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News Release from: Frost and Sullivan | Subject: B705
Edited by the Laboratorytalk Editorial
Team on 06 February 2006
Pharmaceutical pricing issues in Europe
Growing healthcare costs and the rise in pharmaceutical expenditure component prompt cost-containment initiatives by various European governments; share of pharmaceutical spending remains high
Most EU member states have publicly funded healthcare systems and the proportion of pharmaceutical expenditure, as a portion of GDP remains high, particularly in countries such as Italy, Portugal, France, Spain and Greece Also, a vast majority of the EU countries with the exception of Belgium, Ireland and Luxembourg are witnessing a rise in the share of pharmaceutical spending in the total healthcare expenditure thus prompting governments to adopt urgent cost containment measures through more stringent norms in their pharmaceutical policies
This article was originally published on Laboratorytalk on 2 Aug 2002 at 8.00am (UK)
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One of the primary aims of pharmaceutical pricing and reimbursement policies is cost containment, using which governments try to streamline and manage pharmaceutical-based healthcare.
Cost containment is achieved through regulatory measures such as controlling the supply-side and/or demand-side of the markets and a variety of controls and incentives are in use across different EU countries in order to better manage pharmaceutical expenditure.
"Reference pricing, delays in approval, strict procedures, restriction on dispensing and prescribing and reimbursement systems are some of the methods that are largely employed by governments in their efforts to control pharmaceutical costs," explains Frost and Sullivan healthcare analyst Himanshu Parmar.
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"Some European countries operate these policies in a non-transparent environment and certain governments negotiate drug prices with manufacturers before deciding on their eventual market price".
The reimbursement system operates differently across the region and each country has varying reimbursement system regulations that are implemented through tools such as internal or external reference pricing system, reimbursement groups, patient co-payment and prescription budget limit on doctors.
While reference pricing has become more transparent, since the introduction of the Euro and the creation of the European Agency for the Evaluation of Medicinal Products (EMEA), the practice of price freezes is in use in countries such as the United Kingdom and Spain.
With price freezes, the nominal price for a product is established and this price is not influenced by external factors such as exchange rates and it is fixed for a particular period.
In addition to this, positive and negative lists are also maintained in several countries and positive lists are generally a stronger form of price control when compared to negative lists.
Those drugs that have better market alternatives available are included in the negative list and Germany, the United Kingdom and Spain are a few of the EU countries which employ negative lists.
Considering these stringent price and reimbursement controls and the variance in policies across the region, pharmaceutical companies face persistent problems in accessing the markets of various EU countries.
Moreover, these controls are limiting access to innovative pharmaceuticals and hampering ongoing R+D in Europe, while also encouraging intermediaries to buy medical products from a country with lower product prices and sell them in countries with higher price levels.
As an example of the restrictive effects of price and reimbursement controls, the Belgian pharmaceutical environment is considered highly discouraging to research and development initiatives due to taxes, pricing policies and patient access problems.
Similarly, the low levels of pricing in Poland combined with a stringent reimbursement system are major causes for concern for European pharmaceutical industry.
Presented with these challenges, the identification and development of suitable pricing and reimbursement strategies will be crucial in determining a company's success.
"In the drug development process, pharmaceutical companies normally focus on the third and fourth phase for the pricing and reimbursement strategies," says Parmar.
"However, an increasing number of companies are beginning to focus on the early development stage and a strong management effort during the drug development pipeline will enable a company to obtain the optimum price for a product".
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