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 14: Providing affordable medicines in transitional countries

Kees de Joncheere and Tamas Paal

1. Introduction

The term “transitional”, as currently applied to national economies and countries, refers to those former communist systems which are still engaged in the long process of transformation; a centrally planned economy is progressively being replaced by market orientation, and communist ideology and totalitarian rule have gradually given way to democratic political structures. That process has come into motion in many parts of the world, but nowhere more conspicuously than in the Countries of Central and Eastern Europe (CCEE) and the Newly Independent States (NIS) which emerged from the former Soviet Union.

Because of this ongoing process of change, the question of drug pricing and cost containment in these countries unavoidably has to be approached in a broad perspective, involving various other aspects of health and drug policy; well-intended measures on one front could all too readily disrupt a fragile situation on another. In fact most aspects of the health care system in these countries, largely shaped in the past according the Semashko model, have been undergoing major reform. Whereas previously the system was totally state-run and controlled, and pharmaceuticals were produced in state factories, distributed by state wholesalers and supplied and reimbursed through state pharmacies, the health care market has in most of these countries now rapidly and even suddenly opened up; systems have generally been restructured around health insurance schemes [3], and drug production and supply have largely been privatized, with subsequent changes in reimbursement schemes [1]. Many countries in the CCEE have already made great progress in their transition towards a democratic society and a market economy. Most of these countries have embarked on health care reform, separating financing and health services from the State, and in parallel separating health financing from health services delivery (the purchaser-provider split). At the same time, macroeconomic pressures have generally forced governments into implementing a large degree of deregulation, including measures in the health care and pharmaceuticals market. In carrying out that process of deregulation, the authorities have unfortunately often failed to take into account the special risks of market failure which exist in the field of medicines and which render strong government involvement essential; as long experience in the West has shown, regulation in matters ranging from advertising and drug safety studies to pricing is essential if society is to be protected. Particular caution is called for in view of the marginal health situation: the state of health of populations varies widely across this part of Europe, and in many of the transitional countries it has declined. Particular concerns relate to the spread of tuberculosis and HIV-AIDS. There are also considerable differences within countries in terms of health status as well as access to health services [2].

However far reform has proceeded, it has much further to go before a stable and acceptable situation is reached.

Processes other than internal reform have also affected the situation. Ten CEE countries have applied for membership to the EU and are hoping to join in the period 2004-2007. In that connection, further upgrading of their drug regulatory systems and legislation, in order to conform with EU Directives, is underway. Membership of the EU will also have implications for the drug industry in the CCEE as regards issues of intellectual property protection, potential export markets (particularly to existing EU countries but also in their traditional export areas including the Newly Independent States), and the need and opportunities for foreign investment. In Albania, Bosnia and Herzegovina and the Federal Republic of Yugoslavia, on the other hand, the transition process has, unhappily, been severely hampered by prolonged armed conflict and social unrest; only more recently has it regained momentum [4].

Despite the progress which has been made, the increasing health needs and expectations of patients and society generally, as well as those of health professionals, have not yet been matched in this part of Europe by an increase in resources within the health sector. For the supply and reimbursement of medicines this has meant that part of the costs of medicines (often a substantial part) are having to be borne by the patient, either through co-payment for reimbursed drugs or through direct purchases of OTC medicines or non-reimbursable items.

In the NIS the immense transition from the former unitary Soviet system and the creation of a group of new countries has had fargoing implications for people’s changed the social fabric, not always for the better. Growing inequalities, unfair salary systems, unemployment, corruption and lack of perspectives have affected large groups of the population. The emerging market economy requires a different concept of public services and management structures, and new attitudes and skills at all government levels. The changes also impact on the health and the pharmaceutical sector and as noted above they have brought about a real deterioration in the health status of populations.

Major health indicators have shown a worsening trend over a period of years, and only now are they in some countries improving again. The very necessary process of ongoing health care reform unavoidably brings with it disruption. Many citizens of the NIS are currently find that even elementary health care services and essential drugs are out of their reach, and this has led to a decrease in life expectancy, increased morbidity in cardiovascular and infectious diseases, emerging epidemics of poverty-associated disorders and increased antibiotic resistance due to irrational drug treatment (over-prescribing or prescription-free sale) [5].

