole, omeprazole, pantoprazole), and selective serotonin reuptake inhibitors (SSRIs) – citalopram, paroxetine, and sertraline.

Eurohealth Vol 14 No 2 24 PHARMACEUTICAL POLICY

Table 2 Competition in parallel trade markets (Number of parallel importers and price differentials)

Number of parallel importers Price of locally sourced drug Highest parallel import price Lowest parallel import price 2002 (€) 2002 (€) 2002 (€)

Germany

Simvastatin 11 223.4 221.7 212.6

Olanzapine 9 175.4 157.8 155.6

Fluoxetine 5 182.7 1282.1 119.8

Netherlands

Simvastatin 11 50.4 50.2 45.3

Olanzapine 4 74.2 66.5 62.5

Fluoxetine 8 47.1 40.0 39.5

United Kingdom

Simvastatin n/a 55.6 55.4 49.9

Olanzapine n/a 81.8 73.4 68.9

Fluoxetine n/a 51.9 44.1 43.5

Source: Adapted and amended from Kanavos P, Costa-Font J, 2005.1

market share of parallel imports in Europe alent products have nevertheless increased faced with shortages of parallel trade (as approximated by the six destination over time in the three countries, despite products. The larger the market for a countries) remained relatively stable, seeing their domestic market share particular product, the greater the proba- changing from 18.44% in 2003 to 18.40% declining in the presence of parallel bility it will be traded intensely and, thus, in 2006. The most marked changes were imports. the greater the likelihood it will result in observed in Germany and Sweden. In shortages in export countries. The rents Small price differences between locally Germany, the percentage of parallel import accruing to parallel distributors, however, sourced and parallel imported drugs, penetration in the market fell from 17.62% are a multiple of the rent accruing as saving combined with the significantly lower in 2003 to 11.22% in 2006. Conversely, to health insurance. Evidence suggests1,14 acquisition prices by parallel distributors Sweden demonstrated an increase in the that parallel distributor rents were between suggest that there may be little price parallel trade retail market share, growing 2.5 and twenty times higher than savings competition in products subjected to from 8.40% in 2003 to 26.66% in 2006. to health insurance. While it is true that intensive parallel distribution. In addition, Slight increases were also observed in more than one distributor may be involved the uncertainty of a sustainable single Denmark and the UK while slight in the movement of medicines across source of product acquisition by parallel decreases were present in the Netherlands. countries, the fact remains that all distributors is unlikely to fuel sustainable distributor parties benefit from this Competition downward price competition over the practice. longer term. Much of the debate on pharmaceutical Safety and quality of parallel imported parallel trade has focused on the extent to Pecuniary benefits to stakeholders and medicines which it creates sustainable price compe- savings to health insurance tition over the longer term. By examining Until recently, the arguments surrounding Existing evidence points at modest to competition patterns in three high selling the safety and quality of parallel traded moderate savings to health insurance from products across three countries, it is shown medicines were unproven. The theoretical parallel importation of medicines.1,9,11 that in the majority of cases, the difference risk existed that so long as parallel traded More recent evidence updating previous between the highest and lowest parallel medicines could be re-packaged and re- analysis also confirms this.14 Overall, the distributors’ price does not exceed 7%, boxed, this could lead to counterfeiting. savings to health insurance in imported with the sole exception of simvastatin in Yet, parallel distributors are obliged to countries range between 0.4% and 2.2% of the Netherlands, where the spread notify the regulatory authorities as well as the retail prescription drug market. Other between highest and lowest imported price the manufacturer of any changes made to stakeholders also benefit from this is 11% (Table 2). the product concerned, thus, making practice, as discussed previously. For themselves liable in case counterfeit medi- In the majority of cases, the distributors instance, the benefits to pharmacy were cines enter the distribution chain from this with the largest market share are those approximately 0.09% of the pharmaceu- source. with prices towards the lower end of the tical retail market costs.1,14 spectrum, or those with the lowest price in In 2007, however, there were several recalls By contrast, exporting countries may be the range. Prices of locally sourced equiv- of counterfeit medicines that had entered

25 Eurohealth Vol 14 No 2 PHARMACEUTICAL POLICY the UK supply chain via a parallel manufacturers have no incentive to choose Impact of Parallel Imports in Pharmaceu- distributor. Several thousand packs of to serve countries with lower drug ticals: Evidence from the European Union. three medicines were seized or recalled by prices.13 Journal of Health Economics the UK Medicines and Health Care 2004;23(5):1035–57. Products Regulatory Agency (MHRA). Conclusions 3. Kyle M. Pharmaceutical Price Controls The counterfeit medicines, made in China Pharmaceutical parallel trade has been a and Entry Strategies. The Review of and shipped to Singapore, entered the EU controversial practice enabled by the Economics and Statistics 2007;89(1):88–99. in Luxembourg, where they were re-sold European single market. Much of the 4. Szymanski S, Valletti T. Parallel trade, without being checked to UK and Belgian debate surrounding parallel trade in phar- price discrimination, investment, and price wholesalers. This situation raises concerns maceuticals has focused on the economic caps. Economic Policy 2005;20(44):705–49. about the safety and quality of medicines impact it has on stakeholders and whether 5. Maskus KE, Chen Y. Vertical price entering the EU and raises further ques- it facilitates patient access to medicines. control and parallel imports: theory and tions about re-packaging and re-boxing. While proponents and opponents to the evidence. Review of International practice may disagree on the precise pecu- Shortages in exporting countries Economics 2004;12(4) 551–57. niary effects of parallel trade on individual Whereas the pricing structure and the stakeholders, the fact remains that, overall, 6. Ahmadi R, Yang BR. Parallel Imports: Challenges from unauthorized distribution distribution system in exporting countries its impact on health insurance budgets in channels. Marketing Science favour parallel exportation, an important importing countries is very small and the 2000;19(3):279–94. question arises as to what happens to the effect on patients negligible. By contrast, availability of medicines to patients in patients in exporting countries may be 7. Gallini N, Hollis A. A contractual exporting countries. Evidence suggests faced with significant shortages and access approach to the gray market. International that the end result can be shortages in problems. Those who perform the practice Review of Law and Economics drugs that are exported intensively. This also gain significantly from it. Importantly, 1999;19:1–21. has been documented in Greece and Spain, however, it is likely that parallel trade 8. Barfield CE and Groombridge MA. both of which have explicitly raised ques- results in misallocation of resources and Parallel Trade in Pharmaceuticals: tions of shortages. This is reflected in may have a significant long-term welfare Economic Development and Health Policy, recent regulatory interventions by the two effect in terms of investment in innovation. Unpublished Draft no. 1 (4 February respective national governments, essen- 1999), Washington, DC: American Enter- tially placing a requirement on wholesalers prise Institute. to declare the destination of the product "Savings from parallel trade 9. West P, Mahon J. Benefits to Payers and they acquire from manufacturers. One Patients from Parallel Trade. York: York would of course argue that drug manufac- are very small relative to the Health Economics Consortium, 2003. turers should increase production in Available at exporting countries to meet need, but, this size of the pharmaceutical http://www.york.ac.uk/inst/yhec/down loads/ParallelTrade_ExecSumm.pdf does not provide a long-term solution to market" the problem. 10. McGuire A, Drummond M. Reim- bursement of Pharmaceuticals in the Overall welfare effects Finally, in recent months, the ability of European Union. In: Mossialos E, Mrazek Given a range of complex stakeholder parallel trade to procure safe medicines has M, Walley T (eds). Regulating Pharmaceu- considerations and the current brevity of been called into question; the fact that re- ticals in Europe: Striving for Efficiency, empirical evidence on welfare implications, packaging and re-boxing can take place, Equity, and Quality. Buckingham: Open the overall welfare effects for parallel trade increases the probability of counterfeiting; University Press, 2004. are at best ambiguous.2,11 Perceived short on the other hand, the meticulous checking 11. Linnosmaa I, Karhunen T, Vohlonen I. term benefits in increasing affordability of all parallel traded packs of medicines Parallel importation of pharmaceuticals in may support possible welfare increases but increases transaction costs significantly Finland: effects on markets and expendi- such gains are arguably at the expense of and may result to poor allocation of tures. Pharmaceutical Development and potentially negative long-term implica- resources. On balance, although the Regulation 2003;1:67–74. tions. Furthermore, despite the perceived practice of parallel trade is still legal in 12. Rey P. The Impact of Parallel Trade on benefits from increased affordability Europe, it is associated with little actual Prescription Medicines. Toulouse: IDEI, claimed by proponents of parallel trade, pecuniary benefits and high transaction University of Toulouse, 2003. costs to health insurers, regulators and current and previous empirical work 13. Kanavos P, Gross D, Taylor D. Parallel found that parallel trade did not lead to patients, in both importing and exporting Trading in Medicines: Europe’s Experience aggregate and sustainable price reductions countries, making it an undesirable cost and Its Implications for Commercial Drug in key destination countries.1 containment tool. Importation in the United States. Wash- ington, DC: American Association for In regards to long term implications, it is Retired Persons (AARP), 2005. argued that short term gains in potential REFERENCES savings will be erased by the long term 14. Kanavos P, Kowal S et al. The Economic implications of a reduction in product 1. Kanavos P, Costa-Font J. Pharmaceutical Impact of Pharmaceutical Parallel Trade in Parallel Trade in Europe: stakeholder and quality from losses to research and devel- Europe. Discussion paper. London: LSE competition effects. Economic Policy opment.4,12 Furthermore, it has been Health, London School of Economics and 2005;20(44):751–98. suggested that parallel trade reduces global Political Science, forthcoming. welfare by creating an environment where 2. Ganslandt M, Maskus K. The Price

Eurohealth Vol 14 No 2 26 EUROPEAN SNAPSHOTS When will it happen? Paving the way for risk adjustment in Slovakia

Lucia Kossarova

As the revenues of health insurance Table 1: Health care resources in Slovakia (Slovak Korunas billions) companies in Slovakia increase (Table 1), their role as effective spenders of resources 2005 2006e 2007p 2008p 2009p 2010p and purchasers of high quality services for the population is becoming ever more Revenues of health insurance companies 73.5 80.3 89.7 94.4 101.4 108.9 important. However, the current incentive structure for health insurance companies Ministry of Health (excluding the state’s (HICs) does not necessarily encourage this 3.0 3.1 2.9 2.6 2.6 2.6 payment for its insurees) function. The risk adjustment* mechanism in place is based only on age and gender; it Resources of cities, municipalities and regions 0.5 0.6 0.5 0.5 0.5 0.5 is coupled with a new amendment to the Health Insurance Act which obliges HICs Eurofunds 0.0 0.0 0.3 1.5 1.5 1.5 to use any profits generated for health care services and also requires them to reduce administrative costs from 4% to 3.5% of Net financial expenditures of households 19.9 21.2 21.0 22.9 24.9 27.3 total annual premium payments. This imperfect risk adjustment mechanism and Total Resources 96.9 105.3 114.4 121.9 130.9 140.9 a lack of options to compensate for losses may encourage the HICs to ‘cheat’ the Public resources (% of GDP) 5.2 5.2 5.3 5.1 5.1 5.1 system instead of becoming more efficient purchasers. They may ‘cream skim’ and Private resources (% of GDP) 1.4 1.3 1.2 1.2 1.2 1.2 select healthier patients or provide poor quality of care in order to compensate for Total resources (% of GDP) 6.6 6.5 6.4 6.3 6.3 6.3 high cost patients. Source: 2007–2010 General Health Policy Framework2; e: estimation, p: projection The case for risk adjustment Individuals require a wide variety of health adjust their premium rates to accom- efficiency. These include the recent revela- care services throughout their lifetimes, modate for health care expenditure risks, tions that individuals have been reinsured depending on their personal characteristics there may be a motivation to engage in by HICs without their knowledge, while and behaviour, social, economic and hidden selection to improve the health misleading advertisements have also been physical environment. As a result, profile of the pool of the insured. In published, including offers of products purchasers of health care services have to addition, undersupplying care to those that cannot be provided or products finance a range of health care expenditures. patients who need it, and oversupplying it clearly targeted at the healthier part of the While for some individuals, these expendi- to healthier ones, or simply not treating population.3 While not all of these activ- tures can to some extent be planned for those cases that are expensive, are ways ities can be directly attributed to risk (for example, patients with a chronic that HICs can attempt to reduce high selection, some clearly aim to attract the condition), for others they are more health care expenditures. healthier element of the population into their insurance pools. Moreover, anecdotal unpredictable. Therefore, in countries with While the evidence from Slovakia is still evidence suggests that HICs may have plural systems of health care service scarce, there have been several instances been involved in selection activities for one purchasers, such as Slovakia, where which suggest that HICs may have been group of patients who represent a premiums are set by law and HICs are not engaging in risk selection instead of substantial portion of annual health expen- allowed to openly select their enrolees or focusing on improvements in quality and ditures – people requiring renal dialysis.

Lucia Kossarova is reading for a PhD, *Risk adjustment can be defined as the use of information to calculate the expected LSE Health, London School of Economics health expenditures of individual consumers over a fixed interval of time and set subsidies and Political Science.. to consumers or health plans to improve efficiency and equity (see Folland S, Goodman Email: [email protected] AC, Stano M, 20011)

27 Eurohealth Vol 14 No 2 EUROPEAN SNAPSHOTS

Table 2: Relative frequencies of dialysis in Slovak health insurance companies expansion of the current redistribution mechanism by health status parameters based on diagnosis, drugs, and presence of Health insurance company (HIC) A B C chronic disease or inclusion in a disease management program; or (iii) carve outs Number of dialysis patients per 1,000 1.62 0.28 0.56 where some services or diseases that HICs are likely to select by would be managed separately. Number of dialysis sessions per 1,000 155.36 30.32 47.32 One proposal6 to amend the 2004 Health Insurance Act (2004) sought the creation Number of dialysis sessions per N17–N19 diagnosis 19.66 3.92 7.73 of a ‘high risk pool’ which would be used to compensate HICs for cases above a 4 Source: Sanigest Internacional, 2003 certain threshold. This proposal seemed to be a positive step towards establishing risk While HICs may not be able to predict collected by the HICs are redistributed sharing, which is an ex-post tool where which patients will need dialysis, they may using two parameters: age (seventeen age HICs are retrospectively reimbursed for 5 limit access, for example by contracting groups) and gender. The insured are part of their costs and could to some extent with a more limited number of dialysis divided into age groups by gender, where mitigate high cost individuals that the age- 4 providers. Available data bear this out; each group has a corresponding cost risk gender redistribution mechanism does not examination of three HICs suggests great index, adjusted on a yearly basis, according account for. Unfortunately, this proposal variation in both the number of dialysis to historical data. Thus those HICs who has not been approved. patients and dialysis treatment sessions have enrolled a substantially higher provided (Table 2). number of more risky individuals, as Conclusion and recommendations determined by age and gender, are While regulatory measures and lawsuits The absence of an appropriate redistrib- compensated by the remaining purchasers against the HICs can to some extent ution mechanism coupled with a who have a less risky pool of citizens. This control such activities, it is necessary that continued lack of progress on this front mechanism is overseen by the Health Care should worry both policy makers and they be coupled with an appropriate risk Surveillance Authority. adjustment and redistribution mechanism; patients. Morbidity, through the use of one that will compensate for higher risks While risk adjustment based on demo- diagnosis, needs to be taken into consider- while at the same time not providing graphic parameters is better than no risk ation as a parameter for risk adjustment, or perverse incentives on cost-effectiveness adjustment at all, it does not take into failing this some other form of risk sharing and efficiency. account the health status of the population. should be introduced**. Without this A young male can be considered low risk HICs are likely to improve their “risk Current situation in Slovakia yet he could be suffering from a disease selection skills” by providing lower quality Slovakia has a system of mandatory social which is extremely costly to treat. If the services instead of improving efficiency. health insurance where citizens can freely HICs cannot adjust their premiums and For example, they can decide not to choose from six HICs, re-register once a redistribution depends on age and gender contract physicians who have an excellent year and are entitled to uniform benefits*. only, the health plans will incur substantial record of treating patients with chronic or The insurance premium is set out in the predictable losses on their high-risk expensive illnesses; the underlying aim law as a percentage of income to be paid members as demographic models are weak being to reduce the number of such by economically active citizens, self- predictors of individual expenditure and patients enrolled with their company. With 1 payers, while the state contributes from explain only up to 5% of overall variance. the prevalence of chronic diseases in general taxation for the economically Thus they will continue to be motivated to Slovakia (for whom costs are more inactive portion of the population. select low-risk members or take other predictable than acute episodes) now measures, including poor quality of care or becoming similar to that seen in other parts In order to achieve a certain level of reduced access to care for high-risk indi- of Europe, this is something that Slovakia fairness in the system Slovakia has been viduals, to reduce their costs. needs to worry about. developing its redistribution mechanism to compensate HICs for the potentially One of the main goals of the 2007–2010 Inappropriate incentives, a lack of under- 2 sicker and more costly patients. The risk General Health Policy Framework is to standing of the complexities of risk adjustment mechanism has undergone improve the redistribution mechanism. adjustment, implementation difficulties numerous changes, evolving from a system The Framework proposes the estab- and data weaknesses are the main areas lishment of (i) high risk pools which would where adjustment was only by age (two requiring the full attention of policy help to cover catastrophic costs such as age groups) to the one implemented in makers. The current system does not transplants or rare diseases; (ii) the 2005 where 85.5% of the premiums provide the right incentives for health care purchasers and recent changes in the law may have exacerbated the situation. While * Some insurance companies started to offer additional benefits such as screenings, home getting the incentives right is not an easy visits, vaccinations etc. However, there continues to be almost no competition on the task, only once policy makers begin to basis of benefits. understand the technicalities surrounding risk adjustment and its implications for ** (i) Proportional risk sharing; (ii) outlier risk sharing or iii) risk sharing for high-risks. access to quality care, can the necessary

