(This article has been partially published in MAIL PHARMACEUTICAL, week of March 29, 2010)
The agreement Interterritorial Council of March 18 again includes a number of proposals of measures aimed primarily at reducing the price of generic drugs which preaches an alleged drug-expected savings of 1,500 million euros annually to the government budget that would add more than 100 million savings for the citizen's pocket.
star measures to achieve these savings are basically four: first, modify the calculation of the reference price (the maximum amount paid by the NHS) by an off-patent drug by setting it at the lowest price, and second, reduced by an average of 25% the price of generic drugs and increase the price reduction for generic drugs that are not in Spain but in other countries, third, setting maximum prices for medicines for minor ailments excluding public funding which overcome them (targeted funding) and, fourthly, to establish a ceiling the percentage of laboratories and wholesale discounts they can offer to community pharmacies (5% expandable up to 10% for generic drugs).
The English situation on the limited price competition at the level of retail prices in the generic market has a striking resemblance to that observed in other countries that have implemented reference pricing systems or maximum price regulation of generic.
In several European countries (Germany, France, Netherlands, Norway, United Kingdom, Sweden), when applied to the reference price system has witnessed the emergence of deep discounts to pharmacies on the price procurement of medicines that do not move the price to the consumer.
In some European countries have substantially reformed the regulatory systems of pricing and reimbursement of generic drugs through better policies aimed at promoting price competition from generics as a means of improving efficiency, and improving policies deepening the existing system design setting maximum reimbursement level, measures for monitoring the competitive prices in order to reimburse pharmacies only the actual costs of acquisition, and procurement based on market instruments such as auctions public.
The objective of efficient policies to promote price competition should be to progressively lead and before long the price of drugs, both the industrial selling price as the retail, to its marginal cost production and distribution when the period has expired and gone legal protection barriers of entry into the market.
price reduction up to the marginal cost will depend on both the level of the latter as the brand price level prior to the entry of generics. Thus, price reductions can and should be, with justification, be different both between active (And between different presentations of the same active ingredient) and between countries.
The measures taken by the Council on the price of generic point in the line of improving and deepening the reference price system, advocating minor changes rather than structural reform policy of promoting competition in this market . Although no doubt point in the right direction, there are many shadows that justify skepticism about the magnitude of the real impact of the measures announced.
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What drives drug spending are not drug prices but the number of prescriptions per person. Reduce the price by decree is not the same as reducing spending. To the extent that the NHS is more interested in the impact of generic policies on the cost of insurance by the sheer impact on the price of generics, it is important to note that the reduction in selling price the public until the marginal cost (efficiency condition) does not guarantee the reduction of NHS pharmaceutical expenditure in the same proportion as the price (or, sometimes, the reduction of it) or guarantee either the efficiency of spending, as this also depends on changes in the appropriate and inappropriate use of medicines.
The existence of large discounts on purchases made generic pharmacies to laboratories, and not transferred to the retail price paid by the NHS and patients, reveals that it is urgent to reform the structure (and not only the details of calculation) of the reference price so that price competition moves to the bill paid by the NHS. Impose a ceiling on the percentage discount on the billing from the laboratory to the pharmacy is difficult to enforce when the incentives for such practices remain intact. On the other hand, is unjustified and may distort competition to set a ceiling on the lower discount rate for the same product when brand when a generic.
Taking as reference
the lowest price, rather than the average of the three lower prices, requires security of supply capacity at that price in order to prevent anti-competitive practices. A simple change in the calculation of the reference price will alter the level in the right direction but not sufficient, by itself, to change the incentives of the laboratories.
In other countries, lower prices of generics are achieved by liberalizing the price of generics with universal mandatory substitution by lower-priced product on the market automatically updated, either generic or brand (except where the patient prefer to pay the price difference; copayment avoidable).
The English system continues to focus on the hyper-regulation instead of price liberalization when there is competition, flee from preventable copayment for no reason beyond political panic "co" and more than a reference price system is a exclusion system of public funding based on the maximum price.
Given the asymmetry of information, it is difficult to imagine how the controller may be hit with an appropriate division of the unilaterally imposed price reductions for each generic, bringing it down to marginal cost without distorting competition. Keep in mind that the real marginal cost would not have anything to do with either the retail price or the current reference price.
The RDL 4 / 2010 of March 26 has chosen to impose a reduction in the wholesale price of drugs subject to reference pricing system that can reach 30%: the reduction is higher for products whose current difference between reference price and the RRP + VAT is lower. For example, a drug that has a RRP + VAT today as the reference price has a reduced price of 30% industrial, and other medications that now have an RRP + VAT 25% or more below the current reference price does not suffer cut one in industrial prices. From a static perspective (today), "this measure contributes to efficiency (the price closer to marginal cost? I think it's highly doubtful that even from the static point of view this division of the price reduction will contribute to closer to marginal cost.
The explanation is quite simple: there are drugs that have long been under the effect of generic competition and under the reference price system whose reference price may have already reached the production costs, as well , these will be imposed a price cut of no more than 30%! In contrast, other drugs only recently that the system is applied reference price and for which there are few generic, in this case to a drug with a lower VAT PVP + 25% over the reference price is not the price cuts, although you can still find very away from the cost of production. It is quite clear that the difficulty of driving prices to the efficient level through more and more regulation rather than deregulation once and for all the generics market is an illusion that distorts price competition. By
unilateral price cuts applied once the proposal in the agreements of March 18 for generics (and reflected in the RDL 4 / 2010 of March 26), can help mitigate but no garantíasde to eliminate the risk that in the near future or remain or reappear immediately large discounts to pharmacies or other equivalent forms of this practice.
From the dynamic point of view, "these measures favor price acercacimiento efficient price? Again, the answer is rather negative. This is a price cut now tax once it leaves intact the substantive dynamic problem: the effects of strong price competition between laboratories industrial PVP move the NHS and paid users. This cut price point allowing the PVP will not be reduced to the extent that industrial prices do for those drugs that are still run down until the cost of production.
Having opted for the imposition of limits on discounts to pharmacies no objective reasons why it is different for brands and generics. However, experience indicates that this is a measure will only be effective to the extent that incentives disappear as competition takes the form of discounts, rebates or other facilities and other services.
Be careful to exclude from public funding drugs for minor symptoms that do not match a price: the result may be, if no precautions are taken, an increase public expenditure are being replaced by more expensive drugs funded by the NHS. This is indicated by the experience of other countries and the previous English experience.
Although the agreements have prevented Interregional Council again addressed the necessary revision of the inequitable and inefficient system of co-payments current drugs, further highlights a very positive and the commitment to take into account the cost per life year gained to deciding which services should be in the future: better prices only those innovations that lead to a major increase in efficiency and lower cost per life-year gained.
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