2. The drug market in Central and Eastern Europe

Before 1989, drug needs in the CCEE were supplied largely by domestic state-owned companies. These companies also exported their goods to the former Soviet Union. The consumption of medicines was high in volume terms due to inappropriate prescribing habits, a highly specialized and hospital-based health care system, and strong patient pressures.

With the transition, the distribution of drugs through wholesalers and pharmacies was largely privatized. Manufacturing companies in several countries are still (at least partially) state-owned, often through public property investments. Multinational companies have gradually increased their market share (attaining up to 50% in value terms in most markets). Drug expenditures have been rising fast, both in absolute terms and as a percentage of health expenditure (Table 1, Fig. 1). Generic drugs have been losing market share to imported brand name products, due to the perception that the latter are superior, a belief often fostered by marketing practices. And while the level of expenditure per capita, expressed in dollars, is low as compared with figures from the countries of the European Union, it is substantial as compared with the levels of earnings.

Table 1
Drug market CCEE, estimated figures 1999 (or latest available)

Country

Total drug expenditures, million $

Per capita, $

% Total drug expenditures reimbursed

Drug costs as % of health expenditures

Drug costs as % of GDP

Albania

23

7

30

23

1

Bosnia: Fed (1)

Na

Na

Na

Na

Na

Bosnia: RS (1)

6

Na

Na

20

Na

Bulgaria

70

25

70

25

2.1

Croatia

432

90

Na

17

2.2

Czech Republic

1040

101

80

25

1.9

Estonia

13

47

50

23

1.8

Hungary

990

104

55

26

2

Latvia

65

46

40

16

1.3

Lithuania

190

51

54

18

1.8

FYR Macedonia

42

20

73

17

1.4

Poland

2350

61

45

10

1.7

Romania

320

14

42

20

1.4

Slovak Republic

490

70

86

25

2

Slovenia

235

114

84

18

1.5

Average CCEE

 

54

 

20

 

EU figures

 

275 (average)

 

7 to 11%

 

 

Sources: Ministries of Health CCEE, WHO/EURO, World Health Report, European Observatory.

Note: Bosnia Herzegovina: Federation of Bosnia and Herzegovina, and Republika Srpska. FYR Macedonia = Former Yugoslav Republic of Macedonia.


Fig. 1. Percentage rise in drug expenditure in one year.

Data from Script 2000


This rise in drug expenditures continues and has reached unsustainable levels; it is largely due to the introduction of new imported drugs, shifting prescribing patterns, intense marketing efforts and the rapid autonomous growth of health needs.

Investments in the CCEE drug industry have come from multinational companies as well as from companies in the CCEE themselves, particularly Hungary, Slovenia, Croatia, Poland and the Federal Republic of Yugoslavia. Domestic manufacturers produce basically generics, which mostly comprise off-patent drugs. Their traditional export market to the Newly Independent States has been in decline. Productivity, compliance with GMP standards and the implementation of patent protection will be key issues for the CCEE industry over the coming years.

3. The drug sector in the NIS

The biggest changes in the delivery of pharmaceuticals in almost all of the Newly Independent States have been the introduction of a market oriented drug distribution system and diminishing budget allocations for health care. Pharmaceuticals are often the first item to fall victim to health care budget cuts, which means for the patient limiting access to drugs and limited access to health care.

There are large differences between the twelve NIS countries in size, demography, economic and level of human development. In the pharmaceutical sector these countries originally inherited a common system of supply and financing (free drugs, subsidized supply) and similarities in medical practice, pharmacy education, social background. Now differences between them are emerging as regards the structure of the sector (production, privatization, etc.) and in payment, pricing and reimbursement systems.

Clearly (see Table 2) [5], there are large variations in health expenditure and drug expenditure, even when taking into account the ability to pay. In addition, the numbers of registered drugs and the numbers of establishments (production units, wholesalers and pharmacies) vary enormously. The growth in the number of wholesalers and pharmacies since 1990 has been caused by the (mostly uncontrolled) privatization wave in the sector.

4. Provision of medicines, containment of costs, and the quest for rational use

As already noted, rising drug expenditures throughout the CCEE and in the NIS have led to increased private spending and greater co-payments for reimbursable drugs, thus also leading to problems with equity of access to needed medicines. Cost-containment policies, affordability and access to drugs for the population are therefore matters at the top of government agendas.

