THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE

Public Policy and the Austrian Pharmaceutical Market Options for Reform

Authors: Prof. Elias Mossialos Georg Ziniel Sherry Merkur Prof. Tom Walley Prof. Alistair McGuire With: Dr. Anna Bucsics Mag. Peter Wieninger DI. Alfred Mair Mag. Ingrid Rosian

LSE Health and Social Care November 2004

Please do not cite without consent of the authors. Suggested citation: Mossialos, E., Ziniel, G., Merkur, S., Walley, T., McGuire, A. 2004 Public Policy and the Austrian pharmaceutical Market: Report for the Main Association of Austrian Social Security Institutions. London: LSE Health and Social Care

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Table of Contents Part 1: Regulating pharmaceuticals in Europe .................................................................................................. 7 1. Introduction ................................................................................................................................................... 7 2. Trends in pharmaceutical expenditure in the EU Member States ................................................................. 8

Graph 1: Per Capital Health Expenditure in US$ PPP (2000).........................................................9 Table 1: Pharmaceutical expenditure in EU member states (1980-2000*) ...................................10 2.1 Austrian Pharmaceutical Expenditure ....................................................................................................... 11

Graph 2: Trends in Total Income and Expenditure, and Expenditure on Pharmaceuticals (19932002) ..............................................................................................................................................11 Graph 3: Pharmaceutical Expenditure Per Beneficiary by Health Insurer (2002).........................12 3. Pricing and reimbursement policies ............................................................................................................ 13 3.1 Regulating pharmaceutical prices in Europe ............................................................................................. 13

Box 1: Negotiating pharmaceutical prices in France .....................................................................13 Box 2: Price setting in Italy............................................................................................................14 Box 3: Maximum price setting in Belgium....................................................................................15 Box 4: The German reference pricing system ...............................................................................16 Box 5: The Dutch pharmaceutical pricing and reimbursement system .........................................16 Box 6: The UK Pharmaceutical Price Regulation Scheme (PPRS)...............................................17 Table 2: Pharmaceutical expenditure growth in selected EU member states (2002).....................18 3.2 Reimbursement decisions .......................................................................................................................... 19

Box 7: Sweden’s new Pharmaceutical Benefits Board..................................................................20 Box 8: Reimbursement decisions in Belgium................................................................................21 Box 9: Inclusion on the positive list in France ..............................................................................22 Table 3: Rate of reimbursement in France (decree of 27 October 1999) ......................................23 Box 10: Limited lists and restricted formularies in the UK...........................................................23 Box 11: The Irish positive list........................................................................................................24 Box 12: The Italian positive list.....................................................................................................24 Box 13: Positive and negative lists in Germany ............................................................................25 4. The changing doctor-patient relationship .................................................................................................... 26

Table 4: Prescriptions dispensed per capita per year in European countries (circa 1995).............26 Box 14: Patient education and demand in Belgium.......................................................................27 Box 15: Regulation of promotional activities in France ................................................................29 Box 16: Deregulation and DTC advertising in the UK..................................................................29 5. Monitoring and influencing physician decision-making ............................................................................. 29

Box 17: Guidelines to determine coverage policy in Germany .....................................................30 Box 18: Belgian guidelines, protocols and utilization reviews......................................................31 Box 19: Incentives for Italian physicians.......................................................................................32 Box 20: Recommendations for Swedish physicians ......................................................................32 Box 21: Influencing physician prescribing in France ....................................................................33 Box 22: Providing independent medical information to physicians in France ..............................35 Box 23: Information, monitoring and corrective advisory measures in Denmark.........................35 Box 24: Medicines information and pharmacist prescribing advisers in the UK .........................36 Box 25: Educational efforts towards physicians in Belgium.........................................................36 Box 26: Influencing physician prescribing in the Netherlands......................................................37 Box 27: Monitoring prescribing practice in Belgium ....................................................................38 Table 5: Prescription drug cost containment policies in 6 US states Medicaid programme (2003) ........................................................................................................................................................40 6. Financial incentives and prescribing ........................................................................................................... 41

Box 28: Financial incentives for UK prescribers...........................................................................41 Box 29: Prescribing budgets in Ireland..........................................................................................43 7. Regulating pharmaceutical distribution, retail and hospital pharmacy in Europe....................................... 45

Box 30: Remuneration of pharmacists in Ireland ..........................................................................46 2

Box 31: Regulating the distribution chain in the UK.....................................................................46 Box 32: Paying French pharmacists...............................................................................................47 Box 33: Remuneration of wholesalers and pharmacists in Italy....................................................47 Box 34: Paying pharmacists in Spain ............................................................................................47 Table 6: Hospital medicines market in some EU countries ...........................................................49 8. Influencing patient demand through co-payments ...................................................................................... 50

Table 7: User charges for pharmaceutical products in European countries and Norway ..............51 Box 35: Evolution of German co-payments: An example of coinsurance ....................................53 Box 36: Evolution of patient co-payments in Sweden...................................................................54 Box 37: UK policies to influence patient demand .........................................................................55 Box 38: Public campaigns to influence patient demand in France ................................................56 9. The off-patent pharmaceutical market and incentives for the use of generics ............................................ 56

Box 39: GP generic prescribing in the UK ....................................................................................56 Box 40: Generic prescribing and dispensing in Ireland.................................................................57 Box 41: The promotion of generic prescribing in France..............................................................57 Box 42: Generic Substitution in Germany.....................................................................................57 Box 43: Incentives and claw backs for pharmacists in the Netherlands........................................59 Box 44: Regulating generic dispensing in the UK.........................................................................60 Box 45: Generic substitution in Denmark......................................................................................60 Box 46: Reference pricing for French generics .............................................................................60 Box 47: From reference pricing to generic substitution in Sweden...............................................61 Box 48: Regulating generic reimbursement and promoting their use in Belgium.........................62 Box 49: The use of generics in Italy ..............................................................................................62 10. Conclusions ............................................................................................................................................... 63 Part 2: The Austrian health care system and pharmaceutical market .............................................................. 65 Introduction ..................................................................................................................................................... 65 Objectives of the Report.................................................................................................................................. 65 A. Stakeholder Questionnaire.......................................................................................................................... 65 B. Public consultation...................................................................................................................................... 67 C. Follow-up meeting...................................................................................................................................... 67 1. The Austrian Health care System ................................................................................................................ 69

1.1 Structure of the Health care System.........................................................................................69 1.2 Financing..................................................................................................................................70 1.3 Outpatient Care ........................................................................................................................70 1.4 Inpatient Care...........................................................................................................................72 1.5 Employment .............................................................................................................................72 2. Reforms of the Health care System ............................................................................................................. 73

2.1.1 Overhaul of the Provision of Nursing Care ..........................................................................73 2.1.2 Psychotherapeutic Care.........................................................................................................73 2.1.3. Extension of Insurance Coverage ........................................................................................73 2.1.4 Co-Payments .........................................................................................................................73 2.1.5 Membership Fees ..................................................................................................................74 2.1.6 Reform of Hospital Financing...............................................................................................74 2.1.7 ‘Healthy Living Initiatives’...................................................................................................74 2.1.8 Administration (Social-Security ID).....................................................................................74 2.1.9 Self-Government...................................................................................................................74 2.1.10 Quality Control ...................................................................................................................74 2.2 Reforms in the Medicine Sector...............................................................................................74 3. Regulatory Instruments in the Pharmaceutical Sector................................................................................. 78

3.1 Market registration policy for medications..............................................................................78 3.1.1 Division of stakeholder responsibilities................................................................................84 3.2 Health Insurance Reimbursement ............................................................................................84 3.2.1 Procedures.............................................................................................................................84 3

3.2.2 Criteria for the Inclusion of Drugs into the Positive List......................................................84 3.2.3 Nature of Inclusion into Positive List ...................................................................................85 3.2.4 Status of Medicines...............................................................................................................85 3.2.5 Control of Physicians’ Prescribing Habits ............................................................................86 3.2.6 Information systems..............................................................................................................86 3.3 Price Regulation.......................................................................................................................87 3.3.1 Ex-Factory Prices..................................................................................................................87 3.3.2 Prices and the Positive List ...................................................................................................87 3.3.3 Excurs: New Regulations 2004.............................................................................................88 3.3.4 Wholesale Prices ...................................................................................................................91 3.3.5 Pharmacy Margins ................................................................................................................94 3.3.6 Value Added Tax (VAT) ......................................................................................................97 3.3.7 Structure of Pharmacy Consumer Prices – An International Comparison............................98 4. Production and Distribution ...................................................................................................................... 102

4.1. Pharmaceutical Production ...................................................................................................102 4.1.1 Domestic Production...........................................................................................................103 4.1.2 Promotional Activities ........................................................................................................105 4.2 Pharmaceutical Wholesaling..................................................................................................105 4.3 Distribution to end-consumers ...............................................................................................106 4.3.1 Pharmacy Training and Practice .........................................................................................106 4.3.2 Pharmacy Licensing Process...............................................................................................107 4.3.3 Public Pharmacies ...............................................................................................................108 4.3.4 Physicians’ In-house Pharmacies........................................................................................109 4.3.5 Hospital Purchasing, Contracting and Drug Supply ...........................................................110 4.3.6 Distribution Data.................................................................................................................110 4.3.7 Repeat prescribing/dispensing ............................................................................................112 4.3.8 Generic substitution ............................................................................................................113 4.3.9 Advisory role of the pharmacist..........................................................................................113 5. Medicine Consumption ............................................................................................................................. 115

5.1. Volume..................................................................................................................................115 5.2 Pharmaceutical Prices ............................................................................................................117 5.3. Growth Factors of the Pharmaceutical Market .....................................................................117 5.4 Volume and Cost in the Health Insurance Sector ..................................................................119 5.5 Pharmaceutical expenditure by carrier...................................................................................121 6. Physician Contact and Medicine Consumption......................................................................................... 123

6.1 Physician Contact...................................................................................................................123 6.2 Physician Contact and Prescriptions ......................................................................................125 6.3 Prescriptions and Costs According to Age Groups................................................................128 6.4. Medicines by Price Category ................................................................................................131 6.5. Medicines According to Therapeutic Indication...................................................................132 6.6 Senior Physician Authorisation..............................................................................................133 6.7 New legislation regarding prior approval and reimbursement...............................................135 6.8 Towards Quality Prescribing .................................................................................................135 6.9 Financial and other incentives for physicians ........................................................................138 6.10 Influence of hospitals on physician prescribing behaviour..................................................138 7. Control of demand through co-payments .................................................................................................. 141

7.1 Patient co-payment for pharmaceuticals ................................................................................141 7.2 Appropriateness in the level of user fees ...............................................................................144 7.3 Other cost sharing in Austria .................................................................................................145 8. Generic products........................................................................................................................................ 148

8.1. Share of Generics in Austria .................................................................................................148 8.2. Share of Generics in International Comparison....................................................................150 9. Trends in Medicine Expenditure ............................................................................................................... 152

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9.1. All Health Insurers ................................................................................................................152 9.2 Trends in Pharmaceutical Expenditure by Health Insurers....................................................154 9.3 Per Capita Pharmaceutical Expenditure.................................................................................156 9.4 Overview of Variables, All Health Insurers 2002..................................................................164 9.5. Age Structure of Insurance Beneficiaries .............................................................................165 9.6 Health Insurers’ Cost Containment Measures .......................................................................167 9.7 Implementation of the ‘Agreement of Principles’ by the health insurers ..............................168 9.8 Handling of Prescriptions.......................................................................................................169 9.9 Opinion of Stakeholders on Insurers......................................................................................169 10. Austria in European Comparison ............................................................................................................ 170

10.1 GDP per Capita ....................................................................................................................170 10.2 Total Per Capita Health care Expenditure............................................................................171 10.3 Health care Expenditure as % of GDP.................................................................................173 10.4 Private Health care Expenditure ..........................................................................................175 10.5 Pharmaceutical Expenditure ................................................................................................177 10.6 Life Expectancy at Birth ......................................................................................................177 10.7 Life Expectancy at 60 ..........................................................................................................179 10.8 Share of Population Over 65................................................................................................179 10.9 Mortality Rates.....................................................................................................................181 Part 3: Conclusions, Recommendations and Options for Reform................................................................ 183 1. Product registration ................................................................................................................................... 183 2. Pharmaceutical pricing and reimbursement decisions............................................................................... 184

2.1 VAT rate ................................................................................................................................189 3. Regulation of industry promotional activities ........................................................................................... 191 4. Wholesale sector........................................................................................................................................ 192 5. Pharmacy sector......................................................................................................................................... 192

5.1 Mail order...............................................................................................................................194 5.2 Repeat prescribing..................................................................................................................194 5.3 Pharmacy training and practice..............................................................................................195 5.4 Dispensing doctors.................................................................................................................196 6. Incentives - Principles ............................................................................................................................... 197

6.1 Prescribing incentives in Austria ...........................................................................................198 6.2 Specific incentives and their effects.......................................................................................199 7. Quality of Care and Incentives .................................................................................................................. 200

7.1 Improving continuity of care..................................................................................................203 7.2 Disease management..............................................................................................................204 7.3 Pharmaceutical care ...............................................................................................................206 7.4 Further comments on the Austrian Incentive systems ...........................................................207 8. Public Awareness ...................................................................................................................................... 208

8.1 User charges and patient prescription co-payments...............................................................209 9. Senior physician authorization .................................................................................................................. 210 10. Increasing the use of Generics................................................................................................................. 210

10.1a Generic prescribing ............................................................................................................211 10.1b Generic dispensing.............................................................................................................211 11. Health care Interventions, Research and Policy Centre (HIRPC) ........................................................... 211

11.1 Continuing professional development .................................................................................212 11.2 National Registries...............................................................................................................212 11.3 Information systems, monitoring and providing feedback ..................................................213 11.4 E-pharmacy and electronic transmission of prescriptions (ETP).........................................215 12. Hospital pharmacy................................................................................................................................... 215

12.1 Hospital formularies.............................................................................................................216 12.2 Prices of medicines in hospitals ...........................................................................................217 13. Conclusions ............................................................................................................................................. 218 Appendix 1: Measures to cap increases in pharmaceutical expenditure ....................................................... 226

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Appendix 2: Study of doctors’ prescribing habits ......................................................................................... 231 Appendix 3: Repercussions of prescription practice in hospital on non-hospital doctors............................. 233 Appendix 4: An overview of commissions ................................................................................................... 236 Appendix 5: List of stakeholders sent questionnaire..................................................................................... 238 Appendix 6: Responses to stakeholder questionnaire ................................................................................... 239 Appendix 7: Regulation of distribution margins and tax in Europe .............................................................. 251 Appendix 8: The appraisal instrument for guidelines developed by the AGREE Group............................. 254 Appendix 9: Reforms of Health Insurers....................................................................................................... 255 Appendix 10: UK Organization involved in Clinical Governance................................................................ 263 Appendix 11: Financing of pharmaceutical expenditure in Austria (ÖBIG contribution) ............................ 266 References: .................................................................................................................................................... 274

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Part 1: Regulating pharmaceuticals in Europe 1. Introduction In an attempt to regulate the pharmaceutical market, governments must strive to balance the objectives of health policy and industrial policy. These contrasting objectives must also be secured in the face of costcontainment strategies. Prime objectives for health policy are equity, efficiency, quality, and meeting patient needs. Quality is defined by doctors and patients as the appropriate treatment of patients for their condition, often without consideration of costs; while health economists may equate efficiency (or making the best use of limited resources to increase population health) with quality. One of the roles of government in pharmaceutical policy is to provide the funding and framework that allows that quality of care. Important health policy objectives include: protecting public health, guaranteeing patient access to safe and effective medicines, and preventing excessive pharmaceutical expenditure, which can undermine these and other government objectives. Governments must balance these health policy objectives against those of industrial policy. Industrial policy objectives include: encouraging pharmaceutical research and development (R&D), continued employment in the pharmaceutical sector, and a positive balance of trade with regard to drug exports. Governments must be prudent went considering the claims from the pharmaceutical industry that any constraint on profits will threaten the future of valuable innovation. On its own, cost-containment is not a main health policy objective, but a tool that governments employ in an attempt to manage the pharmaceutical market and to achieve a balance between conflicting demands. Governments utilize cost-containment strategies as a regulatory measure, mainly targeting the supply side of the market (namely the pharmaceutical industry), but demand side instruments (targeted at physicians, pharmacists and patients) are increasingly being employed. The effect of these cost-containment measures diverges in different country settings and pharmaceutical expenditures continue to rise. The impact of these policies on efficiency, quality of care, and prescribing is often unclear. Governments may look to other country experiences for guidance, but must consider the different context in which they operate. Furthermore, uncertainty remains in the effect of future developments such as the impact of demographic shifts in aging populations and the introduction of new technologies. In Europe, a variety of incentives and controls have been implemented in different countries in an attempt to balance effective and efficient spending on drugs against the need to promote a major industry. Regulating pharmaceutical markets is complex and involves a dynamic interplay between government and multiple actors. It goes beyond the prescribing physician to the changing characteristics and expectation of modern patients, and back to the drug distribution chain. Beyond dispensing prescription products, pharmacists have an active role in selecting multi-sourced drugs, product procurement, and advising patients on over-thecounter (OTC) remedies. Furthermore, the margins of wholesalers can affect the final retail price of medicines. The pharmaceutical industry possesses an extremely important influence by means of product development and pricing, in addition to stimulating drug utilisation through marketing and information dissemination efforts. With modern patients being more informed about their personal health and treatments, financial incentives are being used in some countries to evoke awareness of their pharmaceutical consumption. The incentives and actions towards all of these stakeholders must be considered when trying to regulate pharmaceutical expenditure. Many of these regulations, market structures, and balances, do not exist for other industrial sectors. The pharmaceutical market is unique with regard to the extent and depth of its failure to meet the criteria for a perfect market (Abel-Smith and Grandjeat 19781, Jacobzone 20002, Dukes et al 20033). Market imperfections are prevalent in both supply and demand. On the supply side, market failures relate to patent protection of drugs, the process and length of regulatory approval, and brand loyalty. On the demand side, there is a four1

Abel-Smith B, Grandjeat P (1978) Pharmaceutical consumption, Brussels: Commission of the European Communities. Jacobzone S (2000) Labour Market And Social Policy - Occasional Papers No. 40. Pharmaceutical Policies In OECD Countries: Reconciling Social And Industrial Goals, Paris: OECD. 3 Dukes G, Haaijer F, Joncheere C, Rietveld A (2003) Drugs and money: prices, affordability and cost-containment, Amsterdam: IOS Press. 2

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tiered structure of demand - the physician prescribes, the pharmacist dispenses, the patient consumes, and a third-party pays. Other fundamental characteristics of pharmaceutical and health care markets that make it less ideal for allocation solely by market mechanisms include the existence of indivisibilities and externalities. Next is presented an overview of the policies and systems by which countries try to address efficiency, equity, and quality, as well as working towards cost-containment. Specific country examples are provided where relevant, with the main focus on Germany, France, Ireland, Italy, Belgium, the UK, the Netherlands, and Sweden. It is challenging to assess which of these approaches has been the most effective because they are rarely applied singly and the influence of each in an overall effect is often impossible to disentangle. In addition, many of the observed effects may be context specific and thus may not indicate a universal truth as to which approaches are the most likely to bring about a change in a given setting. Even where interventions have been studied individually, the quality of the evidence may be weak. 2. Trends in pharmaceutical expenditure in the EU Member States In European Union (EU) member states, most health care is publicly funded; however, this is not universally the case in the pharmaceutical sector, where levels of private expenditure are often high (see Table 1). Pharmaceutical expenditure is predominantly private in Belgium, Denmark and until recently in Italy (OECD 20024). Between 1980 and 2000, the public share of total expenditure on pharmaceuticals declined in nine out of fourteen EU member states (for which data exists), largely because of attempts to contain health care costs (Mossialos and Le Grand 19995). There was only a small decline in Sweden, the Netherlands, Portugal and the United Kingdom (UK), but substantial reductions in Italy and Belgium. Conversely, some countries showed increase in the share of public expenditure on pharmaceuticals, such as in Ireland, where there was a significant increase, and a more modest one in France and Spain. The countries with a low total pharmaceutical expenditure as a percentage of Gross Domestic Product (GDP) include Denmark, Ireland, and Luxembourg, with less than 1% of GDP on pharmaceutical in 2000. While high pharmaceutical expenditures in terms of GDP as well as percentage of total health expenditures include Italy, Portugal, France, Spain, and Greece.6 Between 1995 and 2000, most countries increased their public pharmaceutical spending as a percentage of total health expenditure, with the exception of Belgium, Denmark, and Luxembourg (Table 1). Looking back over the last two decades, between 1990 and 2000 the un-weighted average of per capita pharmaceutical expenditure (in US$ PPPs) in the EU member states (excluding Austria) increased by 79.9%, prompting much greater attention to drug expenditures during the 1990’s. However, most of the data on pharmaceutical spending do not distinguish between different types of private expenditure. As a result, it is difficult to determine how much private expenditure arises from direct payments, such as spending on OTC products or prescribed products that are not reimbursed by the statutory health care system, and how much arises from user charges, i.e. co-payments for reimbursed products. Although OTC drugs are usually relatively inexpensive and consumed by a large proportion of the population, the distributional impact of OTC drug expenditure is difficult to measure. Additional methodological problems exist when performing cross-country comparisons of pharmaceutical expenditure and prices. Biases include exchange rate fluctuations, differences in pharmaceutical prices between countries, and variations in private (out-of-pocket) and public (reimbursed) coverage. To eliminate price level differences in inter-country comparisons, conversions using Purchasing Power Parities (PPPs) equalise currencies to allow the purchase of the same basket of goods and services in different countries. Still, difficulties remain not only because pharmaceutical prices have weakly comparable volume indices, but also because figures for PPPs may be outdated. In addition, there are challenges in separating out factors that 4

OECD (2002) OECD Health data 2002, Paris: OECD. Mossialos E, Le Grand J (1999) Healthcare and cost-containment in the European Union. Aldershot: Ashgate. 6 The stabilization (or reduction, in the case or Ireland) of pharmaceutical expenditure as a percentage of GDP in some countries may not reflect success in controlling growth in pharmaceutical spending but rather may be a function of economic growth. For example, pharmaceutical expenditure in Ireland grew by an annual average growth rate of 6.4% from 1990 to 2000 and the economy grew by 7.3%. Conversely, in Denmark, Finland, France and Italy, pharmaceutical expenditure grew faster than GDP between 1990 and 2000. 5

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influence drug prices caused by the structure of the market in each country that have different health system structures and financing, divergent regulatory and pricing policies, drug subsidies, production costs, and variations in product mix. Further considerations, must be given to where price information is taken from within the distribution chain, as wholesale and retail prices are marked-up from the manufacturer’s price ideally it should always be taken from the same point in each country, but this is not always possible. Austria’s per capita health expenditure (in US$ PPP) lies above the average of the selected 15 EU member states (Graph 1). In the 1990’s expenditure increases were relatively stronger. Compared to 1990 expenditure has risen by 85% (EU average 76%). Graph 1: Per Capital Health Expenditure in US$ PPP (2000) Per Capita Health Expenditure, US$ PPP (2000)

GER

2780 2719

LUX DEN

2398

FR

2387

NLD

2348

BEL

2293

AUT

2233

SWE

2195 2086

EU

2060

ITA UK

1813

IRL

1793 1699

FIN HEL

1556

POR

1519

ESP

1497 0

500

1000

1500

2000

2500

3000

$

Source: OECD Health Data

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Table 1: Pharmaceutical expenditure in EU member states (1980-2000*) Public expenditure on Total per capita expenditure pharmaceuticals on pharmaceuticals (% of total pharmaceutical (US$ PPPs) expenditure) 1980 1985 1990 1995 2000* 1980 1985 1990 1995 2000* 1980 1985 1990 1995 2000* 1980 1985 1990 1995 2000* Total expenditure on pharmaceuticals (% GDP)

Austria** Belgium

-

-

-

-

1.1

1.1

1.1

1.4

Denmark

0.6

0.6

0.6

0.7

0.8

6.0

6.6

7.5

9.1

49.9 45.5 34.2 48.6 46.1

Finland

0.7

0.7

0.7

1.1

1.0

10.7

9.7

9.4

14.0 15.5 46.7 44.5 47.4 45.3 50.1

France

-

-

1.4

1.7

1.9

-

-

Germany

1.2

1.3

1.2

1.3

Greece

1.2

1.1

1.1

1.5

1.5

18.8

-

Ireland

0.9

0.8

0.7

0.7

0.6

10.9

9.9

-

-

1.7

1.5

1.9¹

-

-

Luxembourg

0.9

0.9

0.9

0.8

0.7´¹ 14.5 14.7 14.9 12.0 11.7´¹ 86.4 86.0 84.6 81.7 80.8´¹

Netherlands

0.6

0.7

0.8

0.9

Portugal

1.1

1.5

1.5

1.9

Spain

1.1

1.1

1.2

Sweden

0.6

0.6

0.7

Italy

1.1´¹

Total expenditure on pharmaceuticals (% of total health expenditure)

-

-

13.2 10.4 14.1´¹

-

-

-

-

65.4´¹

-

-

-

139

193

309 328´³

50

77

109

171

223

54

82

122

199

259

-

-

254

346

473

172

228

269 312´²

1.4´³ 17.4 15.7 15.5 16.3 16.3´³ 57.3 51.0 46.8 43.0 44.7´³ 100 9.2

16.8 17.5 20.1

-

-

61.9 61.4 65.1

1.3´² 13.4 13.8 14.3 12.3 12.7´² 73.7 71.9 73.1 72.3 69.2´² 110 65

83

104

195

258

52.7 60.7 65.0 78.3 83.9

50

58

88

126

187

-

-

280

311

459

88

132

223

255 307´¹

53

83

128

196

2.0´² 19.9 25.4 24.9 23.2 23.5´² 68.6 64.7 62.3 63.3 66.1´³

53

97

152

266 316´²

1.4

1.4´³ 21.0 20.3 17.8 17.7 19.0´³ 64.0 62.5 71.7 75.8 78.1´³

69

93

145

210 246´³

1.0

1.0´³

55

82

120

202 227´³

8.0

6.5

9.3

7.0

11.3

9.7

9.6

21.2 20.9 23.7¹ 9.6

8.0

-

-

270´¹

70.3 70.0 61.6

1.0

14.5 17.3 18.4 60.0

-

-

62.8 38.3 53.3¹

11.0 11.8 66.7 63.3 66.6 88.8 63.7

12.5 12.8´³ 71.8 70.1 71.7 71.4 71.2´³

264

94 131 201 236´³ United Kingdom 0.7 0.8 0.8 1.1 1.1´³ 12.8 14.1 13.5 15.3 15.9´³ 67.6 64.1 66.6 63.5 64.2´³ 57 7 Notes: *or latest available year; **Austria data is from OBIG (Rosian et al 2001 ); ¹ - data from 1 following year; ´¹´²´³ - data from 1, 2, or 3 previous years Source: OECD (2002)

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Rosian I, Antony K, Habl C, Vogler S, Weigl (2001) Benchmarking pharmaceutical expenditure: cost-containment strategies in the European Union, Vienna: Osterreichisches Bundesinstitute fur Gesundheitswesen (OBIG).