Eurohealth Vol 14 No 2 28 HEALTH AND DEVELOPMENT changes be implemented. This has to go hand in hand with a focus on improving The Price is Right? data quality and a gradual implementation of the more refined risk adjustment mech- anism. Everyone involved in data collection and reporting needs to under- Promoting local production for stand how data is to be used and how it can contribute to the better functioning of the ARVs in Sub-Saharan Africa system. In addition, patients should also begin to share information on their experiences within the health care system, especially if in switching health plans, they have expe- Kinsley Wilson, Jillian Cohen-Köhler and Alan Whiteside rienced problems accessing care or have been denied care altogether,. Their inputs are essential. Finally, providers should Summary: Affordability is a key concern of European donors who finance clearly state to their patients if they cannot antiretroviral drugs (ARVs) to treat AIDS in Sub-Saharan African countries. provide appropriate care as a result of inappropriate incentives from HICs. In country manufacture of ARV drugs could favourably affect ARV access Disclosing all this information would help through increased affordability; however, generics are a volume based market, raise public awareness about the gravity relying on economies of scale. The ability of Sub-Saharan African countries to and importance of these issues. It would reduce their prices below large-scale manufacturers in India is challenging. also help encourage HICs to reduce their Additionally, these medicines must meet WHO prequalification standards. risk selection activities and facilitate While the cost of second-line ARVs remains a concern, donors should focus demands on policy makers to implement resources on other components ARV access, such as the supply of human an appropriate, fair and viable redistrib- resources for health, health infrastructure and issues of sustainable financing. ution mechanism. Keywords: ARV drugs, Access to medicines, Developing countries, Generic manufacture, Donor financing REFERENCES 1. Folland S, Goodman AC, Stano M. The Economics of Health and Health Care. New Jersey: Prentice Hall, 2001. To increase access to antiretroviral drugs been affordability. This is why the 2. Association of Health Insurance (ARVs) for treating AIDS in the devel- promotion of local production has the Companies of Slovakia. 2007–2010 General oping world, donor countries and multi- potential to address the critical issue of Health Policy Framework. Bratislava, 2007. lateral agencies have developed a variety of ensuring sustainable ARV supply. initiatives. In 2008, the European Available at: http://www.hpi.sk/images/ One of the barriers to ARV price in high Commission and European countries attachments/general_framework_2007.pdf prevalence HIV/AIDS countries is the provided over 60% (about €1.19 billion) of 3. Health Policy Institute. Health Policy World Trade Organization’s Agreement the Global Fund to Fight HIV/AIDS, News. Available at www.hpi.sk/news on the Trade Related Aspects of Intel- Malaria and Tuberculosis budget. With lectual Property (TRIPS). In exchange for 4. Sanigest Internacional. Calculation based these sustained pledges, Global Fund international trade liberalisation, TRIPS on data from HICs, 2003. supported programmes project to treat 1.8 requires twenty years of pharmaceutical 5. Pazitny P. The Redistribution Mech- million HIV infected patients over a five patent protection. This provides a market anism Requires a Review to Include year period.1 To equitably access this monopoly for patent holding drug Critical Diagnoses. Bratislava: Health treatment, the World Health Organization companies and enables them to set their Policy Institute, 2005. (WHO) emphasises a drug’s rational prices freely. ARV prices are often out of selection and use, sustainable financing and 6. Ministry of Health. Amendment to the reach for developing and least-developed Act on Health Insurance, 2007. Available affordable pricing, while also maintaining countries. In 2000, when few generic drugs at: http://www.health.gov.sk/redsys/ reliable health and supply systems.2 For were available, the lowest price triple rsi.nsf/0/2CDF5B67FA6C2AFCC1257274 ARV treatment, a notable challenge has combination ARV treatment was 003A60BB?OpenDocument US$10,439 (€11,326).3

Kinsley Wilson is PhD candidate and Since TRIPS took effect in 1995, interna- Jillian Cohen-Köhler is Assistant tional organisations, such as Médecins Professor, Leslie Dan Faculty of Sans Frontières (MSF), have encouraged Pharmacy, University of Toronto, both developing and the least-developed Canada. Alan Whiteside is Director, countries to exercise flexibilities in the Health Economics HIV/AIDS Research agreement and subsequent Doha Decla- Division (HEARD), University of ration in order to increase ARV access. KwaZulu-Natal, South Africa. Compulsory licensing authorises Email: [email protected] government use of a patent under public

29 Eurohealth Vol 14 No 2 HEALTH AND DEVELOPMENT health crises or a national emergency. A accessed for ARV production. In strengthens long-term health security, self- transition period allows developing and November 2006, a German non-govern- sufficiency and employment while also least-developed countries until 2006 and mental organisation, Action Medeor, part- saving foreign exchange.5 However, 2016, respectively, to implement pharma- nered with a Tanzanian manufacturer, research contends that a local manufac- ceutical patents in domestic legislation. Tanzania Pharmaceutical Industries, was turing industry is often not a viable alter- Both enable the domestic manufacture of successfully awarded this budget for the native for developing countries and does generic ARVs. construction of a new ARV plant. not necessarily reduce prices compared to imported drugs.6 Brazil and Thailand have been noteworthy Arising from these efforts, the question is: in their efforts to reduce the prices of can local ARV production increase The South African National Economic patent holding drug firms.3 In both coun- treatment access cost-effectively? The Development and Labour Council found tries, compulsory licensing threats initiated European Commission grant may suggest that 80% of a manufacturer’s profits on a significant price negotiations with multi- that domestic production should deliver generic drug will be captured within nationals. This, along with generic more affordable treatment, but this may eighteen months of the originator drug production of ARVs that were not not be the case, as the perennial debate of coming off patent.7 Therefore, unless a patented domestically prior to TRIPS, whether it is financially more attractive to generic manufacturer is one of the first to facilitated a more affordable scale up in ‘make’ or ‘buy’ still seems to rest on the enter, the ARV market essentially becomes treatment. India also made use of the latter. This article will discuss the ability of commodity-based and price is the distin- TRIPS Agreement’s 2006 developing Sub-Saharan African countries to produce guishing factor among products. WHO country transition period. By waiting to first-line ARV products at a competitive recommends, and donors require, interna- enforce product patents in its domestic price and quality while considering some tional competitive tenders to ensure the legislation, India fostered and expanded its emerging issues concerning the production lowest cost ARVs are procured. Here, generic drug industry. Following these of second-line therapies. razor-thin margins and large volumes are initiatives, a number of Sub-Saharan required to remain competitive. The African countries with substantial popula- Competitive pricing WHO promotes the ‘rule-of-five’ which tions of infected people (South Africa, With efforts from AIDS advocates and states that five bids on a tender engage Zimbabwe, Zambia, Tanzania, Uganda, international organisations, such as the enough competition to ensure the lowest Kenya, and Ethiopia) are reported to be William J Clinton Foundation and MSF, generic price.8 Competition facilitates trying to manufacture ARVs domestically. India’s generic firms paved the way for greater affordability by pushing prices dramatic ARV price reduction and now act down to marginal costs, but it is difficult Generic production is able to lower the as the major suppliers for developing for new manufacturers to match the price cost of drugs, since it does not have to countries. This occurred concurrently with of longstanding firms. carry the large research and development the development of domestic manufacture (R&D) costs of the drug discovery Currently, six generic manufacturers in Brazil and Thailand, while in South process. Within the WHO framework, produce a leading WHO prequalified Africa, the excessive pricing complaint local manufacture is assumed to predomi- treatment regime 3TC+d4T+NVP. The brought before the Competition nantly have an impact on the affordability most sophisticated generic drug industry Commission led to the first voluntary of drugs. This in turn improves the cost- in Sub-Saharan Africa is in South Africa. ARV licenses under reasonable royalty effectiveness of ARV therapy; frees The country’s leading ARV manufacturer, terms in a developing country. resources to increase treatment numbers; Aspen Pharmacare, currently produces its and strengthens other access components. Since 2000, first-line therapy prices have regime at a quoted price of US$158 (€106) The link between domestic production and plummeted from over US$10,000 (€6,700) per person per year.9 A least-developing access, however, relies on two conditions: per patient per year for patented products country manufacturer has yet to announce to under $100 (€67) per patient per year for a price publicly. Comparatively, the listed – that these medicines can be manufac- the leading triple therapy lamivudine, median transaction price in 2007 was tured more cheaply than they can be stavudine, and nevirapine (3TC+d4T+ US$92 (€62) and US$91 (€61) per patient imported; and NVP).3 This price reduction coupled with per year in low income and middle income – they will meet WHO prequalification increases in multilateral and bilateral aid countries, respectively.10 Even though standards required for donor financing. enabled WHO’s ‘3 by 5’ initiative to scale tendered prices often differ from the esti- up treatment numbers significantly. At the mated and listed prices, the disparity Donors have become involved in local end of 2006, an estimated 1.3 million between Aspen’s treatment cost and the production capacity-building. The devel- people in Sub-Saharan Africa were median price is noteworthy. opment of local capacity has been assisted receiving ARVs, equalling 28% coverage, by the European Commission, which in Therefore, within the access framework, up from 100,000 individuals or 2% 2003 established a health line grant for the question facing Sub-Saharan African coverage at the launch of the 2003 domestic drug manufacturing. The priority countries is whether they can make ARVs initiative.4 area specifically includes “technology inexpensively and justify their manu- transfer, leading to local production of While there is no doubt that generic facture over their import. They have affordable key pharmaceuticals and competition stimulates the reduction of limited resources and manufacturers lack commodities in prevention, treatment and drug prices and increases affordability, the vertical integration which limits their care of HIV/AIDS, malaria and tubercu- debate over domestic manufacturing in capacity and keeps production costs high. losis” and offered to finance proposals of developing countries remains polarised. The skilled labour necessary to develop up to €5 million. At present, the authors Advocates argue domestic production and formulate ARVs is sparse in Sub- are aware of only one example of this grant increases access to essential medicines; Saharan Africa compared to industrialised

Eurohealth Vol 14 No 2 30 HEALTH AND DEVELOPMENT countries (where drug discovery most quality of ARVs on the international are crucial for HIV/AIDS patients who commonly occurs) and the emerging market. The programme publishes a list of have failed or are resistant to first-line economies of India and China (where the certified products and manufacturers that therapy. As with first-line ARVs, there is generic industry flourishes). As an meet quality and safety standards to facil- an opportunity for generic competition to example, researchers employed in R&D itate the public procurement process. reduce prices and increase affordability. per million population amount to an Tenders financed with donor aid limit Second-line regimes, however, change average of 2,538 individuals across EU eligibility to WHO prequalified manufac- many of the ARV market characteristics as Member States, 708 individuals in China, turers and products. In Africa, only Aspen there is a smaller market size, higher devel- 119 in India, 307 in South Africa, and less Pharmacare, has achieved WHO prequal- opment costs and less competition than than 51 in any other reporting Sub- ification for a triple therapy regime. their first-line counterparts. Saharan African country.11 Therefore, the Donors and developing countries alike Currently, around 4% of adults and 1% of sheer size of China and India’s skilled appreciate WHO prequalification as it children are on second-line treatment in human resource population magnifies the streamlines regulation and quality low and middle income countries, approx- industry’s development potential and assurance where there are limited imating to 180,000 individuals in 2008. reduces labour costs compared to Sub- resources to assess ARVs independently. With such small demand a large generic Saharan African countries, with the However, it has come under some scrutiny. market does not yet exist for second-line possible exception of South Africa. DRAs striving to achieve national recog- treatments. As ARV resistance is estimated Most crucial to ARV production is the nition for their capacity suggest that their at a rate of 3% a year,13 alternative first and level of manufacturing capacity. The ability and authority to evaluate product second-line regimes will become a larger capacity to synthesise or extract active and manufacturer standards is undermined portion of ARV procurement. Important pharmaceutical ingredients (APIs) needed by the programme. For manufacturers, to the second-line regime is a newer class to formulate ARVs is the key to drug costs: achieving WHO prequalification is a of drugs, protease inhibitors, of which APIs are volume dependent and comprise rigorous process requiring a large upfront many are protected under patents (patents 55% to 99% of the manufacturers’ cost.12 investment and strong technical and devel- are currently pending in India for WHO’s Without the technology to manufacture opment resources that are often lacking in priority recommended lopinavir/ritonavir APIs, they must be imported from Sub-Saharan Africa. The costs associated and atazanavir). As a result, these ARVs producing countries, such as India and with the completion and submission of a are procured primarily by patent holding China. As a result, the fight for market product dossier can be over US$200,000 pharmaceutical firms and can be priced ten share is fierce as large and vertically inte- (€134,000) and the review process can last to twenty times greater than first-line grated API producing generic firms are up to twenty-four months. These upfront ARVs. Prices for the few generic second- positioned with lower costs and greater costs are difficult for a small local manu- line drugs available are also quite variable. economies of scale. In order to compete, a facturer to bear. As the eligibility criterion Generic prices for second-line regimes are Sub-Saharan African manufacturer needs disqualifies local manufacturers from often greater than those of patented to be assured an expanded national and/or donor financed tenders, these products are products with median prices ranging from regional market to generate the larger unable to compete in most public tenders. US$948 to US$4,245 (€635 to €2,844) volumes necessary to reduce the against US$865 to US$2,577 (€580 to Without meeting WHO prequalification contracted price of APIs. This is difficult €1,727), respectively.14 As these prices requirements, local industry can only in the public tender system where quan- consume a substantial proportion of donor compete in tenders supported by domestic tities are generally determined once the and government budgets, advocates call for financing where (unless specified by the tender is awarded, but pricing is required these prices to be reduced further. tender board) only local DRA approval is upfront. required. This occurs, for example, within This is difficult with few second-line the Ministries of Health of countries like generics currently on the market. A few Quality matters Brazil and Thailand where government patent holding drug firms have contracted At the end of 2007, programmes supported financing procures ARVs from their state- non-exclusive licenses for second-line by the Global Fund reported that 1.1 owned enterprises. However, it is a chal- ARVs to Indian and South African manu- million individuals in Sub-Saharan Africa lenge to convince Sub-Saharan African facturers (such as Bristol Myers Squibb’s were receiving treatment.4 These and other country governments who have much atazanavir to Emcure Pharmaceuticals and donors, especially European governments, larger populations on ARVs and who rely Aspen Pharmacare). Efforts are also the United States President’s Emergency heavily on donor aid to finance their own underway in Thailand to import, as well as Plan for AIDS Relief (PEPFAR), and ARV procurement programmes entirely. produce, generic versions of Abbott’s development agencies, play a critical role This is particularly the case if there are lopinavir/ritonavir and Merck Sharpe and in ARV market entry as they largely questions of ARV price and quality. Dohme’s alternative first-line ARV finance procurement in Sub-Saharan efavirenz under compulsory licenses Africa. With donor financing, ARVs must The next generation issued in 2007 and 2006, respectively. meet a minimum quality threshold in Currently, a significant number of first- However, both the European Commis- international competitive tenders: WHO line generics are on the market. Eleven sioner for Trade and the Office of the prequalification. WHO prequalified generic manufacturers United States Trade Representative The WHO prequalification programme produce a range of first-line ARV (USTR) emphasised their deep concern was introduced in 2001 to assist devel- products. The issue of affordable supply, over the process of compulsory licensing oping countries without stringent drug therefore, is now being directed toward to the Thai Ministry of Commerce. As a regulatory authorities (DRAs) to assess the second-line regimes. These ARV regimes result, Thailand was placed on the Priority