Most reimbursement systems still use a structure inherited from the former system, limiting eligibility for reimbursement to certain drugs or to vulnerable population groups and patients with chronic diseases. Reimbursement has also been restricted by using positive lists and other instruments, such as the limitation of prescribing of listed drugs to particular specialists or the hospital level. Increasingly CCEE countries are using elements of economic evaluation for reimbursement decisions [7,8]. Varying degrees of patient co-payment have been introduced in a number of countries, and some drugs have been accorded over-the-counter status. As financing remains one of the major difficulties for health care systems, especially in NIS - where most countries spend only some 4-5% of their GDP on health - the need for such out-of-pocket payments for medicines has become substantial [6].

Table 2
Economic indicators, drug expenditure and pharmaceutical sector structure NIS (1996-1997)

Country

Population (Million)

GDP per capita
(US$)

Health expend.

Drug expenditure per capita
(US$)

Average monthly wage (‘97)
(US$)

Number of registered (‘97)

Establishments in the sector (1_1_97)

Inhabitants per pharmacy

     

in % of GDP

per Capita
(US$)

     

Production plants

Full assorted wholesalers

Pharmacies

Kiosks

 
 

1996

1996

1996

1996

1996

1997

Sep. ‘97

Sep. ‘97

Sep. ‘97

Sep. ‘97

Sep. ‘97

Sep. ‘97

Armenia

3.5

450

4.2

19

16

80

1200

10

6

600

120

5800

Azerbaijan

7.6

451

2.8

13

7

20

6000

3

2

1000

200

7600

Belarus

10.3

1308

5.1

67

16

145

3000

5

10

1250

4000

8200

Georgia

5.4

841

4.5

38

12

90

1500

20

7

850

600

6400

Kazakhstan

16.4

1278

2.0

26

12

100

2000

22

130

1700

1220

9700

Kyrgyzstan

4.6

379

3.4

13

8

Na

830

9

20

260

500

17 700

Moldova

4.4

443

3.9

17

10

40

3500

5

10

680

0

6500

Russian Fed.

147.5

2985

2.8

84

40

155

11 000

370

10

16 000

25 000

9200

Tajikistan

6.0

177

8.0

14

2

90

Na

1

1

507

Na

11 800

Turkmenistan

4.6

461

5.0

23

5

Na

665

1

2

390

120

11 800

Ukraine

50.9

864

3.3

29

10

Na

5000

22

10

Na

Na

Na

Uzbekistan

22.7

391

3.4

13

3

60

1920

16

20

5200

0

4400

Average

 

836

4.0

30

12

87

3051

       

9000

Total

283.9

           

484

228

28 437

31 760

 

 

Sources: Economic data: EBRD, EIU, BCE, IMF; health care expenditure: WHO Health for All database; sector data and drug expenditure: Ministries of health and Drug Agencies of NIS countries.


Table 3
Drug price regulation in CCEE, 1996-1997

Item

ALB

BIH

BUL

CRO

CZR

EST

HUN

LVA

LTU

MAC

POL

ROM

SVK

SLO

   

Fed.

RSr

                       

Price regulation?

Yes

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Price regulation applied to:

                             
 

Prescription drugs

Yes

 

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

 

Yes

Yes

Yes

Yes

 

OTC drugs

   

Yes

   

Yes

Yes

Yes

Yes

Yes

   

Yes

Yes

Yes

 

Other products

   

Yes

   

Yes

Yes

 

Yes

   

Yes

 

Yes

Yes

 

Manufacturers

Yes

   

Yes

 

Yes

         

Yes

Yes

Yes

 
 

Importers

     

Yes

 

Yes

         

Yes

Yes

Yes

 
 

Wholesalers

Yes

 

Yes

Yes

Yes

 

Yes

Yes

Yes

Yes

 

Yes

Yes

Yes

Yes

 

Pharmacies

Yes

 

Yes

Yes

Yes

 

Yes

Yes

Yes

Yes

 

Yes

Yes

Yes

 

 

Source: Ministries of Health CCEE.


Prices of medicines are mostly controlled, either through policies designed to limit production and import costs, various measures regarding distribution margins or introduction of either international reference pricing, or national reference pricing criteria for reimbursement (Table 3).