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2.1 Austrian Pharmaceutical Expenditure In 2002, Austrian health insurers spent €1.812 million on medicines. This equates to 17.2% of their income and 16.9% of the expenditure. Over the last decade, the share of pharmaceutical expenditure has risen by around 4%, while the volume of medicine expenditure has almost doubled. Income increased by 46% compared to 1993, while expenditure rose by 48% (1993=100). By contrast, the dynamic of medicine expenditure shows much greater increases of around 90% (see Graph 2). Graph 2: Trends in Total Income and Expenditure, and Expenditure on Pharmaceuticals (1993-2002) Total Income and Expenditure, and Pharmaceutical Expenditure ( 1993 = 100 )

200 Income

190

Expenditure Medicines

180 170 160 150 140 130 120 110 100

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Source: Hauptverband, own calculations (1993 = 100) In Austria, from 1993 to 2002 health insurers’ income rose by an annual average of 4.6%, while expenditure rose by 4.8%. By contrast, expenditure on medicines rose by an average of 7.7%. With the exception of 1997, the yearly increase in pharmaceutical expenditure exceeded that of the other two variables. As a result the yearly share of total expenditure spent on pharmaceuticals is rising. Overall, during the period under review, some 29% of additional income is spent on pharmaceuticals. Between 1993 and 1997 growth in pharmaceutical expenditure was subdued. However, the above average increases in the years 1998 and 1999 more than compensated for this. In recent years, pharmaceutical expenditure also grew at a higher rate than increases in income. The increase in 2003 is estimated to have been of 8%. Total pharmaceutical expenditure in 2003 was in the region of €2.3 billion and 14% of health care budget was spent on medicines. In Austria, the regional health insurers account for around 75% of total pharmaceutical expenditure, the four large regional health insurers - Vienna, Niederösterreich, Oberösterreich and Steiermark - account for 55% of total spending on medicines. Year-on-year growth between 1993 and 2002 underlies similar trends, but on different levels and to different intensity. Among the regional health care insurers, Burgenland, Niederösterreich, Kärnten, Vorarlberg and Tirol lie above the average annual increase in pharmaceutical expenditure. Trends in increases in pharmaceutical expenditure, pharmaceutical expenditure per insurance beneficiary, cost per prescription, and the level of patient co-payments vary between different health insurers and regional health Report: The Austrian Pharmaceutical Market

11

insurers in Austria. This can in part be explained by the different demographic structure of the people insured by the various health insurers. It appears evident, that a higher percentage of elderly people among insurance beneficiaries leads to higher expenditure levels. Notwithstanding, a number of regional disparities cannot be explained by demographic factors alone. In 2002, an average of €312,17 was spent in pharmaceuticals per beneficiary (excluding dependents). The regional health insurers of Oberösterreich (€256,57), Vorarlberg (€257,15), Salzburg (€260,97) and the health insurer for the self-employed (€274,93) were well below this average (Graph 3). Per capita pharmaceutical expenditure at the miners’ and railwaymen’s health insurers were above the average by 60% and 43%, respectively. Above average pharmaceutical costs per head can also be detected in the civil servants health insurer (€371,94) and the regional health insurers of Burgenland (€354,52), Vienna (€332,37) and Niederösterreich (€323,64). Graph 3: Pharmaceutical Expenditure Per Beneficiary by Health Insurer (2002) Per Capita Pharmaceutical Expenditure in €, 2002 314.85

SVB 274.93

SVGW VAÖ

371.94

VAE

445.80

VAB

508.28 257.15

VBG

302.93

T 260.97

SGB

312.16

KTN STMK

306.13

OÖ

256.57 354.52

BGLD

323.64

NÖ

332.37

W GKK`s

303.38

alle

€

312.17 0

100

200

300

400

500

600

Source: Hauptverband, own calculations

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3. Pricing and reimbursement policies 3.1 Regulating pharmaceutical prices in Europe Cost-containment measures on the supply side are principally targeted either directly or indirectly at regulating the prices of pharmaceuticals. The primary measures include direct fixed price controls, reference pricing, and profit controls. There is an incentive to ensure that the prices paid for pharmaceuticals, either by public funds or directly by patients, are not more than one would be reasonably willing to pay on the grounds of public health, social solidarity, and efficiency. Economic efficiency, i.e. identifying the best use of limited resources and often determined by economic evaluations, is increasingly being taken into account when making reimbursement decisions. First, fixed pricing attempts to secure pharmaceutical prices that are considered ‘reasonable’ for a given health system. There are many approaches for setting the maximum prices: through negotiated prices (as in France, see Box 1), price-caps, ‘cost-plus’ pricing, price comparisons to other countries (as in Italy, see Box 2) or to similar products within the same country (as in Belgium, see Box 3), price/volume trade-offs and others. Perhaps the least transparent of these is where prices are negotiated between a company and a government, as the criteria for these negotiations, if defined at all, often include a subjective category leaving decisions very much to the discretion of the regulator. There has been some improvement in clarifying the criteria behind such negotiated decisions mainly to the EU Transparency Directive (Council of European Communities 19898). Nevertheless, few countries make pricing data from their schemes publicly available, or produce annual reports on their performance. Some countries have moved away from ‘cost-plus’ pricing, where the price of drugs is set according to the costs of manufacturing the drug, a method confounded by the problem of transfer pricing. Fixed prices based on the prices of equivalent or similar drugs already on the domestic market or available in other countries are widespread, making the product launch strategy challenging for the industry. Several methodological challenges must be considered when making these price comparisons, such as selecting an appropriate comparator product (i.e. formulation, pack size) and price conversion into national currency units. This process is also open to manipulation by pharmaceutical companies. Additionally, many countries have applied cuts and freezes to fixed prices, which usually result in a one-off and very short-lived decrease in pharmaceutical expenditures. Box 1: Negotiating pharmaceutical prices in France France utilizes a system of negotiations between the Economic Committee for Medical Products (CEPS) and drug manufacturers for setting the prices of pharmaceutical products sold in retail pharmacies. This price is set in consideration of the medical improvement the medicine provides. A product’s therapeutic advantage (Amélioration du service medical rendu, ASMR) is evaluated by the Transparency Commission for each therapeutic indication of the product by comparing it with other drugs available in the same therapeutic class on the positive list for reimbursement. The ASMR ranges from I to V as follows: I - major therapeutic progress II - great improvement in terms of effectiveness and/or reduction of side effects III - modest improvement IV - minor improvement, and V - no improvement The level of ASMR is a key element in negotiations between the CEPS and the pharmaceutical companies because drugs offering a high therapeutic advantage are likely to be priced at a high level, especially if there is no competitor in the therapeutic area. If no therapeutic improvement is provided by a drug, it must be priced at a 8

Council of the European Communities (1989) Council Directive 89/105/EEC of 21 December 1988 relating to the transparency of measures regulating the prices of medicinal products for human use and their inclusion in the scope of national health insurance systems. Official Journal L 040, 11/02/1989: 8-11. Report: The Austrian Pharmaceutical Market

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lower level than its competitors. Additionally, the price may be linked to the expected volume of sales, with respect to the daily dosage indicated in the marketing authorisation or in consideration of the daily cost of treatment. In this instance, CEPS and the manufacturer sign specific agreements, which state that prices will be lowered or rebates will be due by the manufacturer if these clauses are not respected. The most recent framework agreement was signed in 2003 for the period 2003-2006. The main innovation is the free pricing for very innovative products. Manufacturers are now free to set their price without any negotiation with CEPS for new products with a major or important therapeutic progress (ASMR level I or II). This also applies to products with a sales forecasts in the third year of marketing that does not exceed €40 million with ASMR III. CEPS maintains the right to veto the price set by the manufacturer, in particular if it seems too high in comparison with prices observed in Germany, the UK, Spain and Italy, but also in other circumstances defined in the agreement, e.g. considerations of public health, incompatibility between sales forecasts of the company and the targeted population identified by the Transparency Commission. In theory, the negotiation of prices in France relies on elements related to clinical and pharmacoeconomic assessment. However, some inconsistencies have been identified in the prices of new drugs, which may show that other elements are likely to intervene in the negotiation. Since 1987, the prices of drugs sold to hospitals have been negotiated between pharmaceutical companies and hospitals, and for drugs not included on the positive list available in retail pharmacies, manufacturers freely set the prices. Source: Adapted from Paris V (forthcoming)9 Box 2: Price setting in Italy In Italy the regulation of prices for reimbursable drugs were previously set based on cost information provided by companies. This was radically modified in 1994, to a surveillance model based on the Average Europe Price (AEP). Since then, new methods and approaches have been introduced that make the regulation of ex-factory prices rather fragmented. Most reimbursable products, which were already on the market in 1997 and those which are registered under the national procedure are subject to AEP. According to the present system, AEP is calculated as a weighted average (based on consumption) of all EU country prices (excluding Luxembourg and Denmark) with values converted using nominal exchange rates. When the new system was implemented, all prices above their AEPs were immediately lowered and prices below were allowed to reach the AEP in six annual steps. However, to date only four steps have been awarded. Since 1997, pricing for products licensed through the European procedure and since 1998, through the mutual recognition procedure are set through negotiations between the marketing company and the regulatory authorities (Fattore and Jommi 199710). In this “contractual model”, marketing companies submit information on prices in other countries, market forecasts (sales, market share, number of patient treated, number of prescriptions) and industrial implications (e.g. impact on investments, employment and exports). In addition, for products which provide treatment for untreated or inadequately treated conditions or with a very favourable riskbenefit profile, companies are required to submit an economic evaluation prepared in accordance to a standard structure; this is voluntary for other products. The procedure should take a maximum of 90 days and includes a face-to-face contact with the marketing company. A special federal technical group (CUF) manages the procedure, acts as an advisory body, and makes the final decision on prices. Since the CUF manages the two decisions concurrently, this procedure directly links pricing to reimbursability. The procedure includes a twoyear follow-up to verify market forecasts made by the marketing company and to possibly modify prices according to price-volume criteria. Two other pricing systems are also in place in Italy. About 20% of the reimbursed products’ prices are determined by their “homogeneous therapeutic category”. For each category a cut-off price is calculated and 9

Paris V (forthcoming) Pharmaceutical regulation in France 1980-2003, International Journal of Health Planning and Management. 10 Fattore G, Jommi C (1997) Il prezzo dei farmaci innovativi tra regolazione e mercato (in Italian), Mecosan, 22: 103-11. Report: The Austrian Pharmaceutical Market

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either the manufacturer accepts that (or a lower) value, or the product is desisted (see Box 12 on the Italian positive list). According to this system, prices of products in the same ATC fourth level are levelled off and are completely precluded from reflecting other perspectives, such as industrial considerations. Finally, for active ingredients with a generic available on the market, a reference pricing system is in place. Generics should be prices at least 20% less than the originator, and reference (reimbursement) prices are calculated at the level of the lowest price available on the market. In addition to these pricing models, at times the government has imposed general and significant price reductions and steps to align actual prices to the AEP have not implemented as planned. Prices of non-reimbursable drugs are not regulated; however, marketing companies: i) must report any price increase to the government and to the Pharmacists’ Union, ii) are allowed to increase prices only once per year, and iii) are subjected to Department of Health (DoH) intervention to prevent unwarranted price increases. Source: Adapted from Fattore and Jommi (forthcoming 2005)11 Box 3: Maximum price setting in Belgium After a compound has been registered in Belgium, a maximum price is set by the Minister of Economic Affairs upon request by the pharmaceutical company. For non-reimbursed medicines, the minister acts after the advice of a committee within the Department of Economic Affairs, which deals with all goods that are subject to price controls, including bread, public transport, etc. For reimbursed medicines, the minister makes decisions based upon the advice of the Price Committee, which is made up of different stakeholders, including consumers, the Health Insurance Funds, the pharmaceutical industry, the professional organisation of pharmacists, and representatives from the DoH and the Department of Social Affairs. Price setting guidance is based on comparisons with similar products already on the Belgian market and with the prices of the compound in five surrounding countries. The ex-factory price and distribution margins are decided. After the maximum price is set by the Minister of Economic Affairs, during the discussions about reimbursement, price negotiations often lead to a lower price. The higher maximum price afforded by the minister is of interest for the company, as it is used in regard to exports and as a reference price in the discussions about price setting in some other countries. Source: Adapted from Bogaert and De Cock (forthcoming 2005)12 Second, reference pricing or setting a maximum reimbursement level aims to contain pharmaceutical expenditure by defining a fixed amount to be paid by the government or other third party payer. In theory, this creates an incentive for both physicians and patients to consider drug prices in decision-making since any cost beyond the reference price must be borne by the patient. Pharmaceutical products are clustered into groups to encourage substitution by either a cheaper generic product or therapeutic equivalent. When reference pricing is applied extensively (as in Germany, see Box 4), it can be effective at eliminating price gaps between therapeutically similar products and improving market transparency (Giuliani et al 199813). In practice, these schemes result in a price decrease for those medicines with prices above the reference price limit, as patients often request to be switched to a drug at the reference price (Lopez-Cassasnovas and Puig-Junoy 200014). On the other hand, the disadvantage of reference pricing is that it reduces incentives for price decreases below the reference price level and thus creates an artificial price floor (Mrazek 200115). There have been concerns that patients’ access to new drugs might be restricted when dictated by the ability/willingness to pay an additional 11

Fattore G, Jommi C (forthcoming 2005) The regulation of pharmaceutical market in Italy, in E Mossialos et al (eds) Pharmaceutical Policy in Europe, Copenhagen: WHO. 12 Bogaert M, De Cock J (forthcoming 2005) The Belgian Situation, in E Mossialos et al (eds) Pharmaceutical Policy in Europe, Copenhagen: WHO. 13 Giuliani G, Selke G, Garattini L (1998) The German experience in reference pricing, Health Policy, 44: 73-85. 14 Lopez-Casasnovas G, Puig-Junoy J (2000) Review of the literature on reference pricing, Health Policy, 54(2): 87-123. 15 Mrazek M (2001) The impact of different regulatory frameworks on competition in post-patent pharmaceutical markets in the United Kingdom, Germany and the United States, 1990 to 1997. PhD thesis. London: London School of Economics. Report: The Austrian Pharmaceutical Market

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cost over the reference price, although this was not an issue in Canadian studies (Schneeweiss et al 200216). Furthermore, in most countries the criteria for defining therapeutic equivalence of drugs are not clear cut or agreed. As a result, this approach has been predominantly applied only to off-patent generic drugs. Moreover, some countries apply a combination of systems, e.g. the Netherlands that implements both internal and external reference pricing for products under reimbursement (see Box 5). Box 4: The German reference pricing system Reference pricing was first introduced in Germany to address the fact that there were many pharmaceutical products on the market with similar effectiveness and quality but at very different prices. In 1989, reference pricing was introduced for drugs containing the same or similar substances and drugs with comparable efficacy, to achieve more transparency in the pharmaceutical market and to prevent physicians from prescribing expensive non-patented drugs. The Common Federal Committee of Providers and Sickness Funds17 is responsible for the identification and classification of drugs, while the Federal Associations of Sickness Funds perform the actual price-setting. From 1996, newly licensed drugs with patent protection were no longer covered by the reference pricing scheme. This measure was focused on industrial policy objectives of boosting innovation and thus stabilizing the position of the pharmaceutical industry. However, its effects were rather disappointing as it primarily encouraged the launch of active substances with minor modifications. Subsequently, the share of reference-priced drugs as a percentage of the total pharmaceutical expenditure was declining; therefore, it appeared that this regulation led to substitution effects to unregulated parts of the market. The Act to Strengthen Solidarity in Germany’s statutory health insurance (SHI) system introduced tighter regulations for the setting of reference prices. Now, prices may not be higher than the highest price in the lowest third of the market. For 202 out of a total of 446 drug groups with reference prices, prices were supposed to be lowered from 1 April 1999 for a reduction of expenditure of approximately €281 million. However, this reduction was stopped legally and reference prices altogether came under threat when a pharmaceutical company successfully sued. On 6 January 1999, the Higher Regional Court in Düsseldorf, Germany argued that price setting by the sickness funds violated EU cartel regulations since sickness funds would unilaterally cartelize in terms of setting the prices for reimbursement. As a result, the Health Minister decided to put reference prices on a new legal basis by fixing them through an ordinance issued by the Ministry of Health (MoH), which was the case from the beginning of 2002 until the end of the year 2003 (until the final judgement by the European Court of Justice (ECJ) was expected). Even before the ECJ refuted the company’s claims and the Regional Court’s verdict in March 2004 18 reference price setting was not only transferred back to the sickness funds, but it was even extended as the SHI Modernization Act calls for the immediate inclusion of new patent products in the reference pricing scheme if no added benefit can be proven, in order to limit the launch of me-too products. Source: Adapted from Busse et al (forthcoming)19 Box 5: The Dutch pharmaceutical pricing and reimbursement system In 1991, the Netherlands employed an internal reference pricing system the “Drug Reimbursement System” (DRS). Reimbursement limits are set based on the average price of a cluster of medicines that are treated as therapeutic substitutes. Patient co-payments are imposed for some expensive drugs above the reimbursement limits for which a less expensive alternative exists. Also, a few inexpensive self-care medications, such as aspirin, must be paid for out-of-pocket by individual patients. 16

Schneeweiss S, Walker AM, Glynn RJ, Maclure M, Dormuth C, Soumerai SB (2002) Outcomes of reference pricing for angiotensin-converting-enzyme inhibitors, N Engl J Med, 346: 822-9. 17 Before 2004, named the Federal Committee of Physicians and Sickness Funds. 18 Cases C-264/01, C-306/01, C-354/01 and C-355/01. 19 Busse R, Henke K-D, Schreyögg J (forthcoming) Regulation of pharmaceutical markets in Germany: improving efficiency and controlling expenditures? International Journal of Health Planning and Management. Report: The Austrian Pharmaceutical Market

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The initial effects of the DRS were estimated at nil during the period between its introduction in 1991 to 1998 (SFK 200120). This occurred because the system was based on 1991 price levels and had not taken advantage of price decreases, such as between 1994 and 1998 where medicine prices had declined by 20%. These decreases were partly a result of a voluntary price decrease by the industry in 1994 of 5%, but mainly the result of the Medicine Prices Act (MPA) introduced in June 1996. Also, an external reference pricing system, the MPA, is in operation for new medicines in the Netherlands. The drug supplier in the Netherlands is limited to the average price level of the same product in Belgium, France, the UK and Germany. This maximum price may be pushed down further by the effect of the DRS, when the limit price of the relevant reimbursement cluster is lower than the maximum allowable price as determined by the MPA. However, new unique medicines only have to obey the conditions of the MPA. Since February 1999, the adjustment of the reimbursement limits in the clusters to the lowered prices has been performed. The cost-saving effect of the adjustment in the DRS is estimated since that time at €72 million annually. The MoH estimates the total structural savings of the MPA alone at €318 million per year as a result of the lowering effect by benchmarking with the selected European price levels. Source: Adapted from De Wolf P et al (forthcoming)21 Despite the challenges in Europe, the experience in British Columbia, Canada suggests that reference pricing combined with other approaches may be a valuable means of containing costs without harm to patient well being (Schneeweiss et al 2002 22 ). In North America, the presence or level of co-payment is often linked to the reference price of a product, as a package to try to contain cost, but this linkage is not used in Europe (see Section 8, Influencing patient demand through co-payments). Third, indirect price control through profit or rate-of-return regulation takes into account the manufacturer’s contribution to drug development and the economy when determining product prices. The objective is to ensure that pharmaceutical firms are not making excessive profits, specifically on patent-protected products paid for by public health care systems, while at the same time rewarding important innovation. Currently, this regulatory mechanism is unique to the UK where pharmaceutical pricing at drug launch is free, but is later subject to a nonstatutory profit control regulation called the Pharmaceutical Price Regulation Scheme (see Box 6) (Department of Health UK 199923). Box 6: The UK Pharmaceutical Price Regulation Scheme (PPRS) In the UK at present, the allowable profit margin is set at 21% return on capital employed, (ROC), which is much higher than most UK industrial sectors. There are margins allowed before excess profits trigger a rebate to the Treasury or underperformance may trigger permission to increase prices. The PPRS provides positive incentives for pharmaceutical firms by allowing R&D costs to comprise 20% of National Health Service (NHS) turnover (3% higher depending on the number of patented products on the market or 3% lower if applying for a price increase), and much higher than the 14% worldwide average (Mossialos 199724). Consequently, the PPRS 20

Stichting Farmaceutische Kengetallen (SFK) (Foundation for Pharmaceutical Statistics) (2001) Data en Feiten (Facts and Figures) The Hague: SFK. 21 De Wolf P, Brouwer WBF, Rutten FFH (forthcoming) Regulating the Dutch pharmaceutical market: improving efficiency or controlling costs? International Journal of Health Planning and Management. 22 Schneeweiss S, Maclure M, Dormuth C, Avorn J (2002) Pharmaceutical cost-containment with reference-based pricing: time for refinements, CMAJ, 167: 1250-1. 23 Department of Health UK (1999) The Pharmaceutical Price Regulation Scheme, London: Department of Health. Available at: http://www.dh.gov.uk/PolicyAndGuidance/MedicinesPharmacyAndIndustry/PharmaceuticalPriceRegulationScheme/ThePP RSScheme/fs/en (accessed 30 July 2004) 24 Mossialos E (1997) An Evaluation of the PPRS: Is there a need for reform? in D Green (ed), Should Pharmaceutical Prices be Regulated? London: Institute of Economic Affairs. Report: The Austrian Pharmaceutical Market

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encourages innovation and local investment in R&D. Companies are also allocated 6% of NHS sales for sales promotional spending (reduced to 3% when considering a price increase). Furthermore, an operational relationship is maintained between the DoH and the pharmaceutical industry, which allows flexibility in negotiating company-specific profit margins and assures no sudden policy changes, thus facilitating a favourable and stable business environment. The PPRS is an innovative attempt to match the objectives of both government and industry. A major difficulty with rate-of-return regulation is weak incentives for cost cutting, potentially leading to high prices. A company may have little incentive to operate efficiently because increased costs can be recovered through increased prices, albeit to a lesser degree for firms operating across several markets. Furthermore, companies may over invest in capital25 to artificially inflate their asset base, or shift production costs to nonregulated divisions if they operate in several markets (Averch and Johnson 196226), consequently allowing them to price their products higher. However, since a company’s costs can be compared with its costs in previous years and with other similar firms, and targets may be set for future gains in efficiency, some of the problems inherent in profit regulation can be mitigated. Even so, there is a lack of transparency in the private negotiations to set target profits and regulatory capture may be a problem. In general, empirical evidence suggests that strict direct price regulation schemes, e.g. fixed maximum pharmaceutical prices, may be more effective in controlling the rise in pharmaceutical prices when looking at measurements of price levels across countries. However, these methods seem less effective in controlling overall expenditure, since any savings may be counteracted by large increases in volume. In fact, the cause of increases in pharmaceutical expenditure is not usually prices, but rather an increase in the volume of prescribing and the introduction of new products (Table 2) (Nefarma 2002 27 ). Even where price-volume agreements have been negotiated as in Spain and Italy, budgets have regularly been exceeded (Donatini et al 200128 ), although a sizeable repayment was required in Spain (Lopez-Bastida and Mossialos 200029). Table 2: Pharmaceutical expenditure growth in selected EU member states (2002) Contribution of different growth factors (in %) Country Price UK 0.00 Spain 0.70 Netherlands 0.00 Germany -0.20 Italy -0.50 France -0.80 Source: Nefarma (2002)

New Product 2.80 2.60 1.00 2.70 2.50 2.50

Volume 8.70 8.40 8.30 5.50 3.20 2.30

Total Growth 11.50 11.70 9.30 8.00 5.20 4.00

Current price control systems do not provide an indication of added therapeutic value of the drug, or incentives to reward this end. McGuire et al (2004)30 have argued that the ideal would be a system of marginal pricing according to the increased therapeutic benefit of the drug, in order to award real innovation and gains in clinical effectiveness. The widespread use of economic evaluations in the reimbursement process would go some way to achieve this. The strengths and weaknesses of this approach are considered in the next section. 25

This may in some cases include higher expenditure on R&D, which may be a positive factor. Averch H, Johnson L (1962) Behaviour of firms under regulatory constraint, American Economic Review, 52: 1052-69. 27 Nefarma (2002) Market data: Drugs use in international perspective, Annual Report, The Hague: Nefarma. 28 Donatini A, Rico A, D’Ambrosio MG, Lo Scalzo A, Orzella L, Cicchetti A, Profili S (2001) Healthcare systems in transition: Italy, Copenhagen: European Observatory on Healthcare Systems. 29 Lopez Bastida J, Mossialos E (2000) Pharmaceutical expenditure in Spain: cost and control, International Journal of Health Services Research, 30: 597-616. 30 McGuire A, Drummond M, Rutten F (2004) Reimbursement of pharmaceuticals in the European Union, in Mossialos E, Mrazek M and T Walley (eds.) Regulating pharmaceutical in Europe: Striving for efficiency, equity and quality, London: Open University Press. 26

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A final relevant point is that local optimisation for one country may contradict global optimisation. For example, in the UK where securing low-cost medicines and encouraging the pharmaceutical industry are concomitant policy objectives, cost-containment is still possible due to relatively free pricing balanced by low volumes of brand prescribing and extensive generic prescribing. But because the UK is often used as a reference country in price fixing systems based on international price comparisons, and companies prefer to launch their products in the UK first due to free pricing for new chemical entities, cost-containment in pharmaceuticals may become more difficult for other countries. Overall, price measures are best used in conjunction with other supply and demand side incentives if these are to contribute to overall cost control. 3.2 Reimbursement decisions Reimbursement levels will reflect the outcome of negotiations between the pharmaceutical company with the new product (monopoly), and the payer that is normally a government or health insurance fund (monopsony). The political and economic power of the two parties and their bargaining skills will determine the final reimbursement price. These reimbursement decisions may also define the level of public subsidies and user charges. Reimbursement can be used as a means of rewarding innovation with new products receiving premium prices when they are judged to be truly clinically valuable. Where there is flexibility in pricing, reimbursement prices can be used to send signals to industry about what price levels are acceptable for what clinical gain. In practice, reimbursement and pricing are often not sufficiently integrated within governments to allow this to occur to any great extent - Austria and Belgium are exceptions to this. Reimbursement might then be based on cost-effectiveness analysis or on criteria related to a product’s clinical effectiveness and potential budget impact, the aim being to maximise efficiency in the use of health care resources. This is the case in Finland, where pricing is related to economic evaluation, and to a lesser extent in the UK, where the prospect of an appraisal by the National Institute of Clinical Excellence (NICE) can influence pricing decisions of industry while not actually setting a price. Nonetheless, it is difficult to evaluate the clinical benefit of a new drug for which there is little experience, especially in the long term, since the data to compute these comparative benefits is lacking in the public domain. This occurs because the information on both effectiveness and costs is proprietary and closely guarded by the industry (Collier and Iheanacho 200231). Although attractive in theory, there is controversy about the appropriateness of such economic evaluation in policy making - both in terms of its theoretical basis as well as its application. Methodological problems exist, where questions of what to include in both costs and consequences (e.g. what costs, what perspectives, analytical periods of studies) are exacerbated by questions of how to include them (Drummond et al 199732). There are technical difficulties to ensure a consistent application of guidelines across studies. Generalizing these findings is also restricted because of questions concerning incremental effectiveness and chosen comparators, as well as context-specific factors such as population, availability of health care resources, relative prices or costs, and variations in clinical practice (Drummond and Pang 2001 33 ). In practice, economic evaluation is further constrained by the fact that there are limited resources to conduct it, so that it becomes nearly impossible to construct league tables with all the possible health interventions. Thus, economic evaluations are therefore rarely global but confined to limited areas. While the mindset behind economic evaluation of “value for money” has influenced health policy-makers, the impact of economic evaluation itself as a measure to contain cost or even to improve efficiency has been extremely limited for several reasons. There is often no effective linkage between economic evaluators and decision-makers. Practitioners and decision-makers may also lack the time and expertise to assess adequately the lengthy and technical economic evaluations that may not set out clear policy implications of the new technology. 31

