Market Report Source

Overview

Introduction

Combined drug sales in the five major European markets represent the second-biggest market globally after the US. Unlike the US, which is dominated by a wide range of private payers, governments are the major payers in Europe. The monopsonistic nature of these markets provides governments with significant leverage and they use extensive P&R controls to contain spiralling healthcare costs.

Scope

*Evaluation of the pressures facing the drugs industry and how these pressures will impact P&R *Overview of global P&R controls, examining which are important in the European market both currently and in the future *In-depth analysis of each of the five major European markets, examining both the healthcare systems and the key P&R infrastructure *Identification of trends and recommendations shaping the European P&R environment

Highlights

Better dialogue between healthcare providers and drugs companies is vital; however, healthcare provider devolution has led to fragmentation of the key European markets, making it difficult to identify key P&R stakeholders

Many European governments profess to be willing to reward innovative drugs, however this is largely a smokescreen as debt-ridden governmental payers increasingly prioritize cost containment

European drug developers need to prioritize P&R as an important factor in drug development, and focus on securing strong P&R justification before green-lighting me-too drugs

Reasons to Purchase

*Gain a clear understanding of the healthcare market dynamics and P&R environment within each of the five major European healthcare markets *Review P&R trends in Europe, based on Datamonitor’s analysis and primary research conducted with key stakeholders in the industry *Gain insight into how P&R fits into company strategy and understand how specific P&R trends are shaping the European markets