31 Eurohealth Vol 14 No 2 HEALTH AND DEVELOPMENT

Watch List of the annual USTR Special 301 facture in Sub-Saharan Africa, under 5. African Union. Pharmaceutical Manu- trade report. This international trade current constraints, is difficult to achieve facturing Plan for Africa. Third Session of pressure to enforce patents stalls generic successfully. It is not presently in the the African Union Conference of Ministers ARV market entry and contradicts the interest of patients, the governments of of Health. Johannesburg; 9–13 April 2007. intention of the European Commission their countries, donors or drug companies. Available at http://www.africa- grant to support manufacture of generic union.org/root/au/Conferences/2007/octo Consideration has and should be taken to ARVs. However, it is unlikely that this ber/sa/Pharmaceutical/Pharmaceutical%20 develop regional cooperation among Plan-CAMH%20MIN.%208(III).doc trend will stop as the imposition of TRIPS- DRAs and manufacturers to shorten the plus standards on countries is now a core 6. Kaplan W, Laing R. Local Production of time to market authorisation and to pool strategy of the research-based pharmaceu- Pharmaceuticals: Industrial Policy and procurement volumes to increase tical industry, primarily through the impo- Access to Medicines. An Overview of Key economies of scale, respectively. Politically, sition of new standards under bilateral and Concepts, Issues and Opportunities for however, an initiative of this type seems regional trade agreements. Future Research. HNP Discussion Papers. unlikely. Manufacturing is not solely an Washington D.C: The World Bank, 2005. Market entry also lags for many second- issue of access, but also economic devel- 7. Maloney C, Myburgh A. The Growth opment. It must address issues of line products because of small volumes, Potential of the Pharmaceuticals Sector in pending patent status (in India), time for financing, technology, employment, self- South Africa: Background Working Paper. development, increased technological sufficiency, and revenue requiring policies Johannesburg: Genesis, 2007. complexity and its associated costs, as well that are difficult for a region to agree upon. 8. World Health Organization. Essential as DRA and WHO prequalification appli- Additionally, of particular note to donor Drugs and Medicines Policy Interagency cation processes and delays. What these countries is that financing drug Pharmaceutical Coordination Group. licenses and other generic production procurement and encouraging local Operational Principles for Good Pharma- efforts will mean for price reduction has production efforts fails to address many ceutical Procurement. Geneva: WHO, yet to be determined. There is concern that other critical components of the WHO 1999. the multiple voluntary licenses may make access framework that prevent affordable it increasingly difficult for advocates to 9. Joint Civil Society Monitoring Forum. medicines from reaching patients. ARV Drugs and Costs. Cape Town: suggest there is a lack of competition in the Increased donor attention should address JCSMF, 2008. Available at marketplace in order to negotiate further shortages of human resources, patient http://www.jcsmf.org.za/?q=drugs/drug_ price reductions. adherence and sustainability of pledged type The issue of second-line ARVs, therefore, donor financing. While increasing the 10. World Health Organization. A encourages least-developed countries to number of people receiving treatment is a Summary Report from the Global Price utilise their 2016 transition period and short-term goal that provides impressive Reporting Mechanism on Antiretroviral manufacture these drugs, such as current statistics, it neither addresses sustainability Medicines. Geneva: WHO, 2008. efforts underway in Tanzania. Yet, like nor does it improve the fragmented health 11. United Nations Development first-line regimes, their ability to do so system and poor health infrastructure that Programme. World Development Report remains in question. In Tanzania, second- limit the availability of treatment and basic 2007/2008. Geneva: UNDP, 2008. line drugs are not tendered publicly, but care. Available at http://hdr.undp.org/en/ financed, procured, and supplied by statistics PEPFAR. Market penetration is limited 12. Pinheiro E, Vasan A, Kim JY, Lee E, REFERENCES without US Food and Drug Adminis- Guimier JM, Perriens J. Examining the tration approval or WHO Prequalifi- 1. Global Fund for HIV/AIDS, Tubercu- production costs of antiretroviral drugs. cation. losis, and Malaria. Fighting AIDS. Geneva: AIDS 2006;20(13):1745–52. Global Fund. Available at 13. World Health Organization. Priori- The way forward? http://www.theglobalfund.org/en/about/ tizing Second-Line Antiretroviral Drugs for In order to maximise ARV treatment aids Adults and Adolescents: A Public Health access through affordable pricing, tenders 2. World Health Organization. Policy Approach. Report of a WHO Working must seek the lowest cost quality drugs Perspectives on Medicines – Equitable Group Meeting. Geneva: WHO, 2007. available. This is typically the system in Access to Essential Medicines: A 14. Waning B. Utilizing Electronic Data place in Sub-Sahara African countries as Framework for Collective Action. Geneva: (GPRM) to Monitor & Improve ARV donors stipulate international competitive WHO, 2004. Available at Medicine Prices: A Case for Picking the tenders to procure ARVs. The success of http://whqlibdoc.who.int/hq/2004/WHO_ Low Hanging Fruit. London: Department local manufacturers then relies on the EDM_2004.4.pdf for International Development, 2007. capacity of the firm to achieve two 3. Médecins Sans Frontières. Untangling Available at http://www.dfidhealthrc.org/ necessary components of donor financed the Web of Price Reduction: A Pricing MeTA/documents/Brenda%20Waning tenders: international quality standards Guide for the Purchase of ARVs for Devel- %20ARV%20Prices%20MeTA%202-28- and economies of scale to lower price. The oping Countries. 10th edition. Geneva: 07.ppt targeted financial support from the Médecins Sans Frontières, 2007. Available European Commission has resulted in at www.accessmed-msf.org only one grant of which we are aware and 4. WHO/UNAIDS/UNICEF. Towards its position on the use of TRIPS safeguards Universal Access: Scaling up Priority to promote generic manufacturing appears HIV/AIDS Interventions in the Health contradictory. We believe that local manu- Sector. Geneva: WHO, 2007.

Eurohealth Vol 14 No 2 32 HEALTH AND DEVELOPMENT Public-private sector partnerships as a means of development in Africa, in the context of HIV/AIDS

Gavin George and Tim Quinlan

Summary: Where and how the private sector can work in partnership with public agencies to improve human welfare is a wide ranging public debate. The broad issues, nonetheless, have been resolved; for example, the ‘Millennium Development Goals’ affirm the need for multi-sectoral, co-ordinated interventions and Corporate Social Responsibility is now an axiom of sound business practice. Indeed, private- public ‘partnerships’ are an accepted premiss for stimulating national development in the countries where there are HIV/AIDS epidemics. Where there is much debate, however, is over the details of where and how these partnerships can and do work effectively. Here, we focus on one ‘big’ question: how to promote development in the context of HIV/AIDS? We also focus on one set of issues, the role of the private sector in public health management in countries with HIV/AIDS epidemics.

Keywords: public-private partnerships, HIV/AIDS, treatment, health

"If health systems are to be considered the vehicle for the delivery of services and This includes community outreach where interventions to deal with HIV/AIDS, [the public health community] has over the the employer covers the costs of antiretro- last few years tended to neglect the vehicle". Much more attention has been paid to viral drugs for permanent employees and getting the passengers into the vehicle and determining where the vehicle is supposed the Global Fund or other donors extend to go, as opposed to trying to address the deficiencies of the vehicle itself." (McCoy)1 access to these drugs to the families, contractors and the local community.3 The quote above by McCoy succinctly of private sector health-oriented interven- Here, however, we draw attention to prac- captures the widespread concerns, past and tions. tical challenges facing the private sector, present, about the capability of public Today, there is little to contest over the which exist irrespective of arguments health services in Africa to confront the capability of the private sector to play a about where and how companies can HIV/AIDS pandemic. A case in point is critical role, particularly in developing contribute to the public good in rolling the ongoing, very public debate on the countries, to reduce poverty and improve back the pandemic and whether they can exodus of health professionals from Africa, public health through independent and co- do more than they are doing. In other their active recruitment by health services operative interventions.2 Indeed, private- words, we ask what precisely are a in the ‘north’, and subsequent government public ‘partnerships’ are an accepted ‘vehicle’s deficiencies’? We discuss this policy changes in some European and premiss for stimulating national devel- question in relation to the global effort to African countries to mitigate the problems opment in the countries where there are expand anti-retroviral treatment (ART) created for the public health services in HIV/AIDS epidemics. The International programmes and, specifically, to the Africa.* Our contention is that McCoy’s Labour Organization (ILO), the Global evolution of workplace ‘wellness/health observation also applies to the current state Fund, and other partners are working management’ programmes in South Africa. together to support expanding public- Our purpose is to illustrate policy-relevant issues that lie beneath debates about the Gavin George is Senior Research Fellow private partnerships in the world of work. and Tim Quinlan Research Director at the Health Economics and HIV/AIDS Research Division (HEARD) of the * South Africa, for instance, entered into an agreement with the United Kingdom in 2003 University of KwaZulu Natal, South which made allowances for health professionals of one country to work in another for a Africa. Email: [email protected] specified period.

33 Eurohealth Vol 14 No 2 HEALTH AND DEVELOPMENT need for, and possible forms of private- as we noted above, demands multiple Even allowing for a sizeable margin of public sector partnerships. interventions. Those interventions entail error, these statistics show that South substantive investment in expertise either Africa has yet to achieve substantive Core challenges through ‘in-house’ employment of health success with regard to containing HIV and Large multi-national corporations are professionals or payment to external AIDS. Numerous reasons are put forward providing a lead in South Africa on the service providers. The long term logic and for this failure, ranging from a prevailing design and implementation of health scope of those investments inevitably culture of stigma and discrimination to management programmes. We refer here to raises consideration of collaboration with lack of political will. We have no reason to the impetus towards comprehensive health the public health sector, as at some point doubt the explanations nor, indeed, the services which include multiple interven- companies must confront issues such as possibility of significant inroads into the tions (for example, education and drug procurement and enabling retrenched epidemic within the next few years as the awareness programmes; voluntary coun- staff to migrate to public treatment manifold small and large scale interven- selling and testing[VCT]; access to, or programmes. tions begin to have direct and indirect direct provision of ART – and nutritional effects. However, ambitions for co-ordi- In turn, the lack of precedents demands supplements – to staff in need; extension nated intervention with attendant multi- experimentation which is reflected in of these services to workers’ spouses; and plier effects, based on private-public sector South Africa, in the existence of different support of ‘community-based interven- partnerships, will not be achieved without models of health care within the private tions).4 These companies have an consideration of the core challenges. sector. Likewise, there are standard advantage over public health services on protocols for health care in South Africa’s In the first instance there are structural several grounds; for example, defined, public health service but, in practice, there constraints to consider. Sengwana and concentrated populations and considerable is huge variation from the norm and Veenstra, for instance, recorded that financial resources to develop services. between different provincial and local managers at all levels of the public health However, the results to date are disap- health service departments and, indeed, services spoke more readily of limited pointing: while many companies can boast between different hospitals and clinics.** capacity to deliver services in health care high participation rates in education and facilities, than management capacity defi- awareness programmes and in VCT Our central argument, therefore, is that ciencies.9 As a result, health workers campaigns, few, if any can show high debates about, and policy-making on, shortages came across as a more pressing uptake rates of workers in ART public-private sector partnerships all too issue than capacity deficiencies resulting programmes*.4 Furthermore, workers easily focus on form and satisfy political more specifically from the decentralisation who do enrol for treatment usually do so and ideological interests at the expense of of management functions. The shortage of when they are too sick to work, thereby appreciating the necessity of experimen- health care workers was moreover not negating the fundamental purpose of a tation and innovation. related to the number of posts, but was workplace programme, which is to keep rather attributed to the limited number of workers healthy and productive. The situation in South Africa health care workers trained, inadequate In 2003 the South African government At root, private sector health initiatives recruitment procedures, poor human announced that it would begin providing encounter two core challenges which resource management impacting on treatment through the public health confront all health systems in countries retention, and increasing deaths among service. However, the roll out has been where there are HIV/AIDS epidemics. nurses as they succumbed to HIV/AIDS.10 extra-ordinarily slow even though the One is the lack of precedents on how to public programme added greatly to the Wadee and Khan highlighted the general contain and manage HIV/AIDS; hence, number of people who were accessing shortage of health workers in South the imperative for innovation in health treatment via non-governmental organi- Africa.11 Very recently, the government systems delivery. The second is the sation and private sector services. In 2006, reaffirmed its approach to tackling this quantum leap involved in conceiving and the estimated total number of people problem. In reply to a question in implementing comprehensive programmes needing treatment was 711,000.5 By 2007, parliament, the Minister of Health which are effective in both preventing the approximately 306,000 people were reported that her department had, in the transmission of the virus and treating those receiving treatment,6 having risen from sixteen month period, since November who are infected. There is little resem- 280,000 in 20067 and from less than 50,000 2006, appointed '507 doctors – predomi- blance between standard occupational in 2003.8,9 Currently (April 2008), South nantly from developing countries' to health programmes and ‘wellness’ Africa’s public media is broadcasting that public sector posts (Mercury newspaper, programmes. The latter invokes the ‘2%’ of the population has tested for 28th March 2008). concept of the ‘continuum of care’ which, HIV.***

* A review of company websites will show that it is very difficult to find figures on actual numbers and proportion of staff on treatment and other success indicators such as treatment adherence rates and survival rates. This same is evident in the case of South Africa’s public health services at national, provincial and local levels.

** As revealed in a HEARD project establishing the cost effectiveness of different models of antiretroviral treatment programmes across clinical sites in KwaZulu Natal in urban and rural settings.

*** In a country with approximately 40–44 million inhabitants, this percentage suggests that approximately eight to nine hundred thousand people know their status, thereby intimating that those who do get tested are predominantly those who are both HIV positive and have sought treatment.