Collier J, Iheanacho I (2002) The pharmaceutical industry as an informant, Lancet, 260: 1405-9. Drummond M, O'Brien B, Stoddart G, Torrance G (1997) Methods for the Economic Evaluation of Healthcare Programmes, Oxford: OUP. 33 Drummond M, Pang F (2001) Transferability of economic evaluation results, in Drummond M. and McGuire A (eds.) Economic Evaluation in Healthcare: Merging Theory with Practice, Oxford: Oxford University Press. 32

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Economic evaluation could play only a part of the policy making process, as other key determinants vary from country to country, e.g. how much a certain health improvement is valued and the rewards to industry for innovation (Drummond et al 1997 34 ). The difficulties in transferring the results from economic evaluations between health care systems undermine the relevance of externally produced data in countries with limited researcher capacity or the lack of necessary funds to carry out their own enquiries. Finally, the role of economic evaluation is to promote efficiency and not contain costs. Consequently, it would be seen as appropriate that a highly effective and efficient therapy should be used, even if overall costs were to rise as a result. Economic evaluation or a wider health technology assessment (HTA), which has to take into account other issues such as equity, affordability, and delivery and service implications, may become one of the drivers of health care costs (Oliver et al 200435). At present, there are few examples in practice of marginal pricing founded on increased therapeutic benefit, although the need to display cost-effectiveness for new pharmaceutical products is becoming a ‘fourth hurdle’ for reimbursement, e.g. in Australia and some Canadian provinces. One might assume that a manufacturer, aware of this fourth hurdle, has gone through a process of using economic evaluation as part of its internal price setting, although anecdotally this is exceptional at present. The possibility of using levels of innovation or therapeutic benefit in price negotiations therefore exists but would be difficult at this time. In several European countries, it is becoming the norm to explicitly include economic concepts in applying for a reimbursement listing, although how the payer uses these is not always clear. Finland is the only EU country where a product’s price and reimbursement is explicitly linked to the economic evidence. Italy, Portugal, Ireland and recently Sweden (see Box 7) also consider economic criteria and may use them to determine the price for reimbursement. Austria, Belgium (see Box 8), Denmark, and the Netherlands are also paying increasing attention to economic considerations. Box 7: Sweden’s new Pharmaceutical Benefits Board From 1 October 2002, drugs will only be included on Sweden’s Drug Reimbursement Scheme (DRS) if they are recommended by a new independent government agency, the Pharmaceutical Benefits Board (PBB) (Läkemedelsförmånsnämnden, LFN36). The PBB decides what medicinal products are to be included and sets the price of those products based on economic evaluations. This Board has taken over the responsibilities formerly vested with the National Social Insurance Board with regard to medicine price controls. The former system, where all prescription priced drugs were automatically included in the Pharmaceutical Reimbursement Scheme, no longer applies. The PBB is also in charge of reviewing all current medicinal products and determining whether the product will continue to be listed in the DRS. The general basis for the Board’s deliberations is the comprehensive health and medical care objective, namely good health and care on equal terms. The Board will also consider the basic ethical principles that apply to health and medical care. These ethical principles pinpoint a general position in priority-setting situations: • The human value principle - care is to be administered with respect for the equality of all human beings and the integrity of every individual • The solidarity principle - those in greatest need take precedence in medical care • The cost-effectiveness principle (new law) - “the cost of using a medical product should be reasonable and fair from a medical, humanitarian, and social-economic perspective” (LFN website 2002) In general, new drugs associated with higher costs than the equivalent existing therapy should not be included in the DRS and new drugs should be assessed on whether the costs are reasonable in relation to the achieved health 34

Drummond M, Jonsson B, Rutten F (1997) The role of economic evaluation in the pricing and reimbursement of medicines, Health Policy, 40(3): 199-215 35 Oliver A, Mossialos EA, Robinson R (2004) Health Technology Assessment and its Influence of Healthcare Priority Setting, Int J Technol Assess Health Care, 20(1): 1-10. 36 LFN website (2002) The Pharmaceutical Benefits Board - areas of responsibility and tasks, Available at: www.lfn.se (accessed 27 July 2004). Report: The Austrian Pharmaceutical Market

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benefits. The Board may set conditions so that a drug is only reimbursable for one particular diagnosis. It is the responsibility of the applicant to show that the criteria for inclusion in the DRS are fulfilled. The PPB has also published general guidelines for economic evaluations which are valid from 1 May 2003, for instance which recommend what costs and benefits should be included, choice of alternatives for comparisons, choice of patient groups, analytical methods (cost-effectiveness analysis is recommended, with quality adjusted life-years or QALYs as a measure of effects, but also cost-benefit analysis may be used, with willingness to pay as a measure of effects; in some cases cost analysis can be used), time horizon, discounting, handling of uncertainty, presentation, etc. Early decision of the PPB include: 1. the rejection for an application for Viagra (Pfizer AB) on the DRS and to set the drug’s price, because two studies showed that it was not cost-effective for the average user (Decision 34/2002) 2. the rejection of Concerta (a drug for treatment of children with “attention deficit hyperactivity disorder”, Janssen-Cilag AB) on the DRS and to set the price, partly on the grounds that the requested price of the drug, when compared with treatment by Ritalin and Ritalin SR, were significantly higher and the producer did not enclose any economic evaluation with the application (Decision 267/2002) 3. the rejection of Cerazette (contraceptive pill, Organon AB) on the DRS and to set the price, because costeffectiveness analysis showed that Cerazette has a higher annual cost than the comparator product Follistrel, and did not show any significant differences with regard to the risk of becoming pregnant (Decision 368/2002/L) Through these and other results, the PPB has demonstrated that it will place a great deal of weight on economic evaluations in the decision to include new drugs in the Swedish DRS. However, the Board has not yet exercised its decision-making power with regard to drugs that may cover large patient groups, drugs that are of particular importance to public health, or drugs that may be of great political interest, e.g. child cancer (Anell 2004)37. Source: Adapted from Gerdtham (forthcoming 2005)38 Box 8: Reimbursement decisions in Belgium After a maximal price is set, the company can apply for reimbursement by the National Health Insurance System. Reimbursement decisions are made by the Minister of Social Affairs based on the advice of the Reimbursement Advisory Committee. Since January 2002, the advisory committee is made up of voting members from the Belgian universities (7), Health Insurance Funds (8), pharmacists working in public pharmacies (2), hospital pharmacists (1), the professional associations of physicians (4), and non-voting members from the pharmaceutical industries (Pharma.be) (2) and representatives of the Minister of Social Affairs (1), the Minister of Health (1) and the Minister of Economic Affairs (1). The committee has two major tasks: 1. advice about the request of the companies for reimbursement of a specific drug, and 2. evaluation of the reimbursement conditions of drug classes on request of the minister or Committee. To arrive at the reimbursement decision the following elements are evaluated: therapeutic value, price, the interest of the drug in practice (from a therapeutic and social point of view), the budgetary consequences for the insurance system, and the relationship between the budgetary implications and the therapeutic value. Three classes are distinguished: Class 1 - innovative (added value compared to existing therapy) - an economic evaluation has to be submitted and there is an obligatory consultation with the company 37

See Anell (2004) which compares the use of health economic evidence across five reimbursement committees - Australia, Ontario and British Columbia in Canada, Finland and France, and one clinical guidance committee - England and Wales. Anell A (2004) Priority Setting for Pharmaceuticals: The Use of Health Economic Evidence by Reimbursement and Clinical Guidance Committees, European Journal of Health Economics, 5: 28-35. 38 Gerdtham U-G (forthcoming 2005) Regulation and Interventions in the Swedish Pharmaceutical Market, in E Mossialos et al (eds) Pharmaceutical Policy in Europe, Copenhagen: WHO. Report: The Austrian Pharmaceutical Market

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Class 2 - drugs not belonging to class 1 or 3 Class 3 - generics and copies If enough evidence is available to warrant reimbursement of the drug, discussions about the price begin but must comply with the maximum price is set by the Minister of Economic Affairs. At the same time, discussions take place about the class (1, 2, 3) and the category of reimbursement (A, B, C) (see Table 7: Belgium). The categories to which a product will belong, depends on the medical and social needs for reimbursement and differ between the ambulatory and hospital care settings. For some drugs with reimbursement in categories A, B and C reimbursement is restricted to specific indications. These specifications are set by the Reimbursement Advisory Committee, in an attempt to limit the prescription of some expensive compounds to patients that particularly benefit from them. Compounds listed in this so-called "Chapter IV" can only be reimbursed if the patient has received prior approval from his Health Insurance Fund. Another type of limited list consists of restricting the ability to prescribe certain forms of medications to specific hospitals or specialists. Source: Adapted from Bogaert and De Cock (forthcoming 2005) In the UK, this role is played by NICE, which uses economic evaluation as part of the consideration in recommending a new technology or drug for use in the UK NHS. This method has been criticised because it may delay the introduction of medicines and recommendations may simply be a “long-deferred catch-up in best practice” (Lynch 200339). NICE is also criticised as it is not responsible for the funding of new technologies, and does not consider affordability. Thus its decisions can pose serious problem for health service managers with limited budgets. Unsurprisingly, NICE sees one of the most difficult barriers it has to overcome as the reluctance of health service mangers to take on effective new innovations. In practice, NICE recommendations have been one of the major drivers of the rise in NHS drug costs in recent years. Some health economists believe that it is politically difficult for these organisations to say no to certain drugs, and that these institutions should genuinely challenge pharmaceutical companies to show the value of their new product (Cookson et al 200140). Moreover, even with these procedures to determine suitability of a drug for reimbursement, many drugs lack appropriate documentation of efficacy. There is also a large discrepancy among different countries regarding what should and should not be reimbursed, and efforts to reimburse drugs on cost-effectiveness criteria have not yet been employed on the supranational level. In addition, another criterion for reimbursement is its inclusion on selected lists, which have been implemented with little uniformity across Europe. These may overlap in part with the selection of products for reference pricing. They are created by the health care funder and explicitly state whether or not a specific product may be adopted for reimbursement. To be placed on a ‘positive list’, a product must meet certain criteria that can be associated with therapeutic benefit, low risk factors, price and budget impact, and possibly cost-effectiveness analysis. Positive lists are used in France, the UK, Ireland, and Italy; while Germany utilizes both negative and positive lists (see Boxes 9-13). Selective lists could decrease overall costs by decreasing the cost and number of prescriptions, particularly when targeted at high cost medicines where there is an effective lower cost preparation available. But if the alternatives are not acceptable to the professionals or the patient, the result will be the inappropriate use of higher cost substitutes. For instance, the de-listing of antacids in Ireland in the 1980’s increased the use of drugs such as cimetidine and ranitidine, and increased overall expenditure (Ferrando et al 198741). Box 9: Inclusion on the positive list in France

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Lynch B (2003) Capecitabine-[National Institute for 3-Year Delay?] Rapid response, BMJ, 326: 1166, Available at: http://bmj.com/cgi/eletters/326/7400/32783 (accessed 31 July 2004). 40 Cookson R, McDaid D, Maynard A (2001) Wrong SIGN, NICE mess: is national guidance distorting allocation of resources? BMJ, 323: 743-5. 41 Ferrando C, Henman MC, Corrigan OI (1987) Impact of a nationwide limited prescribing list: preliminary findings, Drug Intell Clin Pharm, 21: 653-8. Report: The Austrian Pharmaceutical Market

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In France, for a medicine to qualify for reimbursement by the health insurance funds it must be included on the positive list for reimbursable drugs. This list is established by ministerial order on the advice of the Transparency Commission and the Economic Committee for Medical Products (CEPS). Before 1999, drugs considered to be ‘particularly expensive and not substitutable’ were fully reimbursed, while drugs ‘mainly used for the treatment of disorders not usually of a serious nature’ were reimbursed at the rate of 35% and other drugs were reimbursed at 65%. Since October 1999, in order for a drug to be included on the positive list, evidence must be supplied of its therapeutic value (Service Medical Rendu, SMR). The SMR is assessed by the Transparency Commission according to five criteria: 1. effectiveness and possible side effects 2. place in the therapeutic process, in relation to the available alternative therapies 3. the seriousness of the pathology treated 4. the curative, preventive or symptomatic properties of the drug, and 5. importance in terms of public health. The five-level scale - major, considerable, moderate, low, or insufficient - is used to evaluate the SMR for each therapeutic indication. The level of SMR, along with the seriousness of the disease treated, is supposed to determine the reimbursement rate of each medicine (see Table 3). A drug is included in the positive list for a period of five years, after which it has to be re-assessed by the Transparency Commission. Source: Adapted from Paris (forthcoming) Table 3: Rate of reimbursement in France (decree of 27 October 1999) Therapeutic value (SMR)

Serious pathology

Major or considerable Moderate or low Insufficient Source: Lancry (2000)42

65% 35% 0%

Pathology ‘not usually of a serious nature’ 35% 35% 0%

Box 10: Limited lists and restricted formularies in the UK All licensed (and even unlicensed) drugs can be prescribed within the UK NHS, unless specifically excluded in a “black list” of drugs which was introduction in 1984. Medicines on the black list are deemed to be of marginal benefit or poor value; moreover, this list works to save money and also to change the quality of prescribing in some areas. For instance, it drastically reduced the range of benzodiazepines sedatives and hypnotics available. This limited list has had only minor alterations since then. The UK also has a “grey” list of drugs that will only be reimbursed by the NHS in certain circumstances, e.g. sildenafil, for patients with erectile dysfunction due to some defined organic diseases. At the physician practice level, restricted formularies are encouraged for educational and financial reasons (Avery et al 199743). Formularies were often used by GP-fundholders to capture one-time savings from the prescribing budget by using generics (Dowell et al 1995 44 ). Primary Care Organisation (PCOs), which are responsible for health care budgets, have sometimes developed formularies for distinct areas, e.g. antibiotics, but wider PCO formularies are generally avoided, in case they are thought to be an attempt by the PCO to limit the doctors’ clinical freedom. Formularies may allow doctors to consider their choice of drug, but rarely bring about any strategic changes in prescribing behaviour, i.e. they influence what to prescribe but not whether to prescribe. 42

Lancry P-J (2000) Médicaments: Approche économique et institutionnelle (in French), Paris : Cnamts. Avery AJ, Walker B, Heron T, Teasdale SJ (1997) Do prescribing formularies help GPs prescribe from a narrower range of drugs? A controlled trial of the introduction of prescribing formularies for NSAIDs, British Journal of General Practice, 47: 810-4. 44 Dowell JS, Snadden D, Dunbar JA (1995) Changing to generic formulary: how one fundholding practice reduced prescribing costs, BMJ, 310: 505-8. 43

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Source: Adapted from Walley et al (forthcoming) Box 11: The Irish positive list In 1982, a positive list was introduced in Ireland for the Community Drugs Schemes, which represents 77% of total public expenditure on acquisition cost of medicines. Almost 150 medicines were de-listed. Most of these were OTC products, e.g. analgesics, antacids and cough medicines. The number of items per person and the cost per person decreased for the first two years and then rebounded in 1984. Analysis of prescribing trends revealed an increase in prescribing of substitutes for the de-listed OTC products, e.g. NSAIDS as substitutes for analgesics such as paracetamol, H2 antagonists for antacids, and mucolytics for cough medicines. One explanation is that GPs attempted to minimise the financial burden on less affluent members of society. Another explanation is that because of fee-for-service payments, GPs processed the incentive to continue prescribing rather than guiding patients to purchase OTC products (McGettigan 199845). In 1991, some of products de-listed in 1982 were reinstated on the positive list. Uptake of reinstated medicines was observed but there was no concomitant decrease in the prescribing of H2 antagonists, NSAIDS, etc. In an attempt to eliminate a perceived tendency towards supplier-induced demand, fee-for-service payment to GPs was replaced by capitation funding in 1989. However, there were no direct incentives to decrease prescribing rates and no incentives for patients to curb demand. The upward trend in prescribing rates and expenditure continued. Also in 1991, a national formulary of some 140 drugs of first choice was introduced; however, the impact of this formulary was difficult to measure. No advice was given on the choice between options, for instance seven NSAIDS were included in the formulary. It has been suggested that GPs were not sufficiently involved in the formulary development and did not take ownership of it. In addition, a concomitant national hospital formulary was not developed (McGettigan 1998). All products licensed in Ireland are added to the positive list and the list is not reviewed on a regular basiFires. Source: Adapted from Ryan et al (forthcoming 2005) Box 12: The Italian positive list In 1994, the positive list in Italy was radically modified. The new list was based on three criteria: 1. risk-benefit profile of the therapy (clinical efficacy, as documented by controlled clinical trials, pathology relevance in terms of severity and diffusion, side-effects in relation to the expected benefits) 2. improved formulation 3. cost of therapy The new list implied the exclusion of a significant number of products (i.e. SSRIs) and since then several interventions substantially modified its content. The federal technical committee (CUF) was empowered to delist products in case of expected year-end budget overruns. In 2002, Italian NHS coverage of new products was subject to new financial control by the Treasury and the State-Region Conference to avoid expenditure overruns. De-listings were implemented in 1996 and 2003, while in 1999 a number of important products which had previously been de-listed were readmitted for reimbursement. Since January 2001, the positive list includes only one category of drugs fully covered by the NHS, but regions can introduce user charges thus limiting the reimbursability of drugs listed in the national formulary. Since 1999, drugs are grouped according to “homogeneous therapeutic categories” on the basis of the Anatomic-Therapeutic categories (ATC). These groups of drugs are defined in relation to the main therapeutic indication, share the same action mechanism, and are characterised by more or less the same clinical efficacy and profile of undesired side-effects, yet drugs may differ in terms of additional therapeutic indications. Generally these groups coincide with the fourth level of the ATC classification. Examples of categories are: H2 receptors antagonists (A02BA), proton pump inhibitors (A02BC), macrolids (J01FA). 45

McGettigan P (1998) Pharmacoepidemiology: an Irish perspective. MD thesis. Dublin: Trinity College Dublin.

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At first, this classification did not have a significant impact as it served to establish that all drugs belonging to the same category should have in principle the same reimbursement status even if they had different prices per unit of compound. In 2003, this classification was used to introduce new reimbursability rules for about 20% of drugs - therapeutic classes were chosen on the basis of their clinical importance and epidemiological and financial impact. This procedure is still not used for new drugs; however the cut-off price is taken into account in the negotiation process. For each class a cut-off price is defined and higher prices automatically imply their exclusion from the positive list. In order to define the cut-off price all active principles belonging to the homogenous therapeutic class are ordered according to the average daily cost (using DDDs), weighted on the basis of previous year consumption to calculate the cumulative value and quantity. The cut-off for each class was calculated using two alternative procedures: • if the market for the class is dominated by one active principle (accounting for more than 50% of total expenditure), the cut-off is the lowest price of the active principle that ensures at least the cumulative 5% of the market volume • if the market for the category is not dominated by one active principle, the cut-off is the lowest price, provided that two conditions are respected: number of doses is at least 60% of the cumulative market and cumulative expenditure is at least 50% of the whole market. In addition to this system, a reference pricing system for generics has been in place since September 2001. According to this system, coverage for each compound is set at the value of the cheapest option and any difference is directly paid by the patients (see Box 49 on The use of generics in Italy). Source: Adapted from Fattore and Jommi (forthcoming 2005) Box 13: Positive and negative lists in Germany In 1983, Germany introduced a “negative list” that contained all approved pharmaceuticals not covered by the sickness funds for insured persons over 18 years old (Henke et al 199446). The list included drugs generally used for minor conditions, e.g. cough and cold remedies, laxatives, travel sickness products, and mouth and throat infections. At the beginning of the 1990’s, a judicial decree empowered the MoH to expand this list. Additionally, the Social Code Book allowed the exclusion of “inefficient” drugs (ineffective for the desired purpose), “trivial” diseases (such as common colds, which can usually be treated by treatments other than drugs), and drugs with combinations that cannot be evaluated with certainty (homeopathic, anthroposophic47, and herbal medicines). In 1991, a negative list according to these principles came into effect and was further revised in 1993, and in 2000 contained about 2,200 drugs. Supplementary to the negative list, the 1993 Healthcare Structure Act had called for a “positive list” of reimbursable pharmaceuticals to be developed by the MoH, made up only of pharmaceuticals that provide effective and necessary treatment, and diagnosis or prevention of severe diseases. Therefore, in March 1995, an Institute for Medicines with a board of eleven independent experts was established to compile an initial list of reimbursable drugs. All interest groups of the German health care system had been invited by the MoH to discuss the draft list (Schöffski 199648). The list was dropped only weeks before it was to be put into effect because the MoH cited the successful cost-containment measures in the pharmaceutical sector, the otherwise rising costs for chronic patients due to OTC purchases, and most importantly the threat to smaller 46

Henke K-D, Ade C, Murray MA (1994) The German Healthcare System: Structure and Changes, Journal of Clinical Anesthesia, 6: 252-62. 47 Drugs generated from natural sources based on a philosophy about the affinity of humans to nature. 48 Schöffski O (1996) Consequences of Implementing a Drug Budget for Office-Based Physicians in Germany, Pharmacoeconomics, 10(Suppl. 2): 37-47.

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pharmaceutical companies. While this decision was welcomed by the pharmaceutical industry, it faced criticism from both the sickness funds and the Social Democratic Party (Busse 2000). The idea of a positive list was again introduced in the Reform Act of SHI 2000, but subsequently dropped. Nevertheless, the Federal Committee of Physicians and Sickness Funds regulate the coverage of drugs through pharmaceutical guidelines (see Box 17: Guidelines to determine coverage policy in Germany). Source: Adapted from Busse et al (forthcoming) 4. The changing doctor-patient relationship Recently, the doctor-patient relationship has changed as patients can easily access an abundance of detailed medical information through books, the media, and the Internet and are becoming more involved in their choice of treatment. Many patients also seem less trusting of physicians. Furthermore, in an environment geared at containing health care spending, patients have an increased responsibility in paying for their medicines and may be encouraged to care for minor ailments with over-the-counter (OTC) remedies paid for out-of-pocket. Research on doctor-patient relationships and medicine taking has revealed that patients have complicated agendas during GP consultations (Barry et al 2000 49 ). Patients are ambivalent and often averse to taking medicines and do not fully express these feelings to GPs. At the same time, some patients want prescriptions that may not be medically indicated. These behaviours create communication difficulties between the doctor and patient that can lead to poor consultation outcomes, incorrect use of medicines, and non-adherence with medicines taking. Exacerbating this situation is the fact that patients are often poorly educated by their doctors regarding the correct use of their drugs, expected duration of treatment, possible side effects, available alternatives (medical and non-medical), and indications to return. National and regional populations differ in how they regard disease, thus influencing how illnesses are managed in different contexts. Culture is defined as the socially transmitted beliefs, norms, values, religion, civilization, and all other products of human work and thought of a population. Just as health care utilisation differs between cultures and nations, so does the use of medicines. The influence of culture on pharmaceutical prescription and consumption must be considered in the context of the respective health care system structure and economy (Payer 198850). Rates of prescription differ enormously across Europe (see Table 4). Table 4: Prescriptions dispensed per capita per year in European countries (circa 1995) Country Austria Belgium Denmark Finland (1994) France Germany Iceland Ireland Italy Luxembourg The Netherlands Norway (1994) Portugal Sweden Switzerland

Prescriptions per capita 11.5 9.5 7.1 5.7 52.2 12 16 11 5.2 26 11 6.9 21 6.1 8

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Barry CA, Bradley CP, Britten N, Stevenson FA, Barber N (2000) Patients' unvoiced agendas in general practice consultations: qualitative study, BMJ, 320(7244): 1246-50. 50 Payer L (1988) Medicine and Culture, New York: Henry Holt and Company. Report: The Austrian Pharmaceutical Market

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UK 10 Source: Yuen (1999)51 The use of drugs in a society goes far beyond the chemical properties of a drug and considers the cultural definitions of disease, attitudes towards health and pain, and the perceived effects of the drug on the individual. The ritualistic nature of medicines is deeply embedded in the ethos of a group. Cross-national differences have been observed regarding the acceptance of generics, the sharing of medicines, patient compliance, selfmedication, and information seeking. In some societies, the very act of a physician prescribing a medicine may convey the message to a patient that the consultation is complete and the illness is in fact real. Thus, patients need to be educated about the benefits and limitations of specific pharmaceuticals by their doctor in a clear, understandable, and timely fashion. Additionally, public campaigns for patient education are also used to influence their demand for medicines (see Box 14 for Belgium). Box 14: Patient education and demand in Belgium With regards to patient education, there are a number of initiatives by different organizations in Belgium. The Health Insurance Funds have the legal duty to inform their members on health matters and their periodicals often give information about rational drug use, drug prices, and generics. A periodical on health matters is distributed by the Belgian consumer organisation. There are also local initiatives, such as pharmacists producing and distributing informative materials to patients. Furthermore, the website of the Belgian Centre for Pharmacotherapeutic Information (www.cbip.be) is accessible to the public. However, neither on the level of the Communities nor on the federal level (Department of Health or Social Affairs) are there systematic initiatives for providing information about pharmaceuticals to patients or consumers, apart from specific public campaigns and the package inserts in products. Recently, there have been three public campaigns about specific classes of drugs, initiated and financed by the authorities: 1. Antibiotics - the Belgian Antibiotic Policy Coordination Committee (BABCOC) within the DoH, has organized with financial support by the National Health Insurance System, three campaigns to the public about appropriate use of antibiotics (in the winters of 2000, 2001, 2002). This focus was motivated by the high antibiotic prescribing in Belgium and the awareness of the problem of bacterial resistance. The campaigns were prepared in collaboration with scientific organisations of pharmacists and physicians. They were preceded by a press conference and consisted of messages in the media (TV and radio) and in the written press. Leaflets summarizing the messages were distributed via physicians and pharmacists and a website was produced to provide more detailed information. Surveys have shown that the campaigns had high visibility for both the public and GPs, were evaluated positively, and shifted the opinion in favour of using antibiotics more sparingly. During the campaigns, antibiotic sales were significantly, but only transiently reduced. There are no data available about the long term effect of these campaigns on antibiotic prescribing and on attitude of professionals and the public. 2. Hypnosedative drugs - In November 2002, a campaign on the correct use of benzodiazepines and other hypnosedative drugs was launched by the MoH with TV and radio spots, in the written press and distributing leaflets. It is too early to draw conclusions about the impact of this campaign. 3. Generics (see Box 48 on Regulating generic reimbursement and promoting their use in Belgium) Source: Adapted from Bogaert and De Cock (forthcoming 2005) Patient compliance is an important area for policy, since its implications are far-reaching. Poor patient compliance can have adverse effects on public health, e.g. low rates of childhood vaccination in parts of the UK

51

Yuen P (1999) Compendium of Health Statistics, 11th Edition, London: Office for Health Economics.