Table of Contents

CHAPTER 1 EXECUTIVE SUMMARY
Scope of the report
Key findings
CHAPTER 2 OVERVIEW OF THE DRUGS MARKET: IDENTIFYING WHY PRICING AND REIMBURSEMENT IS IMPORTANT AND WHERE IT FITS IN
Introduction: why is drug pricing and reimbursement important?
Pharma is facing a reduction in productivity
R&D spend is rising
The number of approvals is falling
There are delays in P&R assessment
Biotech is more productive and is set to have a correspondingly higher growth rate
Blockbuster patent expiries are also damaging Big Pharma
Pharma pipeline strategy needs to adjust to market demands
Globally, public and private payers exert pressure on profit margins
Pressures on drug developers rise because healthcare expenditure is set to continue to increase
Although drugs make up a relatively small percentage of healthcare spending, they are a highly visible target
Spending on drugs is set to rise
The drugs industry is being squeezed on drug pricing and reimbursement
CHAPTER 3 GLOBAL OVERVIEW OF P&R TOOL IMPLEMENTATION
Introduction
Price setting mechanisms are used to set the initial theoretical price
The initial theoretical price is then modulated by a range of factors
A key factor impacting pricing is the broad range of pricing controls used globally
An overview of government-led price controls
Profit controls are used in some European countries such as the UK
Reference pricing is used extensively across Europe
Price cutting and price freezing play a central role in European cost containment
Linking pricing with the Consumer Price Index
The use of pharmacoeconomics in pricing controls: using healthcare economics, outcomes research and pharmacoeconomics to justify pricing
Discounts and rebates play a role in European drug pricing
A single European drug price has been discussed as a possible cost containment tool
A range of factors impact the drug price only once the drug has been launched
Parallel importation can reduce profit margins for drugs companies
Health informatics may lead to increased cost containment
DTC marketing cannot be used in Europe to support higher drug pricing
Generic incursion reduces profit margins for drugs
Key global reimbursement mechanisms
Reimbursement favours innovation-focused drug development
Spending on sales and marketing is prioritized over seeking innovation
The focus on sales and marketing encourages the development of me-too drugs, although healthcare providers are penalizing me-too development
A wide range of factors influence reimbursement
Controlling doctors’ budgets is used more widely in Europe than in the US
Volume and expenditure limitations play a role in Europe
Although tiered co-pay and formularies play an extensive role in the US, they are not used in Europe, and most patients pay a low co-pay in a flat-fee form
Formulary access and Positive/Negative lists play a more significant role in the US compared to Europe
Taxes on reimbursed drugs
Some countries require drugs to be included on reimbursement lists of a number of countries before reimbursement is granted
Pharmacoeconomics and risk-sharing agreements are increasingly important in Europe
Step therapy or fail first plays a key role in the US, but is not widely used explicitly in Europe
Prior authorization
Pharmacist substitution
Enforcing a switch to OTC status is another reimbursement restriction tool in both the US and some European countries
CHAPTER 4 PRICING & REIMBURSEMENT IN FRANCE
Healthcare in France: high debts increase the focus on P&R
An overview of the French healthcare system
Private healthcare is increasingly used to support public healthcare
French healthcare provision can be split into PCP-dominated community healthcare and hospital-based healthcare
The creation of the HAS has significant impacts on healthcare provision in Europe
A range of other stakeholders impacts on healthcare provision
Recent changes affecting the pricing and reimbursement environment in France
The Transparency Commission determines the SMR and the ASMR
The SMR and the ASMR are used as a basis for P&R in France
The unification of a range of P&R functionalities under HAS is set to transform P&R in France
P&R mechanisms used to contain costs in France
A range of reforms have been instituted to boost cost containment
Recent co-payment reforms help drive healthcare cost containment
The ‘Médecin Traitant’ scheme drives adoption of a gatekeeper system in France
There has been considerable consolidation across a range of healthcare stakeholders to help contain costs
A range of P&R tools are being used to support healthcare reforms in the fight to contain costs
Volume limitations are an important restrictor of strong sales growth
The focus on utilizing and incorporating reference pricing is increasing
The market profile of drugs companies and their products is limited by restricting salesforce activity and physician contact
Taxes and levies make the environment harsher for drug developers
Generic usage and prescription is the most important macroeconomic factor modulating pricing once the drug is on the market
CHAPTER 5 PRICING & REIMBURSEMENT IN GERMANY
Healthcare in Germany: the need for cost containment
An overview of the German healthcare system
Public healthcare insurance covers the vast majority of German patients
Ambulatory care is highly regulated and is dominated by reimbursement controls
A range of stakeholders impact healthcare provision in Germany
The limited control that governmental bodies exert on healthcare provision is primarily mediated through the Federal Ministry of Health and the 16 Länder
Sickness funds are the key healthcare provider
Physician and pharmacist committees exert significant influence on prescription
A range of organizations represent industry interests
A number of reforms shape the evolution of the German healthcare market
IQWiG is helping to introduce cost effectiveness and evidence-based healthcare
Recent changes affecting the pricing and reimbursement environment in Germany
Reference pricing is a key cost-containment tool but the inclusion of patented drugs in the scheme is highly contentious
The evolution of jumbo reference pricing
Reference price levels are calculated by the Federal Committee of Physicians and Sickness Funds
German pharmaceutical companies are fighting jumbo reference pricing
Jumbo reference pricing is affecting an increasing number of drugs
The requirement for innovation is steep and many drugs are not sufficiently innovative
Pharmacy substitution: a cost-saving idea in principle but it has yet to show significant savings
Restrictors of aut idem substitution
Incentives for aut idem substitution
The impact of aut idem substitution on the German drugs market