Eurohealth Vol 14 No 2 34 HEALTH AND DEVELOPMENT

Table 1: Medical practitioners by population for the private and public sectors history of workplace programmes since 2000 reveals that companies often start Ratio medical practitioner to Medical practitioners with education and awareness population per 100, 000 population programmes, proceed towards provision of ART, incorporate supplementary Public sector dependents 1 per 4219 23.7 services such as food supplements and then are driven to expand further through providing access to services for workers’ Medical scheme beneficiaries 1 per 602 166.3 spouses and/or supporting HIV/AIDS ‘supply chain’ initiatives (assisting Source: Wadee H, Khan F, 2007.11 companies that supply them with compo- nents or other services). Less discernable but in the same vein are initiatives within The shortage is exacerbated by the uneven campaigns (VCT and company-wide the public sector. A conference on ART distribution of health workers between the sero-prevalence surveys) as factors that services included many reports by clini- public and private health sectors. Table 1 disrupt daily production demands and cians and managers of public health service shows the number of medical practitioners so they reluctantly support employee facilities that outlined how they had or available to those served by the public and participation in them; were changing protocols and procedures private sector respectively. Additionally, – Insufficient training, time or means and creating opportunities to collaborate the retention of health workers appointed given to peer educators to interact with with surrounding communities and busi- to rural posts is difficult and rural areas employees; nesses and NGOs in a quest to improve tend to have a lower ratio of health the effectiveness of both their prevention workers to population than urban areas.12 – Disincentives such as when contract or and treatment programmes.* In some cases casual employees see that they are What these figures also allude to is the these innovations were being done with entitled to VCT services but access to existence in South Africa of distinct the approval of local health authorities (for treatment is restricted to permanent parallel health services that are not example, Cape Town). In many cases, employees; mutually supportive. Simply put, the however, they were initiatives of frustrated public health services serve, however – Workers not seeking treatment if they clinic and hospital staff who were prepared imperfectly, the majority of the population have not disclosed to their spouses to dispense with formally sanctioned and primarily the sub-population of HIV and/or the latter do not have access to protocols. These dynamics are significant infected people, while the private sector treatment. for revealing not only the current experi- serves a small minority of the national mentation within health programmes in – Interventions that ‘do not speak’ to the population and primarily those who are South Africa but also for indicating the individual, taking into account factors not infected (as attested by their success inevitable outcome: a diverse range of such as age, gender, social circumstances with VCT campaigns). models, structures and partnerships; in and culture. short fragmented evolution of public and Both sectors have limited reach. In the case Yet, these problems along with those of private health services. of the public health services there are few stigma and discrimination are what stimu- facilities where individuals can get tested – lates innovation and experimentation by Conclusion the current government policy is for one managers –in the public and private sector We have outlined the expansion of health- facility per district. There are more facil- - to improve the reach and effectiveness of related services in South Africa to illustrate ities which provide treatment if necessary their HIV/AIDS services. In the public the dynamic nature of private and public but they are not always the same as those sector, the government began in 2004 to sector initiatives in contexts where there which provide testing; hence people need dismantle HIV/AIDS specific programmes are rampant HIV/AIDS epidemics. Our to travel and make different arrangements and to integrate them into normal health purpose has been to qualify the long- to get access to treatment. Private sector service programmes and infrastructure. standing interest in public-private sector employees access treatment through They also began to expand services such as partnerships as a means to combat HIV medical insurance or as a contract benefit if looking for better ways to ensure and AIDS and, more broadly, to enable employed by companies that operate adherence to treatment, establishing development in the context of HIV/AIDS comprehensive workplace programmes. ‘youth-friendly’ clinics (where adolescents epidemics. Such partnerships may be Furthermore stigma and discrimination are would not face moralistic injunctions from desirable but, in practice, their form and frequently cited by managers in both staff) and increasing the number of facil- content (hence the actual role of the private sectors and, indeed, by individuals as ities that provide treatment.14 sector) cannot be prescribed in view of the reasons for low levels of participation, be it experimentation and innovation that is for VCT or ART in any facility.4 Changes to private sector workplace occurring in the absence of effective solu- programmes in the mining industry and in Nonetheless, other more prosaic reasons tions to curbing HIV/AIDS in developing the automotive industry illustrate the are emerging. In the private sector, these countries. Nonetheless, we discern an general direction of both the private and include:13 opportunity in these circumstances for public sectors. Put schematically, the – Lack of ‘buy-in’ from management; for example, when line managers and supervisors view interventions such as * Roundtable on Health Systems and Antiretroviral Access, Bloemfontein, 22 and 23 peer education and ‘know your status’ October 2007.

35 Eurohealth Vol 14 No 2 HEALTH AND DEVELOPMENT policies that support the drive towards 2. McDaid D. Corporate Lifelines: a new (eds). State of the Nation Review. Pretoria: private-public sector partnerships. The approach to making poverty history. Euro- HSRC, 2004. private sector has proved capability to health 2006;14(4):18–21. 9. Sengwana M, Veenstra N. Phase 1 and achieve an essential first step in containing 3. UNAIDS Best Practice Collection. Phase 2 Reports of the Burden of the transmission of HIV: widespread Access to Treatment in the Private-sector HIV/AIDS on Public Health Services in participation in VCT campaigns. It has not Workplace. The Provision of Antiretroviral KwaZulu-Natal. HEARD: Durban, 2005. achieved substantive success in expanding Therapy by Three Companies in South 10. Ijumba P, Barron P (eds). South African access to treatment. However, it has Africa. Geneva: UNAIDS Publications, Health Review 2005. Durban: Health demonstrated capability to systemic inno- 2005. Systems Trust, 2005. vation; in short greater flexibility and 4. George G. Workplace ART 11. Wadee H, Khan F. Human resources commitment than the public sector to act programmes: Why do companies invest in for health. In: Harrison S, Bhana R, Ntuli upon experience and evidence. These are them and are they working? African A (eds). South African Health Review. characteristics which support greater Journal of AIDS Research Durban: Health Systems Trust, 2007. funding support from international 2006l;5(2):179–88. 12. Kotzee T, Couper I D. What interven- agencies to companies specifically. 5. Dorrington RE, Johnson LF, Bradshaw Inevitably, companies come up against the tions do South African qualified doctors D, Daniel T. The Demographic Impact of think will retain them in rural hospitals of same challenges as the public health HIV in South Africa, National and the Limpopo province of South Africa? services such as drug procurement and lack Provincial Indicators for 2006. Cape Town: Rural and Remote Health 2006; 6(581). of health-care infrastructure. Providing Centre for Actuarial Research, South support on the basis of their capability to African Medical Research Council and 13. George G, Quinlan T. ‘Health systemic innovation is a required step Actuarial Society of South Africa, 2006. management’ in the private sector in the context of HIV/AIDS: progress and chal- towards making public-private sector part- 6. ITPC (International Treatment nerships an effective option. lenges faced by company programmes in Preparedness Coalition). Missing the South Africa. Sustainable Development, Target. San Francisco: ITPC, 2007. Forthcoming 2008. Available at www.aidstreatmentaccess.org REFERENCES 14. Andrews G, Pillay Y. Priorities for the 7. Grimwood A, Almeleh C, Hausler H, national health system (2004–2009): 1. McCoy D. National Leadership, Inter- Hassan F. HIV and Tuberculosis Update. Contributions towards building a model national Cooperation Keys to Effective Capetown: Treatment Action Campaign, developmental state in South Africa. In: AIDS Response. Coverage of the Sixth 2007. Available at www.tac.org.za Ijumba P, Barron P (eds). South African International Conference on Healthcare 8. Quinlan T, Willan S. Finding ways to Health Review 2005. Durban: Health Resource Allocation for HIV/AIDS, contain the HIV/AIDS epidemic: South Systems Trust, 2005. Washington, DC, October 13–15, 2004. Africa 2004–5, In: Daniel J, Southall R

Health Economics, Policy and Law

International trends highlight the HEPL invites high quality contributions in confluence of economics, politics and health economics, political science and/or law, legal considerations in the health within its general aims and scope. Articles on policy process. HEPL serves as a forum social care issues are also considered.The for scholarship on health policy issues recommended text-length of articles is from these perspectives, and is of use 6–8,000 words for original research articles, to academics, policy makers and health 2,000 words for guest editorials, 5,000 words care managers and professionals. for review articles, and 3,000 words for debate essays. HEPL is international in scope, and publishes both theoretical and applied work. Considerable emphasis is placed on rigorous conceptual Instructions for contributors can be found at development and analysis, and on the presentation of empirical evidence www.cambridge.org/journals/hep/ifc that is relevant to the policy process. All contributions and correspondence should be sent to: Anna Maresso, Managing Editor, The most important output of HEPL are original research articles, LSE Health, London School of Economics and although readers are also encouraged to propose subjects for editorials, Political Science, Houghton Street, London review articles and debate essays. WC2A 2AE, UK. Email [email protected]

Eurohealth Vol 14 No 2 36 Mythbusters

Myth: We can improve quality one doctor at a time

The solo doctor who embodies every process comes to improving clinical practice,11 and the needed to ensure highest quality care is now same is true for improving quality in health nearly a myth. All physicians depend on care.12,13 A more promising strategy would bear systems, from the local ones in their private in mind not only the evidence on effective offices to the gargantuan ones of national health practice, but the evidence on how to transform care.1 Quality problems are pervasive. But poor the health care system at large. quality is not a result of a series of individual mistakes.2 No simple prescription While the popular focus is on solo doctors, we Individual doctors are often singled out as ‘bad know “no person acting alone is as effective as a apples’ when health care safety is lacking.3 In team to drive best practices and outcomes.”14 the same way, when it comes to achieving a And looking beyond the clinical level, a broader high-quality health care system, doctors are team exists. It is at the macro level, where frequently regarded as the system’s lone rangers, managers and policy makers drive system-wide standing to improve quality of care one ‘first- quality improvement initiatives, including 1 rate’ doctor at a time. But the performance of greater use of information technology, the health care system depends on the actions of performance measurement and reporting, and many players: just imagine a rowing boat with a integration of services. team of rowers pulling on the oars; one is a doctor and is rowing at a completely different Few would dispute the significance of inter- rhythm from the rest of the team. Progress will professional collaboration in promoting safe, 15,16 be slow, frustrating for all, and with a great deal efficient, and quality health care. Teams are of splashing and bruising. less prone to making mistakes than individuals, especially when team members are well aware of The belief that quality of health care rests solely their own and their team members’ roles and on the shoulders of doctors has led to strategies responsibilities.17,18 And a health care system focused on improving the quality of care offered that supports effective teamwork can improve by individual physicians through approaches the quality of care through enhanced patient such as clinical practice guidelines. Clinical safety and reduction of workload issues causing guidelines have long been regarded as key to burnout among health care professionals.19 improving quality of care; this idea is based on Systematic reviews of collaboration and the notion that if we gather the evidence on teamwork also show effectiveness across a range appropriate health care for specific circum- of chronic conditions – from cancer to mental stances and tailor this evidence to the needs of health to geriatric care – ultimately leading to individual practitioners, we can improve profes- shorter hospital stays, reduced costs, and sional practice and health outcomes.4 Unques- increased patient satisfaction.20–23 An additional tionably, guideline development is worthwhile, benefit of teamwork is its ability to help with but doctors face a number of barriers — effective transfer of evidence to practice.8 including those that are beyond their control — Mythbusters are prepared by that serve to undermine guideline implemen- Taking a systems approach Knowledge Transfer and tation.5–7 For example, physician adherence to Exchange staff at the Another important contribution from research Canadian Health Services clinical guidelines often relies on systems-level is to consider processes (such as information 24 Research Foundation and improvements such as acquisition of new and patient flow) and systems (suites of published only after review resources, facilities, and enhanced staff processes) for improving health care by a researcher expert on the support.5,8,9 One academic put it best when he outcomes.25 topic. said “there has been a preponderance of patient- The ‘theory of continuous quality level outcome studies within a biomedical The full series is available at improvement’ (or CQI) counteracts the still- paradigm which is incomplete without attention www.chsrf.ca/mythbusters/ popular ‘theory of bad apples’1,3 and operates to the context within which patients receive index_e.php. on the principle that, while health care providers their care.”10 This paper was first published aim to do their best, they are limited by faulty in 2007. © CHSRF, 2007. There’s undeniably no ‘magic bullet’ when it health care processes.1,25,26 With an emphasis on

37 Eurohealth Vol 14 No 2 A series of essays by the Canadian Health Services Research Foundation on the evidence behind healthcare debates

improving processes and systems for Why don’t physicians follow clinical Salas E, Barach P. Medical Teamwork and improving health care quality, CQI initia- practice guidelines? A framework for Patient Safety: The Evidence Based tives take the heat off individuals. improvement. Journal of the American Relation. American Institutes of Research, Medical Association 1999;282(5):1458–65. 2003 Available at www.air.org/teams/ One example of CQI functioning at its publications/MTT/AIR_Lit_Review.pdf best comes from the American 6. Natsch S, van der Meer JWM. The role of clinical guidelines, policies and stew- 17. Smith-Jentsch KA, Salas E, Baker DP. Department of Veterans Affairs (VA), ardship. Journal of Hospital Infection Training team performance-related which initiated a “system-wide re-engi- 2003;53:172–76. assertiveness. Personnel Psychology neering” to improve its quality of care in 1996;49:909–36. the mid-1990s.27 Taking a systematic 7. Lomas J. Teaching Old (and Not so Old) approach to measure, manage, and be Docs New Tricks: Effective Ways to 18. Salas E, Cannon-Bowers JA. The held accountable for quality, the VA saw Implement Research Findings. Hamilton: science of training: A decade of progress. Annual Review of Psychology a drastic upgrade in its overall McMaster University Centre for Health Economics and Policy Analysis Working 2000;52:471–99. performance, with statistically significant Paper, 1993. improvements for all quality indicators 19. Canadian Health Services Research collected from 1994–95 through to 8. Grol R, Grimshaw J. From best evidence Foundation. Teamwork in Healthcare: 2000.27 In addition to instituting routine to best practice: effective implementation Promoting Effective Teamwork in quality indicators and performance meas- of change in patients’ care. Lancet Healthcare in Canada. Ottawa: CHSRF, urements and introducing an electronic 2003;362:1225–30. 2006. Available at www.chsrf.ca/research_ themes/pdf/teamwork-synthesis- medical record system, the VA’s success 9. Di Blasi Z, Harkness E, Ernst E, report_e.pdf relied on performance contracts and Georgiou A, Kleijnen J. Influence of making performance data public, which context effects on health outcomes: A 20. Bower P, Sibbald B. On-site mental served to make managers accountable for systematic review. Lancet 2001;357:757–62. health workers in primary care: effects on meeting quality improvement goals.27 10. Sheldon TA. It ain’t what you do but professional practice. Cochrane Database the way that you do it. Journal of Health of Systematic Reviews, 2000, Issue 3. Conclusion Services Research and Policy 2001;6(1):3–5. 21. Hearn J, Higginson IJ. Do specialist Physicians aim to provide quality health 11. Oxman AD, Thomson MA, Davis DA, palliative care teams improve outcomes for care for their patients, but they cannot Haynes RB. No magic bullets: A cancer patients? A systematic literature achieve high-quality health care alone or systematic review of 102 trials of interven- review. Palliative Medicine 1998;12:317–32. without support. If we are to improve tions to improve professional practice. 22. Rubenstein LZ, Stuck AE, Siu AL, health care quality, we must focus our Canadian Medical Association Journal Wieland D. Impacts of geriatric evaluation attention at the systems level – the ‘big 1995;153(10):1423–31. and management programs on defined picture’ – and involve multiple actors, 12. Institute of Medicine. Crossing the outcomes: Overview of the evidence. from health care providers to managers quality chasm: A new health system for the Journal of the American Geriatrics Society and policy makers. 21st century. Washington, D.C.: National 1991;39:S8-S16. Academies Press, 2001. 23. Sulch D, Kalra L. Integrated care 13. Woolf SH. Patient safety is not enough: pathways in stroke management. Age and REFERENCES Targeting quality improvements to Aging 2000;29:349–52. 1. Berwick D. Continuous improvement as optimize the health of the population. 24. Ovretveit J. Pathways to quality: A an ideal in health care. New England Annals of Internal Medicine framework for cost-effective team quality Journal of Medicine 1989;320(1):53–56. 2004;140:33–36. improvement and multiprofessional audit. 2. Rachlis M. Prescription for Excellence. 14. Montague T. Patient-provider partner- Journal of Interprofessional Care Toronto: HarperPerennialCanada, 2004. ships in healthcare: Enhancing knowledge 1994;8(3):329–33. 3. Canadian Health Services Research translation and improving outcomes. 25. James BC. Implementing practice Foundation. Myth: We can Eliminate Healthcare Papers 2006;7(2):56–61. guidelines through clinical quality Errors in Healthcare by Getting Rid of the 15. Baker DP, Gustafson S, Beaubien JM, improvement. Frontiers of Health Services ‘Bad Apples’. Ottawa: CHSRF, 2004. Salas E, Barach P. Team training in health Management 1993;10(1):3–37. Available at www.chsrf.ca/ care: A review of team training programs 26. Berwick D. A primer on leading the mythbusterspdf/myth15_e.pdf and a look toward the future. Advances in improvement of systems. British Medical 4. Field MJ, Lohr KN. Clinical Practice Patient Safety: From Research to Imple- Journal 1996;312:619–22. Guidelines: Directions for a New Program. mentation. Rockville: Agency for 27. Jha AK, Perlin JB, Kizer KW, Adams Washington, D.C.: National Academy Healthcare Research and Quality, 2005. Dudley R. Effect of the transformation of Press, 1990. Available at http://www.ncbi.nlm.nih.gov/ the Veterans Affairs Health Care System books/bv.fcgi?rid=aps.section.7246 5. Cabana MD, Rand CS, Powe NR et al. on the quality of care. New England 16. Baker DP, Gustafson S, Beaubien JM, Journal of Medicine 2003;348:2218–27.

