1 Table of Contents 4
1.1 List of Tables 6
1.2 List of Figures 7
2 Introduction 8
2.1 Report Guidance 8
3 Pharmaceutical Pricing & Reimbursement Issues at Global Level – Innovative Mechanisms To Decrease the Healthcare Costs 10
3.1 Introduction 10
3.2 Issues at Global level 12
3.2.1 Value Based Pricing and Risk-Sharing Models 12
3.2.2 Increased Focus on Evidence-based Medicine and Health Technology Assessment (HTA) 14
3.2.3 Role of Pharmacoeconomics in Pricing and Reimbursement 16
3.3 Conclusion 19
4 Pricing and Reimbursement Issues in US – Government’s Cost Rationalization Efforts Will Make Future Tough for Big Pharma 21
4.1 New Nationwide Database to Set Healthcare Reimbursement Rates 22
4.2 Medicaid Pricing for Dual Eligibles of Medicare Part - D 24
4.3 New ICD-10 (International Classification of Diseases - 10) Coding System 26
4.4 Generic Price War at Retail Sector 28
4.5 MIPPA (Medicare Improvement for Patients and Providers Act), the AMP Rule Litigation 30
4.6 First DataBank/Medi-Span Settlement and the Impact on AWP 31
4.7 Conclusion 32
5 Pricing and Reimbursement Issues in Western Europe – Cost-Effectiveness is the Key to Success 34
5.1 Parallel Trade 34
5.2 EU Single Pricing - Still an Issue 36
5.3 International Price Referencing 38
5.4 Status quo of P&R in Western Europe 40
5.4.1 UK 42
5.4.2 France 42
5.4.3 Germany 42
5.4.4 Italy 43
5.4.5 Spain 43
5.5 Conclusion 43
6 Pricing and Reimbursement Issues in Central & Eastern Europe (CEE) and Scandinavia – Reference Pricing and Centralization Proves Detrimental for High Price Drugs 45
6.1 Central & Eastern Europe – Cost-Effectiveness is of Paramount Importance 45
6.1.1 Czech Republic 47
6.1.2 Poland 48
6.1.3 Austria 48
6.1.4 Romania 49
6.1.5 Hungary 50
6.2 Scandinavia – Moving Towards Centralized Healthcare Regime 51
6.2.1 Denmark 53
6.2.2 Norway 54
6.2.3 Sweden 54
6.2.4 Future Landscape 55
6.3 Conclusion 55
7 Pricing and Reimbursement Issues in Asia-Pacific – Negative Pricing Pressures Leaves Less Hope for Expensive Medicines 57
7.1 DPC (Diagnosis Procedure Combination) Reimbursement System in Japan - Immense Savings for the Government 57
7.2 Reforms in Chinese Pharmaceutical Market: Tougher Landscape for Generic and Off-Patent Brands 58
7.2.1 Active Ingredient Based Reimbursement: Restricted Market for Original Branded Products 59
7.2.2 New Regulatory Reforms: Stricter Rules for Innovation Seal 61
7.2.3 Price Cuts and Hospital Tendering Process: Erosion of Generic Margins 61
7.2.4 Future Scenario: Innovation is the Key for Western Pharmaceutical Companies 62
7.3 Transparency Issues with PBS in Australia 62
7.3.1 AUSFTA (Australia-United States Free Trade Agreement) - Boon for Branded Pharma 63
7.3.2 Access Issues for HCM (High Cost Medicines) and Controversial Selection Criteria 64
7.3.3 Consumer Participation in the PBS Drug Listing - A Move towards Greater Transparency and Cost-Efficiency 65
7.4 Conclusion 65
8 Pricing and Reimbursement Issues for Orphan Drugs – Excessive Prices of Orphan Drugs Increasing Financial Pressures on Government 67
8.1 Exploiting Orphan Drug Act; Maximizing Revenues 68
8.1.1 Ovation’s Indocin and Questcor’s H.P. Acthar Gel 68
8.2 Pricing of an Orphan Drug 69
8.3 Price Control Measures 71
8.3.1 Global Approach for Orphan Drug Development 71
8.3.2 Introducing Sales Ceiling and Flexible Market Exclusivity 71
8.3.3 Price Revisions 72
8.4 Conclusion 73
9 Key Takeaway 74
10 Appendix 75
10.1 Market Definitions 75
10.2 Key Support Data 75
10.3 Abbreviations 78
10.4 Research Methodology 80
10.4.1 Coverage 81
10.4.2 Secondary Research 81
10.4.3 Primary Research 81
10.4.4 Expert Panel Validation 82
10.5 Contact Us 82
10.6 Disclaimer 82
10.7 Sources 821.1 List of Tables
Table 1: Examples of Pharmacoeconomic Evaluations in Ireland 18
Table 2: Drug Manufacturers Receiving Largest Windfalls, ($m), 2006–2007 25
Table 3: Pricing and Reimbursement Mechanisms in Western European countries 41
