Drugs and Money - Prices, Affordability and Cost Containment
(2003; 158 pages) View the PDF document
Table of Contents
View the documentIntroduction
Open this folder and view contentsPart I: Problems and approaches to a solution
Close this folderPart II: Selected experiences with policy options
View the documentChapter 6: Measures relating to use of drug subsidy lists and to regulation
View the documentChapter 7: Experiences with budgets
View the documentChapter 8: Experiences with reference pricing
View the documentChapter 9: Experiences with patient charges
View the documentChapter 10: Switching to non-prescription status
View the documentChapter 11: Experiences with generics
View the documentChapter 12: Experiences with pharmacy benefit management programmes in the USA
View the documentChapter 13: Experiences with professional education
View the documentChapter 14: Providing affordable medicines in transitional countries
View the documentChapter 15: Access to medicines in low-income countries
View the documentList of Contributors
View the documentBack cover

Chapter 6: Measures relating to use of drug subsidy lists and to regulation

A.S. Mitchell

1. Terminology

This chapter is contributed primarily from the perspective of a country - Australia - in which the pattern of public payments for drugs is built largely around the compilation of “drug subsidy lists” - i.e. lists of those drugs considered eligible for such payment. In other countries the terminology is a little different but, as pointed out in Chapter 3, the notion of establishing positive (or negative) lists for this purpose is widely accepted.

2. The systematic use of economic evaluation

In the last decade or so, there has been increasing interest in the use of economic evaluations of drug treatments in order to provide a firm basis for the value-for-money judgements that are inherent in drawing up or amending drug subsidy lists. The relevant form of economic evaluation is an incremental analysis. This can be defined as an analysis of the change in costs as compared to the change in outcomes that will occur when one intervention substitutes for its comparator [4], for example when one chooses to treat hypertension with a newer angiotensin II receptor antagonist or calcium channel blocker rather than with an older diuretic. This approach recognizes that there is always an alternative approach to treatment (even if it is merely the choice of “no active intervention”). The changes in costs and the resulting changes in outcomes must be quantified as accurately as possible.

Decisions to change the subsidy status of a drug are mostly made “at the margin”, i.e. they relate to a particular new drug [7]; they are not part of “global” decisions in the sense that the subsidy status of all currently subsidised drugs in the therapeutic class is under review each time a new drug is considered. Rather the considerations focus on the comparative merits and costs of the proposed new drug as compared with its nearest competitors.

3. The decision-making framework

The first basic requirement is a decision maker. The administrators of many large drug payment systems seek advice on clinical - and increasingly on economic - matters, usually from an independent committee. In these instances, actual decision-making is usually shared between the committee and the administrators. The cardinal issue in each decision is usually whether a new drug should or should not be added to the existing lists. An incremental economic evaluation of the proposed drug can provide useful and relevant information to help in making such decisions. However, incremental economic evaluations are even more useful if the drug subsidy system has the capability of restricting drug subsidies to specific patients and specific indications, or of negotiating prices. Targeting the subsidy to patients likely to benefit most and/or lowering the price can both improve the cost-effectiveness, or value for money, which the drug provides [8].

The second requirement is a process by which timely and relevant information is provided to the decision maker. There are three basic approaches. Firstly, the commercial sponsor of the drug may initiate consideration, by lodging an application for subsidy. This is attractive because sponsors know when new drugs are becoming available, have the incentive to seek listing and have access to most of the necessary information. In addition, it leaves the onus of proof with the sponsor to meet any requirements of the decision maker. Secondly, other interested parties outside the scheme (for example a patients’ organization) may lodge a similar application; this can be more difficult where the requirements of the decision maker are onerous, requiring the submission of medical and economic evidence which the interested party may not have available. Thirdly, the drug subsidy system itself can initiate consideration, for example where it feels that new published evidence calls for a re-evaluation of therapeutic preferences. In practice, all three approaches are used, but the first is the most usual.

The third basic requirement is for the information needs of the decision maker to be clearly made known. This is important to promote consistency in applications and thus in decision-making. This is best achieved through the promulgation of guidelines. Australia was the first jurisdiction to release guidelines that requested economic analyses. The current Australian Guidelines date from the November 1995 edition [3]. These are the only set of guidelines to have been revised by a decision maker in order to reflect insights and experience and, in particular, to indicate the basis on which the decision to list a drug could be negative as well as positive. The province of Ontario in Canada released its guidelines in 1994 [9]. The province of British Columbia accepts submissions that follow either the Ontario guidelines, or the guidelines of the independent Canadian Coordinating Office of Health Technology Assessment [2]. The French government released guidelines in 1995 [10]. The Sickness Funds Council in the Netherlands released Guidelines which entered into effect in 1999 [1]. Guidelines fall within a wide spectrum which ranges from the purely clinical at the one extreme to the purely financial at the other.