Eurohealth Vol 14 No 2 38 Evidence-based health care

The thing about looking at evidence of any sort leads to the phenomenon of significance chasing, On limitations is that there are likely to be limitations to it. in which data are analysed to death, and the aim Trials may not be properly conducted, measure is any test that shows significance at the paltry outcomes that are not useful, be conducted on level of 5%. One issue arising is correcting for patients not like ours, or present results in ways multiple statistical testing, something almost that we can easily comprehend; trials may have never done, as pointed out in Bandolier 153. few events, when not much happens, but make The more important question, not asked much of not much, as it were. Observational anything like often enough, is whether any studies, diagnostic studies, and health economic statistical testing is appropriate. Put another studies all have their own particular set of limi- way, when can we be sure that we have enough tations, as well as the more pervasive sins of information to be sure of the result, using the significance chasing, or finding evidence to mathematical perspective of sure, meaning the support only preconceptions or idées fixes. probability to a certain degree that we are not Perfection in terms of the overall quality and being mucked about by the random play of extent of evidence is never going to happen, if chance? This is not a trivial question, given that only because the ultimate question – whether many results, especially concerning rare but this intervention will work in this patient and serious harm, are driven by very few events. produce no adverse effects – cannot be A few older papers keep being forgotten. When answered. The average results we obtain from looking at the strengths and weaknesses of trials are difficult to extrapolate to individuals, smaller meta-analyses versus larger randomised and especially the patients in front of us. trials, a group from McMaster2 suggested that with fewer than two hundred outcome events Acknowledging limitations research (meta-analyses in this case) may only Increasingly we have come to expect authors to be useful for summarising information and make some comment about the limitations of generating hypotheses for future research. their studies, even if it is a nod in the direction of acknowledging that there are some. This is not A different approach using simulations of easy, because there is an element of subjectivity clinical trials and meta-analyses3 arrived at about this. Authors may also believe, with some pretty much the same conclusion, that with reason, that spending too much time rubbishing fewer than two hundred events the magnitude their own results will result in rejection by and direction of an effect becomes increasingly journals, and rejection is not appreciated by uncertain. pointy-heads. Just how many events are needed to be Even so, the dearth of space given over to limi- reasonably sure of a result when event rates are tations of studies is worrying. A recent survey1 low (as in the case for rare but serious adverse that examined four hundred papers from 2005 events) was explored some while ago.4 in the six most cited research journals and two Bandolier's best try at explaining lots of maths open-access journals showed that only 17% and tables appears in Table 1. This looks at a used at least one word denoting limitations in number of examples, varying event rates in the context of the scientific work presented. experimental and control groups, using proba- Among the twenty-five most cited journals, bility limits of 5% and a more stringent one of only one (JAMA) asks for a comments section 1%, and with the power of 80% and 90% to on study limitations, and most were silent. detect an effect. Higher power, greater stringency in probability Few events values, lower event rates, and smaller differences It is an unspoken rule that to have a paper in event rates between groups all militate published it helps to have some measure that towards needing more events and larger displays a statistically significant difference. This numbers of patients in trials. Once event rates fall to about 1% or so, and differences between experimental and control to less than 1%, the Bandolier is an online journal about evidence-based healthcare, written by number of events needed approaches one Oxford scientists. Articles can be accessed at www.jr2.ox.ac.uk/bandolier hundred and the number of patients rises to tens of thousands. This paper was first published in 2007. © Bandolier, 2007.

39 Eurohealth Vol 14 No 2 EVIDENCE-BASED HEALTH CARE

Table 1: Examples of numbers of events and numbers of subjects required to be reasonably sure of the direction of a result at various levels of signifi- cance and power for rare events

Event rates (probabilities) Mean event rate Power of 80% Power of 90% (%) p < 0.05 p < 0.01 p < 0.05 p < 0.0

Experimental Control Events Total Events Total Events Total Events Total

0.1 0.01 5.5 12 218 14 255 15 273 21 382

0.01 0.001 0.55 12 2,182 14 2,545 15 2,727 21 3,818

0.001 0.0001 0.055 12 21,818 14 25,455 15 27,273 21 38,182

0.1 0.05 7.5 67 893 > 75 > 1,000 > 75 > 1,000 > 75 > 1,000

0.01 0.005 0.75 67 8,933 > 75 > 10,000 > 75 > 10,000 > 75 > 10,000

0.001 0.0005 0.075 67 89,333 > 75 > 100,000 > 75 > 100,000 > 75 > 100,000

0.04 0.01 2.5 23 920 34 1,360 29 1,160 42 1,680

0.004 0.001 0.25 23 9,200 34 13,600 29 11,600 42 16,800

0.0004 0.0001 0.025 23 92,000 34 136,000 29 116,000 42 168,000

0.03 0.01 2 33 1,650 48 2,400 42 2,100 59 2,950

0.003 0.001 0.2 33 16,500 48 24,000 42 21,000 59 29,500

0.0003 0.0001 0.02 33 165,000 48 240,000 42 210,000 59 295,000

0.02 0.01 1.5 > 75 > 5,000 > 75 > 5,000 > 75 > 5,000 > 75 > 5,000

0.002 0.001 0.15 > 75 > 50,000 > 75 > 50,000 > 75 > 50,000 > 75 > 50,000

0.0002 0.0001 0.015 > 75 > 500,000 > 75 > 500,000 > 75 > 500,000 > 75 > 500,000

Subgroup analyses Figure 1: Subgroup analysis in One of the best examples of the dangers of women women and men of death or subgroup analysis, due to unknown myocardial infarction with 5 confounding, comes from a review article. platelet glycoprotein inhibitors It examined the thirty day outcome of (95% confidence interval) men death or myocardial infarction from a meta-analysis of platelet glycoprotein inhibitors. Analysis indicated different 0.5 1.0 2.0 results for women and men (Figure 1), with benefits in men but not women. Odd ratio (95% Confidence Interval) Statistically this was highly significant (p<0.0001). In fact, it was found that men had higher levels of troponins (a marker of myocardial Suppose we have a population in which intervention. damage) than women, and when this was one hundred events occur with our control Large relative risks may be important, even taken into account the difference between intervention, whatever that is. If we have with more limited data. Small relative risks, men and women is understandable, with one hundred and fifty events with an probably below 2.0, and certainly below more effect with greater myocardial experimental intervention, the relative risk about 1.5 should be treated with caution, damage; sex wasn't the source of the is now 1.5. It may be statistically signif- especially where the number of events is difference. icant, but most events were those small, and even more especially outside the occurring anyway. If there were two context of the randomised trial. Trivial differences hundred and fifty events, the relative risk It is worth remembering what relative risks would be 2.5, and now most events would The importance of a relative risk of 2.0 has tell us in terms of raw data (Table 2). occur because of the experimental been accepted in US courts.6 “A relative

Eurohealth Vol 14 No 2 40 EVIDENCE-BASED HEALTH CARE

Table 2: What different levels of relative risk actually mean Yusuf S. Strengths and limitations of meta- analysis: larger studies may be more Relative risk What this means reliable. Controlled Clinical Trials 1997;18:568–79. < 1.0 The risk of an event is reduced for the experimental intervention compared with 3. Moore RA, Gavaghan D, Tramèr MR, the control intervention Collins SL, McQuay HJ. Size is everything – large amounts of information are needed 1.0 No increased or decreased risk for experimental versus control to overcome random effects in estimating direction and magnitude of treatment effects. Pain 1998;78:209–16. 1.0 – 2.0 Higher risk of events with experimental intervention, but most events occur 4.Shuster JJ. Fixing the number of events in because of underlying factors - like the patient population being studied large comparative trials with low event rates: a binomial approach. Controlled > 2.0 Higher risk of events with experimental intervention, and most events occur Clinical Trials 1993;14:198–208. because of the experimental intervention 5. Thompson SG, Higgins JPT. Can meta- analysis help target interventions at indi- viduals most likely to benefit? Lancet risk of 2.0 would permit an inference than try our best to exclude the rubbish. Some 2005;365:341–46. an individual plaintiff's disease was more try a philosophical approach to calculate likely than not caused by the implicated thresholds above which we can begin to 6. Green M D, Freedman M, Gordis L. agent. A substantial number of courts in a believe,7 but that seems a bit too glib. Reference guide on epidemiology. In: variety of toxic substance cases have Reference Manual on Scientific Evidence. accepted this reasoning.” Second Edition. Washington: Federal Judicial Center, 2000, pp 384. Available at REFERENCES http://www.fjc.gov/public/pdf.nsf/lookup/ Confounding by indication etc. 1. Ioannidis JPA. Limitations are not sciman00.pdf/$file/sciman00.pdf Bias arises in observational studies when properly acknowledged in the scientific patients with the worst prognosis are allo- literature. Journal of Clinical Epidemiology 7. Djulbegovic B, Hozo I. When should cated preferentially to a particular 2007;60:324–29. potentially false results be considered acceptable? PLoS Medicine 2007;4:2:e26. treatment. These patients are likely to be 2. Flather MD, Farkouh ME, Pogue JM, systematically different from those not treated, or treated with something else (paracetamol, rather than non steroidal New Health Systems This latest addition to series illustrates that Estonia has vigorously and quite successfully anti-inflammatory drugs in asthma, for in Transition Profile: reformed its health system over the last instance). Estonia decades. Whereas incremental changes are Confounding, by factors known or observed in the last five years, larger scale unknown, is potentially a big problem, legislative reforms were implemented from the because we do not know what we do not early 1990s. The current system is built on soli- know, and the unknown could have big darity based health financing; a modern provider network based on family-medicine effects - like troponin above. When relative centred primary health care; modern hospital risks are small, say below about 1.3, services and more attention for a public potential bias created because of unknown health. This has resulted in a steadily confounding, or confounding by indi- increasing life expectancy and continuously cation improperly adjusted, becomes so high population satisfaction rates with access great that it makes any conclusion at best and quality. unreliable. However, a number of challenges remain. They include reducing inequities in health status Comment – the uncertainty principle and health behaviour; improving control of and These are just a few of the limitations Agris Koppel, Kristiina Kahur, responding to the consequences of the high Bandolier sees in papers and talks. There Triin Habicht, Pille Saar, Jarno rates of HIV and related conditions; improving are more, obviously. Worst of all is an Habicht, Ewout van Ginneken regulation of providers to ensure better public outcome failing to reach statistical signifi- accountability; and, sustaining health expendi- cance at a trivial level like 5% despite Edited by Ewout van Ginneken tures and human resources on a level that ensures timely access and high quality of care. multiple statistical comparisons, then Copenhagen: World Health The last challenge is particularly important in being trumpeted as a 'result' and extrapo- Organization on behalf of the the face of rising patient expectations and lated to whole populations. If it is not European Observatory on Health statistically significant, it does not signify. increased costs and volume of health care Systems and Policies, 2008 services. If solidarity and equity are to be The trouble is that we live in an imperfect ISSN 1817-6119 maintained and guaranteed for the future, world, where we never have the truth, the additional resources need to be found from whole truth, and nothing but the truth on 253 pages public sources of revenue. which to work and build judgements. We have to make do with what we have and Available on-line at http://www.euro.who.int/Document/E91372.pdf

41 Eurohealth Vol 14 No 2 NEW PUBLICATIONS

Eurohealth aims to provide information on new publications that may be of interest to readers. Contact Sherry Merkur at [email protected] if you wish to submit a publication for potential inclusion in a future issue.

Sales growth of new pharmaceuticals As part of the Erasmus Research Institute advertising, tend to hurt sales. across the globe: the role of of Managements report series on Research Furthermore, regulations on physician regulatory regimes in Management, this new publication prescription budgets and DTC advertising examines the role of regulatory regimes in have a differential effect for newly explaining the international sales growth launched and mature drugs. In addition to Stefan Stremersch and Aurélie Lemmens of new pharmaceutical products. The these regulatory effects, other mechanisms publication analyses fifteen new molecules that affect drug sales include national in thirty-four countries and endeavours to culture, economic wealth, introduction shed light on the effect regulatory regimes timing, lagged sales and competition. have on new drug sales across the globe. These findings may be used by public policy administrators to compare drug The report examines several aspects of the sales across countries and to assess the role regulatory environment on: manufacturer of regulatory regimes. price, physician prescription budgets, patient co-payments, marketing efforts to Contents: physicians, and direct-to-consumer Abstract (DTC) advertising. Based on a time- Introduction Rotterdam: Erasmus Research Institute varying coefficient model, the authors find of Management, 2008 that differences in regulation substantially Data contribute to cross-country variation in Model specification ISSN 1566-5283 sales. Although manufacturer price Results 44 pages controls had a positive effect on drug sales, Discussion the other forms of regulation, such as Freely available online at: restrictions on physician prescription References http://publishing.eur.nl/ir/repub/asset/ budgets and the prohibition of DTC 12340/ERS-2008-026-MKT.pdf

Payment for Performance (P4P): This Health Financing Policy Paper With regards to Estonia, the organisa- international experience and a published by the WHO Regional Office tional structure to finance and provide cautionary proposal for Estonia for Europe’s Division of Country Health health care has been established with Systems looks at Payment for elements of contracting and provider Performance (P4P) in health systems. payment systems, but additional incen- Alan Maynard Alan Maynard first reviews evidence of tives to enhance quality are desired. The common provider problems in all health recommended P4P reforms for providers systems and their implications for intro- and hospitals, Maynard notes, have to be ducing a P4P system. This is followed by carefully designed, implemented and eval- a review of P4P reforms in England and uated. the United States in particular. Contents: Throughout the analysis, he places an emphasis on gaps in the evidence base and Executive summary the need for careful experimentation and Background evaluation to inform service reform. Common problems confronting The ultimate goal of P4P reforms is to purchasers and providers Copenhagen: World Health Organization, promote evidence-based care and to Incentivising change in health care 2008 ensure that in doing so process provision and purchasing management is supplemented by patient- 26 pages Reinforcing the purchaser role: reported outcome measures. Maynard development of normative incentives Freely available online at: argues that focus should be on gradually Conclusions http://www.euro.who.int/Document/ and systematically shifting the policy HSF/P4P_Estonia.pdf processes from analysis of process to References outcome measurement and management to inform decision-makers about whether health care expenditure actually leads to the desired patient outcomes.