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(Meulemans et al 200252). One of the reasons behind non-compliance may be a growing mistrust of the health care industry (Robertson 198553). Another may be the divergent options of what patients view as a worthwhile personal benefit and what health professionals considers useful. A better understanding of non-compliance and its consequences can lead to more effective strategies for improved concordance between doctors and patients and better adherence to medicines (Dardano 200054). Beyond misinformation or individual irresponsibility, some non-compliance is due to external factors outside the patient’s control, such as poverty or other logistical problems (Fletcher 198955). Monitoring patient compliance may also be important to ensure that the potential therapeutic benefits are not wasted (Kaveh 200156). The United States have successfully used financial incentives to improve patient adherence, such as cash, vouchers, lottery tickets, or gifts (Giuffrida and Torgerson 199757). Recent initiatives in the UK show anecdotal evidence that patients can manage some of their own health conditions much more effectively than by simply depending on health care professionals (Donaldson 200258). In all cases, an ethos where patients begin to take more responsibility for their health has the potential to improve doctor-patient relationships and achieve health gains. The media can have a positive influence on health care issues through public health education campaigns, or a negative impact when exaggerating the benefits of break-through drugs or the disasters of adverse effects. The news, television, and more recently the Internet can manipulate public beliefs, attitudes, and behaviours pertaining to health care and medicines. Information from particular sources such as the Internet, can often be misleading or wrong, and can contribute to mistrust between doctor and patient. Likewise, incomplete information given by pharmaceutical companies, especially about the limits of clinical benefit, is a major concern (Woloshin et al 200159). Direct to Consumer (DTC) advertising for prescription-only medicines is illegal in Europe and opposition to it generally remains widespread, both among health professionals and by patient and consumer groups. Such opposition stems from uncertainty about any benefits of DTC and its well-documented problems. Since 1997, DTC advertising of prescription drugs has been allowed in the US, thus influencing medicines consumption by raising public awareness. The industry draws attention to advantages in ‘empowering the consumer through information’, resulting in more autonomy and speedier access to medicines. This is to be weighed against the often dubious nature of the information provided. It has been shown that even FDA regulated OTC advertisements in the United States, often make inaccurate statements and neglect to mention potential sideeffects (Sansgiry et al 199960). As a result, there is a fine line dividing information and advertising. Pharmaceutical companies can promote themselves in many other ways including indirect financial support to physicians, such as sponsoring drug lunches or dinners, giving industry gifts, or paying for travel and expenses 52

Meulemans H, Mortelmans D, Liefooghe R, Mertens P, Zaidi SA, Solangi MF, De Muynck A. (2002) The limits to patient compliance with directly observed therapy for tuberculosis: a socio-medical study in Pakistan, International Journal of Health Planning & Management, 17(3): 249-67. 53 Robertson WH (1985) The problem of patient compliance, American Journal of Obstetrics & Gynecology, 152(7Pt2): 948-52. 54 Dardano KL (2000) Contraceptive compliance, Obstet Gynecol Clin North Am, 27(4): 933-41. 55 Fletcher RH (1989) Patient compliance with therapeutic advice: a modern view, Mount Sinai Journal of Medicine, 56(6): 453-8. 56 Kaveh K (2001) Compliance in hemodialysis patients: multidimensional measures in search of a gold standard, Am J Kidney Dis, 37(2): 244-66. 57 Giuffrida A, Torgerson DJ (1997) Should we pay the patient? Review of financial incentives to enhance patient compliance, BMJ, 315(7110): 703-7. 58 Donaldson L (2002) Expert patients usher in a new era of opportunity for the NHS, BMJ, 326: 1279. 59 Woloshin S, Schwartz LM, Tremmel J, Welch HG (2001) Direct-to-consumer advertisements for prescription drugs: what are Americans being sold? Lancet, 358: 1141-6. 60 Sansgiry S, Sharp WT, Sansgiry SS (1999) Accuracy of information on printed over-the-counter drug advertisements, Health Marketing Q, 17(2): 07-18. Report: The Austrian Pharmaceutical Market

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to educational conferences (Moynihan 200361). These promotional activities aimed at health professionals are often regulated (as in France, see Box 15). Companies will also use apparently neutral and independent sources to promote new drugs, whether individuals, patient groups, or medical journals (Smith 200362, Wager 200363). Furthermore, if drugs that were once prescription-only are de-listed to OTC status, they can then become a candidate for DTC advertising (as in the UK, see Box 16). Box 15: Regulation of promotional activities in France In France, DTC advertising is allowed for non-reimbursable products while advertising for reimbursable products is strictly reserved to professionals. Content and media regulation are very strict and the Commission of the French Health Products Safety Agency (AFSSAPS) ensures compliance with these rules. The control of relations between health professionals and the pharmaceutical industry is based on a legal framework (two laws in 1993 and 1994, following the EC directive of 1992), and on the Medical Code of Ethics. Pharmaceutical companies are not allowed to offer payments to physicians or gifts unless they are of a “negligible value”. Firms are authorized to sign agreements with physicians to pay for hospitality at scientific meetings or for participation in clinical studies. Another tool to limit promotional expenditure is a fiscal incentive set up in 1991, which is now a sliding-scale tax based on promotion expenditures. The tax rate is calculated according to the value of the promotion expenditure/turnover ratio and applies to the total expenditure on promotion. If the above ratio is lower than 10%, then the tax rate is 9.5%, and then it increases up to the highest rate of 31% for a ratio higher than 14%. The effectiveness of this policy is not easy to assess but the share of promotional expenditures in the turnover has slightly decreased between 1997 and 2001, from 12% to 11%. Source: Adapted from Paris V (forthcoming) Box 16: Deregulation and DTC advertising in the UK In the UK, there is a policy of deregulation from prescription-only medicines (POM) to pharmacy (P) status, wherever it is reasonable on the grounds of public safety. DTC advertising is permitted for OTC medicines but not for POM, and some companies seem to have used the launch of an OTC with the same brand name but at a lower dose to reinforce loyalty to or encourage demand for the POM. The result is that deregulation from POM to P status has rarely reduced patient demand for prescribed drugs and may increase it. This occurs because the prescription charge is often far less for a given dose and volume of drug than the OTC cost (Erwin et al 199764). Source: Adapted from Walley et al (forthcoming)65 5. Monitoring and influencing physician decision-making Since physicians are the key decision-makers on the demand side of the pharmaceutical market, it is imperative to ensure that they are engaging in good prescribing practices. This, ‘good prescribing’ should encompass the appropriate choice of medicine beyond the perspective of the physician, but also that of the patient; while concurrently attempting to maximise effectiveness, minimise risk, and minimise cost (Barber 199566). However,

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Moynihan R (2003) Who pays for the pizza? Redefining the relationships between doctors and drug companies, 1: Entanglement, BMJ, 326: 1189-92. 62 Smith R (2003) Medical journals and pharmaceutical companies: uneasy bedfellows, BMJ, 326: 1202-5. 63 Wager E (2003) How to dance with porcupines: rules and guidelines on doctors’ relations with drug companies, BMJ, 326: 1196-8. 64 Erwin J, Britten N, Jones R (1997) General practitioners' views on the over-the-counter availability of H2-antagonists. Br J Gen Pract, 47: 99-102. 65 Walley T, Mossialos E, Mrazek M (forthcoming) Regulating Pharmaceutical Markets: improving efficiency and controlling costs in the UK, International Journal of Health Planning and Management. 66 Barber N (1995) What constitutes good prescribing? BMJ, 310: 923-5. Report: The Austrian Pharmaceutical Market

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what constitutes good prescribing may diverge between different health care systems because it depends on the perspectives of the prescribers, patients, as well as payers. There are significant differences in the prescribing habits of individual practitioners and across countries. For instance, only 62.9% of consultations result in prescriptions in the Netherlands, whereas in Italy this figure is 94.5% (Nefarma 2002). In 1996, only five medicines were common among the 50 most prescribed medicines in France, Germany, Italy, and the UK (Garattini and Garattini 199867). It is premature to attribute these differences only to prescribing culture, but clearly these discrepancies are significant (Nefarma 2002). Moreover, the study of good prescribing is challenging because patients’ needs are difficult to define and measure, and are not well captured by administrative databases. Furthermore, it is difficult to disentangle the complex interaction of factors that lead to a decision to prescribe a particular drug for a particular patient. Various approaches have been made to monitor prescribing quality, including the use of a Medical Appropriateness Index and a review of detailed medical records. The Medical Appropriateness Index assesses prescribing suitability for an individual patient based on ten dimensions. The use of medical records is the most accurate measure of performance quality, although it is not a realistic option for most European countries. Financial incentives also have been used to influence prescribing behaviour, as discussed in Section 6. In the UK, prescribing data are used to provide doctors with reliable, regular, and prompt information on their current prescribing practices in an effort to improve cost awareness, in theory leading to more effective and economical prescribing. In practice, the usefulness of such cost-focused prescribing data in initiating change is limited because such changes depend on the doctors’ willingness to consider costs when prescribing. Although doctors are not necessarily averse to considering costs, other criteria such as clinical benefit and personal experience or opinion are more valued (Denig and Haaijer-Ruskamp 199568). Clinical practice guidelines are specific criteria outlining how and when particular tests and treatments should be used. These have also been employed in an attempt to standardise both physician variation in the management of diseases, as well as control spending. The introduction of guidelines may be complemented with financial incentives (or disincentives) and educational efforts. However, there is often no mechanism for monitoring or enforcement after dissemination of guidelines. Clinical practice guidelines appeal to policy-makers as well as clinicians because their objectives are to improve care and not simply to ration services. Guidelines can be used in conjunction with utilisation reviews to penalise doctors or hospitals, or to determine coverage policy, which makes them less acceptable to some health care professionals. Examples of guidelines and other non-financial incentives to influence physicians are presented below for Germany, Belgium, Italy, Sweden and France (see Boxes 17-21). Box 17: Guidelines to determine coverage policy in Germany In Germany, the Federal Committee of Physicians and Sickness Funds regulates the coverage of drugs by the sickness funds through pharmaceutical guidelines, which also form part of the contract between the two sides at the federal level. These guidelines attempt to steer the appropriate use of different groups of pharmaceuticals and are legally binding, and can thus be used in malpractice lawsuits. These guidelines have limited the prescription of certain drugs to specific indications (e.g. anabolics to cancer patients), specified that they may only be used after non-pharmaceutical treatments were unsuccessful (e.g. so-called chondroprotective drugs), or in a few cases disallowed any prescription by the sickness funds (e.g. drugs to quit smoking). However, the overall effect of these guidelines is low, since very few drugs with mainstream indications were affected.

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Garattini S, Garattini L (1998) Discrepancy remains in pharmaceutical prescriptions in four European countries, BMJ, 317: 947. 68 Denig P, Haaijer-Ruskamp FM (1995) Do physicians take cost into account when making prescribing decisions? Pharmacoeconomics, 8(4): 282-90. Report: The Austrian Pharmaceutical Market

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In mid-1998, the Federal Committee amended its pharmaceutical guidelines to exclude drugs for the treatment of erectile dysfunction and drugs to improve sexual potency, such as Viagra. In its opinion, the responsibility of the sickness funds ends where personal lifestyle is the primary motive for using a drug. This case demonstrates that the criteria for exclusions are less explicit than for medical technologies, so that decisions actually depend on the common will of physicians and sickness funds. Accordingly, the Federal Social Court disapproved of the general exclusion of drugs for the treatment of erectile dysfunction and instead demanded measures against their misuse. In early 1999, the Federal Committee passed completely new pharmaceutical guidelines. These stated explicitly that the licensing of pharmaceuticals is a necessary but not sufficient precondition for coverage by the social health insurance system (Busse 200069). The Federal Committee expected savings in the region of €500 million annually. However, these pharmaceutical guidelines were never implemented since the pharmaceutical industry successfully filed a lawsuit against them. Initially in March 1999 one court argued that the guidelines violated cartel law since the Federal Committee is a joint committee of sickness funds and physicians. Two other courts approved the rejection arguing guidelines were only supposed to specify prescription practices of physicians but are not allowed to exclude certain drugs; therefore, the proposed guidelines exceeded the competences of the Federal Committee and exclusion of drugs have to be approved by legislation. As part of the SHI Modernization Act (2004), “lifestyle drugs” are now being legally excluded from reimbursement; therefore, drugs for erectile dysfunctions, anti-smoking, etc. are not reimbursed by the sickness funds, although this is not based on any economic and therapeutic evidence. In addition, the Act also excludes any non-prescription drugs from reimbursement with the exception of drugs for children under twelve years and certain indications. Along with simple cost-containment, this measure could also be due to the price increase of non-prescription drugs over the last years as well as an explicit intention to liberalise the pharmaceutical market. This has been recommended by the High Level Group on Innovation and Provision of Medicines “G10 Medicines”, on a European level of which the German MoH was a member. Source: Adapted from Busse et al (forthcoming) Box 18: Belgian guidelines, protocols and utilization reviews The Committee for Evaluation of the Quality of Medical Practice concerning Pharmaceuticals of the National Health Insurance System in Belgium organizes bi-yearly Consensus conferences on a pharmacotherapeutic subject with emphasis on efficiency and reimbursement problems, and is involved with Pharmanet feedback (see Box 27). Previous consensus conferences have been held on the subject of peripheral vasodilators, antidepressant drugs, antibiotics in respiratory disease, gastro-intestinal and urinary disease, anti-asthma drugs, low-molecular weight heparines, hypolipemic drugs, antihypertensives, and proton pump inhibitors. The conclusions of the consensus juries are distributed to all Belgian physicians and pharmacists. The Flemish speaking and the French speaking Scientific Societies of GPs are subsidized by the DoH to elaborate guidelines on a number of health problems, including drug therapies. The Belgian Antibiotic Policy Coordination Committee in the DoH distributes Guidelines for rational antibiotic use in ambulatory practice and in hospitals. These guidelines are formed in collaboration with paediatricians, GPs, infectiologists, and ear-nosethroat physicians. So far, guidelines about pharyngitis, otitis and cystitis have been distributed to all GPs, and hospital physicians have received a guideline on the treatment of pyelonephritis. In 2003, a National Council for the Promotion of Quality of Care was created and is managed by representatives from health providers, scientific organisations, public authorities and the Health Insurance Funds. Part of its mission is to organize periodical feedbacks on prescription and activity data to the medical profession. Feedback about antibiotics was sent out in the beginning of May 2003 and feedback about antihypertensive drugs is in preparation. Source: Adapted from Bogaert and De Cock (forthcoming 2005) 69

Busse R (2000) Healthcare systems in transition: Germany, Copenhagen: European Observatory on Healthcare Systems.

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Box 19: Incentives for Italian physicians The 1992 reform of the Italian NHS created greater incentives and opportunities to make doctors (particularly GPs) accountable for their prescribing activity. In principle, the reform introduced an expenditure target per GP and created incentives for GPs to achieve this target. The implementation was left to the regions and the Local Health Units (LHUs). Only a few LHUs introduced these targets and were focused on drugs. In the following years more sophisticated budget systems were piloted in several LHUs. Although budget systems vary from between regions, they are converging towards a model different from a simple expenditure target (or cap). Qualitative (participation in the definition of and comply with local guidelines, participation in home care programs, etc.) and quantitative (prescribing mix consistent with guidelines, hospitalisation rate, expenditure targets, etc.) objectives and related incentive schemes are now negotiated between the LHUs and GP Unions (Cavallo et al 200170). Budget systems have been introduced together with clinical governance programmes, managed at the central, regional, and local level. The most important experience is represented by a set of compulsory central guidelines on prescriptions (CUF’s notes on prescription), issued for first time in 1994 and updated in 1998 and 2001. Since 2001, Notes should be revised by the CUF each year on the basis of the most recent evidence from the scientific literature. The Notes were introduced in order to increase the appropriateness of prescriptions and curb pharmaceutical expenditure. In principle, since 1996 doctors have been liable to sanctions (they have to reimburse the prescription to the NHS), if they do not respect the Notes. Management of controls and sanctions were delegated to LHUs. Evidence on the effects of Notes on prescribing behaviour is very poor and has proved that: 1. restriction and enlargement of therapeutic indications covered by the Notes did affected the prescribing behaviour (Damiani et al 200271 on parenteral cephalosporin) 2. expenditure for those therapeutic classes where Notes have substantially changed over time shows a very unstable trend, such as for SSRIs (desisted in 1994, re-listed in 1999 with a Note, the Note was removed in 2001) Some Regional Governments (13 out of the 21) have also introduce their own guidelines on prescriptions , e.g. on the treatment of hypertension, asthma, etc. Some Regional Governments have launched additional programmes, such as regional drugs information centres (e.g. Veneto and Emilia Romagna), promoted public campaigns on the appropriate usage of drugs (e.g. Lombardia and Toscana), limited the access of the pharmaceutical companies’ representatives to hospitals and invested funds provided by the DoH in regional and local programs aimed to increase the appropriateness of prescriptions (e.g. Toscana and Campania). Despite the huge investment at national, regional and local levels, a recent study carried out in one of the regions where clinical governance had been developed showed that guidelines are still perceived to be less useful than other sources of medical information, developed for cost-containment reasons, imposed from external sources and difficult to apply to individual patients (Formoso et al 200172). Source: Adapted from Fattore and Jommi (forthcoming 2005) Box 20: Recommendations for Swedish physicians In Sweden, the financing and delivery of health care services are supplied by 21 public county councils in a monopolistic integrated system. Each county council has independent political, economic, and administrative 70 Cavallo MC, Gerzeli S, Vendramini E (Cergas, Bocconi University) (2001) Organizzazione e gestione delle cure primarie: un’indagine nazionale, Milano: McGraw Hill. (in Italian) 71 Damiani et al (2002) Impact of drug policy on the use of parenteral cephalosporin in Italy, Pharmacy and world science, 24(5): 169-71. 72 Formoso G, Liberati A, Magrini N (2001) Practice guidelines: useful and participative method? Survey of Italian physicians by professional setting, Archive of internal Medicine, 161(16): 2037-42.

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control. From 1 January 1997, the county councils were legally required to set up special drug and therapeutic committees with the role of promoting reliable and rational prescribing of medicines. They could choose to issue a list of recommended product or practice guidelines. As a result, there is an increasing interest in providing feedback on physician prescribing and promoting generic prescribing. The level and type of activities committees vary across county councils. An important issue is the extent to which prescribers follow theses recommendations. Approximately 90% of GPs reported that they followed the list of committee recommendations and 77% were also aware of the aims of the recommendations (Melander and Nilsson 200173). In the study, GPs attitudes were also specially investigated with regard to four high cost drugs, i.e. Seloken ZOC, Tenormin, Losec and Lanzo. This data was compared to actual prescriptions for these drugs made by all GPs in the sample surveyed. The results show important divergences between reported their attitudes and actual prescriptions, e.g. physicians in twelve county councils reported that they prefer to prescribe Tenormin above Seloken for the diagnosis hypertension but the actual prescription rates of Tenormin were not significantly higher and in fact Seloken dominated in nine of the twelve county councils. There are also studies on other interventions aiming to influence physician prescribing behaviour. For example by educational models aimed at improving prescribing in primary care (Diwan et al 199574, Stålsby, Lundborg et al 199975). Source: Adapted from Gerdtham (forthcoming 2005) Box 21: Influencing physician prescribing in France Until the beginning of the 1990’s, medical practice was only subject to partial control exercised by the medical advisers of the health insurance funds, who were responsible for detecting anomalies and abuses in physicians’ practices. Since then, the National Agreements and later the Ordinances (1996) have emphasized the need to monitor and evaluate medical practice and promote quality and efficiency in physicians’ behaviour in France. In 1994, the first recommendations on good practice became mandatory for doctors and were included in the National Agreement signed between physicians’ representatives and National Health Insurance Funds. Seventeen of these références médicales opposables (RMOs) were towards the prescribing of medicines, but used no official reference to scientific evidence. A year later, guidelines based on clinical evaluation were established by the Agency for Medicines - 37 RMOs were on drug prescription in 1995 and the 1997 Agreements, signed separately for GPs and specialists, contained 74 and 77 drug RMOs, respectively. The recommendations are generally presented in a negative form to indicate ineffective or potentially dangerous practice. Failure to comply with these recommendations could have resulted in financial penalties for the physician, which was calculated through a formula taking into account the frequency, cost, and seriousness of the non-compliant behaviour. However, this system of penalties was rarely used. From 1994 to 1997, 482 of the 26,682 physicians checked were accused of non-compliance with RMOs76 but only 194 (24%) of them were finally given financial penalties (Cour des comptes 199877). By the end of 1999, the Council of State abolished these penalties because the method used to compute penalties, which was linked to the revenues of the physician, could lead to financial sanctions out of proportion with the seriousness of the non-compliance behaviour.

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Melander A, Nilsson JLG (2001) Läkares relationer till läkemedelskommittéer. Attityder och faktisk förskrivning (in Swedish), NEPI Rapport, Stockholm: Apotekarsocitetens förlag. 74 Diwan VK, Wahlström R, Tomson G, Beerman B, Sterky G, Eriksson, B (1995) Effects of “Group Detailing” on Prescribing of Lipid-Lowewring Drugs: A Randomized Controlled Trial in Swedish Primary Care, J Clin Epidemiol, 48: 705-11. 75 Stålsby Lundborg C, Wahlström R, Oke T, Tomson G, Diwan VK (1999) Influencing Prescribing for Urinary Tract Infection and Asthma in Primary Care in Sweden: A Randomized Controlled Trial of an Interactive Educational Intervention, J Clin Epidemiol, 52: 801-12. 76 These figures concern all RMOs and not only RMOs on drugs. 77 Cour des comptes (1998) Rapport annuel sur la sécurité sociale: La mise en oeuvre des références médicales opposables (in French): 252-261, Paris: Les éditions du Journal Officiel. Report: The Austrian Pharmaceutical Market

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Nevertheless, the first assessments of the impact of RMOs showed significant results for the most relevant guidelines (Cour des comptes 1998). Physicians’ prescription behaviour had changed in at least 26% of cases targeted by the 1994 set of RMOs in the first six months and in at least 17% of cases targeted by the 1995 set of RMOs. The RMOs on antibiotic therapy and on the treatment of prostate adenoma were the most successful as they generated behavioural changes of the order of 36% and 44%, respectively (Le Fur and Sermet 199678, La Pape and Sermet 199879). However, cost-savings due to RMOs were less than 1% of total expenditures, partly because they covered only a narrow range of all physicians’ activities. Some studies mention a wider impact due to the focusing on certain therapeutic classes or prescription habits by RMOs (Cavalié 199880). Despite this, the impact on behaviour declined each month and the most positive result of this experience was the broadcasting of the existence of practice guidelines. In France, these RMOs accompanied a general movement towards quality improvement in health care, which was also visible in the creation of new agencies, the development of evaluation, the elaboration of guidelines, and the accreditation of hospitals. Source: Adapted from Paris V (forthcoming) In France, prescribing guidelines were poorly followed because of the volume of guidelines, lack of information systems, limited capacity for monitoring, and physicians concern that following the guidelines could negatively affect the quality of care being delivered (Durieux et al 200081). But, studies on the effectiveness of clinical guidelines have been conflicting (Gundersen 200082). Some show little effect of clinical guidelines on physician prescribing behaviour (Hetlevik et al 200083), while others suggest that evidence-based guidelines, if designed well and implemented consistently, can help to deliver “best practice” (Garfield and Garfield 200084, Perleth et al 200185, Richman and Lancaster 200086). In general, adherence to evidence based guidelines would be expected to improve the quality of care, efficiency, and equity but might increase or decrease total expenditure depending on previous practice. In areas where patients had been under-treated, increases in total expenditure are likely. Guidelines written with the explicit objective of cost-containment are unlikely to be acceptable because of serious ethical and legal implications (Carter et al 199587, Cheah 199888). Like any other health technology, the development and implementation of

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Le Fur P, Sermet C (1996) Les Références Médicales Opposables: Impact sur la prescription pharmaceutique (in French) Paris: CREDES. 79 La Pape A, Sermet C (1998) Les références médicales opposables sur le médicament: bilan de trois années d'application (in French), Questions d'économie de la santé, Paris: CREDES. 80 Cavalié P (1998) Les références médicales opposables: quel impact sur la consommation de médicaments? (in French), Economie et statistique, 312-313: 85-99. 81 Durieux P, Chaix-Couturier C, Durand-Zaleski I, Ravaud P (2000) From clinical recommendations to mandatory practice, International Journal of Technology Assessment in Healthcare, 16(4): 969-75. 82 Gundersen L (2000) The Effect of Clinical Practice Guidelines on Variations in Care, Ann Intern Med, 133: 317. 83 Hetlevik I, Holmen J, Krüger O, Kristensen P, Iversen H, Furuseth K (2000) Implementing clinical guidelines in the treatment of diabetes mellitus in general practice, International Journal of Technology Assessment in Healthcare, 16: 21027. 84 Garfield FB, Garfield JM (2000) Clinical judgment and clinical practice guidelines, International Journal of Technology Assessment in Healthcare, 16(4): 1050-60. 85 Perleth M, Jakubowski E, Busse R (2001) What is 'best practice' in healthcare? State of the art and perspectives in improving the effectiveness and efficiency of the European healthcare systems, Health Policy, 56(3): 235-50. 86 Richman R, Lancaster DR (2000) The clinical guideline process within a managed care organization, Int J Technol Assess Health Care, 16(4): 1061-76. 87 Carter AO, Battista RN, Hodge MJ, Lewis SL, Basinski AS, Haynes RB (1995) Proceedings of the 1994 Canadian Clinical Practice Guidelines Network Workshop, Canadian Medical Association Journal, 153: 1715-9. 88 Cheah TS (1998) The impact of clinical guidelines and clinical pathways on medical practice: effectiveness and medicolegal aspects, Annals of the Academy of Medicine, Singapore, 27(4): 533-9.