The fourth basic requirement is that one must be able to appraise independently and critically the submissions received according to the Guidelines. The Australians have instituted a two-step process to appraise submissions: an in-depth review by evaluation teams comprising skills in clinical epidemiology, biostatistics and health economics; and a concise overview by an independent technical committee comprising individuals of national standing from the same three skill areas. The integration of the three skills is deliberate. The appraisal restricts its comment to the validity, relevance, strength and interpretation of the evidence. It leaves the value judgements inherent in the decision-making process to those delegated to making the decisions. The Ontarians have lists of clinical and economic experts who provide advice on submissions according to a set format. Advice from a clinician is routinely sought for new drugs. When thought necessary, economic advice is separately sought. Each expert is asked to recommend a course of action to the decision-makers. The British Columbians have two separate teams, one to review the clinical evidence and another to review the economic evidence. Both teams prepare recommendations to the decision-makers. The French do not appear to have established an evaluation process. This seems to have contributed to the decision of the key committee (la Commission de Transparence) to indicate in 1997 that it no longer wished to receive submissions according to its guidelines.

4. Experience with and potential offered by economic evaluation

Little material has so far been published which provides any real insights into the experience gained in using economic evaluations in a systematic manner. Most of what has been learnt lies with the Australians, although the Ontarians are currently reviewing their experience. The Australian experience suggests that the underlying clinical evaluation is pivotal [5], and hence has focused on the scientific basis of the clinical evidence. Even under this regime with clear guidelines, underpinned by strong legislation, problems arise frequently during the conduct and interpretation of the analyses [6]. Economic evaluation is intrinsically complex and genuine differences of opinion on how to interpret the results of clinical trials complicate matters further.

The problem most commonly encountered relates to means of determining the therapeutic outcome when comparing different drugs. It is possible that this focus could become the basis of future harmonization of the preparation and appraisal of economic evaluations around the world. Key issues would include methods for rigorously applying high quality clinical evidence across different contexts and integrating appropriate inferences from this evidence into economic evaluations. Based on a careful and rigorous evaluation of the experience in Australia so far, Hill et al. [6] warn that any agency or organization that wishes to make formal use of pharmacoeconomic data should realize the rigorous appraisal process that is needed before the raw data can be used as a basis for taking decisions. Published pharmaco-economic analyses usually do not provide enough detail to assess the accuracy of the underlying data.


[1] Anon, Dutch finalising pharmaco-economic guidelines, SCRIP 6 (23-25 December 1998), 2398-2399.

[2] Canadian Coordinating Office for Health Technology Assessment, Guidelines for Economic Evaluation of Pharmaceuticals: Canada, 2nd edn, CCOHTA, Ottawa, 1997.

[3] Commonwealth of Australia, Guidelines for the Pharmaceutical Industry on Preparation of Submissions to the Pharmaceutical Benefits Advisory Committee: including major submissions involving economic analyses, Department of Health and Aged Care, Canberra, 1995. Available from http://www.health.gov.au/pbs/pubs/pharmpac/gusubpac.htm.

[4] M.F. Drummond, B. O’Brien, Methods for the Economic Evaluation of Health Care G.L. Stoddardt and G.W. Torrance, Programmes, 2nd edn, Oxford University Press, Oxford, 1997.

[5] S. Hill, D. Henry, B. Pekarsky and A. Mitchell, Economic evaluation of pharmaceuticals: what are reasonable standards for clinical evidence? The Australian experience, Br. J. Clin. Pharmacol. 44 (1997), 421-425.

[6] S. Hill, A.S. Mitchell and D.A. Henry, Problems with the interpretation of pharmacoeconomic analyses: A review of submissions to the Australian pharmaceutical benefits scheme, JAMA 283 (2000), 2116-2121.

[7] A. Laupacis, D. Feeny, A.S. Detsky and P.X. Tugwell, Tentative guidelines for using clinical and economic evaluations revisited, Can. Med. Assoc. J. 148 (1993), 92-99.

[8] A. Mitchell, Update and Evaluation of Australian guidelines: Government perspective, Med. Care 34 (1996), DS216-DS225.

[9] Ontario Ministry of Health, Ontario Guidelines for Economic Analysis of Pharmaceutical Products, Ministry of Health, Toronto, 1994.

[10] République Française, Acceptabilité des Etudes Médico-économiques: Contenu et Présentation. Saint-Denis: Agence du Médicament, 1995.

Further reading

M.R. Gold, J.E. Siegel, L.B. Russell and M.C. Weinstein, Cost-Effectiveness in Health and Medicine, Oxford University Press, New York, 1996.

A. Laupacis, D. Feeny, A.S. Detsky and P.X. Tugwell, How attractive does a new technology have to be to warrant adoption and utilisation: tentative guidelines for using clinical and economic evaluations, Can. Med. Assoc. J. 146 (1992), 473-481.

G. Salkeld, A. Mitchell and S. Hill, Pharmaceuticals, in: Economics and Australian Health Policy, G. Mooney and R. Scotton, eds, Allen & Unwin, St Leonards, 1998, pp. 115-136.

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