Eurohealth Vol 14 No 2 42 Please contact Philipa Mladovsky at [email protected] to suggest web sites WEBwatch for potential inclusion in future issues.

French EU Presidency 2008 News and information from the French Presidency of the European Union http://www.ue2008.fr/PFUE

European Centre for Disease The European Centre for Disease Prevention and Control, based in Stockholm, was established Control (ECDC) in 2005. It is an EU agency with an aim to strengthen Europe's defences against infectious diseases. The web site provides information about the organisation’s activities, publications for http://ecdc.europa.eu free download (scientific and technical papers, newsletters, the Eurosurveillance journal, and annual reports), events including conferences, calls for tender and news. There are special news sections on influenza and vaccines and immunisations. There is also a searchable list of health topics.

European Public Health Alliance The Brussels based EPHA is an international non-profit association composed of organisations working on all aspects of public health. Its English language web site features: an ‘Environment’ http://www.epha.org section which provides news on a variety of topics including air and water, nuclear energy and road safety; a ‘Europe’ section which provides health related news from the European Institu- tions; a ‘Food and Agriculture’ section which provides news on this topic (including health related news on the Common Agriculture Policy (CAP), genetic modification and biotech- nology and obesity and overweight); and a ‘Society’ section which provides news about civil society, governance issues, health rights, NGOs, public interest, patients, health inequalities, social policy, alcohol, drugs, tobacco, Global Health. There is also information about European health related publications and events and a newsletter.

The Commonwealth Fund The Commonwealth Fund is a New York-based private foundation that supports independent research on health care issues and makes grants to improve health care practice and policy. http://www.commonwealthfund.org Although predominantly US focused, it has an international programme in health policy designed to stimulate innovative policies and practices in the US and other industrialised coun- tries. The English language web site provides publications, including The Commonwealth Fund Digest and an annual report; downloadable charts (mainly featuring US data); a US state scorecard; surveys, including results from international surveys; news about health systems innovations; and details about grants, programmes and fellowships.

European Federation of EFPIA represents thirty-two national pharmaceutical industry associations and forty-three Pharmaceutical Industries and leading pharmaceutical companies operating in Europe. Its mission is to improve the compet- Associations (EFPIA) itiveness of the research-based pharmaceutical industry in Europe in a regulatory and political environment, which above all stimulates research and development and rewards http://www.efpia.org innovation. The website contains a range of statistical information, including the patient WAIT indicator which provides data on the length of time patients have to wait for access to medications in different European countries. The publications section of the website contains a range of policy documentation as well as the 2008 edition of The Pharmaceutical Industry in Figures. Press releases, video presentations and information on forthcoming events are also available.

Improving Chronic Illness Care The web site of the Improving Chronic Illness Care Programme, an initiative of the Robert (ICIC) Wood Johnson Foundation, offers a range of resources and teaching tools designed for leading and managing improvement efforts in chronic diseases management within a variety of settings. http://www.improvingchroniccare.org It focuses mainly on the US but provides many resources that are also relevant to the European context, including: a compendium of tools for clinicians involved in changing chronic disease care for their patients; learning materials; surveys (including Spanish and Danish translations); ICIC reports; ICIC presentations with downloadable graphics; and evidence in the form of literature reviews (condition specific and related to the chronic care model).

43 Eurohealth Vol 14 No 2 MONITOR

EUROPEAN MONITOR the Conference. “As we now and social well-being, under- know, cash, commitment and lining that the charter places commodities cannot boost particular emphasis on ensuring European ministers sign adequate progress in the absence people are treated with dignity groundbreaking charter on of delivery systems that reach and respect when they come health systems those in great need, on an into contact with their health Ministers of health from the adequate scale, in time.” system. fifty-three countries of the The charter details the key The final text of the charter, WHO European Region signed actions needed to make health together with material and a new charter on health systems systems stronger, such as recordings from all Conference in Tallinn, Estonia on 27 June, improving transparency and sessions, including the charter committing themselves to accountability for health signing ceremony, are available concrete and measurable action spending and ensuring that at http://www.euro.who.int/ on strengthening health systems spending is aligned to policy healthsystems2008 that will allow both their own objectives. “Increasing people and the international investment in health will pay Commission adopts proposal community to hold them to dividends only if it’s well for directive on patients' rights account. spent,” said Dr Nata Menabde, in cross-border health care All countries have pockets of Deputy Regional Director, On 2 July the European people who miss out on quality WHO Regional Office for Commission adopted a proposal health care. The charter stresses Europe. “There is no ‘right’ or for a directive to facilitate the that strong health systems must ‘optimal’ size of budget that application of European be put in place to remove should be devoted to health. patients' rights in relation to barriers such as insufficient We do not want to give the cross-border health care, as well access, costs and lack of impression that simply as a Communication on information, to ensure coverage increasing the level of budget improving cooperation between across the board. The charter allocations to the health sector Member States in this area. The declares that “today, it is will solve all problems. The move came following calls from unacceptable that people health system needs to increase both the European Parliament become poor as a result of ill- and demonstrate its capacity to and the Council of Ministers for health. …We, the Member use the money in a prudent and the Commission to propose a States, commit ourselves to: transparent manner.” specific initiative on cross- border health care, in a way promote shared values of soli- As part of the preparations for explicitly adapted to, and darity, equity and participation the charter, WHO conducted respecting, the unique nature of through health policies, resource studies that have produced the health care sector. Previ- allocation and other actions, evidence of the link between the News ously it been excluded from the ensuring due attention is paid to health and wealth of the popu- scope of Directive 2006/123/EC the needs of the poor and other lation, making the case for on services in the internal vulnerable groups.” giving serious political attention market. WHO estimates that, each year, to the performance of health health expenses cause 150 systems. WHO’s research also Despite several consistent million people to suffer financial indicates that in the past the European Court of Justice catastrophe and push 100 importance of the health system rulings confirming that the EU million below the poverty line. to the general health of the Treaty gives individual patients population has been underesti- the right to seek health care in “Health is the right of everyone mated, as has the impact of other Member States and be and it has value in itself. It is in better health on economic reimbursed at home, uncertainty the interest of all governments growth. Rather than being seen remains over how to apply the to invest in the health of their as a ‘necessary burden’, principles of this jurisprudence populations, as improving the investment in effective health more generally. With this health of the population makes a systems should be considered as proposal the Commission aims material contribution to the an investment in the future well- to provide legal certainty on the wealth of the nation,” said being of the population. issue. Prior public consultation Dr Marc Danzon, WHO conducted by the Commission Press releases and Regional Director for Europe, Speakers at the Conference reported that the majority of other suggested at the charter signing ceremony. stressed that good health 280 respondents received information for systems should not be a luxury “I am personally thrilled by the favoured some form of future inclusion that only rich countries can value system so clearly evident Community action on health can be e-mailed to afford, but a fundamental part in the Tallinn charter,” said care, combining both legislative the editor of the social and physical WHO Director-General, elements and practical support David McDaid infrastructure that supports a Dr Margaret Chan, addressing for cooperation between [email protected] country’s prosperity, cohesion,

Eurohealth Vol 14 No 2 44 MONITOR

European health systems. strength of feeling in some quarters. would be agreed upon “would clearly Robert Madelin, Director General at DG exceed the competence of the EU.” Speaking of the proposed directive, Health and Consumers, predicted that European Health Commissioner The proposal has little chance of going early discussions on the draft directive Androulla Vassiliou said that it “aims to through the co-decision procedure signalled “the beginning of a long row” clarify how patients can exercise their during the lifetime of the current as he defended the proposal against rights to cross-border health care, while Commission. There may be a first hesitations over the legal workability of at the same time providing legal certainty reading in the Parliament next spring, but the system. Others in the debate pointed for Member States and health care the process will have to begin again after to the gap that the proposal could create providers. It ensures that the quality and the June 2009 European Parliament between rich and poor. safety of health care will be guaranteed elections. throughout the Union, and promotes “In a decade, we will look back and see The draft directive on the application of cooperation between health systems to how far we've got,” said Madelin, patients' rights in cross-border health care provide better access to specialised care.” suggesting that discussions over the is available at http://ec.europa.eu/ matter could take many years. The draft According to the Commission, the health/ph_overview/co_operation/health directive only “streamlines the rights that directive, if adopted by the Council and care/cross-border_healthcare_en.htm and the Court has already delivered,” said the the European Parliament, will provide a the results of the public consultation at EU official. “It is not the end of the clear framework for cross-border care. http://ec.europa.eu/health/ph_ world as seen by health managers,” he Under its major provisions patients overview/co_operation/healthcare/ added. would have the right to seek health care cross-border_healthcare_en.htm abroad and be reimbursed up to what Irene Wittmann-Stahl, health attaché at they would have received at home. The the Permanent Representation of Commission proposes to harmonise directive will provide clarity over how Germany to the EU, said a lot of minimum taxes on tobacco prices these rights can be exercised, including questions remained to be answered On 16 July the European Commission the limits that Member States can place before the Council was able to form its proposed harmonising minimum taxes on on such health care abroad, and the level opinion on the draft directive. Among tobacco products to cut down on smug- of financial coverage that is provided for others these included issues of legal gling and eventually deter smoking cross-border health care. certainty; whether the European Court of through increased prices. The draft Justice jurisdiction should be seen as the Directive foresees a gradual increase in The directive will also facilitate starting point for legislation or something the EU minimum taxation levels on European cooperation on health care. It stricter is required? Another issue is cigarettes and fine cut tobacco up to will provide a basis to support the devel- whether it should protect individual 2014. It also updates the definitions of opment of European reference networks, patients or health care systems which different types of tobacco products so as which will bring together, on a voluntary already have the obligation and need to to remove loopholes which allow certain basis, specialised centres in different guarantee equal access to treatment, cigarettes or fine cut tobacco to be Member States. This collaboration poten- moreover, at what stage the Directive presented as cigars, cigarillos or pipe tially will bring benefits to patients should override Article 152 of the Treaty tobacco and therefore benefiting from a through easier access to highly specialised which ensures that competence for health lower tax rate. care. It may also be useful to health matters remains a Member State systems as it would facilitate the efficient László Kovács, Commissioner for responsibility? use of resources, for example by pooling Taxation and Customs Union said the resources to tackle rare conditions. Irish MEP Avril Doyle argued that the proposal will “help reduce illicit trade directive was “a charter for the wealthy and cross-border shopping, which The initiative is also intended to help to to opt for care abroad,” as people need to undermine the revenue and the health reduce overlap and duplication of efforts pay for the care first themselves “which is objectives of Member States which in the field of health technology not an option for the poor”. Therefore, impose high taxes to deter smoking”. assessment and hence promote the she said, it would lead to more inequality According to the Commission, the effective and efficient use of resources. than equality. Marc Schreiner from the proposed Directive will also make The directive will also put in place shared German Hospital Federation also flagged taxation rules more transparent, thereby formats and standards for up concerns over whether sufficiently creating a level playing field for e-health technology that can be used comparable information was available to manufacturers and giving flexibility to between different systems and different develop a reimbursement system that Member States to set minimum taxes. It countries. Information and communi- could function across the EU. He stated aims to contribute to reducing tobacco cation technologies have enormous that “the core problem of this directive is consumption by 10% within the next five potential to improve the quality, safety that as national health systems are not years. and efficiency of health care. comparable, the reimbursement system Taxation forms part of the EU’s overall ‘Long row’ predicted can't work out and the directive would strategy on the prevention and dissuasion not help to initiate a cross-bordering Enshrining the draft directive into of tobacco consumption. This strategy supply of health services”. He also said legislation will be far from a smooth also includes other important measures that as proposal put forward by some process. A stakeholder debate on the such as non-price measures, protection commentators to create a basket of treat- Commission’s proposal at the European from exposure to tobacco smoke, ments to which all citizens have a right all Parliament on 15 July indicated the regulation of contents, and advertising over Europe, and the price of which

45 Eurohealth Vol 14 No 2 MONITOR restrictions. However, according to the Acknowledging the problems that the the 'Pharmaceuticals Package', expected World Bank, price increases in tobacco directive might pose for some of the new to be adopted by the Commission in products are the most effective single Member States Kovács indicated that November. The dossiers include work on intervention in preventing smoking. these countries would be granted one or pharmacovigilance, information for two years extra time to comply with the patients and counterfeit drugs. At present, there are considerable directive. The Commissioner hopes to see differences in taxation levels between the She said counterfeiting would be one of discussion on the proposal finalised by lowest and the highest taxing Member the main issues discussed by an EU phar- mid-2009 and the directive finally States. For cigarettes, the difference can maceutical ministerial forum to take place adopted by the end of 2009. The proposal be up to almost 600% of the excise on 2 October. The forum will “take stock is, however, likely to be subject to a burden expressed in Euros. Commission of the work done over the past three heated debate as it needs to be adopted studies show, that in 2006 cigarettes were years” on the three topics of drugs unanimously. six to seven times more expensive in the pricing, their relative effectiveness and UK than in Latvia and 13% of the More information at http://ec.europa.eu/ information for patients. tobacco consumed in the EU is not taxation_customs/taxation/excise_duties/ The Presidency Programme is available at purchased in the country that is used. tobacco_products/index_en.htm http://www.ue2008.fr/webdav/site/ “4–5% of this comes from legitimate PFUE/shared/ProgrammePFUE/ cross-border shopping and 8-9% from Health priorities under the French Programme_EN.pdf illicit trade,” Kovács stated, adding that presidency in some countries the share of illicit trade The French EU Presidency's health EMEA accepts electronic-only marketing is as high as 20%. priorities are five-fold: food safety, authorisations healthy ageing, cross-border health care, Currently, excise duties levied on Since 1 July 2008, the European health determinants such as alcohol and cigarettes must account for at least 57% Medicines Agency (EMEA) has been tobacco, and pharmaceuticals, French of price, and must be at least €64 per accepting electronic-only marketing Health Minister Roselyne Bachelot told 1,000 cigarettes, for products falling authorisation (MA) applications for the European Parliament. France wants under the ‘most popular price category’ medicinal products for human use in the to focus on the areas where the added in that country. centralised procedure. These electronic- value of EU-level action is undeniable, only MA applications of the Common The concept of the ‘most popular price said Bachelot, speaking to Parliament’s Technical Document (CTD) are now category’ was designed more than thirty Environment, Public Health and Food submitted without a corresponding years ago, when national markets were Safety Committee on 15 July 2008. paper-based application. dominated by one brand that was clearly We have ambitious objectives, acknowl- ‘most popular’. Nowadays, markets are The CTD was developed by the Interna- edged Bachelot, before listing the “five more dynamic with several popular tional Conference on Harmonisation of axes of work” on which the Presidency brands and regular price changes. Technical Requirements for Registration hopes to make a difference. The healthy of Pharmaceuticals for Human Use as a In order to create more transparency and ageing priority comprises working standard format for regulatory submis- to ensure a level playing field for manu- together to fight degenerative diseases sions in Europe, Japan and the USA. The facturers, the Commission proposes such as Alzheimer's and the Presidency eCTD is an electronic version of the replacing the most popular price category hopes to develop an EU Alzheimer's plan CTD, with corresponding structure, with a weighted average price of all focusing on joint research efforts and folder and file names. In addition, it cigarettes for determining the tax base. In improving the quality of life of people contains technical components which order to underscore health objectives it with this condition. A special conference enable the management of the lifecycle of will be combined with a monetary on Alzheimer's will take place in Paris on individual files in the application, and the minimum tax applicable to all cigarettes. 30–31 October. lifecycle of the product itself. The current percentage of 57% will be Regarding the Commission's recent increased to 63% of the weighted average The current plan is to phase out the proposal on patients' rights in cross- price and the rate of €64 will rise to €90 paper-based and non-eCTD formats, the border health care, Bachelot said work for all cigarettes by 2014, under the new latter being any submission of electronic had already started and the dossier would proposal. It is estimated that this will information to support an MA appli- be the subject of a special ministerial contribute to a 10% decrease in tobacco cation that is formatted to a simple set of meeting to be held in Paris on 13–14 consumption in most Member States electronic files and folders. For a number October. As for specific health determi- within the next five years. of years, agencies have been accepting nants, Bachelot said particular focus and processing non-eCTD electronic The Commission also proposes to give would be placed on two lifestyle related submissions in addition to paper-based Member States more flexibility in tobacco determinants: alcohol and tobacco. The submissions, but these are difficult to taxation by abolishing the existing rule Presidency promised to kick-off work on navigate and do not allow easy updates or which forbids Member States levying a a Commission Communication on status markers. Both the US and Europe minimum excise tax higher than 100% of smoke-free environments, expected to be are planning to accept eCTD applications the total excise on the most popular price adopted this autumn. only from 2009. category. Furthermore, the Commission The Presidency also plans to make proposes to widen the band of the progress on the various pharmaceutical Europe's mental health in the spotlight specific component of the excise duty dossiers currently on the table as well as Commissioner for Health Androulla from 5–55% to 10–75%.