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clinical guidelines are expensive and must prove their value (Gandjour and Lauterbach 200189, Mason et al 200190). Another approach to influence physician prescribing is educational (Soumerai and Avorn 199091). There are many forms of educational interventions, from the simple distribution of educational bulletins or pamphlets to organized lectures or seminars aimed at prescribers (see Boxes 22 and 23, for examples in France and Denmark). More participatory approaches to prescriber education include audit and feedback, and academic detailing. In general, there has been no good evidence showing effectiveness of the simpler, more passive measures such as circulation of educational materials, or even audit and feedback (Freemantle 200092). However, these methods do improve knowledge and while they may not secure change alone, they prepare the ground for more direct approaches, such as academic detailing. Box 22: Providing independent medical information to physicians in France In 2001, the Fund for independent medical information (Fonds de promotion de l'information médicale et médico-économique, FOPIM) was created in France to provide physicians with information on medicines independent from the pharmaceutical industry. Because the main source of information and continuing education for physicians is from the industry, the FOPIM is supposed to counter-balance this. However, the activities of FOPIM have been limited - surveys have been conducted to estimate the physicians’ need for information and a call for tender has been launched to finance medical journals independent from the industry. Documents have been produced to inform physicians about therapeutic strategies, but they have not been distributed yet because of a lack of scientific validation according to FOPIM managers. Source: Adapted from Paris V (forthcoming) Box 23: Information, monitoring and corrective advisory measures in Denmark In Denmark, the pharmaceutical industry promotes its products through scientific arrangements and arranging courses for professionals, which update them on new medical treatments not necessary closely related to a particular drug. The Institute of Rational Pharmacotherapy was created to counter-balance these industry efforts, with the purpose of enhancing information about the best use of pharmaceuticals from both a medical and economic perspective. The institute publishes short reports and arranges short courses. The institute disseminates information and gives advice, but does not monitor prescription practices. The control of provider performance is carried out at county level since the providers are independent and working under a collective agreement with the health care organization “Sygesikringen”, which is controlled by the county governments. Records are kept of the prescriptions of the practitioners, and recurrent comparisons with county average are performed and sent to each provider. Beyond prescriptions, this practice also covers other functions such as the directions to specialists, laboratory tests, etc. Where the records of a provider differ considerably from average, he will be reminded of this and suggested to contact one of the other providers with a record closer to the average; such suggestions are not to be neglected since the county can withdraw the support of Sygesikringen, so that patients will be reimbursed at a much lower rate. To date, there no automatic reduction of payments to providers in the Danish system. Source: Adapted from Jørgensen and Keiding (forthcoming 2005)93 89

Gandjour A, Lauterbach KW (2001) A method for assessing the cost-effectiveness and the break-even point of clinical practice guidelines, International Journal of Technology Assessment in Healthcare, 17(4): 503-16. 90 Mason A., Towse A., Drummond M, Cooke J (2003) Influencing prescribing in primary care led NHS, London: Office of Health Economics. 91 Soumerai SB, Avorn J (1990) Principles of educational outreach (“academic detailing”) to improve clinical decisionmaking, JAMA, 263: 549-56. 92 Freemantle N (2000) Implementation strategies, Fam Pract, 17(Suppl 1): S7-10. 93 Jørgensen KP, Keiding H (forthcoming 2005) Regulating pharmaceutical markets: improving efficiency and controlling costs: The Danish pharmaceutical market, in E Mossialos et al (eds) Pharmaceutical Policy in Europe, Copenhagen: WHO. Report: The Austrian Pharmaceutical Market

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Academic detailing involves a trained individual meeting with a physician in their practice setting in order to modify their performance. This method has been shown to change practice (Avorn and Soumerai 1983), but is expensive. Academic detailing is prevalent in the UK (see Box 24) and Belgium (see Box 25). Studies in the UK have shown a useful effect in general practices with small numbers of doctors, but less effect in larger practices with more doctors, where securing the “buy in” to change practice from all the doctors is more difficult (Freemantle et al 200294). An important qualification to academic detailing is that the people chosen to educate the professionals should not be seen as biased health managers. For example in the UK in the early 1990’s, a problem with prescribing advisors was that they were seen as agents of the government and as a result were received with some antagonism by doctors. Box 24: Medicines information and pharmacist prescribing advisers in the UK The UK NHS has well developed medicines information centres that support both primary and secondary care. The two national medicine information bulletins funded by the DoH: the MeReC bulletin from the National Prescribing Centre and the Drugs and Therapeutics Bulletin from the Consumer Association. On their own these documents have little effect in changing practice, but they are often used by prescribing advisers in their “academic detailing” work. The DoH also funds the British National Formulary which is produced by the British Medical Association and the Royal Pharmaceutical Society and distributed to all prescribers every six months. This is not a restricted formulary, but provides up-to-date essential information on most licensed drugs available in the UK. In PCOs, there are one or more pharmacist prescribing advisers with the role of setting and monitoring budgets, and supporting practices in addressing both the cost and quality of their prescribing. This has similarities to academic detailing, i.e. practice visits for education and reinforcement of key messages in medicines information bulletins, and feedback on a practice’s prescribing data, but also includes the setting of the drug budgets and incentive schemes (professional and managerial roles). Qualitative research suggests that GPs find advisers acceptable (Weiss and Fitzpatrick 199795), but another study emphasized that GPs and advisers were “poles apart”, with advisers stressing cost-containment (Avery and Heron 199796). There has been one rigorous study in the UK of true academic detailing without managerial overtones. This found a small but definite effect in changing prescribing in the desired manner (Freemantle et al 2002), but led the authors to question whether it was worth the effort (Mason et al 200197). Other studies have found that pharmacists working closely with GPs, such as the employment of pharmacists in a general practice, improves prescribing quality and contains costs (Rodgers et al 199998). Source: Adapted from Walley et al (forthcoming) Box 25: Educational efforts towards physicians in Belgium Within the system of accreditation of Belgian physicians, local quality groups (LOKs or GLEMs) are organized per discipline (e.g. GPs, cardiology, nephrology, orthopaedics) and have to meet at least four times a year to discuss problems of pharmacotherapy. These groups have distributed material about the use of non-steroidal anti-inflammatory agents and the appropriate use of antibiotics. A project of visits to GPs by independent detailers (physicians or pharmacists) in certain regions of Belgium has now been going on for five years and is 94

Freemantle N, Nazareth I, Eccles M, Wood J, Haines A (2002) A randomised controlled trial of the effect of educational outreach by community pharmacists on prescribing in UK general practice, Br J Gen Pract, 52(477): 290-5. 95 Weiss M, Fitzpatrick R (1997) Challenges to medicine: the case of prescribing, Sociology of Health and Illness, 19: 297327. 96 Avery AJ, Heron T (1997) Poles apart? The views of general practitioners and family health services authority advisers on prescribing cost issues, British Journal of General Practice, 47: 347-51. 97 Mason J, Freemantle N, Nazareth I, Eccles M, Haines A, Drummond M (2001) When is it cost-effective to change the behavior of health professionals? JAMA,. 286(23): 2988-92. 98 Rodgers S, Avery AJ, Meechan D, Briant S, Geraghty M, Doran K, Whynes DK (1999) Controlled trial of pharmacist intervention in general practice: The effect on prescribing costs, British Journal of General Practice, 49: 717-20. Report: The Austrian Pharmaceutical Market

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financed by the DoH. The project is continuously evaluated with regard to acceptability by the physicians - the response is for the most part enthusiastic, and after a first visit more than 90% of the physicians visited were willing to receive the detailer again in the future (Habraken et al 200399). A monthly bulletin on evidence-based medicine (Minerva) is subsidized by the Scientific Organisations of GPs, the National Health Insurance System, and the Health Insurance Funds. It is sent to all members of the Flemish speaking and French speaking scientific societies of general practice for free, and to others on request. This bulletin is mainly devoted to messages about evidence based medicine, although some issues are devoted to themes, such as Alzheimer drugs and drugs in cerebrovascular prevention. The Belgian Centre for Pharmacotherapeutic Information is financed by the DoH and provides information about medicines in Flemish and French. This information is sent to all physicians, pharmacists, and dentists in Belgium for free as well as final-year students in these fields. The current circulation is about 70,000. The information consists of the following items: 1. A monthly drug bulletin Folia Pharmacotherapeutica, with abstracts of recent articles from the world literature on drug therapy. Moreover, this monthly bulletin mentions recent changes in the availability of medicines in Belgium. There is in each monthly issue, a communiqué by the Belgian Pharmacovigilance Centre, based on recently received spontaneous reports of adverse events. 2. A yearly drug formulary, Gecommentarieerd Geneesmiddelenrepertorium, Répertoire Commenté des Médicaments which lists all medicines marketed in Belgium, with details about price, reimbursement conditions, doses etc. This formulary gives comments about the rational use of drugs and emphasizes the evidence base for their use. Clear-cut messages are also given about dangerous or obsolete drugs. 3. Leaflets about new chemical entities summarize the evidence and position them as far as is possible at the moment of their introduction 4. Transparency brochures, with emphasis on evidence and economic considerations are distributed to all physicians and pharmacists. Recently, brochures about drug therapy of migraine, Alzheimer disease, type 2 diabetes, herpes zoster and gout have been sent. These brochures contain tables for comparison of the prices of the different products and classes discussed in the brochure. 5. The website of the Belgian Centre of Pharmacotherapeutic Information (www.cbip.be) provides the issues of the monthly bulletin, transparency brochures, and links to other sources of information. Also, tables are provided for easy comparisons of the prices of different pharmaceuticals (e.g. original drugs versus generics). In a recent survey, it was found that there was much interest by physicians, pharmacists and dentists, in the information of the Belgian Centre. Source: Adapted from Bogaert and De Cock (forthcoming 2005) Another method to directly assist in clinical decision-making is the use of computerized decision support systems (CDSS) that use software to generate patient-specific assessments or recommendations. The Netherlands makes use of an electronic prescription system (EPS) (see Box 26), while prescribing patterns in Belgium are recorded on their “Pharmanet” system (see Box 27). These two educational methods - academic detailing and computerised decision support – have can be expected to bring about a 15% change toward the desired behaviour by professionals (Freemantle 2000). Other methods such as socialisation and instilling certain norms of behaviour for physicians have been attempted, but with much less success (Robinson 2001100). Box 26: Influencing physician prescribing in the Netherlands

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Habraken H, Janssens I, Soenen K, van Driel M, Lannoy J, Bogaert M (2003) Pilot study on the feasibility and acceptability of academic detailing in general practice, European Journal of Clinical Pharmacology, 59: 253-60. 100 Robinson J (2001). Theory and practice in the design of physician payment incentives, The Milbank Quarterly, 79(2): 149-77. Report: The Austrian Pharmaceutical Market

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GPs in the Netherlands have little incentive for cost-conscious prescribing, but focus mainly on the quality of different medication (Brouwer and Rutten 2001101). GPs do not have a budget that restricts them in prescribing medication, nor do they have any financial gain from prescribing more drugs. There are guidelines for some disease areas, in the construction of which cost-effectiveness has played a role and there have been attempts to influence GPs through an electronic prescription system (EPS), sometimes with financial incentives. However, GPs often have limited direct incentives to strictly follow guidelines (which normally do not specify the specific brand of pharmaceuticals needed but offer more general guidance) or to work with the EPS. The results of experiments with the EPS were rather disappointing in terms of cost-savings; although 70% of the Dutch GPs reported using the system, the estimated savings on drug costs appear to be €7-15 million compared to the expected €139 million reduction in costs (Wolters et al 2002102). The evaluation concluded that the EPS may have a more positive impact on the quality of drug prescription than on the costs. Guidelines and the EPS may also be perceived as a limitation of the professional autonomy of medical doctors. At the regional level, pharmaceutical therapeutic discussion groups have been established to promote the use of science-based prescription protocols made up of GPs, pharmacists, and medical specialists. These discussions are being extended towards all relevant health care sectors (e.g. also involving nursing home physicians) and should produce formularies which cross borders between organisations for health care and are available countrywide. In order to stimulate efficiency, it is hoped that insurers will encourage the use of guidelines and the EPS. As the insurers become more competitive, they will need to become more involved in the way providers of care carry out their work. In contractual arrangements, the use of the EPS and clear formularies can have a more obligatory character in the future. Given the scarcity of physicians in the Netherlands (Westert and Groenewegen 1999103) and the subsequent dominant position they have, pressure on GPs or other physicians to comply with standards and formularies may prove counterproductive. A more successful policy is that of stimulating generic prescriptions. At present, some 42% of all prescriptions are generic. This allows the pharmacists to dispense generic pharmaceuticals, which are supposed to be less expensive than branded products. Despite this, the savings on generics in Belgium are disappointing; however, this has much to do with the incentive structure and discounts offered to pharmacists. Source: Adapted from De Wolf P et al (forthcoming) Box 27: Monitoring prescribing practice in Belgium In Belgium, the monitoring of prescribing practice by the authorities is restricted to reimbursed drugs. Monitoring of antibiotic use has started within the framework of the European Surveillance of Antimicrobial Consumption (ESAC) project. Since 1996, the National Health Insurance System has organized a data collection system called "Pharmanet", to obtain better insight into the consumption and expenditure trends of pharmaceuticals in ambulatory care. These data concern around 98 million reimbursed packages (averaging nine packages per inhabitant per year) prescribed by 31,000 physicians (GPs and specialists) in ambulatory medicine and dispensed by 5,000 public pharmacies. The Pharmanet data only allows linking prescriptions to the prescriber and it is not possible to link the data to patients or to patient characteristics such as age, disease, or concomitant medication. In the future, these links may become possible. The data can be used to evaluate consumption trends, down to the lowest ATC-level and are also used for presentations in the consensus conferences. Periodically, physicians receive their own prescription data with the possibility to situate themselves amongst all prescribers in the same discipline. The 101 Brouwer WBF, Rutten FFH (2001) GVS geeft verkeerde signalen (Drug Reimbursement System gives wrong signal, in Dutch), ESB, 86: 884-6. 102 Wolters I, Dijk L van, Hoogen H van den, Bakker D de (2002) Evaluatie Invoering Elektronisch Voorschrijf Systeem (in Dutch), Utrecht: Nivel. 103 Westert G, Groenewegen PP (1999) Regional disparities in health care supply in eleven European countries: does politics matter? Health Policy, 47(2): 169-82.

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data are also made available to the local quality groups for peer review. Indicators are formulated to identify abnormal prescriptions patterns, so that specific individualized feedback can be given. Source: Adapted from Bogaert and De Cock (forthcoming 2005) While academic detailing might increase quality, equity, and effectiveness by encouraging the application of evidence based medicine, it may also increase costs by encouraging appropriate treatment where previously there was under-treatment, or decrease costs where there was over-treatment or waste. Of the interventions considered here, it is probably the most professionally acceptable. The use of economic evaluation or wider health technology assessment (HTA) may improve efficiency, but usually with increased overall costs, as in the case of NICE in the UK where most of the guidance increase NHS costs. Some policies might inadvertently seriously decrease efficiency, e.g. if saving money on drugs led to more hospital admissions, as has been clearly seen in the United States (Soumerai et al 1991104) and as allegedly happened in Germany in the early 1990’s in response to GP budgets. This illustrates the need to consider the broader effects, including efficiency, in evaluating any intervention. Prior authorization necessitates a physician or patient to obtain approval from a senior physician or insurance fund in advance of prescribing a specific drug. These drugs may be limited for a particular use or patient group, or may be particularly expensive. International experience on prior authorization is as follows: In Germany, there is no such system as prior authorisation before prescription105. In Belgium, the authorization for reimbursement of some pharmaceutical products has to be given by the advisory doctor of the sickness fund to the patient106. There is a detailed list with categories of pharmaceutical products for which an authorisation is needed. This list is provided in Dutch and French on the INAMI website107. This list includes criteria in function of indications and alternative therapies, e.g. diet or cheaper products, that have to be followed before the product can be prescribed. It covers mainly expensive products, but the price is not a criterion in itself. The prescribing doctor has to fill out a form explaining the fulfilment of the criteria. The patient sends it to his sickness fund. He will in principle soon receive authorisation (or refusal). Some forms are provided for by pharmaceutical companies. In the Netherlands, products with a reference price are listed in an “annex 1a” and those without a reference price will be placed in “annex 1b”, where a products therapeutic value, efficacy, possible adverse effects and method of administration are considered. Some drugs in the positive list are reimbursed only if certain criteria are fulfilled – “annex 2”. The criteria could be: i) the prescription must be written by a specialist physician, ii) for a defined population, or iii) following particular protocol. In the United States, the state of Massachusetts manages pharmaceuticals for some patients under MassHealth108 Drug Utilization Review Program. Physicians are required to fax in a prior authorization request for certain drugs, and a response is provided within 24 hours. MassHealth reviews requests for prior authorization on the basis of medical necessity only. For prescriptions that were written before a prior authorization was required, MassHealth will pay for any remaining refills, up to 6 months or 5 monthly refills, whichever comes first. Prior authorization is required for a list of drugs under New York State Medicaid. The prescriber or their authorized agent, must call the Prior Authorization Call Line to initiate the prior authorization process. Prescribers are instructed to use a worksheet in order to answer a number of questions before calling the 104

Soumerai SB, Ross-Degnan D, Avorn J, McLaughlin T, Choodnovskiy I (1991) Effects of Medicaid drug-payment limits on admission to hospitals and nursing homes, N Engl J Med, 325: 1072-7. 105 Source: Mr. Schröder and Irene Langner of the Wissenschaftliches Institut der AOK (WIdO). 106 Source: Wim Bailleul of the INAMI/RIZV. 107 INAMI website. Available at: http://www.riziv.be/ (accessed 1 September 2004). 108 In Massachusetts, Medicaid and the Children's Health Insurance Program are combined into one program called MassHealth. Report: The Austrian Pharmaceutical Market

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automated voice interactive call line109. Once authorization has been given and a prior authorization number is obtained, and must be written on the prescription, documented on the Prior Authorization Worksheet, and included in the patient’s medical record. Prior authorization is required for each new prescription and is effective for the life of the prescription - up to 5 refills within 6 months. If a prior authorization number is not written on a prescription for product, the pharmacy will be prohibited from filling the prescription. Table 5: Prescription drug cost containment policies in 6 US states Medicaid programme (2003) State Massachusetts

Connecticut New York

Delaware

Maine

Florida

109

Principal prescription drug cost control measures a. Aggressive prior authorization with proof of medical necessity required b. Lowest-price pharmacy reimbursement (federal & state formulas c. Rebates based on Average Manufacturer’s Price (AMP) and Average Selling Price (ASP) in some cases d. Massachusetts Health Drug List (formulary) with reference pricing reimbursing lowest in class e. 11 refills w/in 12 months for non-controlled substances f. Retrospective and prospective Drug Utilization Review (DUR) g. Planned: (a) higher co-payments, (b) user fee for pharmacies to take part in Medicaid a. Some prior authorization, but expanding b. Rebates based on Average Manufacturer’s Price c. DUR a. Limited, but expanding, prior authorization b. Rebates based on AMP c. Mandatory generic substitution, unless brand proved medically necessary d. Pharmacy network controls e. DUR a. Aggressive (as of April 2002) prior authorization with proof of medical necessity required b. Limited formulary c. Reference pricing deeming brand medically necessary in order to be prescribed d. $500 ceiling per script e. Remove ability to prescribe for Medicaid if consistently overprescribing f. Pharmacy network controls g. DUR a. Price controls introduced by state legislature b. Aggressive prior authorization c. Rebates based on AMP d. Physician Directed Drug Initiative (PDDI) e. Pharmacy network controls f. DUR a. Aggressive prior authorization with proof of medical necessity required b. Four-brand prescription limit per month c. (Voluntary) Preferred Drug List requiring additional rebates d. Drug therapy limits e. Higher generic drug rebates

An example of a worksheet can be viewed at:http://www.health.state.ny.us/nysdoh/medicaid/pharmacypa/preworkser.pdf

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f. Secure prescription pads g. Pharmacy network controls h. Aggressively monitoring drug benefits Source: Kanavos P, Prior Authorisation: Evidence from the United States Medicaid Programme (for low-income and disabled Americans), 2004. In some cases, doctors have been shown to try and circumvent prior authorization systems. In the Australian Pharmaceutical Benefits Scheme, this behaviour was particularly evident with regards to proton pump inhibitors110. These drugs have been restricted on cost-effectiveness grounds for four specific diagnoses and require a doctor to obtain prior approval from the Health Insurance Commission. However, utilization and epidemiological data indicate that there is widespread leakage of these drugs outside the clinical guidelines. Until 1997, this may have been caused by the lack of a specific diagnostic test to identify the conditions for authorization. Moreover, it was shown that many patients have not had relevant investigations or an adequate trial of other therapies111. 6. Financial incentives and prescribing To limit the resources available for providing medicines, prescribing budgets can be used at the level of the individual doctor, practice, or region. Hard budgets use penalties or rewards to motivate doctors to meet budgetary goals, while target budgets do not impose an immediate penalty but allow useful record keeping of the costs incurred by the agent concerned. There may be rewards or fines for meeting or failing to meet treatment guidelines or quality targets, or staying within a cash-limited prescribing budgets schemes. Financial incentives can be effective, but mostly in the choice of drug as opposed to the volume of prescribing; whether a doctor prescribes medication is difficult to change, while the type of drug chosen is negotiable. Even so, these changes in prescribing, which can be a simple shift to generic medications, are usually one-off and cannot be repeated although their benefits can be maintained. Punitive disincentives placed on physicians (as until recently in Germany and France) seem less acceptable and more difficult to enforce. At the same time, weaker schemes that appeal to professionalism but hold no real positive or negative incentives have been shown (at least in the UK) to be relatively ineffective at changing behaviour. Prescribing budgets have been implemented in the UK (Box 28) and Ireland (Box 29). These have generated financial and ethical concerns. They risk reducing patients’ confidence in their doctors, as they increasingly become aware of the financial incentives linked with prescribing behaviour. There is a risk that the quality of prescribing may deteriorate if the financial incentive becomes the driving force behind the prescribing decision. Should doctors be especially rewarded for doing a professional job, or perhaps depriving the patients of the medicines they need? The use of cheaper medicines to meet budgetary constraints may not necessarily be costeffective. Additionally, prescribing economies might be only short-term. Perverse incentives may cause cost shifting to other health services, thus decreasing prescribing spend but increasing overall health care costs. Moreover, there may be problems of ‘cream-skimming’ associated with physicians referring severe and expensive patients to hospitals (Goodwin 1998112), making patients with chronic illnesses less of a priority, and the possibility of doctors denying appropriate but expensive treatments to patients. This suggests that extreme care should be taken in the design and implementation of these incentives. Box 28: Financial incentives for UK prescribers

110 McManus P, Marley J, Birkett DJ, Lindner J (1998) Compliance with restrictions on the subsidized use of proton pump inhibitors in Australia, Br J Clin Pharmacol, 46(4): 409-11. 111 Pillans PI, Kubler PA, Radford JM, Overland V (2000) Concordance between use of proton pump inhibitors and prescribing guidelines, Med J Aust, 172(1): 16-8. 112 Goodwin N (1998) GP fundholding, in Le Grand J, Mays N and J Mullligan (eds.) Learning from the NHS Internal Market: A Review of the Evidence, London: King’s Fund.

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Historically, the UK had two schemes of prescribing budgets (Walley et al 1997113). First, GP fundholding, involved practices volunteering to receive a hard budget to cover prescribing costs, elective surgery and nonmedical practice staff. Any money saved in one part of the budget could be spent on other parts, or in other ways to benefit the patients of the practice. Second, the indicative prescribing scheme, for all other practices target budgets were set for the spending of a practice on drugs for a year. The GPs received regular feedback on their prescribing and their actual spending against their budget. There was a small incentive to keep within budget. Fundholding GPs had an almost personal financial incentive to contain their prescribing costs: although strictly speaking, the savings were for patient benefit rather than an income supplement, in many early cases the savings were used to fund developments that would otherwise have come out of practice profits. But the major incentives were professional, both to improve the care of their patients, and to be able to make local hospital services more responsive to the needs of primary care and their patients. Fundholders saved by generic prescribing or simple therapeutic substitution, but made no real strategic changes in prescribing behaviour, i.e. changing rates of prescribing or developing alternative models of managing disease.http://bmj.com/content/vol313/issue7071/images/large/707114.jpeg Between 1991-1996, the absolute cost of prescribing increased in non-fundholders by 66%, but in fundholders by 56-59% (Harris and Scrivener 1996114). The slower rise in drug costs over the early years in fundholders did not persist - the shift to generic prescribing or therapeutic substitution could only happen once, and thereafter the rate of increase was dictated by new drugs coming onto the market, or the general upward trends in prescribing rates. Overall, there was no evidence of poorer treatment by fundholders than non-fundholders, nor of cream skimming, i.e. deliberately avoiding high cost patients so as to maximise the fundholding budget surplus (Matsaganis and Glennerster 1994115). Despite its successes in containing the rise in drug costs, there were concerns about inequity between the patients of fundholding GPs and nonfundholders, e.g. in speed of access to elective surgery. As the scheme extended to 70% of GPs, the advantages were diluted. In 1997, the new Labour government announced further reforms of the NHS with a different model of commissioning of NHS services by PCOs, and fundholding ceased in 1999. The Indicative Prescribing Scheme was less successful. There were few positive incentives for doctors to keep within their budget, so most ignored it (Audit Commission 1994). Later practice specific incentives were introduced based on outcome against budget but also on locally agreed “quality” markers. These schemes were diverse, and so difficult to study: one study (Bateman et al 1996116) concluded that non-fundholding general practitioners responded to financial incentives just as fundholders did, reducing costs in similar ways and with no effect on quality of prescribing. Anecdotally, these schemes were popular with GPs and were the basis of later schemes in PCOs. From 1999-2004, the concept of budgets for prescribing remains. The UK DoH gives an annual cash limited budget to each primary care organisation (PCO)117 that are based mostly on the given population with allowance for patterns of morbidity. The PCO must then fund most health care services (both primary and secondary care) and prescribing (about 16% of its total budget) for its patients, while staying within this budget. Any overspending is in theory deducted from the following year’s budget. Benefits from prescribing savings are therefore largely collective and may in part benefit the gross over-spender as well as the cautious prescriber. This reduces the incentive for addressing prescribing. In addition, National Service Frameworks (NSFs)118 are driving

113

Walley T, Haycox A, Barton S (1997) Drug rationing in the UK National Health Service, Pharmacoeconomics, 12: 33950. 114 Harris CM, Scrivener G (1996) Fundholders' prescribing costs: the first five years, BMJ, 313: 1531-4. 115 Matsaganis M, Glennerster H (1994) The threat of "cream skimming" in the post-reform NHS, J. Health Econ, 13: 31-60. 116 Bateman DN, Campbell M, Donaldson LJ, Roberts SJ, Smith JM (1996) A prescribing incentive scheme for nonfundholding general practices: an observational study, BMJ, 313: 535-8. 117 PCOs administer the GP practices in an area, which covering a population of between 100,000 to 250,000. 118 NSFs, which aim to improve population health, are defined by specific government policies and set a minimal acceptable standard of care for key disease areas with targets to be met by PCOs and hospitals. Report: The Austrian Pharmaceutical Market

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prescribing and as a result, almost every PCO is overspent on the prescribing element of its budget and has to take money from other services or offset it against future years’ budget (Audit Commission 2003). Practices are issued a target budget and their performance against that is monitored by the PCO. PCOs attempt to use peer pressure and develop a sense of corporate affinity among GPs to encourage compliance with the target budgets, while at the same time improving quality in particular areas of prescribing. There are no direct penalties for spending beyond the target budget. In contrast to the indicative prescribing scheme, peer pressure in a smaller group may support this, and there is now a greater acceptance among doctors of the need to consider the wider population benefits - wasteful prescribing will cut resources available for other PCO patients. PCOs are obliged to have a practice-level incentive scheme. Individual schemes are hugely diverse but key targets are keeping within budgets, and may additionally include adherence to targets for generic prescribing, review of repeat prescribing, or adherence to guidance for specific disease areas (Mason et al 2003). There is no clear pattern to these schemes nor as yet any evidence of their effectiveness (Ashworth et al 2002). Incentive payments can be as high as £45,000 (approx. €70,000) per practice, but most are far lower ranging from £6,00015,000 per practice (Audit Commission 2003119). A new GP contract, negotiated in 2003, came into force from 1 April 2004. A new “quality framework”, with 76 quality indicators in ten clinical areas, 56 indicators in organisational areas, and four indicators reflecting patient experiences will be used to assess GP performance and to determine large parts of their payments (Lanier et al 2003120). This replaces prescribing incentive schemes. GPs are encouraged to diagnose and actively treat patents with a range of chronic diseases121 and to achieve specific numeric targets in their treatment. For instance, GPs will be expected to diagnose hypertension more readily and to achieve set levels of blood pressure control. This is to address evidence of persistent underperformance in treating chronic illnesses. Delivering the new targets will be challenging and monitoring its effects in the widest sense will be important. However, concerns have been expressed about this disease management approach (Head 2003122): • it may encourage diagnosis and treatment of milder cases, where achieving targets is easier • the GPs may become increasing target, rather than patient focused • it is likely to greatly increase spending on medicines within these areas, which is in itself an issue since the health gain for the increased expenditure may be less than if the money were targeted at more severe cases • there may be a huge opportunity cost by reducing time and resources for dealing with conditions outside the target areas • many pharmaceutical companies see this as a major opportunity to promote their products in these areas by offering disease management services, and it remains unclear that these services represent value for money. Source: Adapted from Walley et al (forthcoming) Box 29: Prescribing budgets in Ireland On 1 January 1993, the Irish government introduced a financial incentive scheme, the Indicative Drug Target Scheme (IDTS) in response to rising costs of prescribing to General Medical Service (GMS) scheme patients. The aim of the incentive scheme was to encourage more rational and economic prescribing. Individual indicative budgets for GP prescribing and associated pharmacy fees are set. These nominal budgets take account of the average prescribing rates for the country as a whole and the demographics of the GP’s GMS panel of patients with some increases in individual resource intensive cases, e.g. palliative care. This avoids both cream-skimming (incentive to recruit low cost patients) and adverse selection (avoidance of high cost patients). Any savings achieved are divided between the GP concerned and the local health authority, to be used for the development of primary care services. Information on costs and percentage performance relative to the national average taking account of age and gender of patient panel is provided to doctors on a regular basis, to help them to keep within 119