Whereas many western countries have succeeded in increasing the market share held by generic products, the trend in CCEE runs counter to this with generics losing market share to expensive imported specialties. These may in some cases offer new and necessary therapeutic possibilities, but at the same time they lead to overall affordability problems. CCEE will have to strike a balance and ensure that as great a part as possible of the market is covered by low-cost generic items [12].

Armed conflicts in Albania, Bosnia and Herzegovina and the Federal Republic of Yugoslavia have disrupted not only the reform process but also the pharmaceutical supply system. Humanitarian organisations have helped to ensure the maintenance of basic health services and the supply of medicines. Donations of drugs have proved of vital importance in such exceptional conditions, with an estimated 80 to 100% of medicines at times being provided through humanitarian assistance. Donated drugs have however often been inappropriate and of poor quality, due to lack of coordination and experience among the charities involved [13], and it is clear that they do nothing in the longer run to ensure a sustainable flow of affordable drugs. In some situations they have even been found to lead to an unhealthy distortion of prescribing practices [15].

Several CCEE countries were among the pioneers of drug utilisation studies in the seventies and some developed extensive systems to monitor drug use. Most of these systems later collapsed, and complete and reliable data on drug consumption and use are currently difficult to obtain. Such studies as have been performed in recent years point to marked differences between countries in prescribing patterns, attributed largely to differing therapeutic practices and the changing reimbursement environment [14].

Health professionals in these countries still have little access to objective and independent drug information, yet marketing practices by the pharmaceutical industry have greatly intensified over recent years. Some countries have developed policies seeking to improve the use of drugs through the establishment of drug information centres, the promotion of independent drug information services and the adoption of essential drugs lists and formularies.

5. The regulation of medicines

Some of the radical developments have taken place in the area of drug regulation, particularly because this is a requirement of the EU accession process. As early as 1997 regulatory authorities in ten CEE countries organized themselves under the CADREAC arrangement [9,10], and this has now developed into an intensive collaborative programme with the EU Commission. CCEE experts now participate regularly in the expert committees of the EU regulatory system, and many of the CCEE have updated their drug legislation since the early nineties and brought their legislation in line with EU Directives and Regulations [11]. The enforcement of regulations will however need to be strengthened. At the same time it is clear that the harmonisation with EU criteria may create a series of problems around the availability of medicines, as some of manufacturers may find it difficult to fully comply with GMP in time, and as it may prove difficult to complete the full review of old registration dossiers before the day of accession. This will lead to a welcome cleaning up of the eastern European drug scene, but at the same time may also lead to disappearance of many cheap generic products from the market.

Most CCEE and NIS have established national medicines agencies - through a transformation of what was earlier a quality control institute - and made them responsible for drug regulation as a whole. In some of these countries procedures for obtaining marketing authorizations nevertheless remain cumbersome and lengthy; most agencies face a significant backlog in marketing applications. This too can have economic repercussions, where generic products fail to reach the market in good time.

6. Current challenges

Several major challenges for the coming years in Central and Eastern European and the Newly Independent States can be identified:

- The available funds for drug reimbursement will not be sufficient to meet the rising demand from patients and professionals; effective cost containment measures will be necessary, while at the same time access to needed medicines will have to be guaranteed and quality of treatment improved. The policies to meet these conflicting needs will have to be developed and implemented through a participatory process that can ensure public and professional confidence.

- Drug regulation is rapidly brought into line with EU regulations, as negotiations for the enlargement of the Union proceed; however it will at the same time be necessary to prove better systems for the enforcement of regulations and policies than those currently existing, and it is vital to ensure that this harmonization will not lead to decreased access of needed drugs.

- In each country the domestic pharmaceutical industry will face the need for an ongoing improvement in quality and efficiency if it is to compete effectively in a rapidly changing market. Patent legislation will change product portfolios. Export markets, particularly those offered by the Newly Independent States, will remain of major importance to successful developments for CCEE companies. These industries will therefore need to be commercially astute and enterprising, and in that they will no doubt be supported by the governments; that however must not prejudice the implementation of critical policies on drug pricing and use.

- In the Newly Independent States the pharmaceutical sector is now entering a new stage of development. Modest economic growth and decentralization in principle offer opportunities for new development; health care reform may gradually deliver results. However, despite the positive economic development in several of these countries, it is clear that all will remain in a transitional stage for several years at least, and that the environment for change and innovation will not always be positive and stable. Recent economic turmoil only underlines the need for ongoing reform and adaptation of the sector if one is to achieve sustainable systems and structures.