Eurohealth Vol 14 No 2 46 MONITOR

Vassiliou launched the European Pact for social exclusion. prescription charges and fees levied on Mental Health and Well-Being at a High individuals who consult direct with a Speaking at the conference Commis- Level Conference on Mental Health in specialist rather than first going to a sioner Vassiliou said that “today, we in Brussels on 13 June. This was the first primary care doctor. In looking at further Europe, have raised our voices and conference to bring together ministers, efficiency measures, the new proposed spoken out about the devastating effect experts, patients, health professionals, tax may appear to be more palatable that mental illness has on society. This researchers and high profile personalities politically than simply increasing the Pact is a symbol of our determination in and other stakeholders to agree future costs of social insurance to employers Europe to take up the challenge and joint actions to improve mental health in and employees in a country that already deliver action in our different areas of Europe. has some of the highest labour costs in responsibility and across the health, Europe. Opposition politicians claim that The Pact is a call for partnership action. It education and labour sectors. We need to health insurers will simply raise their was launched by the European act in partnership because mental health premiums to cover these taxes. However Commission in collaboration with the concerns us all.” taxing these health insurance funds and Slovenian Presidency and the World Five consensus documents have been mutuals direct will not affect the 8% of Health Organization Regional Office for produced in cooperation with national the population who do not purchase Europe. It is a follow up to the consul- ministries, practitioners and researchers additional insurance. tation on the Green Paper on Mental from several sectors. They cover the five Health, which was presented by the In the same interview with Le Parisien key priority areas previously outlined. Commission in autumn 2005. More than Health Minister Roselyne Bachelot stated Each of these consensus documents high- 230 written contributions, including a that this latest reform would build on the lights the current data, policies and state European Parliament Resolution, and a important reforms already in place to of the art on the subject, and will support number of consultation meetings showed strengthen the role of primary care the implementation of the Pact and a strong support for enhanced EU efforts doctors, reduce the price of prescription series of thematic conference planned to raise the visibility of mental health as a medicines and reorganise and rationalise over the next two to three years. priority and to create opportunities for the hospital care. She also announced exchange and cooperation in tackling More information on the conference and accounting reforms that avoid interest common mental health challenges. access to the Pact and Consensus Papers is payments of more than €400 million per available at http://ec.europa.eu/ annum on current health system debts. It recognises the health, social and health/ph_determinants/life_style/ economic benefits of good mental health Another step in reducing costs will be to mental/mental_health_en.htm for all and the need to overcome the increase the amount of revenue raised by taboo and stigma still associated with the health system when treating occupa- COUNTRY NEWS mental illness. An estimated 11% of tional injuries and accidents. Previously Europeans experience some form of an independent expert commission mental illness each year. Such disorders reported that the level of compensation France: New tax on health insurers are the leading cause of suicide; every received by the health system from occu- On 29 July the French government nine minutes there is a suicide within the pational insurance (€410 million per unveiled proposals for a tax on health EU. Data from western and southern EU annum) is well below the costs to the insurers as part of a package of measures Member States indicate a lifetime preva- health care system of treating these intended to help reduce the budget deficit lence of major depression in 9% of adult accidents. for health which last year amounted to European men and 17% of adult €4.6 billion. The proposed tax will be These latest reform measures will be European women. The economic costs of levied on the turnover of private health presented to Parliament in September depression in the EU alone are insurance companies and mutual and, if approved, should be implemented substantial; being more than €2,000 for insurance funds. It is expected to raise from the spring of 2009. every European household. While the €1.6 billion per annum. health system costs are high the majority The interview with Ministers Woerth and of costs occur outside of the health While the budget deficit has been Bachelot is available [in French] at sector, in particular through work absen- decreasing in recent years, Finance http://www.leparisien.fr/economie/le- teeism, work disability and early Minister Eric Woerth, in an interview patient-ne-doit-etre-en-aucun-cas- retirement. Many mental health problems with Le Parisien, warned that without perdant-29-07-2008-105653.php can develop in the early years of life, action it is set to increase by €2 billion while there is also a strong need to plan per annum. Pointing to the challenges of Blueprint on future of the English NHS for good mental health in older age. an ageing population, long term care On June 30 Health Minister Lord Darzi needs and the changing nature of illness, published a review entitled High Quality To address this problem and to benefit he stated that reforms were essential if the Care For All setting out plans for the next from shared experience, ministers and government is to meet its target of ten years of the English NHS. The experts from across Europe pledged to balancing the budget by 2011. review, which took twelve months to work together and focus on five key complete, was led by 2,000 clinicians and areas: prevention of suicide and France spends approximately 11% of its staff across the country and involved depression; promoting mental health in GDP (€152 billion) on publicly funded 60,000 patients, public and staff. It is youth and education; mental heath in health care per annum. Several measures intended to meet key future challenges: workplace settings; the mental health of to cut costs have been introduced in rising public expectations, demand driven older people; and combating stigma and recent years, including higher

47 Eurohealth Vol 14 No 2 MONITOR by an ageing population; the changing independent quality standards. UK: New checks to protect patient safety nature of disease and changing needs of Plans to improve patient safety and Giving the report a cautious welcome, the health system workforce. The support professionals in sustaining their chair of the British Medical Association changes will be driven not through top- high standards were set out on 23 July by (BMA), Hamish Meldrum said that down targets but by giving responsibility the Chief Medical Officer for England, “there is much here that could bring to the staff at local level. Sir Liam Donaldson. about improvement – if it can be Specific attention is placed on tackling delivered. That will depend on the details, In proposals, outlined in the report variations in quality of care, it also and on the true engagement of NHS staff Medical Revalidation – Principles and further emphasises the need to person- in implementing change.” He warned Next Steps, doctors will be required to alise services and proposes that the however that “if they are sidelined, these renew their professional registration concept of patient choice be enshrined as are little more than fine words and we every five years, in order to provide a right in a new NHS Constitution. will not see the improvements the NHS assurance that they are practising to the Choice will be expanded further within desperately needs.” The BMA also standard that patients, the public and the primary care: catchment areas for general welcomed the intention to “move away profession itself expect. It will also play a practitioner (GP) practices will be from target-driven health policies and to part in putting quality at the heart of expanded, while patients will also be able focus instead on the quality of patient NHS care – a key element of the to express a preference to be seen by a care.” Peter Carter, General Secretary of proposals outlined in Lord Darzi's report GP within specific practices. Patients the Royal College of Nursing (RCN), High Quality Care for All. with long term care problems will also also welcomed the review stating that Patients will play an important role in receive individualised care plans and “the overwhelming majority of care this process. They will be asked for views personal budgets, again promoting the provided by the NHS is safe, but the on their doctor, including effective notion that patients can be empowered to RCN believes the ambition now must be communication, including listening, purchase services that best meet their to drive up patients' experience from a informing and explaining; involving needs. 'safe' to a 'high quality' service.” He patients in treatment decisions; care added that “if fully implemented, these Information on the quality of an NHS coordination and support for self-care; recommendations have the potential to body's service will be published on the and showing respect for patients and achieve this ambition.” web and on clinical ‘dashboards’ in treating them with dignity. hospitals and GP surgeries. Moreover, all Health spokesman for the opposition Speaking on publication of the report, Sir providers of NHS care will have to Conservative Party, Andrew Lansley, was Liam said that he was “confident that this publish quality accounts each year. The more critical, claiming that the plans process, agreed with doctors' representa- report states that “a range of quality would not reduce bureaucracy. He stated tives will help raise standards of medical measures covering safety (including that it is “no good talking about focusing practice and improve the quality of the cleanliness and infection rates), clinical more on health outcomes if doctors and patient experience. The involvement of outcomes, patient experience and nurses continue to be micro-managed by patients and public in the process will patient's views about the success of their bureaucrats in [central government] and help define what counts as good health treatment will be used.” their local strategic health authorities. care and in the rare cases where doctors What health professionals want and need Overall it is anticipated that quality- are falling short, provide them, where is for politicians to stop interfering and to linked funding could make up between possible, with the support needed to allow them to do the job they were 3% and 4% of the average district general renew their registration.” trained to do.” hospital's budget of around £250m The General Medical Council (GMC) within a few years. A review of workforce planning, training will be establishing a programme board and education was also published Speaking at the launch of the review, to support the development of revali- alongside the review. This proposes the Lord Darzi said that it “will enable dation processes as well as to consider the establishment of NHS Medical Education frontline doctors, nurses and patients – practical issues around implementation. England – an independent, advisory non- who provide and use NHS services – to The GMC, the Academy of Medical departmental body that will scrutinise put into practice their visions for high Royal Colleges and UK Health workforce planning proposals for doctors quality care.” He added that “by meas- Departments have all committed to and dentists, as well as bringing a uring this quality across the service and working together with patients, the coherent professional voice on matters publishing that information for the first profession, and employers. relating to education and training. There time, both staff and patients can work will also be a new tariff-based system for Underlining the support which doctors together to make better informed choices education funding. This will mean for the themselves have given the proposals, about their care.” first time that education funding will President of the GMC, Sir Graeme Catto The appraisal process used by the follow the trainee, which it is hoped will said that the “introduction of revalidation National Institute for Health and Clinical improve transparency, promote fairness represents the biggest change to medical Excellence (NICE) is also to be and reward quality. regulation in one hundred and fifty years. reformed; the review recommends that The GMC welcomes the opportunity to More information on the next stage the appraisal process should in future work with partners in health care organi- review of the NHS in England and on take a maximum of six months to sations across the United Kingdom to workforce developments can be found at complete. NICE will also be charged develop a supportive process focussed on http://www.ournhs.nhs.uk/ with setting and approving more raising standards that will deliver benefits

Eurohealth Vol 14 No 2 48 MONITOR to both patients and professionals.” Meantime, the risk of flooding remained South of Ireland by the Health Research in Moldova and by August 1 more than Board. Those findings highlighted that Members of the Academy of Medical 5,700 people had been evacuated while Travellers of all ages have much higher Royal Colleges will have a central role in three people lost their lives in the capital, mortality rates than people in the general setting standards for recertification and Chisinau. population, with differentials in life designing the methods by which doctors expectancy averaging eleven years less will be evaluated against those standards. Flooding can have profound conse- than the general population. The revalidation and recertification quences for human health. Drowning is process will be introduced in stages from the leading cause of death in case of flash No national research has been conducted spring 2009 following a series of pilots floods and coastal floods while fatal on Travellers since 1987 until now. The scheduled to begin at the start of the year. injuries can occur during evacuation or All Ireland Health Study has been These arrangements will be supported by clean-up activities. Other injuries typi- commissioned by the Department of the introduction of Responsible Officers, cally include small lacerations or punc- Health & Children (Ireland) and the senior doctors in each health care tures due to the presence of glass debris Department of Health Social Services and organisation who will take responsibility and nails as well as electrical shocks. Public Safety (Northern Ireland) and for collating the information needed to builds on the study of 1987 by the Health In the short term, the impact of floods on support a recommendation on Research Board. It will be conducted by the transmission of communicable revalidation. the School of Public Health and diseases is limited, with outbreaks of Population Science at University College The report, Medical Revalidation – Prin- communicable diseases rarely observed. Dublin (UCD). It is the first study of ciples and Next Steps, can be downloaded However the impact on health infrastruc- Travellers' health status and health needs at http://www.dh.gov.uk/en/ tures and all lifeline systems can be that involves all Travellers living in the Publicationsandstatistics/Publications/Pu massive and can result in food shortages island of Ireland and will be completed in blicationsPolicyAndGuidance/DH_ and the interruption of basic public 2010. 086430 health services such as the water supply. The study will identify health needs as Contamination by toxic chemicals during Flooding in Eastern Europe identified by Travellers and health floods is theoretically possible but no Heavy rains and rising flood waters in services providers and measure the health verifiable correlation has been observed Ukraine, Romania and Moldova since 23 status of Travellers. The findings from the or measured so far. Mental health July have caused the loss of forty-two study will provide a framework for problems are frequently observed among lives, and necessitated the evacuation of policy development and practice in flood victims. As well as having them- about 40,000 people (as of 1 August relation to Travellers. selves experienced a traumatic event, the 2008). A large number of houses, bridges, victims may also have to cope with the For further information visit the UCD roads, agricultural lands have been loss of family members, friends and web site http://www.UCD.ie/phps/ damaged. property. In addition, there is a risk of research/trav.htm or In the Ukraine heavy rainfall has resulted physical and mental exhaustion during email: [email protected] in rising high waters of the Rivers the clean-up phase. Dniester and Prut and serious floods Tajikistan: Germany to finance €2 More information at affected six oblasts (provinces) in Western million TB Control Project http://www.euro.who.int/emergencies/ Ukraine. Thirty-six people have died. On July 28 Tajikistan's Ministry of fieldwork/20080730_1 40,703 houses and 33,882 hectares of farm Economic Development and Trade and land have been flooded. The total losses the German Development Bank Ireland: First All-Island Census of the in the western regions are estimated at KfWEntwicklungsbank signed an Traveller Population $650–870 million. As of agreement worth €2 million to finance a Preparations are now underway for the 4 August the majority of the evacuated tuberculosis (TB) control project in first all-island Census of Traveller Popu- population has returned home. Areas Tajikistan. The project will include lation to be carried out from in the most affected by floods were rural; urban rehabilitating a TB hospital in the autumn. The Census, which will include areas remained intact. The government, at country's Vahdat district. According to information on accommodation, is part both national and local levels, various Nusratullo Salimov, Tajikistan's Minister of the All-Ireland Traveller Health Status organisations, groups and individuals of Health, detection of TB in Tajikistan Study launched last year. Only Travellers responded to the disaster in a prompt and has improved, and the functioning of TB who self ascribe will be included in the efficient manner. Other countries have hospitals has become more transparent. Census. This means that individuals who responded by launching initial humani- Salimov added that an increase in the do not wish to be identified as Travellers tarian support, while the WHO number of recorded TB cases “does not will not be included. responded by conducting a initial rapid mean that TB has spread in Tajikistan” assessment of most affected areas and Irish Travellers are a small indigenous but might indicate that TB detection has supporting the coordination of response minority with a unique shared history, improved. Salimov said that official effort. culture, customs and language. Their figures provide an accurate estimate of distinctive lifestyle and culture, based on the TB situation in the country. In Romania, more than 10,000 people a nomadic tradition makes them an have been evacuated due to the floods identifiable group, both to themselves while more than 6,700 houses and and others. It is twenty years since agriculture have been damaged. Traveller health was examined in the