Audit Commission (2003) Primary care prescribing: a bulletin for primary care trusts, London: HMSO. Lanier D, Roland M, Burstin H, Knotterus J (2003) Doctor performance and public accountability, Lancet, 362: 1404-8. 121 Coronary heart disease, hypertension, diabetes, chronic obstructive airways disease, asthma, and stroke. 122 Head S (2003) The new GP contract: prescribing implications, Prescriber, 14: 13-5. 120

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their budgets. Data provided includes details of prescribing by therapeutic category, cost, and level of generic use. In 2002, the GMS Payments Board established a review group to examine the current indicative budget methodology to consider whether using age and gender in the calculations is sufficient or if the medical needs of the patients should be more closely integrated into the calculations. This review is ongoing. The indicative budgets are thought to be responsible for the lower growth rate of drug expenditure in the GMS compared with the private sector. It was estimated that IR£13.5 million was saved in the first year of the scheme and a trend towards increased generic prescribing was reported. However, savings under the IDTS were mainly generated in the early years following its introduction. Initially the level of prescribing of symptomatic therapies, e.g. NSAIDS and H2 antagonists, decreased and the level of generic prescribing increased but the budgetary effect was short-lived. 5% of the GPs who were continuously in the scheme over the first four year period achieved savings each year, whereas 27% of GPs did not achieve savings in any year. The financial incentives had a marked effect on prescribing volume and cost for some practices but the effect was short lived, with a similar rate of rise in costs for all groups by the third year of the scheme. An evaluation of the impact of the IDTS on the quality of prescribing revealed no divergence in practice between underspenders and overspenders, i.e. uniform decrease in usage of drugs of limited clinical value, uniform adoption of newer therapies across all GPs and uniform distribution of optimum prescribing indicators such as the anti-inflammatory/ adrenergic ratio for inhaled drugs (Murphy et al 1997123). According to the agreement between the Irish Pharmaceutical Healthcare Association, which represents the pharmaceutical industry in Ireland, and the Department of Health and Children (DoHC), doctors are free to prescribe the medicines of their choice from the list of medicines available under the GMS or Drug Payments (DP) schemes. The DoHC reserves the right to influence the prescribing habits of doctors. The DoHC has taken a number of steps to improve the quality of prescribing by promoting cost effective strategies - statin therapy is promoted by making it budget neutral above a specified threshold. Cost containment strategies include limits on the quantity prescribed and restriction of selected drugs to specified prescribers. In 1999, the DoHC was concerned about the potential budget impact of sildenafil and set a maximum limit on reimbursement of four tablets per month. Other expensive agents, such as betaferon, must be prescribed initially by a consultant physician before being reimbursed on the High Tech Drug Scheme. Source: Adapted from Ryan et al (forthcoming 2005)124 There was also an attempt to use global targets to control prescriptions in France. Targets for physician services and prescriptions were implemented by the Juppé125 reform in 1996. In 1997, two separate National Agreements (conventions) were signed with GPs and specialists, each mentioning a target for physicians' fees and one for prescriptions. However, these Agreements were sued by physicians’ unions and cancelled by the Council of State. Therefore, in France sanctions for overstepping global budgets never applied. Although some suggest that drug budgets may not be necessary for containing costs, and that better data on costeffectiveness would empower prescribers to make rational decisions regarding treatments (Levy and Gagnon 2002126, Laupacis et al 2002127), others argue that budget constraint is essential to contain costs (Brougham et al 2002). Still, others contend that containing costs without budgets and exclusively depending on prescribers to make their own rational decisions based on evidence not yet been collected is impractical (Fernandes 2002128). 123 Murphy M, Walley T, Boland M et al. (1997) Review of indicative drug target saving scheme. Report submitted to the Minister of Health. 124 Ryan M, Tilson L, Feely J, Barry M (forthcoming 2005) Pharmaceutical Policies in Ireland, in E Mossialos et al (eds) Pharmaceutical Policy in Europe, Copenhagen: WHO. Schwabe U, Paffrath D (2003) Arzneiverordnungs Report 2002, Berlin: Springer. 125 French Prime Minister between 1995 and 1997. 126 Levy AR, Gagnon YM (2002) Getting the cat back in the bag: reforming the way provinces manage drug expenditures to make them manageable, Healthc Pap, 3(1): 32-7. 127 Laupacis A, Anderson G, O’Brien B (2002) Drug policy: making effective drugs available without bankrupting the healthcare system,. Healthc Pap, 3(1): 12-30. 128 Fernandes R (2002) Managing healthcare costs within an integrated framework, Healthc Pap, 3(1): 70-6.

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The conflict doctors face between giving the best treatment to each patient along with being responsible stewards of the health care system, is felt more keenly with these new arrangements. Possible solutions to confront these challenges include, compensating physicians not only through financial incentives to decrease utilisation but also through rewards for quality and productivity, and providing regular information on approved ways of managing particular conditions. It is crucial for policymakers hoping to design incentive systems that they consider the benefits and risks of these incentive schemes and align interests of patients, providers, and payers. The types of incentives employed should be chosen according to the particular circumstances, taking account of current practice patterns and levels of provision. Few studies have determined whether health outcomes are changed due to financial incentives. However, most evidence implies that physicians prefer that their autonomy be protected (as in UK fundholding) and when combined with simple, transparent, appropriate incentives can save money with no loss of quality. The use of less visible yet still persuasive forms of regulation such as peer pressure through professional associations, may also be important in changing the culture of prescribing. In the end, while the effects of financial incentives may be more visible in the short term, they may also be less professionally and ethically acceptable and in the long run less effective at containing costs. 7. Regulating pharmaceutical distribution, retail and hospital pharmacy in Europe Pharmaceuticals pass from the manufacturer to the patient through a distribution chain of wholesalers and pharmacists. The distribution of pharmaceuticals in the EU is governed by both supranational and national regulations in conjunction with professional bodies, health service providers, and health care payers. The principal objective of regulating distribution is to protect the public’s interest in safety and access to medicines. Secondary objectives include ensuring the financial viability and integrity of wholesalers and pharmacies, promoting quality services, limiting overall drug costs, and encouraging increased consumer choice. The specific details of this regulation differ between member states. There are many different types of wholesalers, each playing a different role in the pharmaceutical distribution chain. Wholesalers may offer a full range of products, support the supply of bulk orders, provide selected product ranges, or engage in parallel importation. The number of pharmaceutical wholesalers has decreased in the EU since the 1990’s and at present, a few key players in each member state dominate the market. All European countries impose limits on drug wholesalers’ margins. In the past, the role of the community pharmacist was to dispense prescription medicines and sell OTC products. This is now evolving throughout Europe because of rising awareness of their extensive knowledge related to the appropriate use of medicines and their potential as independent providers of health care. Pharmacists are highly educated professionals and in some countries will have a more integrated clinical role in the future. In addition, the pharmacist can be instrumental in controlling pharmaceutical expenditure when given the freedom to engage in generic and therapeutic substitution, and when economical dispensing practices are promoted through financial incentives. There is much variation between the regulatory patterns related to pharmacists in EU member states. These include controlling community pharmacy ownership and location, setting allowable profit margins, and influencing drug distribution patterns and product selection through different incentives and remuneration methods. How pharmacists are paid influences their product selection. In countries such as Ireland (see Box 30), the Netherlands, Sweden and the UK (see Box 31), pharmacists receive a fixed fee per item dispensed. Furthermore, the UK also sets a fixed reimbursement price on unbranded generics and pharmacists have the incentive to dispense the cheapest suitable product and in doing so retain the difference between the purchase price and the reimbursement price. Similar preferential margins to motivate dispensing choice operate in other EU markets as well. Denmark has a unique approach applying a dispensing budget that introduces a collective incentive to dispense cost consciously. Most other EU countries (Austria, Belgium, Denmark, France, Germany, Greece, Italy and Portugal) pay pharmacists with regressive scaled margins or margins that are a fixed percentage of a product’s price (see Boxes 32 and 33). For example, in Germany the overall size of the margin increases with a Report: The Austrian Pharmaceutical Market

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product’s price and consequently there is little incentive for a pharmacist to dispense a less expensive medicine. In contrast, Spanish pharmacists are paid a fixed proportional mark-up of the consumer price, up to a specific amount (see Box 34). Only Denmark and Spain allow a pharmacist to substitute a generic for a branded preparation, regardless of how the prescription was written. From 1 January 2004, Germany has implemented a new system for remunerating pharmacists; a combinationmodel with dispensing fees will be used instead of margins depending on the drug price. Pharmacies receive a 3% margin on the pharmacy wholesale price plus a price-independent flat fee of €8.10; €2 of which has to be passed to the health insurance funds. The flat fee is supposed to cover all fixed costs including rent for the premises, advice to patients, personnel costs, etc. Box 30: Remuneration of pharmacists in Ireland In Ireland, pharmacists are paid depending on the classification of the product bring dispensed. From 31 December 2002, pharmacists receive a dispensing fee of €2.98 for pharmaceutical products provided under the General Medical Service (GMS) scheme. Under the Drug Payments (DP), Long Term Illness (LTI), and European Economic Area (EEA) schemes pharmacists receive a standard fee of €2.59 plus a 50% mark up on the ingredient cost. For medicines under the High Tech Drugs Scheme, a set patient care fees of €49.64 per patient per month are paid by the General Medical Services Payments Board (GMSPB) to the pharmacy to cover dispensing costs and does not include VAT. Therefore, payment to pharmacists is much greater under the DP scheme as compared with the GMS scheme. Source: Adapted from Ryan et al (forthcoming 2005) Box 31: Regulating the distribution chain in the UK Prescriptions are dispensed by 12,250 community pharmacies, which send dispensed prescriptions to the Prescription Pricing Authority which reimburses them at either the list price for branded drugs or the “Drug Tariff” price for generics, less a claw back based on the discounts the pharmacists are thought to receive from wholesalers. This claw back varies depending on the value of prescriptions handled by a pharmacy (assuming that a larger volume pharmacy will obtain better discounts) but averages around 11%. The pharmacists must negotiate their prices from the wholesaler, but typically their margin after the claw back is approximately 5% on branded medicines and up to 9% on generics. Pharmacists thus have a great incentive to find the cheapest source of supply including parallel imports, which amount to about 4% of the total market by value. Pharmacists also receive a flat fee for dispensing of £0.94 per item, and allowances for containers. The number of pharmacies is limited, by negotiation between the pharmacist professional bodies and the DoH. Recent recommendations (Office of Fair Trading 2003 129 ) that these restrictions should be eased so as to promote more competition among pharmacies were widely criticised, not only by pharmacists but also by government. The government concerns were that such measures would undermine the growing role of pharmacists as independent health professionals, (a position strongly supported by the DoH and evident in policies such as deregulation, increased roles as supplementary prescribers and in medication reviews) and throw them back into the “shopkeeper” role. However, the government does plan “to move cautiously in the direction recommended by the OFT” and a consultation document proposes considerable easing of regulations which will particularly benefit the large supermarket chains who wish to open pharmacies (Bellingham 2003130). About 13% of all GPs dispense as well as prescribe, for at least some of their patients - those who live more than one mile from a pharmacy. These GPs clearly have different incentives from their non-dispensing colleagues. In

129

Office of Fair Trading (2003) The control of entry regulations and retail pharmacy services in the UK: a report of an OFT market investigation, Available at: http://www.oft.gov.uk/NR/rdonlyres/BABF839A-3088-4EBB-B3A9-00D955719EE0/0/oft609.pdf (accessed 30 July 2004). 130 Bellingham C (2003) Is it a balanced package of measures? Pharmaceutical Journal,271: 293-4. Report: The Austrian Pharmaceutical Market

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effect, the added income they get by dispensing is an unofficial subsidy to encourage the continued presence of GPs in poorly populated rural areas. To illustrate the average discounts and margins for each element in the supply chain, consider a basket of dispensed drugs with a list price of £100: the DoH pays the pharmacist £89; the pharmacist buys these at £82.70 (17.3% before discounts) from the wholesaler, who buys them from the manufacturer at £72.30 (10.4%) (Paterson et al 2003131). These are typical pharmacist’s profits but on generic medicines, the profits are often much greater than this. There are no fixed margins or prices for OTC or private prescriptions. Source: Adapted from Walley et al (forthcoming) Box 32: Paying French pharmacists Since September 1999, pharmacists have been paid on the basis of a mixed system linking: i) a fixed-sum component of €0.53 per item, with an additional €0.30 for specific drugs, and ii) a sliding scale margin of 26.1% of the portion of the manufacturer’s pre-tax price that is below €23.10 and 10% on any portion above that threshold. Source: Adapted from Paris V (forthcoming) Box 33: Remuneration of wholesalers and pharmacists in Italy In Italy, pharmacies and wholesalers are paid on a margin basis. If a drug is reimbursed by the state, the margin on the final price (net of VAT) is 6.65% for wholesalers and 26.7% fixed for pharmacists. A 3.75% to 19% degressive rebate is applied to pharmacies’ margins (the rebate has been gradually increased till 1992, when it was introduced as a 2.5% fixed). Presently, the effective margin for pharmacists ranges from 22.95% to 7.7%. Pharmacies receive the whole 26.7% margin if the reimbursable drug is privately prescribed and not reimbursed by the NHS and if a generic is prescribed. Margins for non-reimbursable drugs are not regulated, but they are usually fixed at 26% for pharmacists and 7% for wholesalers. Source: Adapted from Fattore and Jommi (forthcoming 2005) Box 34: Paying pharmacists in Spain In Spain, pharmacists have traditionally been paid based on a fixed proportional mark-up of the consumer price before tax. This system offers incentives to increase revenues by selling more expensive drugs, and the same applies to distributors. This might explain the gradual move towards the dispensation of new, more expensive drugs. The system has often been criticised as providing protective measures that confer illegitimate although legal market power and excessive revenues taking into account the dispensation costs and the stock of capital invested. In 1997, mark-ups were established at 11% for wholesalers and 27.9% for pharmacies. A unilateral reduction in margins for wholesalers was established at 9.6% in 1999, although accompanied with mild incentives to introduce generics. An additional reform in 2000, set a decreasing mark-up with increasing product price by introducing a monetary cap of €78.34 (ex-factory price) and increasing the mark-up for generics by 5.1%. This meant that drugs priced above €78.34 displayed a wholesaler’s margin that remained at 9.6%, a retailer’s margin for generics of 33% and 27.9% for originals and copies. Furthermore, with drugs priced above €78.34 the wholesaler’s margin was set at €8.54 per pack and the retailer’s margin €33.54 per pack. Finally, a proportional discount scale was introduced for retail sales. The pharmaceutical reimbursement reform may have moderately increased the penetration of generics, but because some generics are almost the same price as original products, this provided an incentive to dispense 131

Paterson I, Fink M, Ogus A, Merz J, Fink F, Berreret H (2003) Economic impact of regulation in the field of liberal professions in different member states. Final Report-Part 1. Study for the European Commission, Vienna: Institute for Advances Studies (HIS). Report: The Austrian Pharmaceutical Market

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highly priced generics which could in turn have created additional distortions into the market. However, substantial savings may be achieved because the average mark-up decreases with the volume of sales. Thus, overall, the evidence suggests that pharmaceutical expenditure increased by 7.43% in 2000, while without this change it would have increased by 8.47% (Puig-Junoy 2004 132 ). Interestingly, the greater savings were in Autonomous Communities (ACs) with the highest density of pharmacists (Puig-Junoy and Llop 2004). Some one-off attempts have been made to reduce pharmacists’ margins, but they have had little impact on total expenditure. Generally speaking the pharmacist payment system has not produced incentives to dispense lowpriced drugs. Nor does it provide “equal treatment”, given the significant heterogeneity of pharmacists in terms of costs, location and population. Source: Adapted from Costa-Fonta and Puig-Junoyb (forthcoming 2005)133 The distinction between manufacturers, wholesalers, and community pharmacies is becoming increasingly vague with more vertical integration (when permissible) that allows for consolidation of the distribution channel and increased margins for wholesalers. In addition, competition is growing with the introduction of mail order and online pharmacies. However, these later distribution alternatives are not allowed in some EU countries. Yet the evolution and further deregulation of the pharmaceutical supply chain in Europe may face countervailing trends. These include the continued demand for face-to-face pharmaceutical advice and care, divergent and deeply rooted regional histories of pharmacy services, the strength of the professional lobby of pharmacists, and lack of consistent public pressure and sound political vision for the future of the industry. As a result, the likely future of pharmacy service regulation may be one characterised by slow evolution rather than radical change. One radically new role for pharmacists in the UK will be as prescribers, taking on responsibility for dose adjustment and monitoring in a range of chronic conditions where a doctor has made the diagnosis. The role of hospital pharmacies has also dramatically transformed over the past three decades. Hospital pharmacists are increasingly required to become comfortable with larger roles. Their traditional responsibilities of drug preparation and verification are being augmented working as clinical pharmacists at the ward level. The international trend in hospital pharmacies has become providing products to meet individual patient need, thus necessitating increased collaboration between hospital pharmacists and prescribers, nurses, dieticians, biochemists, and laboratory scientist. On an institutional level, hospital pharmacies must support the safe, effective, and economic use of medicines in hospitals in accordance with government rules and budgetary requirements. Carrying out these responsibilities require medicines information services and clinical pharmacy services within the hospital to service outpatient care. In addition, specialised databases and information services based in hospitals have been developed to facilitate drug treatment decision-making by clinicians (Taggiasco et al 1992134). The idea of “pharmaceutical care” (Cipolle et al 1998135) has changed the traditional role and function of hospital pharmacists from dealing solely with in-patient care, to involvement in ambulatory care (working closely in treatment delivery), patient care (regarding hospital risk management strategies), and in the clinical setting (contributing information on adverse side effects to national pharmacovigilance systems). In addition, hospital pharmacists play an important role in combating inaccuracies in transmitting patient drug information between community physicians and hospital specialists. Hospital pharmacists can and do work in conjunction with nurse specialists to improve patient education and in special cases provide follow up visits in the patient’s home. Furthermore, pharmacists serve a fundamental role in improving patients’ self-management in diabetes and other chronic conditions that can potentially reduce hospital readmission rates and improve patient compliance to drug treatment regimes. 132

Puig-Junoy J, Llop J (2004) Propuestas de Racionalización y financiación del gasto público en medicamentos (in Spanish) Working Paper, Fundación Alternativas (forthcoming). 133 Costa-Fonta J, Puig-Junoyb J (forthcoming 2005) Regulatory Ambivalence and the Limitations of Pharmaceutical Policy in Spain, in E Mossialos et al (eds) Pharmaceutical Policy in Europe, Copenhagen: WHO. 134 Taggiasco N, Sarrut B, Doreau CG (1992) European survey of independent drug information centres, Ann Pharmacother, 26: 422-8. 135 Cipolle RJ, Strand LM, Morley PC (1998) Pharmaceutical Care Practice, New York: McGraw Hill. Report: The Austrian Pharmaceutical Market

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Table 6: Hospital medicines market in some EU countries Country Sweden

Netherlands

UK

136

Hospital medicines market The hospital market in Sweden has some incentives for price-conscious behaviour on the demand for drugs, but these incentives vary according to hospital budget structures. The hospital market is financed by the county councils, which usually own the hospitals136. Hospitals purchase drugs as an input factor to hospital production and each hospital has a drug formulary committee that makes recommendations on drug purchases within a restricted hospital budget. The budget restrictions provide hospitals with the incentive to be cost-conscious in drug decisions. Although the resources used for drug purchases have an opportunity cost, physicians using the drugs within the hospitals may not always be aware of them. The market can be assumed to be more efficient when hospital departments are responsible for the costs of drugs. The price consciousness of the buyer is reduced when the hospital has one global drug budget and no incentives exist for individual clinics and departments to contain drug costs (freerider problem). But still, since each hospital must finance drug purchases, price becomes a relevant factor in purchase decisions, and this is likely to positively affect efficiency and price competition in this sub-market. Hospital drug consumption makes up 14% of total drug sales in the Netherlands and drug costs are thought to be under control of the hospital management. In 2000, intramural drug sales increased by 2%, while this figure was 8% for outpatient sales. The difference is related to hospital’s budgetary constraints (see below), countervailing purchasing power, and the willingness of pharmaceutical producers to ensure maximum exposure of their innovative brands in exchange for large discounts to hospitals. Often, the drug prescribed or administered by hospital personnel will also be consumed after discharge from the hospital. Thus, giving discounts to hospitals can partly be seen as investments in (more lucrative) outpatient sales. Strict budgetary constraints for hospitals were introduced in the 1980’s. Hospitals may earn up to a certain amount (the budget constraint) through declarations that need to be paid by insurers. If they exceed the maximum amount of earnings, the surplus is deducted from the budget in the next year. The costs made by the hospital, should naturally be below the earnings, otherwise losses are generated which may lead to bankruptcy of private hospitals, in the extreme case. As a result, hospitals have a clear incentive to control costs including pharmaceutical costs, which are included in the budget. In some instances, where very expensive new drugs have been used in hospitals, e.g. ReoPro® used in patients with heart failures, pharmaceutical spending may threaten the overall cost-containment of a hospital, leading to questions as to whether hospitals can afford prescribing such expensive drugs. In the near future, hospitals should be freer in their earnings and spending and micro-efficiency is stimulated through the introduction of so-called diagnosis-treatment combinations (a type of DRG-system). In this payment system the budgetary constraints on a hospital level are lifted, while introducing budgetary constraints per patient with a specific condition. New developments in terms of new drugs should then be reflected in the price per diagnosis-treatment combination. In the UK, the GP does most long-term prescribing, even of drugs recommended by a hospital specialist. Managing this interface between primary and secondary care prescribing is therefore very important. The selection of drug in hospitals is very important in influencing the GPs choice of drug and in promoting the use of new drugs to GPs - perhaps as much as 65% of GP prescribing had some traceable element of

With the exception of St Görans sjukhus AB that has been run privately since 1 December 1999.

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hospital influence (Audit Commission 1994). This influence is still strong but less than before and even sometimes even reversed, because of PCO activities, because any increase in hospital prescribing comes out of the PCO’s single unified budget137. PCOs may use their influence over other budgets to exert pressure on hospitals to adapt their prescribing to suit the community, for instance in limiting consultants’ access to the latest drug, or in keeping the prescribing of some drugs within the hospital (e.g. erythropoietin). In most areas, there are joint prescribing committees to coordinate prescribing policy between hospitals and the PCO, or perhaps to create written polices or a shared care agreement. Hospitals have always found it difficult to control their doctors however, and many will still force the use of their favoured drug onto hospital formularies, or if frustrated will ask GPs to prescribe it. 8. Influencing patient demand through co-payments In all Western European countries, cost sharing for pharmaceuticals has been introduced in an attempt to control pharmaceutical expenditure and influence demand for prescription drugs. There are three different forms of cost sharing currently employed: coinsurance, flat-rate payments, and deductibles. First, coinsurance requires the patient to be liable for some percentage of the total cost of a drug and is the most common form. Second, flatrate payments oblige the patient to pay a fixed fee per item or per prescription. Third, deductibles involve the individual paying the initial expense of the product up to a specified amount. There is great variation across European countries with respect to the implementation of prescription drug charges or co-payments (see Table 7). Although co-payments are not usually linked to reference pricing in Europe as they are in North America, there has been linkage with variable co-payments for drugs on restricted lists in France and Italy, based on the perceived therapeutic value of that drug to the health service. Some countries use differential charges to encourage a more rational use of prescription drugs. In Europe they tend to be applied on the basis of a drug’s therapeutic importance and/or severity of disease rather than on the basis of estimates of cost-effectiveness. Although there is no evidence of the impact of this type of differential charge on micro-efficiency, it is likely to be low. Differential charges are also used to encourage users and providers to substitute generics for branded drugs. These are widely applied in North America, but not in Europe (Mrazek and Mossialos 2002138). Evidence from North America suggests that the introduction of these differential charges might increase micro-efficiency. American studies assessing the impact of charges applied exclusively to branded prescription drugs found that they led to a decrease in the use of branded drugs and an increase in the use of generic drugs (Weiner et al 1995 139 , Hong and Shepherd 1996 140 , Motheral and Henderson 1999 141 ). Another recent study found that differential charges were also associated with a significant shift from non-preferred to preferred branded drugs (Rector et al 2003142). Advocates of cost sharing argue that it increases efficiency by reducing excessive demand and containing overall health costs. Individuals become price sensitive and will seek what is to them the least expensive treatment. If there is competition between providers, individuals’ sensitivity to price may result in lower prices. Introducing the price mechanism in this way may also prevent unnecessary (or even potentially harmful) care since 137

In the UK, hospitals receive 75% of their budgets from their local PCOs, and the remainder from central government. Hospital budgets are for overall services and usually do not include a separate prescribing element which is rather part of the global budget. 138 Mrazek MF, Mossialos E (2002) Increasing demand while decreasing costs of generic medicines, Lancet, 356(9244): 1784-5. 139 Weiner JP et al (1995) Impact of managed care on prescription drug use, Health affairs (Millwood), 10(1): 140-54. 140 Hong SH, Shepherd MD (1996) Outpatient prescription drug use by children enrolled in five drug benefit plans, Clinical therapeutics, 18(3): 528-45. 141 Motheral BR, Henderson R (1999) The effect of a copay increase on pharmaceutical utilization, expenditures, and treatment continuation, American journal of managed care, 5(11): 1383-94. 142 Rector TS et al (2003) Effect of tiered prescription copayments on the use of preferred brand medications, Medical care, 41(3): 398-406. Report: The Austrian Pharmaceutical Market

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individuals will select treatments and interventions that are of high value to them. Other supporters of cost sharing maintain that any additional revenue raised could be targeted at low-income people or used to confront inequality in the health care system. The ability of cost sharing to raise revenue, however, is limited by the prevalence of widely-applied exemptions and high administrative costs. In many countries, significant groups within the population - based on age, income, and clinical condition - are exempt from cost sharing in an attempt to protect the disadvantaged, satisfy need, and ensure equitable access to drugs. Moreover, the existence of complementary voluntary health insurance in some countries (e.g. France, Croatia, Slovenia) effectively removes price signals for those who can afford to purchase a medicine and therefore negates the potential for cost sharing to reduce demand. Critics argue that the theoretical case for using cost sharing as a means of reducing excess utilisation is weak because health care markets are characterised by information asymmetry, proxy demand, and heterogeneity. Furthermore, since demand for health care is largely provider-determined, policy tools that focus on the demand side may not be as effective in controlling demand as those that focus on supply. Cost sharing also has implications for equity in funding health, because it shifts the financial burden towards individuals and households and away from population-based risk sharing arrangements. Equity in access to health care is also reduced by cost sharing as those with low incomes, who are likely to be in the poorest health, are most probably discouraged from using health services. This decrease seems to be noted in both essential and nonessential drug therapy (Evans et al 1995143). Furthermore, these out-of-pocket payments by patients tend to be a regressive means of funding; however, they are less regressive in countries where people with low incomes are covered by comprehensive statutory health insurance and are exempt from cost sharing on the grounds of income, age or health status. Table 7: User charges for pharmaceutical products in European countries and Norway Country Austria

Belgium

Denmark

Level of co-payment • For medically prescribed registered pharmaceutical products included in the List of Pharmaceutical Products or approved by supervisory medical doctor: charge per item prescribed is €4.35 • For notifiable infectious diseases or in case of need: no charge • Insured person's share by category: A, serious illness: no charge B, useful drugs: 25%, ceiling € 9.90 B, large box: 25%, ceiling € 14.80 C, less useful drugs: 50%, ceiling € 16.50 CS, ease drugs: 60% Cx, f.e. the pill: 80% • Patients in hospital: €0.62 per day • Reduction of 26% in the refund of pharmaceutical products when existing identical generic products • Refund of cost of preparations by pharmacist: Maximum share of insured person €1 or €2. Exemption made for long lasting treatments • Those benefiting from preferential scheme: reduced charge • Participation of the insured person dependent on the expenditures during the year: Expenditure under DKK 540 (€73): 100% of cost (persons under the age of 18: 50%) Expenditure between DKK 540 (€73) and DKK 1,300 (€175): 50%. Expenditure between DKK 1,300 (€175) and DKK 3,045 (€410): 25%.