- In all CCEE and NIS countries, continuing improvements in sector management should strengthen recently established structures and create sustainability. National drug policies will continue to play a stimulating strategic role. The quality of the drugs on the market and of domestic production in general needs further development. However important price is, one will have to be wary of the temptation to let economy prevail over quality.

- Rational selection and prescribing of drugs is critical because of the often low standard of inherited prescribing practices and the current lack of money. A comprehensive approach, with initiatives at regional and hospital level, is needed to achieve tangible results. Fundamental changes in the educational system should make health professionals more patient focussed and health outcome oriented, with special emphasis on drug selection and prescribing.


7. Conclusion

The situation of the countries of Central and Eastern Europe and the Newly Independent States is immensely variable, as is their rate of progress, both economically and in the development of health systems. Viewed globally they occupy a situation intermediate between that of the industrialized west and the developing world. Some, particularly the countries approaching the point of accession to the European Union, have the potential to attain western standards within a decade. For others it will take much longer and they may for a generation or more continue to struggle with large populations which will not be capable of affording drugs at the price levels customary in the west. For these countries it would seem essential to contemplate the application of strongly differentiated pricing for drugs available internationally, as discussed in Chapter 15 with respect to the developing world.

References

[1] Pace of change steps up in Central and Eastern Europe, Scrip Magazine (January) (1998).

[2] M. McKee and B. Jacobsen, Public health in Europe, Lancet 356 (9230) (2000), 665-670.

[3] H.U. Deppe and S. Oreskovic, Back to Europe: back to Bismarck? Int. J. Health Services 26(4) (1996), 777-802.

[4] G.I. Petrova, Monitoring of national drug policies - regional comparison between Bulgaria, Romania, former Yugoslav republic of Macedonia and Bosnia Herzegovina, Centr. Eur. J. Public Health 9(4) (2001), 205-213.

[5] F.W. Stobbelaar and N. Menabde, Development of the pharmaceutical sector in the Newly Independent States, Eurohealth, 4 (6) (special issue winter 1998/9) (1998/1999), 80-84.

[6] N. Nazmi Sari and J. Langenbrunner, Consumer out-of-pocket spending for pharmaceuticals in Kazakhstan: implications for sectoral reform, Health Policy and Planning 16(4) (2001), 428-434.

[7] WHO/EURO, Proceedings of a seminar on drug financing, reimbursement and pricing policies in CCEE, Budapest, 1997.

[8] WHO/EURO, Report of a meeting on policies on pricing and reimbursement of medicines in Europe, November 2000.

[9] CADREAC, Proceedings of the first meeting of the drug regulatory authorities in CCEE, National Drug Institute, Sofia, Bulgaria, 1997.

[10] CADREAC, Collaborative agreement of drug regulatory authorities of EU associated countries, http://www.cadreac.org, accessed on June 10, 2002.

[11] Pan European Regulatory Forum, http://perf.eudra.org/, accessed on June 10, 2002.

[12] D.R. King and P. Kanavos, Encouraging the use of generic medicines: implications for transitional economies, Croat. Med. J. 43(4) (2002), 462-469.

[13] P. Kanavos, WHO/EURO and LSE, The pharmaceutical market in the Balkans (1997) (unpublished document).

[14] R.A. Kiivet et al., Changes in the use of anti-bacterial drugs in the countries of Central and Eastern Europe, Eur. J. Clin. Pharm. 48 (1995), 299-304.

[15] R. Škrbi c, D. Babic-Djuric, S. Stojisvlevic-Šatara et al., The role of drug donations on hospital use of antibiotics during ´ the war and post-war period, Int. J. Risk and Safety in Med. 14 (2001), 31-40.

Further reading

E. Goldstein et al., The World Bank, technical paper no. 341; Trends in health services, status and finance: the transition in Central and Eastern Europe, 1996.

P. Berkmans et al., Inappropriate drug donation practices in Bosnia and Herzegovina, 1992 to 1996, The New England Journal of Medicine 337(25), 1842-1845.

Report of a WHO/WTO Workshop on Differential Pricing and Financing of Essential Drugs, Høsbjør, Norway, World Health Organization and World Trade Organization, April 2001.

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