49 Eurohealth Vol 14 No 2 MONITOR

Not enough debate in Finland on how government commission over recent Lindgren from Lund University, writing climate change affects health years. Reforms to the system were imple- about their research in a debate article “Finland has been setting trends in many mented on 1 July following commission published in Dagens Nyheter state that areas. I would, however, like to highlight recommendations, writes Anne Melke this will inevitably lead to higher taxes, one particular area where we need more from the School of Public Administration unless there are savings made in other debate than at present especially from the at Gothenburg University. The Swedish parts of the state budget or drastic health perspective, that is, climate change dental care system has not been fully changes are made to how health care is and its health impacts”, said the Minister within the publicly funded health system financed. and consequently, patient charges have of Health and Social Services Paula This increase in costs was estimated using been the subject of more minimal regu- Risikko in the joint press conference with a simulation model which estimated lation and not covered by the general the WHO Director-General Margaret future demands on the health care system health care high-cost protection scheme. Chan in Helsinki on 24 June. in a country where the number of people “In recent years, heatwaves, drought, and While the July reforms do not change the over sixty-five will have increased from floods have caused more and more havoc institutional structure of the system, they 17% to 24% by 2040. The authors do all over the world. Climate change and do encourage the more frequent use of however indicate that their model especially the effects of weather extremes preventive dental health check ups projects that if health improves for are a serious threat to health. A concrete through a reduction in out of pocket everyone over forty, and in particular for example of this is the morbidity and costs to patients. the oldest segment of the population, the increase in hospital costs may be limited increased mortality during heatwaves. First, a voucher worth 300 or 600 SEK to 65% rather than 270%. Moreover, Risk groups include cardiac patients who (€30 or €65) will be allocated to all they note that if, at the same time, a get exhausted by heat and elderly people citizens every second year. The higher greater number older people stay in the whose blood vascular system is no longer amount is targeted to those aged twenty workforce, this will increase incomes as effective as with young adults.” to twenty-nine, as well as people over the which contribute to financing health care, Minister Risikko stated that the complex age of seventy-five. The voucher is either through taxes or patient fees. Thus interconnection of climate change and supposed to fully or partially cover the their research concludes by recom- diseases is visible also in Finland. “For costs of a dental visit. mending a concerted effort to improve example the tick, a vector for brain fever, Second, a high-cost protection scheme is public health and conditions allowing has become more common and wide- being introduced for those who need older workers to stay in the job market. spread, which may be a result of climate further treatment (though with restric- change. Another example of global tions on treatment content). 50% of all Spain: New law on pricing of warming is that the growing season is charges over 3,000 SEK (€325) will be pharmaceuticals and devices. extending in Finland, which makes it covered by the public purse; for those Enacted on 26 July, the new law entitled more profitable to cultivate food, but at expenses exceeding 15,000 SEK (€1,630) Guarantees and the Rational Use of the same time the number of allergenic this figure will rise to 85%. Medicinal Products and Medical Devices, elements is growing and their season is establishes the general pricing framework getting longer,” said Minister Risikko. Patients will also be encouraged to take for medicinal products for human use to account of price differentials between be provided by the Spanish National “Climate change affects our health both dental surgeries when choosing which Health System and to be dispensed directly and through the measures we use dentist to visit. In order to facilitate such within Spanish territory under an official to control it. As we must adjust ourselves comparisons, the national insurance prescription. to direct global emission effects, we in agency will publish information on the Finland must take part in reducing global fee schedules used by many private and The law, along with a Royal Decree from emissions in accordance with agree- public providers. Dentists must also 16 May, sets distribution and dispensing ments,” Minister Risikko stressed. provide prospective patients with written margins; enables the adjustment of these “The development of broad-based health information on their treatment changes. margins and deductions to the current economic situation; and allows the systems is of utmost importance also in Further information: contributions of pharmacists and future. We need the Health in All Policies [email protected] approach even in dealing with climate distributors to be adjusted to reflect profit volume. issues. Changing the focus from Sweden: Costs of care could rise by corrective work to prevention and health 270% by 2040 The distribution margins are fixed at promotion is a necessary step for The costs of care at Swedish hospitals 7.6% of the distributor’s sale price ensuring our ability to take care of have been projected to rise by 270% by (excluding taxes) for products with a everyone even in future. We need great the year 2040 due to an ageing popu- laboratory sale price of €91.63 or lower, changes in our ways of thinking and lation, according to a new research. As and above this value the profit margin is acting, and I believe we can achieve that the generation born in the baby boom of 7.54% for each product. For pharmacy by working closely with WHO,” the 1940s reach retirement age, more and sales to the general public of products Minister Risikko concluded. more will require care while fewer will be with a laboratory sale price of €91.63 or working. lower the margin is fixed at 27.9% of the Sweden: Reforms in dental health care retail price (excluding taxes), and above The Swedish dental care system has been Anders Klevmarken, professor emeritus this value the margin for dispensing is the subject of investigation by a at Uppsala University, and Björn 38.37% for each product.

Eurohealth Vol 14 No 2 50 MONITOR

Deductions are calculated on a monthly These adverse effects were not associated Russia: Government backs tougher legis- basis for the dispensing of products with with the activities of other lenders, such lation on drink-driving official prescriptions and financed by as the European Bank for Reconstruction On 21 July the Presidium of the public funds. The minimum external and Development, which invests in government of the Russian Federation monthly sales are fixed at €32,336.12, Eastern Europe. Nor did it vary in step approved a bill to increase the penalties which means that approximately 45% of with other factors such as HIV, conflict, faced by drunk-drivers. The bill, Spanish pharmacists should not make any or the rate at which people were put in presented by Interior Minister Rashid contributions. Also, pharmacists have the prison, where much TB transmission Nurgaliyev, will increase the maximum option of applying discounts of up to takes place the region. penalty for drunk drivers responsible for 10% of the retail price (taxes included) in the deaths of two or more people by two “This report suggests that the IMF has its the dispatching of over-the-counter years to nine years in prison. Where just priorities backwards,” said Cambridge products. one fatality is involved the maximum sociologist Stuckler. “If we really want to penalty will increase to five years, with a create sustainable economic growth, we IMF loans ‘fuelling TB deaths’ in eastern increase to three years for non-fatal need first to ensure that we have taken Europe injuries. care of people's most basic health needs,” The rapid spread of tuberculosis (TB) in he added. Co-author, Basu said that Prime Minister Putin said that the legis- eastern Europe and the former Soviet “despite the International Monetary lation is “long overdue”. According to Union has been fuelled by the economic Fund's good intentions to produce Minister Nurgaliyev more than 11,700 policies of the International Monetary economic stability, their programmes people died in some 90,600 road acci- Fund (IMF) according to a new study could be destablising public health and dents in the first six months of 2008. published in the July issue of the journal taking a toll in human lives.” Another 111,500 were injured in road Public Library of Science Medicine. accidents during the same period. One in In response the IMF criticised the study Researchers from Cambridge and Yale every fourteen accidents involves a drunk as being flawed, arguing that the universities looked at twenty-one coun- driver. “fundamental problem is that the study tries in the WHO European region which does not take properly into account that Nurgaliyev said the amendment was had received IMF loans. Such loans are countries implement IMF-supported aimed at establishing an aggravated factor subject to conditions which demand that reforms in times of economic distress.” for drunk drivers who face criminal countries meet strict economic targets. They added that “any analysis that seeks charges. The Criminal Code currently Doctors have warned that these stipula- to estimate the impact of IMF-supported makes no distinction between drunk and tions might lead to reduced government programmes on economic or social sober drivers who cause road accidents. funding for health services such as outcomes should take into account the Drivers´ rights advocates supported the hospitals and clinics, undermining the economic and political conditions that bill, which must be passed in the State fight against diseases such as TB. This first led the country to agree to an IMF- Duma and the Federation Council before new study suggests that the loans supported programme. By not including being sent to the President to be signed programmes led to less being spent on these conditions, this study confuses the into law. health care and as a result increased the reasons for asking IMF assistance with rate of TB. However, the new bill comes just weeks the consequences of this assistance.” after the end of Russia’s zero-tolerance Looking at the timing of rises in the TB They also claimed that the increase in policy for alcohol while driving. Under a rate and comparing them with the timing expenditure on public health programmes law that came into effect 1 July, the of IMF intervention, study authors David was greater in countries that had received maximum legal blood-alcohol level for Stuckler, Lawrence King and Sanjay Basu IMF assistance than in countries without drivers increased from zero to 0.3g per claimed that a direct relationship could be such assistance. litre of blood – roughly equal to a glass of observed; the start of the increases In contrast, Paul Sommerfeld, from the wine, a half-litre of beer or 50g of vodka matched the starting point of IMF UK based international charity TB Alert, for a man weighing eighty kilogrammes. programmes and continued rising as the said the findings were “unsurprising” According to the Russian newspaper, programme continued. This they claimed claiming that “the surge of TB in ex- Novosti, the new rules have been criti- had led to a 16.6% increase in deaths USSR countries through the nineties was cised by the country’s Chief Medical across the twenty-one countries rather an unforeseen and unwelcome result of Officer, Gennady Onishchenko. than an expected fall of 10% in deaths. the end of communism – because of the Speaking to reporters in Japan during the They also reported a 13.9% annual vast drop in public spending, including G8 summit he said that the decision was increase in new cases of TB and a 13.3% on public health, of which IMF policies “a crime and a dangerous decision for our increase in the number of people living are a contributory part.” However, he country.” with TB. Each 1% increase in IMF loans said that an over-reliance on expensive was associated with a 0.9% increase in “sanatoria” for TB patients was another mortality. Public spending, they noted, as reason for problems in Russia. a proportion of GDP averaged an 8% fall in government spending, while there was The study is available at http://dx.doi. a 7% drop in the number of doctors per org/10.1371/journal.pmed.0050143 head of population and a fall in the principal method of TB treatment, ‘directly observed therapy.

51 Eurohealth Vol 14 No 2 News in Brief

Latest health statistics on-line The ban is the latest restriction on surveillance, environmental manage- The WHO European Health for All smoking in the Netherlands. In 1990, ment, emergency and hospital care, pre- database and European mortality data- under the Tobacco Act 1988, smoking paredness for the potential deliberate use base were updated on 25 July. With over was banned in government, education of explosives, biological and chemical six hundred indicators, plus mortality by and health care buildings. In 2004 smok- agents or radio-nuclear material, disease sixty-seven causes, they provide fast and ing was also banned on public transport prevention, as well as coordination and easy access in graphical form to a wide and in most workplaces. unified command. It also highlights that range of basic health statistics on the mass sports gatherings such as the Further information on the new legisla- fifty-three countries of the WHO Olympics can be powerful platforms for tion is available at http://www.minvws. European Region. promoting health messages, especially nl/en/Overig/vgp/2008/information-on- physical activity and active living, The database can be accessed at the-smoke-free-workplace.asp healthy nutrition and avoidance of http://www.euro.who.int/hfadb smoking. Finally, it synthesises conclu- Malta and Libya sign agreement on sions and lessons learned and offers WHO calls for complete tobacco medical services and public health insights and strategic points for future advertising ban On July 31 in Tripoli, Malta and Libya organisers of mass gatherings. On May 30, the WHO urged govern- signed a memorandum of understanding ments to protect the world’s 1.8 billion on medical services and public health, The book can be freely downloaded at young people by imposing a ban on all aimed at developing collaborations to http://www.euro.who.int/document/e90 tobacco advertising, promotion and counteract public health threats. In a 712.pdf sponsorship. The WHO call came on the speech marking the agreement, Maltese eve of World No Tobacco Day. This Social Policy Minister John Dalli said Roma exclusion requires joint year’s campaign focuses on the multibil- the Mediterranean experiences of the response, says EC report lion dollar efforts of tobacco companies health and epidemiological effects of Millions of Europeans of Roma origin to attract young people to its addictive irregular migration from sub-Saharan are subject to persistent discrimination, products through sophisticated market- Africa are ample demonstrations of the both at individual and institutional level, ing. Recent studies suggest the more need to enhance networking for surveil- and far-reaching social exclusion, says a young people are exposed to tobacco ad- lance of communicable disease around European Commission report published vertising, the more likely they are to start the Mediterranean. He stated that on 2 July. The report is a response to a smoking. Despite this, only 5% of the “Malta has set out its goals to develop request by EU leaders in December world’s population is covered by com- the health sector into a European centre 2007 to examine policies and instru- prehensive bans on tobacco advertising, of excellence in the Mediterranean. One ments available at EU level to improve promotion and sponsorship. Tobacco of the areas we are seeking to develop is Roma inclusion. It concludes that there companies continue targeting young international medical training. We is a powerful framework of legislative, people by associating the use of tobacco therefore look forward to opportunities financial and policy coordination tools products with qualities such as glamour, aimed at strengthening the links between available and that these are increasingly energy and sex appeal. “In order to our institutes responsible for training of used, but that there is still an implemen- survive, the tobacco industry needs to health care professionals.” He added tation gap in the Member States. EU replace those who quit or die with new that as trade and industry links between Structural Funds, including the Euro- young consumers. It does this by creat- Malta and Libya continue to grow, it is pean Social Fund, and pre-accession in- ing a complex 'tobacco marketing net' important for both countries to gain a struments are crucial to overcoming that ensnares millions of young people deeper mutual understanding of their exclusion. The report examines instru- worldwide, with potentially devastating health systems and to share ideas and ments, legislation, cohesion policy and health consequences” said WHO experience on counteracting common non-discrimination actions, as well as Director-General Dr Margaret Chan. challenges. the most important policy areas for Roma inclusion: employment, social More information on World No Tobacco Mass gatherings and public health: inclusion, education, public health, Day at http://www.who.int/tobacco/ the experience of the Athens 2004 enlargement and gender equality. wntd/2008/en/index.html Olympic Games The report is available at The Olympic Games are a very popular Netherlands: Smoke-free workplaces http://ec.europa.eu/social/BlobServlet?d but vulnerable global event and thus in- On 1 July 2008 workplaces in the cater- ocId=481&langId=en trinsically raise the expectations of the ing, sports and cultural sectors became international community on all aspects smoke free. Employers in these sectors of preparedness, including public health. no longer have an exemption from the Additional materials supplied by A new publication, edited by Agis statutory duty to protect their employ- EuroHealthNet Tsouros and Panos Efstathiou, looks in ees from exposure to tobacco smoke. 6 Philippe Le Bon, Brussels. depth at this experience. The book con- The ban in the catering sector applies to Tel: + 32 2 235 03 20 tains strategic, technical and scientific all establishments, both those with em- Fax: + 32 2 235 03 39 information about epidemiological ployees and those run by sole traders. Email: [email protected]

eurohealth Vol 14 No 2 52 Eurohealth is a quarterly publication that provides a forum for researchers, experts and policy makers to express their views on health policy issues and so contribute to a constructive debate on health policy in Europe

ISSN 1356-1030