Table 4: Pricing and Reimbursement Mechanisms in Czech Republic, Romania, Austria, Poland and Hungary 46
Table 5: Different Pricing Mechanisms used in Czech Republic, Poland, Austria, Romania and Hungary 47
Table 6: Box Model for Reimbursement in Austria 49
Table 7: Comparative Analysis of Per Capita Healthcare Expenditures in the Scandinavian Countries, 2006 51
Table 8: Pricing and Reimbursement Mechanisms in the Scandinavian Countries 53
Table 9: Norway - Step Price System, 2008 54
Table 10: Trend in the Revision Rates of Reimbursement Prices in Japan, 1992–2008 57
Table 11: Sales in Pharmaceutical Industry, China, $bn, 1998–2008 59
Table 12: Increase in the Per Capita Expenditure for Medical Services in the Urban and Rural Households, China, $m, 1990–2006 60
Table 13: Ratio of Retail v/s Wholesale Price in Eight European Countries and China, 2005 61
Table 14: Definition and Incentives for Orphan Drugs in US, EU, Japan and Australia 67
Table 15: Average Annual Premiums for Family and Single Coverage. US, ($), 1999-2009 76
Table 16: Australia Drug Price Components and Payment Structure 77
Table 17: GDP (Nominal) Comparison Between Western Europe and Central & Eastern Europe, ($bn), 2008 781.2 List of Figures
Figure 1: Comparison of Per Capita Expenditure on Health at Average Exchange Rate ($) v/s Life Expectancy, 2006 10
Figure 2: Comparison of CAGR of R&D Expenditure v/s Turnover Over the Last Five Years for the Top 5 Companies, 2003–2008 11
Figure 3: Value Based Pricing – Concept and Process 12
Figure 4: Impact Analysis: Value Based Pricing 14
Figure 5: Drivers and Restraints for EBM (Evidence Based Medicine) 15
Figure 6: Impact Analysis: Evidence Based Medicine 16
Figure 7: ISPOR 33 Guidelines for Pharmacoeconomics Assessment 17
Figure 8: Impact Analysis: Pharmacoeconomics 19
Figure 9: Average Annual Percentage Change in Manufacturer Prices for Most Widely Used Prescription Drugs in US 21
Figure 10: Case: An Example Of Data Tampering To Provide Artificially Low Reference Prices For Reimbursements Of Out-Of-Network Medical Expenses 22
Figure 11: Impact Analysis: New Database for Reimbursement Rates of Out-of-Network Medical Expenses 23
Figure 12: Comparison of Medicare Part D and Medicaid Discounts 24
Figure 13: Impact Analysis: Medicaid Pricing for Dual Eligibles in MPD (Medicare Part D) 26
Figure 14: ICD-10 Coding System; Features and Benefits 27
Figure 15: Impact Analysis: ICD-10 Coding System 28
Figure 16: Impact Analysis: Generic Price War 29
Figure 17: Impact Analysis: MIPPA (Medicare Improvement for Patients and Providers Act) 31
Figure 18: Impact Analysis: First DataBank/Medi-Span Settlement 32
Figure 19: Parallel Import Market Break-down, Europe, 2007, Total Size = $7.5bn 34
Figure 20: Impact Analysis: Parallel Trade 35
Figure 21: Price Level Indices for Pharmaceutical Products, EU25 = 100, 2005 37
Figure 22: Impact Analysis: EU Single Pricing 38
Figure 23: Impact Analysis: International Reference Pricing 39
Figure 24: Overshooting Actual Budget Expenditure, Hungary,(%), 1994–2005 51
Figure 25: Impact Analysis: P&R Issues in CEE and Scandinavia 56
Figure 26: Impact Analysis: DPC (Diagnosis Procedure Combination) Reimbursement System 58
Figure 27: Sales in Pharmaceutical Industry, China, $m, 1998–2008 59
Figure 28: Increase in the Per Capita Expenditure for Medical Services in the Urban and Rural Households, China, ($m), 1990–2006 60
Figure 29: Impact Analysis: Reforms in Chinese Pharmaceutical Market 62
Figure 30: Arguments For and Against the AUSFTA 63
Figure 31: Impact Analysis: AUSFTA 64
Figure 32: Number of Orphan Drugs Approved by FDA, 2000–2009 68
Figure 33: Factors Influencing the Pricing of an Orphan Drug 69
Figure 34: Correlation Between the Prevalence and the Annual Cost of Therapy for Orphan Drugs 70
Figure 35: Impact Analysis: Price Control Measures on Orphan Drugs 73
Figure 36: The US Healthcare Expenditure, Historical, $tn, 1980–2008 75
Figure 37: The US Healthcare Expenditure, Projections, ($tn), 2009–2018 76
Figure 38: Methodology 80