Pharmacy and pharmaceutical company rebates are used in cost containment
The high number of patients exempt from co-payment is being reduced
Historically, budgets and spending caps have restricted Germany’s pharmaceutical market
Ambulatory physician budgets have been successful at reining in drug expenditure
Hospital budgets are being reshaped by DRGs
Despite several initiatives over the last 15 years, there are no plans to introduce a positive list
Germany lacks a positive list
Payers are restricting the number of reimbursable drugs by placing them on negative lists in Germany
Additional factors impact on drug prescription guidelines
Discounts and rebates increasingly shape profit margins in the German hospital markets
Parallel importation and generic competition impact on drug price following launch
A reduction in the parallel importation quota is set to reduce the damage to pharmaceutical company profit margins
Generic penetration in Germany is relatively high
Healthcare informatics is playing an increasingly important role in German healthcare provision
CHAPTER 6 PRICING & REIMBURSEMENT IN ITALY
The Italian healthcare system is racked by debt and it is very difficult for drugs companies to generate a profit in this market
An overview of the Italian healthcare system
Private healthcare is used to replace public service with better provision
Italian healthcare provision is increasingly decentralized
The Italian national health service
Reimbursement is still assessed on a national level
AIFA dictates drug reimbursement in Italy
Although there is a formalized reimbursement structure, reimbursement is based on negotiations
Drugs are grouped into classes to determine reimbursement levels
Class C drugs still face cost containment pressures
Healthcare delivery is the responsibility of regional and local healthcare bodies
ASLs provide primary and secondary care in Italy
Italian reforms have shaped healthcare provision significantly in the last two decades
Recent changes affecting the pricing and reimbursement environment in Italy
Patient co-payment is making a re-emergence on a local level
Drugs companies help fund the Italian healthcare system through levies
Price cuts are part of price manipulation, and are used to contain costs in Italy
Pharmacist substitution has been introduced but has historically had slow adoption
Reference pricing is a key cost-containment tool in Italy
Drug monitoring and risk-sharing agreements have been introduced in Italy
Parallel importation and generic competition impact on drug price following launch
Generic drugs have historically made a limited impact but are now being increasingly utilized
CHAPTER 7 PRICING & REIMBURSEMENT IN SPAIN
An overview of the Spanish healthcare system
Spanish healthcare has become increasingly devolved to the Autonomous Communities
Public healthcare dominates healthcare provision
Inpatient and outpatient healthcare is provided on a devolved regional basis
The introduction of the Medicines Bill in July 2006 revolutionizes healthcare provision in Spain
Recent changes affecting the pricing and reimbursement environment in Spain
Reference pricing, price cuts, price freezes, discounts, rebates and taxes are all used in Spain to limit drug company profit margins
Reference pricing has evolved significantly with the introduction of the new medicines bill
Price cuts and price freezes are used in Spain to contain costs
Despite their unpopularity, discounts, rebates and taxes are used by the Spanish government
Positive/negative lists and prior authorization are used to limit physician prescription
Positive/negative lists have met with limited success in Spain
Despite issues raised by the EC, prior authorization exists in Spain
Additional tools are used in cost containment, including pharmacist substitution and patient co-payment, although these have a limited role in P&R in Spain
Pharmacist substitution is allowed on a relatively restricted basis
Patient co-payment is low in Spain
Generic competition is having an increasing role affecting drug prices following launch
The profile of generics is being raised
A range of strategies have been used by Big Pharma to restrict parallel importation of drugs out of Spain
Healthcare informatics helps to promote the rational use of medicines
CHAPTER 8 PRICING & REIMBURSEMENT IN THE UK
An overview of the UK healthcare system
Governmental spending on healthcare in the UK has risen significantly in the last five years
A range of trusts, authorities and NHS plans increase the complexity of healthcare provision in the UK
A range of trusts and authorities are involved in healthcare provision in the NHS
PCTs dominate healthcare provision in the UK
PCTs and SHAs shape prescription in the primary care setting and beyond
A number of plans and publications are shaping the evolution of the NHS
Additional initiatives impact on NHS evolution
A range of schemes and bodies impact on drug prescription in the UK
NICE is a key P&R stakeholder in the UK
NICE and HTAs
HTA bodies are becoming more homogeneous, however significant differences still exist between them
The government has thrown significant power behind the adoption of NICE recommendations
The postguidance and preguidance effects are a significant concern
Accelerated assessments via the STA route will help to reduce the preguidance effect, although there are also concerns over how the shortened timeframe will impact assessment and approval
There are concerns that NICE and more specifically the new STAs are shaped by politics
A range of schemes also impact on drug prescription
Recent changes affecting the pricing and reimbursement environment in the UK
Direct pricing and reimbursement mechanisms in the UK
The PPRS is the principal method of governmental P&R regulation in the UK
Patient co-pay, hospital discounts and pharmacist clawback are also used to contain costs, however they are not key P&R tools
Parallel importation and generic competition impact on drug price following launch in the UK
The UK has a strong generics market and increased switching to generics is set to make it stronger
Parallel importation
CHAPTER 9 KEY P&R TRENDS AND RECOMMENDATIONS ACROSS THE FIVE MAJOR EUROPEAN COUNTRIES
European P&R is a difficult environment to generate a strong ROI
There is slow uptake of new drugs in the European market
Governments need to clarify their P&R strategy, making it more transparent and remove conflicting policies
Governments are incentivizing increased generic prescription and setting quotas for parallel trade
The drugs industry is being pressed into helping to fund healthcare provision
Identifying and targeting the right stakeholders is increasingly difficult in the various European markets
