Cost-containment Policies in Public Pharmaceutical Spending in the EU. Economic Papers 461. September 2012 (European Economy/European Commission)
(2012; 67 pages)

Abstract

This paper describes and attempts to evaluate pharmaceutical policies in the EU with a focus on controlling public expenditure while guaranteeing value for money. In the EU, public and private outpatient pharmaceutical spending accounts for roughly 16% of total expenditure on health care and 1.6% of GDP. Public expenditure alone represents about 1.1% of GDP. Due to this high cost, and in the frame of the current economic crisis and the budgetary impact of an ageing population, public healthcare payers in the EU are increasingly interested in policies supporting the rational use of medicinal products and contributing to containing pharmaceutical budgets.

Next to income and health care needs, it is the regulatory framework of pharmaceutical markets which determines the level and quality of pharmaceutical spending. Regulations are many and, despite national features, there is a basket of core policies common to many EU countries aimed at promoting the rational use of pharmaceuticals. These policies relate to pricing, reimbursement, market entry and expenditure control and are targeted at specific agents such as the distributors, physicians and patients.

The main messages of this paper are as follows. The decision to pay for a medicine with public money should be transparent, based on relevant criteria – including cost-effectiveness - and the decisions should be revisable. Price controls, such as external and internal reference pricing, may contain costs. However, they should ideally be supplemented by measures to control the volume of consumption, as price reductions are often out-balanced by volume growth. Volume controls relate to improving the prescription behaviour of physicians by means of guidelines, monitoring and prescription (preferably by active substance) of less expensive alternative medicines, obliging pharmacies to operate generic substitution, and increasing incentives of rational use of medicines for patients, e.g. via co-payments.

Effective volume controls may take the form of payback policies, whereby pharmaceutical producers or the distributors of medicines are asked to contribute to achieving a given target of public spending on pharmaceuticals. To reduce prices and control spending, tendering for pharmaceuticals in the out-patient sector has proven to generate substantial savings for the public payer, and is increasingly common in EU countries.

Policies promoting the use of less expensive equivalent ("generics") medicines are a key opportunity for generating savings without adverse effects on quality of care. In the next four years, up to 40% of currently patent protected pharmaceuticals in the EU will be available to generic medicines, creating huge potential savings for Member States' pharmaceutical budgets (and consumers). Speeding up pricing and reimbursement of generics, promoting generic substitution and other policies aimed at enhancing the share of generics can generate substantial savings.

At the European level, policies should address the lack of transparency of pharmaceutical prices across European countries, which currently leads to a fragmented internal market. Delays to market entry for generic products should be addressed, exchange of best practices relative to pricing and reimbursement should be enhanced and the pooling of resources in implementing systematic HTA should be encouraged. Finally, at the current juncture, given the fiscal cost of the economic and financial crisis and the projected increase in the healthcare spending due to the ageing of population, the sustainability of public finances should be duly taken into account in all pharmaceutical policies at European level.

 
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