143

Evans RG, Barer ML, Stoddart GL (1995) User Fees for Healthcare: Why a Bad Idea Keeps Coming Back, Canadian Journal on Aging, 14(2): 360-90. Report: The Austrian Pharmaceutical Market

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Finland

France

Germany (see Box 35)

• • • • • • • • •

• • Greece

• • • •

Ireland

• • •

Italy

•

Luxembourg

•

Netherlands

• •

Expenditure over DKK 3,045 (€410): 15%. Sickness insurance patients: €10 + 50% of excess amount for prescribed products Some listed products for serious and chronic diseases qualify for refunds of 75% or 100% of the costs exceeding €5 If patient cost for one year exceed € 601.15, excess amount is fully reimbursed Public hospitals: costs included in fee Insured person: reimbursed 35% or 65% of cost for drugs mainly meant for troubles or affections normally without gravity Ease drugs: 100% Long-term patient (only for the illness concerned): no share Insured person: 10% for all prescribed drugs irrespective of package size, minimum €5, maximum €10 per pack, or the complete package price if below €5, except children below age 12 and hardship cases (2004) If there are fixed-price pharmaceutical products (Festbetragsarzneimittel), the amount of contribution payable depends on this fixed price. If the price of the product exceeds the fixed price, the patient must pay the difference between the fixed price and the prescribed product, in addition to the set prescription charge. Member’s of the family receive the same charges Insured persons must pay for OTC drugs (Bagatellarzneimittel), and certain uneconomical drugs are not paid by the insurance Prescribed medicines: charge of 25% Medication prescribed for certain illnesses (e.g. Parkinson's disease, Paget's disease, Crohn's disease, etc.): 10% Retired persons receiving the minimum pension: 10% Employment accident, medication during pregnancy and chronic illnesses (i.e. cancer, diabetes): no charge Persons with full eligibility: no charge Persons suffering from mental handicap and mental illness (under 16 years only) and from specified long-term illnesses in respect of drugs prescribed for treatment: no charge Drugs Payment Scheme: No individual or family is required to pay more than € 70 per month for prescribed medicines Classification of permitted and registered medication by group: A, "essential" medicines for the treatment of more serious complaints: no charge for all insured persons, except for the fixed amount for the prescription B, medication for the treatment of serious complaints but less serious than those referred to in group A: no charge for some categories of persons as mentioned under item “Patient's contributions towards medical expenses” and for the disabled, the rest of the population pays 50% C, other medication and medication for which a prescription is not required: cost borne fully by the insured person Reimbursement according classification of drugs: Normal: 80% Preferential: 100% Reduced reimbursement: 40% Non-refundable products and drugs Registration of insured person with a chemist who entered into contract with the health insurance fund: benefit in kind, insured person is entitled to a qualitatively good package of medicines without it being necessary to make additional payment supplied and charged to the health insurance funds up to the average price per standard dosage of medicines which belong to a certain classified medical package,

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with an additional payment to be paid by the insured himself Prescribed medicines on the important medicines list: 36% of the cost up to a ceiling of NOK 400 (€55) for each three months period of consumption • Less important medicines: patient pays the full cost even when prescribed • National Insurance (folketrygden) pays, normally through direct settlement with the pharmacies, up to the full cost • Pensioners in receipt of a minimum old age or disability pension are exempt from cost-sharing charges on important medicines and nursing articles Portugal • Depending on type of illness, the state contributes 70% or 40% of the cost of medicines on the official list drawn up by the health services • For pensioners whose pensions are less than the minimum wage, the percentages are increased by 15% Spain • Beneficiaries: pay 40% of the price • For certain special medicines: 90% reduction of the price with a maximum limit of €2.64 • For pensioners, patients undergoing residential hospital care, residents over 65 years of age with insufficient means of existence, as well as conscientious objectors performing social work: No charge Sweden • Patient pays the whole cost up to and including SEK 900 (€99) during a period of (see Box 36) twelve months from the first purchase • Costs SEK 901 (€99) to SEK 1,700 (€186) are subsidised by 50% • Costs SEK 1,701 (€186) to SEK 3,300 (€362) are subsidised by 75% • Costs SEK 3,301 (€362) to SEK 4,300 (€471) are subsidised by 90% • Costs above SEK 4,300 (€471) are subsidised fully UK • Charge of £6.20 (€9.51) per prescribed item, in Wales £6 (€ 9.20) (see Box 37) • Those who need regular medication can purchase an annual or four month prescription prepayment certificate: £32.40 (€50) for four months and £89 (€137) for one year, in Wales £31.40 (€48) and £86.20 (€132) • In England and Scotland, children under 16, aged 16-18 and still in full-time education, people aged 60 or over, pregnant women and women who have given birth in the last twelve months, War Pensioners (for their accepted disability), people and their partner receiving Income Support, or income-based Jobseeker's Allowance, Working Families' Tax Credit or Disabled Person's Tax Credit (and named on a Tax Credit NHS Exemption Certificate), some other people on low incomes, and people suffering from specified conditions: no charge • Wales, all above exemptions and aged 18-25: no charge Source: MISSOC (2002)144 Norway

•

Box 35: Evolution of German co-payments: An example of coinsurance In 1977, the German government imposed co-payments on pharmaceuticals that were reimbursed by the sickness funds. Through the Healthcare Structure Act, cost-sharing was regulated through the introduction of new copayments according to the price per package (1993) and later according to pack size (1994), the latter to provide an exact collection scheme rather than just charge a general fee per pack. These measures doubled patient out-ofpocket payments as a percentage of pharmaceutical expenditure, from 3.5% in 1992, to 7.5% in 1993 and 8.8% in 1994.

144

MISSOC (Mutual information system on Social Protection in the EU Member States and the European Economic Area) (2002) Comparative Tables on Social Protection in the Member States: II Healthcare: Pharmaceuticals, Available at: http://europa.eu.int/comm/employment_social/missoc/2003/missoc_59_en.htm (accessed 2 August 2004). Report: The Austrian Pharmaceutical Market

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Co-payment levels were increased sharply by the Health Insurance Contribution Exoneration Act (1997) and by the 2nd SHI Restructuring Act six months later, which increased patient out-of-pocket payments to around one sixth of SHI pharmaceutical expenditure (1998). From 1 January 1999, the new coalition government decreased the co-payment through the Act to Strengthen Solidarity in Statutory Health Insurance. Then, the SHI Modernization Act (2004) changed co-payments so that patients now have to pay a 10% share for all prescribed drugs irrespective of package size, with a minimum of €5 and a maximum of €10 per pack; or pay the complete package price if the package price is below €5. As of 2004, general exemptions include: i) children below the age of 12 and above the age of 12 if drugs are for the treatment of development disorders or severe diseases, ii) limited to 1% of income for persons with chronic diseases, and iii) 2% of income for all other insurants. These are different than previous exemption from copayments, which until 2003 included: i) children and adolescents aged below 18 years, ii) pregnant women if drugs are needed due to pregnancy, iii) patients who were exempted by status (welfare recipients, unemployment aid recipients, students, etc.), iv) insurants with a low monthly income (single persons < €952, person with one child < € 1309; for each additional relative in the household the limit is raised by €238), v) limited to 1% of income for persons with chronic diseases, and vi) 2% of income for all other insurants. In 2001 about 47% of prescriptions were exempted from co-payments (Schwabe and Paffrath 2002). Source: Adapted from Busse et al (forthcoming) Box 36: Evolution of patient co-payments in Sweden The Swedish drug market can be divided into three different submarkets: prescription (80% of sales by value), hospital (12%), and OTC (8%)145 (Apoteket AB 2002146). These submarkets differ in the degree of separation in financing and purchasing decisions and differentially affect the incentives on patients and providers to be costconscious. The Swedish county councils fully finance all medicinal products dispensed within hospitals. In the prescription drug market, the level and system of co-payments have changed several times during the last few decades. Prior to 1997, the Drug Reimbursement Scheme consisted of two groups of drugs: (1) the free list, and drugs that involved out-of-pocket charges for the patients. Since consumers only paid a small amount for every prescription drug purchase, their cost consciousness extended only to that ceiling, i.e. SEK 15-90 (1968-1992) and SEK 120170 plus SEK 10-70 for each additional item on the prescription (1992-1997). The maximum co-payment limit was SEK 600-2,200 SEK from 1993-1997 and included co-payments for physician visits and some further types of care. A new reimbursement scheme was introduced in January 1997 based on three important parameters: a deductible, coinsurance rates, and a ceiling over which the government pays all costs. This system was valid for all prescription drugs, with the exception of insulins. Since 1999, all patients have been required to pay the full price of all prescribed medication up to an accumulated cost of SEK 900 (€ 99) within a 12-month period; also depending on the cost patients pay a specified amount (see Table 5). Costs for all children under 18 years of age within a family unit may be added together. A patient who has paid SEK 1,800 receives a certificate or “free pass” enabling him or her to receive any further prescribed drugs free of charge during the remainder of the 12month period, counted from the day of the first purchase. The increase in user charges for patients during the 1990’s has led to a steady increase in the number of patients with free passes, which numbered 1.074 million in 2001. The aim of this reform on user charges was to: • make both the prescribing doctor and the patient act in a more cost-efficient way. The separation of financing from purchasing decisions can lead to substantial allocation inefficiency and welfare losses • ensure that all drugs and diagnosis groups are treated the same way, leading to the removal of the free list 145 146

There is no tax on prescribed drugs but for OTC sales, the VAT rate is 25%. Apoteket AB (2002) svensk Läkemedelsstatisk.

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•

ensure, within the framework of available resources, that those who need large quantities of drugs and medicines are adequately protected against excess costs, i.e. this scheme protects individuals who need large amounts of drugs from incurring large costs and thus relatively healthy individuals with a temporary need for drugs pay a larger share of their costs than individuals with chronic diseases.

Beyond user charges, the major share of the cost of prescribed drugs within the framework of the Drug Reimbursement Scheme is paid by the county councils, whose expenditure is offset by government grants by the National Social Insurance Board. In 2002, benefit-related sales amounted to SEK 23 billion, patients paying just over 5 billion (22%) and the county councils, via government grants, the remaining 18 billion. A study by Lundberg et al (1998)147 examined sensitivity towards increases in user charges of drugs among different socio-economic groups. The study was based on responses by 2,008 consumers of prescription drugs in Uppsala County in Sweden. The questionnaire included a question about whether the respondents would use fewer prescription drugs if user charges increased by a specific amount. The increase in user charges was varied between 9 and 150% in five different sub-samples. Results showed that price sensitivity decreased with increasing age, income, education and self-rated health status. Price sensitivity was highest for antitussives and lowest for climacteric drugs. If the user charges doubled, 40% of antitussives users would reduce their consumption whereas only 11% of climateric drug users would reduce their consumption. It is concluded that sensitivity to increases in user charges varied greatly between different types of drugs and between socioeconomic groups. Source: Adapted from Gerdtham (forthcoming 2005) Box 37: UK policies to influence patient demand From April 2004, the charge for all NHS prescription items increased148 to £6.40 (€10), regardless of the cost of the medicine supplied. In practice, about half the population are exempt from these charges; about 20 million people because of age and four million for low income. The exempt population are the heaviest users of medicines, so only 15% of prescriptions are actually charged. The charge reduces drug utilisation in non-exempt patients, but this is relatively minor in part due to patient perception of need and because the doctor, who is the real decision maker, is insensitive to the charge. There is no recent analysis of how annual changes in prescription charges affect utilisation, but old studies suggest that a 10% increase in the charge would reduce utilisation by 1.5-5% (Lavers 1989149). The system is not carefully policed and is open to abuse, such as patients claiming an exemption when not entitled. Since as many as 60% of prescriptions actually cost less than the charge, doctors may in many cases offer private prescriptions to patients liable for charges. These patients may also choose to buy some medicines available OTC, rather than seek a prescription unlike many exempt patients. On the other hand, a factor in increasing demand for medicines are deliberate government efforts to encourage patients to seek preventive therapies to reduce the major public health problems in the UK, in particular ischaemic heart disease, driving the use of statins. Source: Adapted from Walley et al (forthcoming) In terms of macro-efficiency, the savings in drug costs may be outweighed by increased utilisation of other health care services which may, in fact, increase overall health care spending. In addition, the transaction costs of implementing prescription charges and exemption schemes limit the cost saving. Third, in cost sharing for pharmaceuticals, governments impose a risk on individuals for an intervention that is largely beyond their control; that is, where consumption depends on prescription by doctors. In other words, financial (dis)incentives are placed on individuals, who have less power to control drug spending than prescribers and user charges can be seen as punishing the patient for following their doctor’s orders. The use of co-payments is a blunt mechanism 147

Lundberg L, Johannesson M, Isacson DGL, Borgqvist L (1998) Effects of user charges on the use of prescription medicines in different socioeconomic groups, Health Policy, 44: 123-34. 148 The flat-rate co-payment in the UK increased annually in line with inflation. 149 Lavers RJ (1989) Prescription charges, the demand for prescriptions and morbidity, Applied Economics, 21: 1043-52. Report: The Austrian Pharmaceutical Market

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of controlling costs and must be applied cautiously so as not to be counterproductive to the overall objective of a health care system. Careful use of differential co-payments or co-payments with well defined exemptions may be more acceptable. Beyond co-payments, other non-finical mechanisms have been used to influence demand by the end-consumer on their selection of medicines. In France, the health insurance funds and the MoH have launched several campaigns aimed at patients and consumers since the beginning of the 1990s (see Box 38). Box 38: Public campaigns to influence patient demand in France In France, the most popular campaigns involved messages broadcast on radio and television to evoke patient awareness in their consumption of medicines. The first one is “Un médicament, ça ne se prend pas à la légère”, which means that drugs must be consumed with temperance (1993). Another campaign sent the message, “Les antibiotiques, c’est pas automatique”, that antibiotics are not automatic (2002-2003). More recently, a huge promotional campaign has been launched to promote the use of generic drugs. Since these campaigns often accompany other reforms, their impact is very difficult to determine. However, a recent survey of the French population showed that positive opinion on the prescribing of generics has been increasing. It was observed that 82% of French people are now in favour of their physician prescribing generic drugs (Cnamts, 2003150). Source: Adapted from Paris V (forthcoming) 9. The off-patent pharmaceutical market and incentives for the use of generics Once the patent on a pharmaceutical product has expired, generic equivalents may enter the market and increase competition. A generic equivalent is a perfect substitute to the original brand and competes in price for market share. The new product must demonstrate bio-availability for the main active ingredient comparable to a brand leader. These virtual copies of the original branded medicine may be branded or un-branded and are also known as off-patent, post-patent, or multi-sourced drugs. Because generics are often of lower cost compared to the brand leader, they potentially offer significant savings that can release funds to pay for innovative, patentprotected products. The low cost of generics is due to supply side factors such as market size and the number of suppliers. Equally important are the demand side incentives that encourage prescribing, dispensing, and consumption of generics. First, generic prescribing, where products are prescribed by their proper name rather than brand name, allows for the dispensing of less expensive preparations. Generic prescribing is promoted in the UK and Ireland (see Boxes 39 and 40); whereas, guidelines for generic prescribing may tie into physician budgets or guidelines, as in France (see Box 41). Box 39: GP generic prescribing in the UK In the UK, generic prescribing is seen as good medical practice and promoting more efficient prescribing. Generic prescribing rates in 1991 were 40% but after sustained promotion by government, 76% of all prescriptions were written generically in 2002 (Anon 2003151). For many drugs still under patent, there may only be one branded preparation so even if prescribed generically, the patient still receives the expensive branded product. The proportion of prescription items actually dispensed as generics is therefore less than the proportion prescribed at 53%, accounting for 19.9% of total costs. Generic substitution for branded preparations by pharmacists is routine in hospitals where all drug supply is controlled, but is not permitted in primary care. Source: Adapted from Walley et al (forthcoming)

150

Cnamts (2003) Quelques aspects significatifs de la consommation de médicaments en France, Points de conjuncture (in French), 12: 13-32, Paris: Cnamts. 151 Anon (2003) Prescriptions Dispensed in the Community Statistics for 1992 to 2002: England. Available at: http://www.doh.gov.uk (accessed 28 July 2004). Report: The Austrian Pharmaceutical Market

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Box 40: Generic prescribing and dispensing in Ireland The Irish Department of Health and Children has a policy of encouraging generic prescribing; however, in practice the level of generic drug dispensing is low - in the GMS scheme with branded generics 17% and nonbranded generics 5% (2001). The Irish system tends to encourage branded generic prescribing because when a drug is prescribed generically the pharmacist chooses which product to dispense and will be reimbursed for the cost of that particular brand. There is no incentive to dispense the cheapest brand, rather the community pharmacist negotiates discounts with the suppliers in the form of rebates and therefore processes the incentives to dispense the generic brand that maximises their profit margin. Generic substitution by pharmacists is not permitted. Source: Adapted from Ryan et al (forthcoming 2005) Box 41: The promotion of generic prescribing in France The process towards generic prescribing in France began with the publication of a ministerial order in 1997, which defined the concept of a generic drug in the French context. Subsequently, the French Health Products Safety Agency (AFSSAPS) published a list of generic groups the Répertoire des génériques, which is regularly updated and available on the AFSSAPS’ website (http://afssaps.sante.fr). At the end of 2001, drug prescribing by non-proprietary-name (NPN) was officially introduced. Furthermore in 2002, an additional clause was added to the National Agreement with GPs where physicians committed themselves to prescribe in NPN with an objective of 25% of all prescriptions in compensation of better fees for visits. However by the end of 2003, prescribing in NPN had not really developed and represented only 6% of GPs’ prescriptions. According to estimates by AFSSAPS in 2000, generics accounted for 2.6% of sales and 5.6% of quantities of reimbursable drugs. This represented 18% of the sales of the potential generic market, which itself represented only 14% of the total market (AFSSAPS 2002152). Since then, the penetration of generics has really improved and the increase became visible just after the signing of the Agreement. In May 2004, generics represent 55% of volumes and 40% of turnover in generic groups, which themselves represent 15% of the total market turnover (LEEM 2004153). Source: Adapted from Paris V (forthcoming) Second, the selection of the least expensive multi-sourced drugs by the pharmacist and generic substitution, which is generally the displacement of expensive branded products with phased out patents by cheaper generic products (where it is allowed), is also motivated more effectively by financial incentives which give pharmacists higher margins or additional payments for dispensing a lower-cost generic medicine (see Boxes 42-45). In France, in June 1999 a law gave pharmacists the right to substitute generics for brand-name drugs and offered them a financial incentive to do so: in the event of substitution, the pharmacist’s profit margin is equivalent to the margin that would have applied to the original product (with the sliding scale margin, the sale of a lower priced product theoretically implies a lower profit margin). Generic substitution is also allowed in Germany (see Box 42). Generic prescribing or substitution is seen as an excellent example of a measures that works to contain costs without any diminution in quality, thus this practice demonstrates an important efficiency gain. Box 42: Generic Substitution in Germany In August 2002, Germany introduced generic substitution by pharmacists with the “Pharmaceutical Expenditure Containment Act” called “aut idem regulation”. Historically, pharmacists were only allowed to substitute drugs if explicitly indicated on the prescription by physicians; now, pharmacists are requested to substitute nonpatented pharmaceuticals above a certain substitution price line by other cheaper products.

152

AFSSAPS (2002) Analyse des ventes de médicaments aux officines et aux hôpitaux en France 1988-2000, Paris: AFSSAPS. 153 Les Entreprises du Médicament (LEEM) (2004) Le marché des génériques, mai 2004 (ed.) (in French), Paris : LEEM. Report: The Austrian Pharmaceutical Market

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To determine this price line: • certain classes of replaceable active ingredients and pharmaceutical forms was defined by the Federal Committee of Physicians and Sickness Funds • all available alternatives to each class of defined active ingredients and pharmaceutical forms was determined by the Association of sickness funds, Bundesverband der Betriebskrankenkassen (BKK) • a price line was calculated for each class of drugs • the substitution price line was updated every three months Setting this price line involved determining the average selling price of the three most expensive and three cheapest drugs of each class. Then, calculating the price difference between the average prices of each class, and finally dividing this price difference into three parts of identical size. For example, if the average prices of the most expensive drugs is €100 and that of the cheapest is €40, then the difference was divided into three parts of €20. To determine the price line, one of the three parts was added to the average price of the three cheapest drugs, e.g. the price line would be €60 (40+20) (SGB V 129). According to the new “aut idem” regulation pharmacists had to substitute a prescribed drug if its price was above the substitution price line of this specific class and substitution was not prohibited by the physician on the prescription. If the physician did not explicitly specify the drug on the prescription and only defined the active ingredient, then pharmacists had to select a drug below the substitution price line. However, pharmacists did not receive any incentives or additional payments to do so. In practice, this substitution scheme apparently does not work so far as pharmacists do not consequently substitute drugs above the substitution line. A random test on prescriptions in southern Germany for ten selected substitution classes during two weeks revealed that pharmacists only substituted 7.6% of prescriptions which were above the substitution price line and not excluded for substitution by physicians (Pharmafakt 2002154). There are several reasons for this result. First, there is no incentive for pharmacies to substitute drugs, and a substitution means a reduction of prescription value and thus alleviating possible margins on the manufacturer’s price. In addition, pharmacists have to convince the patients that the alternative drug is as good as the original drug prescribed by the physician and might face compliance problems. Also, there are no court-proven sanctions for pharmacists for not following the “aut idem” obligation. Second, the pharmaceutical industry were easily able to manipulate the price-line by launching high priced dummies which are not really intended to be sold but affecting the average price of the three most expensive in one substitution class. This was noted as the updated new substitution price line of the specific substitutions class (after three months) was significantly higher than before. In this way pharmaceutical companies were able to avoid substitution of their “real” products. Considering agency theory it seems obvious that physicians and pharmacists have little incentives to invest in the information about availability of generics or their effectiveness and prices (Hellerstein 1998 155 ). Therefore certainly something has to be done to provide more incentives for generic substitution, but the existing aut-idem scheme was most likely the wrong way. It might be able to work if the incentives would be improved. On the other hand, it should also be considered that the share of generic substitution in Germany is already very high compared to other countries. In 2002 the savings for the sickness funds through the substitution scheme were estimated to be only €45 million (Ärzte Zeitung 2003156).

154

Pharmafakt (2002) Random test on substituted prescriptions in southern Germany based on data from a data processing centre for pharmacy bills of the Association of Sickness Funds physicians in southern Germany (on behalf of the pharmaceutical industry), München. 155 Hellerstein JK (1998) The Importance of the Physician in the Generic versus Trade-Name Prescription Decision, RAND Journal of Economics, 29: 108-36. 156 Ärzte Zeitung (2003) Aut idem mit dürftigem Ertrag. Available at: http://www.aerztezeitung.de/docs/2003/03/11/046a0408.asp?cat=/politik/arzneimittelversorgung/aut_idem (accessed 30 July 2004). Report: The Austrian Pharmaceutical Market

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The German legislative has already reacted to the first results of the “aut-idem” scheme. From the beginning of 2004, with the introduction of the SHI Modernization Act, the need for calculating the substitution price line is being lifted. Instead products with replaceable active ingredients are grouped and the substitution price line is calculated. Subsequently the reference prices for those drugs with replaceable active ingredients is amended and automatically set below the substitution price line. Furthermore, the “Pharmaceutical Expenditure Containment Act” obliged pharmacists to generate at least 5.5% in 2002 and 7.0% in 2003 of their turnover by officially listed parallel imports, which can be sold at a lower price than the domestic equivalent. As first result, the market share of parallel imports increased significantly from 1.8% in 1998 to 7.1% 2002 (VFA 2003157). Source: Adapted from Busse et al (forthcoming) Box 43: Incentives and claw backs for pharmacists in the Netherlands In the Netherlands, a pharmacist can only substitute between branded products and generics if the GP prescribes generically. If the GP specifies a specific brand, the pharmacist is obliged to deliver this (Brouwer et al 2003158). Financial incentives for generic substitution are in place, where if the pharmacist dispenses a generic product he will receive a stimulation fee of 33% of the difference between the brand price and the generic price. Given the increase in generic dispensing, the fact that generics are normally expected to be cheaper than their branded counterparts, and the fact that pharmacists are financially stimulated to deliver generics, one could expect large savings due to generic prescriptions. However, the truth is more complex and less successful. Challenges exist in the regulation of the reimbursement prices of pharmaceuticals, which has led to competition among manufacturers of generics. This competition is aimed towards convincing the pharmacist to deliver a particular generic product by providing the pharmacist with discounts on their generic products. This allows the pharmacist to claim a higher price from the insurers (the list price) than they actually pay to the manufacturer, and this difference is direct income for pharmacists. This practice is possible so long as the declared price is below the DRS limit price. Although the discounts are not illegal, it is clearly not in the interest of final consumers that pharmacists collect them. This possibility has lead to a relative increase in list price of generic pharmaceuticals as compared to brand pharmaceuticals, since increasing this price provides manufacturers of generic pharmaceuticals with more room for giving bonuses and deductions to pharmacists. In the Netherlands, he difference in list prices between generics and brands has declined to only 4% (Brouwer and Rutten 2002159). These problems have been amplified by the fact that: • from the mid-1990’s to 2003, the Dutch government installed a general claw back of 6.8% of all list prices to recapture the high income of pharmacists and savings of generic prescribing • from 1 September 2003, the discounts to pharmacists were ‘taxed’ by declaring a differentiated claw back regime with higher claw back percentages. Single-source medicines/brand products were charged with a claw back of 8%, while multi-source medicine were charged with a claw back of 40% The aim was explicitly to claw back around €300 million per year of the estimated retail discounts of €500 million per year. The resistance of the Association of Pharmacists has resulted in an appeal against this measure at the Court of Private Enterprises (College van Beroep voor het Bedrijfsleven), which they recently won. The Minister subsequently threatened to implement new legislation, which would ensure the realisation of the projected savings. This was averted by a signed agreement in which insurers and pharmacists agreed that there would be an effective reduction in sales of generics of 40%, as desired by the Minister. Meanwhile, the Minister is working on a modernized DRS, which regulates prices and ensures lower prices for multi-source products. 157

VFA (Association of research based pharmaceutical companies) (2003) Press release no. 004/2003, Berlin: VFA. Brouwer WBF, Hulst E, van Nooten F, Rutten FFH (2003) Generieke substitutie (Generic substitution, in Dutch), TSG Tijdschrift voor Gezondheidswetenschappen, 81(3): 162-5. 159 Brower WBF, Rutten FFH (2002) Geef de dokter maar de schuld (Just blame it on the doctor, in Dutch), Medisch Contact, 57: 540-1. 158

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Source: Adapted from De Wolf P et al (forthcoming) Box 44: Regulating generic dispensing in the UK In the UK, a book known as the Drug Tariff sets the reimbursement price for generic drugs paid to pharmacists. These prices were based on a basket of the manufacturers’ declared prices, but were often far higher than the real price to the pharmacist because of undeclared discounts. Thus the government depended on free market competition to hold generic prices down. In 1999-2000, there were problems of supply in the generic market (Walley and Burrill 2000160 ) and price increases which cost the NHS at least £200 million. The reason was allegedly the closure of some factories manufacturing generics, reducing capacity. However, a government investigation concluded that solely this did not explain the problems and that there was evidence of deliberate market manipulation, possibly by some wholesalers. Police investigations led to a number of arrests but the cases have yet to come to trial. As an immediate action, in 2000 the government regulated the generics market for the first time by introducing the Maximum Price Scheme, which set a statutory ceiling on the prices of the main generics. The current scheme still allows incentives for pharmacists to demand discounts to lower the price of the drug below the statutory ceiling. After a review of the whole generics market, the DoH has opted for a less radical solution of regulating key generic maximum prices and monitoring competition, rather than to reform the whole market. For products with a number of manufacturers there will be little regulation, but for products with only one or two, manufacturers will have to justify their prices on a cost-plus basis (Thompson 2003161). Source: Adapted from Walley et al (forthcoming) Box 45: Generic substitution in Denmark In 1993, generic substitution was introduced in Denmark as an option for the provider to indicate on the prescription whether or not it was to take place. This was only used to a very small extent, and subsequently strengthened so that generic substitution was the rule and only overruled by an explicit statement from the prescribing physician. Since this was followed by general increased monitoring of prescription practices of the doctors, the application of generic substitution has become widespread. In 1998, the rules were sharpened to the effect that the minister was given an option of introducing also analog substitution (same therapeutic effect). However, this possibility has not been used, to some extent due to very fierce resistance from the medical profession and pharmaceutical industry. Source: Adapted from Jørgensen and Keiding (forthcoming 2005) Third, differential or lower co-payments for generics over brands also encourage patients to ask for generic substitution, and are extensively used by managed care in the United States as part of reference pricing systems linked to co-payments, as described above. This has yet to take hold in the EU mainly because generic substitution for a branded prescription is not allowed in most EU countries. In the UK, the government’s promotion of generic prescribing by doctors has been so successful that generic substitution would actually make little further saving. There are other opposing factors: the extent of use of branded generics and low priced original brands impede the extent of price competition. Although evidence suggests that price competition with the right combination of demand side incentives does stimulate price competitiveness, many EU governments nevertheless choose to regulate the prices of generics directly (UK) or indirectly through reference price schemes (as in France, see Box 46). Box 46: Reference pricing for French generics

160 161

Walley T, Burrill P (2000) Generic Prescribing: time for regulation in the market? BMJ, 320: 131-2. Thompson M (2003) A new way of paying for NHS generics, Pharmaceutical Journal, 271: 295-6.