The mix of P&R tools used by governments depends on other European countries and constantly fluctuates
The regulator and the P&R bodies have different goals
The definition of innovation is making the European P&R environment difficult
Innovation is the key to securing strong pricing and reimbursement, however, is it being adequately rewarded?
Do governments recognize the argument of incremental innovation?
How to best identify innovation? It is based on whether a drug improves quality and/or quantity of life
Me-too drugs, together with non-essential drugs are being strongly discriminated against from a reimbursement perspective
What will happen if innovation is marginalized?
The use of PE in Europe is evolving
The use of PE in Europe is increasing
The way that PE analysis is being used and analyzed is evolving
Drugs companies need to determine which bodies want which types of analysis
Payer HTAs are increasingly based on in-house analysis using company clinical data and peer-reviewed PE analysis
P&R bodies want simpler PE models, although not at the expense of a confused message
There is increased sharing of information between the main HTA bodies
Key recommendations: ways that drugs companies can build up skills to optimize European P&R strategy
Negotiation skills are highly important
Drugs companies need to be better at communicating
Internal communication is vital in ensuring a strong ROI
External communication is vital in ensuring a strong price and adequate reimbursement
It is vital for drugs companies to have a clear P&R strategy
It is important to integrate P&R analysis into the clinical trial process
The remit of PE analysis should be broadened and shifted into earlier-phase clinical trials
Drugs companies should know which markets to launch in first
Drugs companies should consider adopting certain US-focused P&R strategies
Consider using political lobbying and legislation to change the P&R environment
Carry out more effective targeting of healthcare professionals as part of the allowance for providing information
CHAPTER 10 GLOSSARY
Glossary of terms
CHAPTER 11 BIBLIOGRAPHY
Publications and online articles
Datamonitor resources
Conference literature
Online resources
List of Tables
Table 1: HAS has taken over a number of healthcare P&R stakeholders
Table 2: Examples of additional stakeholders that affect healthcare provision and P&R in France
Table 3: The range of ASMR levels used to determine reimbursement in France
Table 4: Key reforms shaping the German healthcare system
Table 5: Key drug reforms in Italy, 1993-2005
Table 6: Examples of discounts on drug prices for high-volume drugs (statins, PPIs), 2003-05
Table 7: Trusts and authorities involved in UK healthcare provision
Table 8: Key plans and publications shaping NHS evolution
List of Figures
Figure 1: Key pressures facing drugs developers in the US market, 2006
Figure 2: Key P&R cost-containment tools in EU5
Figure 3: NME & BLA approvals, compared to PhRMA company R&D spend, 1990-2004
Figure 4: Average time delay between marketing authorization and effective market access, using products from June 2000- June 2004
Figure 5: Biotechnology companies are set to show a stronger CAGR than pharmaceutical companies for 2004-10
Figure 6: The percentage of BLAs approved is falling, while the percentage of NMEs is rising, 1990-2004
Figure 7: Generic risk facing leading pharmaceutical and biotech companies is rising through to 2010
Figure 8: Average EU5 healthcare spending has risen steadily between 1990 and 2003
Figure 9: Spending on pharmaceuticals as a percentage of total healthcare spending is higher in the EU5 than the US, although some European markets have lower spending than Japan
Figure 10: The UK has the highest CAGR increase in healthcare spending for 1990-2003
Figure 11: Factors affecting drug pricing, 2006
Figure 12: Key pricing controls used globally, 2006
Figure 13: Globally, a number of factors can affect the price of a drug following launch
Figure 14: Examples of reimbursement controls used globally, 2006
Figure 15: Estimated cost-containment savings in France, 2003-05
Figure 16: Reimbursable drugs provided by retail pharmacies account for three-quarters of drug provision, 2003
Figure 17: Both the SMR and the ASMR rating are required to determine the reimbursement rate
Figure 18: Key cost-containment P&R tools used in Germany
Figure 19: Estimated cost-containment savings in Germany, 2003-05
Figure 20: There are few major differences between public and private healthcare insurance in Germany
Figure 21: A number of governmental bodies, physician and pharmacist associations, and industry associations impact healthcare provision in Germany
Figure 22: Pfizer’s evaluation of Sortis’ therapeutic benefit did not match the assessment of the drug
Figure 23: Pfizer’s atorvastatin sales in Germany fell significantly after being removed from the reference pricing list
Figure 24: AstraZeneca’s Nexium generates strong sales and volume growth, after drug prices fall to the reference level
Figure 25: Parallel importation penetration in Germany increased from 1997-2002 before falling slightly through to 2004
Figure 26: Key cost-containment P&R tools used in Italy
Figure 27: Estimated cost-containment savings in Italy, 2003-05
Figure 28: The Italian healthcare system is highly decentralized
Figure 29: AIFA acts as an umbrella to a range of commissions and observatories
Figure 30: Reimbursement depends on the level of therapeutic advantage offered by a new drug
Figure 31: Key cost-containment P&R tools used in Spain, 2006
Figure 32: Estimated cost-containment savings in Spain, 2003-05
Figure 33: Spain’s healthcare provision is largely decentralized with provision made by ACs
Figure 34: There are a range of incentives and disincentives impacting generic prescription in Spain
Figure 35: An overview of the UK healthcare system
Figure 36: A range of bodies impact drug prescription in the UK
Figure 37: There are more advantages than disadvantages to the PPRS system
Figure 38: There are a number of incentives for generic prescription in the UK
Figure 39: Drugs companies must overcome a range of hurdles to generate a strong ROI
Figure 40: European markets are complex and involve a number of bodies, complicating the task of identifying key P&R stakeholders
Figure 41: The battle between cost-containment and cost-effectiveness determines whether drugs companies stay in the European market or decide to exit
Figure 42: Although a greater priority is being placed on PE analysis, it has a relatively low profile in Germany and France
Figure 43: The optimal launch across Europe takes place over three waves
Figure 44: Estimated cost-containment savings in the five major European markets, 2003-05