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Since September 2003, reference prices (tarif forfaitaire de responsabilité, TFR) have been set for 23 “generic groups”, in which the generic share of the market was between 10% and 45%. In each group, which include a branded product and its generic equivalents, a reference price has been set that becomes the basis for health insurance reimbursement. Altogether, 460 products are affected by reference prices representing approximately 5% of the total market. In reaction to this policy, 70% of the branded drugs concerned immediately lowered their price to the level of TFR. Reference prices are to be introduced for other generic groups in which the generic market share is less than 60%. Source: Adapted from Paris V (forthcoming) Some EU member states have less explicit financial incentives for generic prescribing but do mandate responsibility to inform patients of cheaper generic alternatives to either physicians (in Sweden, see Box 47) or pharmacists (in Denmark). Belgium regulated the reimbursement prices of generic products and provided public awareness campaigns to encourage their use (see Box 48), Italy has recently implemented both reference pricing and substitution of generic products (see Box 49). Evidence seems to point to the finding that financial incentives for physicians, pharmacists, and consumers toward demand side cost-awareness may be more effective than regulating prices of generic products. Box 47: From reference pricing to generic substitution in Sweden From January 1993, a reference price system was introduced, which was applied to products with expired patents and generic equivalents on the Swedish market. The Medical Product Agency determines which drugs should be considered to be generic. Patients must bear the cost above the reference price, which in the beginning was set at the price for the least expensive generic plus 10%. In the reference price system, pharmacists were not allowed to substitute an alternative generic product drug for the one that a doctor had prescribed; however, they could dispense a generic product subject to the doctor’s approval. If a product was available under the same name from different companies, the pharmacist could select the one to dispense unless the name of the manufacturer or the importer was explicitly requested on the prescription. Under the reference price system, doctors were required to inform patients of generic alternatives that were available and information on generics was available through publications by the Swedish Medical Products Agency and the National Social Insurance Board. This reference pricing system was abandoned on 1 October 2002 and replaced with a system where drugs supplied on prescription and included in the Reimbursement Scheme are replaced with the cheapest equivalent (generic or parallel-imported) product available at the pharmacy concerned. The Medical Products Agency still decides which medicinal products are interchangeable. A product may not be replaced if this is ruled out on medical grounds in the prescription or if the patient opts for paying the price differential between the prescribed and cheapest products. It is the duty of the dispensary to inform the patient that a substitution is being made and that it is possible to obtain the prescribed product by paying the price difference. Moreover, substitutions are reported by the dispensary to the prescriber and all prescriptions must be supplied with a prescription code, which identifies the workplace of the prescriber, in order to follow up on their activities162. In 2002, before the new reform came into effect more than 960 price reduction took place, and after in 2003, 5,018 price reductions of on average 12% and 470 price reductions of 16% were observed (PPB 2004163). If the cheapest drug is dispensed at the pharmacy every time then this drug will receive a 100% market share which means that the other producers must lower their price if they want to sell their products. Thus, this reform will have both a direct effect on the average price (the substitution effect) and an indirect effect (the price reduction effect). Price reductions in this way are also an expected effect of generic substitutions. The better the pharmacies are to keep the cheapest drugs in their stocks so substitutions can be made, the larger will probably the effect be of both these effects. 162

If a prescription is not supplied with the prescription code then the patient cannot take part in the Drug Reimbursement Scheme and will have to pay the full price. 163 Pharmaceutical Benefits Board (PPB) (2004) Priser och konkurrens (prices and competition, in Swedish). Available at: www.lfn.se. Report: The Austrian Pharmaceutical Market

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In total, between 1 October and 31 December 2003 the price level on drugs has been reduced by about 10%. These price reductions for non-patented pharmaceuticals correspond to about SEK 2 billion in a year; however, the actual saving during 2003 is lower since the price level have not been at this low level during the whole year. PPB (2004) have estimated that the generic substitution of drugs in 2003 have reduced the spending on drugs by about SEK 1 billion. Source: Adapted from Gerdtham (forthcoming 2005) Box 48: Regulating generic reimbursement and promoting their use in Belgium In the Belgium ambulatory care setting, generic substitution is not allowed. In hospitals, generic substitution is possible if there is an agreement between the hospital pharmacy and the prescribers. The use of generics is stimulated by the Reference Reimbursement System (RRS), which was introduced in 2001. Generics and copies can only be reimbursed if their price is 26% lower than that of the original compound. When generics or copies are available for a specific formulation of a pharmaceutical compound, the basis for calculation of the reimbursement conditions is fixed at minus 26% of the price of the original product. This implies that copayment by the patient is lower for a generic or a copy than for the original compound, unless the price of the original product is reduced by the company concerned. Up until now, the introduction of the RRS has increased the prescription of generics only slowly. However, at the moment of the introduction of the RRS, the prices of many original drugs were reduced by their producers, so that the co-payment is of the same order as that for the generic equivalent. This has resulted in significant savings on the overall expenditure for both patients and the National Health Insurance System. Bi-annually the authorities sent a brochure to all physicians and pharmacists with the list of active substances for which a reimbursed generic is available, and with the financial consequences thereof. This list is also available on the website of the National Health Insurance System (www.riziv.be), and that of the Belgian Centre for Pharmacotherapeutic Information (www.cbip.be). The introduction of the RRS was accompanied by a campaign to the public via TV and radio spots, the written press, and leaflets. Source: Adapted from Bogaert and De Cock (forthcoming 2005) Box 49: The use of generics in Italy In Italy, the generics market is still negligible when compared to other EU countries, e.g. the UK and Germany (Garattini and Tediosi 2000164). A number of factors have hindered the growth of generics, notably: i) patent protection of key molecules to the year 2002 and beyond, ii) high level of brand prescribing, iii) GPs are very willing to switch their prescriptions form older and cheaper drugs to the latest innovations, and iv) resistance by the research-based industry and especially by the companies specialised in me-too drugs. In the last few years, the use of generics has been more decisively promoted. Various initiatives have been initially managed at the local level, such as information, advice, transparency lists, expenditure targets for GPs. Subsequently the DoH has supported generics through: 1. the introduction of reference pricing on the generics market. A reference value was initially set as the lowest price of the available generics. Since 2002, it has been set as the lowest price of all products, including the originator, generics and me-toos. 2. mandatory substitution by pharmacists with the lowest-price medicine in the case of generic products, unless the GP explicitly opposes. Pharmacists are obliged to substitute, but have also a financial incentive such that if a generic is dispensed they are not obliged to apply the compulsory discount to the NHS 3. information campaigns on generics 4. the realise of a transparency list 164

Garattini L, Tediosi F (2000) A comparative analysis of generic markets in five European countries, Health Policy, 51: 149-62. Report: The Austrian Pharmaceutical Market

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These actions have produced a growth of the generic market and defensive actions by the pharmaceutical companies. On the one hand, these policies have smoothed the expenditure growth rate, thanks to a greater competition, such as price-cut for drugs subject to reference pricing. In other cases, they may have produced and increase in the level of expenditure, e.g. prescribing switch from generic to similar non-generic products. Source: Adapted from Fattore and Jommi (forthcoming 2005) 10. Conclusions There are many different approaches used to regulate pharmaceuticals in Europe that affect public policy objectives to control costs while improving efficiency, quality of care, and equity. International comparisons may contribute to a better understanding of how different measures and policies are implemented; however, there are significant limitations to the relevance and transferability of lessons and policies across different countries. Contextual factors such as the social, economic, medical, health care, and political environment as well as constraints of history and institutional frameworks play a major role in how policies are developed and implemented in practice. This is particularly important for EU member states not only because of national regulations but also EU supranational regulations. Consequently, a policy adopted in one country may not necessarily work, or at least not to the same degree, in another and may need to be modified to the new context. As described above, it is often difficult to be clear on which component of a diverse range of measures undertaken was most successful. Given these two factors, deriving any sense of which of the many possible interventions is most effective is difficult. A further complication is that governments must consider those policies already in place and their effects before new policies are adopted. Trade-offs between competing policy objectives (health versus industrial) or the interests and needs of different stakeholders (patients, health professionals, industry, wholesalers, pharmacists) are inevitable. Governments in Europe are all faced with rising pharmaceutical expenditures but have taken widely divergent approaches to tackling these. Some government policies that enhance quality of care, efficiency, or access may decrease the ability to contain expenditures. Rising expenditures in themselves may not be a problem if they are accompanied by health gain or by a similar rise in government revenues. In practice, the added health gain for added expenditure is often unclear, and the rate of rise of expenditure often exceeds that of revenue, so governments are forced to act. At the same time, they must aim not just to contain costs but to improve the efficiency and quality of the health service, and preserve or enhance equity. Any approach to cost-containment therefore has to be evaluated in terms of its effects in these four dimensions. From the review presented here, it is clear that no single policy approach acts without a trade-off on the impact along these four dimensions, in addition to competing trade-offs between the objectives of the policies themselves. Therefore, a policy maker needs to be clear what primary impact is desired, but conscious of where a subsequent negative impact of any policy may arise in other dimensions: If the impact of the trade-off along the other evaluative areas outweighs the gains in the primary indicator, a policy must be reconsidered. When considering the four dimensions, it is clear that most of the measures intended to contain costs do have an impact; however, the extent of any cost savings or their sustainability over the longer term is variable. In most cases, the cost savings generated by any one policy are either limited or short-term. The most effective approaches work best when combined with other policy measures. For instance, price controls alone have a limited effect, but are more successful when policy measures are applied to the volume-side of the expenditure equation as well. Polices aimed solely at cost-containment might reduce equity, but if the aim of cost-containment is to reduce unnecessary expenditure (e.g. increasing prescribing of generics) so as to allow access to other therapies, then cost-containment would increase equity. In general, policies for the rational use of medicines would be expected to result in improvements in equity at an aggregate level. Policies such as reference pricing and prescription copayments may reduce equity, unless there are exemptions to protect more vulnerable patients. When used carefully, these interventions can increase efficiency and decrease cost, without damaging quality and with minimal disruption to equity.

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The quality of care dimension is usually raised as a primary objective of some measures that target the rational use of medicines. In these, cost is secondary and in fact some measures may be cost increasing. This raises the difficult balance faced by policy makers in this sector to secure quality, maintain equity and improve efficiency, but yet contain costs. It is clear that there is no perfect solution to balancing these four dimensions in the pharmaceutical sector. Even if one is sure where the balance should lie, no one policy or policy combination is right for all countries. Different countries will need to meet their own objectives and needs through policy approaches that reflect their particular environment. Nevertheless, there are some general principles of best practice that policy makers should keep in mind. First, the objective of the policy must be clear from the outset and consideration given to its possible impact on all of the evaluative dimensions of efficiency, equity, quality, and cost. Rigorous price control schemes seem to have an impact on controlling prices, but controlling price alone (if this can be achieved) does not necessarily improve efficiency, nor does it necessarily control total expenditures. Attention to the demand side and the promotion of rational drug use is vital if efficiency, equity and quality are also to be improved. New drugs and changes in product mix will certainly drive drug expenditure in the future. The policy community at large needs to consider how clinically valuable innovation is defined and rewarded, so that drug expenditure reflects the value of the drug’s benefits for society. The future will require a greater partnership between all stakeholders if the solidarity of socialised pharmaceutical care is to be maintained despite greater needs and constrained resources.

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Part 2: The Austrian health care system and pharmaceutical market Introduction Spending on medicines is the third largest expenditure in health care budgets behind spending on outpatient and inpatient care, respectively. In 2001, European countries spent an average of 14.5% of their health care budgets on medicines. In Austria, this percentage was 15.1% of total health expenditure (OECD health care statistics 2003). Notwithstanding the growth in private as well as public spending on medicines has been above average. The level and the nature of spending on medicines is being influenced on the demand side by an increase in the percentage of elderly people in the general population and the demographic shift triggered by higher life expectancies, while on the supply side by medical and technical advances, salary structures of so-called ‘surgery doctors’, and the medicine distribution channel. State intervention in the pharmaceutical sector has an important role to play. Objectives of the Report Commissioned by the Federation of Social Security Institutions (“Hauptverband der österreichischen Sozialversicherungsträger” – referred to herein as Hauptverband), LSE Health and Social Care, a research centre at the London School of Economics, has put together this report analysing and evaluating the steering mechanisms used in the pharmaceutical market and their implementation on the part of the state and the social security sector. This report presents a taking-stock of currently employed steering mechanisms while also giving an overview of available empirical data. The report will particularly highlight reforms of the health care and pharmaceutical sectors. Details are provided of the mechanisms employed to regulate the pharmaceutical market, the process of drug registration, pricing and reimbursement mechanisms by the social security sector, product distribution, as well as the control of physicians’ prescription habits. The inclusion of empirical data relating to trends in the pharmaceutical sector (volume, prices and expenditure) over the last ten years is designed to facilitate an evaluation of the control mechanisms that have been employed. For salient data, Austria is set into the European context. A. Stakeholder Questionnaire A questionnaire was administered to 22 stakeholders in Austria (for a complete list of stakeholders see Appendix 5). Slightly modified questionnaires were sent to the various stakeholders; below is an example of the template questionnaire:

Stakeholder Questionnaire Policies concerning the regulation of pharmaceutical products in Austria. Outline your views regarding pharmaceutical regulation in Austria with regards to: 1. The mechanism of pharmaceutical product registration (e.g. length of approval, administrative burden) and price setting 2. The mechanism and criteria, including therapeutic and economic effectiveness for: i) gaining acceptance to the positive list for reimbursement by health insurance (Hauptverband) and ii) obtaining prior approval for specific drugs from Chefarzt 3. The difference between the reimbursement price for sozialversicherung and other purchasers Report: The Austrian Pharmaceutical Market

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4. The current level of Value Added Tax (VAT) on pharmaceutical products 5. The margins allowed for i) wholesalers and ii) pharmacists. Should pharmacist be paid under a different method (i.e. fixed fee per prescription, degressive margins) 6. The regulation of the number and location of pharmacies and dispensing physicians. 7. What kind of physician guidelines and prescription monitoring should exist, if any? Please express your view on: i) who should be involved in the development of guidelines, ii) educating physician on effective prescribing, and iii) the use computer support systems in decision-making and monitoring 8. The influence of hospitals on the prescribing behaviour of physicians, with regards to the marketing strategies of pharmaceutical industry. 9. Please comment on whether financial and other incentives should be provided for physicians that a) increase generic prescribing, b) follow practice guidelines, c) prescribe the least expensive product among therapeutic alternatives. And what form these incentives should take. 10. The role of pharmacists in dispensing products i) the potential for generic substitution (with or without the agreement of the prescribing doctor) and applicable financial incentives ii) pharmacists’ advisory role in over-the-counter product selection, other nonprescription products, and people with long-term treatments or chronic conditions iii) pharmacists’ role in repeat prescribing 11. Please comment on whether the level of user fees and exemptions are appropriate, or should be revised (i.e. lower user fees for generic products, or user fees reflecting the therapeutic value of drugs). 12. Given the rising pharmaceutical expenditure caused by new products and changing demographics, what policy measures do you think will be necessary to achieve quality of prescribing, equity of access, and reasonable expenditure growth? Please express your view on whether the current system needs changes? And to what direction. The responses from the stakeholder questionnaire are referred to in the analysis sections of this report. In some instances, responses to the questionnaire had to be translated from German to English and spelling and grammatical errors were corrected where necessary. The timelines for the administration of the questionnaire, collection of responses and follow-up, were as follows: 1. 05/05/04 – First sending of questionnaire by email and/or post 2. 11/05/04 to 15/06/04 – Three proper responses received and two replies with no answers 3. 15/06/04 – Reminder / Second sending of questionnaire 4. 25/06/04 – Closing date to receive stakeholder responses Responses to the questionnaire were received from: • DI. Alfred Mair, Oberösterreichische Gebietskrankenkasse (Upper Austria Insurance Fund) • Univ. Prof. Dr. Hans-Georg Eichler, Vizerektor für Forschung und Internationale Beziehungen • Hr. Dkfm. Erhard P. Geisler, Pharmig (in German) • Mag. Martin Traxler, Head of Economic Department of the Austrian Chamber of Pharmacists (also sent brochure "The Austrian Pharmacy-Facts and Figures") Report: The Austrian Pharmaceutical Market

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• • • • • •

Univ. Prof. Dr. Werner Clement, Institut fur pharmaokonomische Forschung (sent comments only) Dr. Otto Pjeta and Dr. Reiner Brettenthaler, Austrian Medical Chamber Hr. Dr. Gerald Bachinger, NÖ Patientenanwalt Dr. Joseph Probst, Hauptverband Mag. Rosian, ÖBIG (in German) Mag. Peter Wieninger provided specific answers to questions

A summary of the stakeholder responses to the questionnaire can be found in Appendix 6. B. Public consultation Additionally, a three-day public consultation process was carried out in Vienna from 24/05/04 to 26/05/04. A team of investigators from London conducted interviews with various stakeholders. The program was as follows: London team: Prof. Elias Mossialos Prof. Alistair McGuire Dr. Panos Kanavos Prof. Tom Walley Sherry Merkur Tanja Sturm (translator) Day 1 Frau Dr. Wirthumer-Hoche, BMGF, Unit for Market Authorization Prof. Dr. Seyfried, Sozialversicherungsanstalt der Bauern (Farmers’ Insurance Fund) Richard Gauss, BMF (Ministry of Finance) Mag. Rosian, ÖBIG Dr. Gerold, Krankenanstaltenverbund, Chief Pharmacist, Viennese Hospital Association Day 2 Dr. Probst, Hauptverband Prof. Dr. Eichler, Fachbeiratsvorsitzender Prof. Mag. Krammer, Wirtschaftskammer Österreich (Association of Wholesalers) Mag. Traxler, Apothekerkammer (Association of Pharmacists) Prof. Clement and Frau. Mag. Dr. Walter, IPF Mag. Wenty, Kammer für Arbeiter und Angestellte (Chamber of Labour) Prasident Dr. Brettenthaler, Arzekammer, Head of the Upper Austrian Medical Association Day 3 DI. Mair, Oberösterreichische Gebietskrankenkasse (Upper Austria Insurance Fund) Mag. Griesser, Wiener Gebietskrankenkasse (Vienna Insurance Fund) Dr. Geisler, Pharmig Dr. Bachinger, Patientenanwälte (Patient/Consumer Association for Health) Group Meeting with Hauptverband C. Follow-up meeting From 4/10/05 to 5/10/05 a meeting was conducted with the Hauptverband to confirm the data and review the first draft of the report. Report: The Austrian Pharmaceutical Market

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Those present at the meeting included: Prof. Elias Mossialos Georg Ziniel Prof. Schütz Prof. Eichler Prof. Peskat Prof. Klaushofer DI. Mair Mag. Hofmarcher-Holzhacker Dr. Bucsics Mag. Wieninger Dr. Probst

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1. The Austrian Health care System In Austria, the statutory health insurers cover around 97% of the country’s 8.1 million inhabitants. Life expectancy at birth is 80.9 years for women, and 74.6 years for men. GDP per head is €24,255 and per capita health expenditure is €2.087 - in 2002. There is one doctor for every 262 inhabitants, while the number of inhabitants per pharmacy amounts to 7,431. The availability of hospital acute beds is 6.3 per 1,000 inhabitants. The health system is characterised by access to medical care regardless of the level of individual income. The health insurance system is based on principles of solidarity, and financed through a mix of personal contributions and general taxation. A mix of public and private health service providers offer medical services. 1.1 Structure of the Health care System As laid down by the constitution, responsibility over the Austrian health care system is divided between the federal and the state level. The states are principally responsible for the delivery and partly for the financing of inpatient care. The federal government is responsible for laying down the basic laws regulating the hospital sector. Most regulatory responsibilities, including the provision of professional guidelines for the practice of medical professions, the registration of medicines and the provision of outpatient care, also fall within the remit of the federal level. The delivery of outpatient care is provided by the social insurance funds. Within the legislative guidelines contained in the General Social Security Act (Allgemeines Soczialversicherungsgesetz – ASVG) and under the supervision of the Ministry of Health, the social security funds are self-regulating in their operations. In practice, the room for manoeuvre within the concept of self-regulation is limited. In its jurisdiction, the General Social Security Act (ASVG) applies to remunerated employees, the unemployed, pensioners and their dependents. For certain professional groups including civil servants, the self-employed, farmers, and free-lancers separate legal provisions apply. With regards to medications, all health insurance policy holders in Austria are subject to the same system. The validation of contracted physicians is under two systems in Austria: 1. The system of the §2 funds (geographic area health insurance funds, company health insurance funds, social insurance agency of the farmers as well as the Austrian mining insurance agency), which are mostly based on country specific legal closings with the respective responsible country medical association, that are mutually converted and deducted 2. Social insurance carrier: these are federally acting social insurance carriers (e.g. insurance agency public servant, social insurance carrier in the commercial economy), who arrange for independent legal closings from the §2 funds with the contract partners and who posses their own billing departments. The 25 social security providers are members of the Federation of Austrian Social Security Institutions – the sector’s umbrella organisation. The Federation’s principal role is to co-ordinate. Among its responsibilities are the elaboration of guidelines, the signing of collective contracts with representatives of interested parties, and the administration of insurance data. In the pharmaceutical arena, the Federation regulates the inclusion and pricing of reimbursable medicines. Social security encompasses the areas of health, accident, and pension insurance. The social security funds are organised according to professional affiliation, while the health insurance of employees is also divided regionally. Affiliation to the social security sector is mandatory and affiliates have no individual say over the choice of social security provider. Additionally, the option of voluntary affiliation to the statutory health insurance funds exists. Private health insurance plays a secondary role in Austria. Around a third of Austrian residents are members of complementary private health insurance schemes. Private insurance mainly covers the cost of more luxurious Report: The Austrian Pharmaceutical Market

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hospital accommodation, or to finance the cost of visiting a ‘non-contract doctor’ (Wahlarzt), i.e. practicing physicians not under contract with any of the health insurance funds. The public sector (at state and municipal level) dominates in the delivery of hospital care, while private providers dominate in the provision of outpatient care. The social security funds offer certain services themselves through outpatient centres, accident hospitals, and rehabilitation centres. 1.2 Financing Spending 7.7% of GDP on health care (2002), Austria lies within the European average. Around 20% of the financing is raised through general taxation, in other words comes out of federal, state and municipal budgets. The financing of around half of all health care expenditure is raised through contributions to the social security sector. The level of contributions is not unique for all insurance funds. For insurees covered by ASVG the contributions are currently fixed at a 7.4% pay-roll deduction, equally shared between the employee and the employer. The level of contribution payments has an upper limit currently fixed by the General Social Security Act (ASVG) at €3,450. Public financing of health care currently accounts for 70% of total expenditure. Private expenditure in the form of co-payments, private health insurance fees and other out-of-pocket expenditures account for the remaining 30% (2002). Table 1: Health care expenditure in Austria, OECD/VGR Concept (ESVG 95), 1995 – 2002 (in € million)

Total Health Expenditure Total Health Expenditure as % of GDP Public Health Expenditure Public Health Expenditure as % of GDP Public Health Expenditure as % of Total Health Expenditure GDP Source: Statistics Austria

1995 1996 1997 1998 1999 2000 2001 2002 14,081 14,860 13,839 14,644 15,378 15,994 16,238 16,806 8.2 8.3 7.6 7.7 7.8 7.7 7.6 7.7 9,982 10,351 9,690 10,210 10,710 11,137 11,130 11,740 5.8 5.8 5.3 5.4 5.4 5.4 5.2 5.4 70.9

69.7

70.0

69.7

69.6

69.6

68.5

69.9

172,3

178

182,5

190,6

197,1

206,7

212,5

218,3

Equalization Fund 2% of revenue from the different insurance funds is transferred to an equalisation-fund (Ausgleichsfonds), which is established by law. The main task is to contribute to a balanced level of financing among the health care funds. In addition, structural differences between funds should be equalized, e.g. according to the level of revenue, structure of the insurees (number of dependents, pensioners), urality (counting for special conditions in big cities), obligation from running a hospital, and payment to the hospital sector. In addition, a further 2% has been dedicated for financial incentives to reward those funds which are successful in reaching certain aims. In March 2004, the High Court of justice cancelled main elements of the recent regulation (e.g. the number of participating funds, the separate 2% contribution for the rewards, and urality). 1.3 Outpatient Care At the end of 2002 there were 36,535 registered doctors in Austria of which 13,804 were ‘surgery doctors’, mainly practicing out of individual surgeries. Of secondary importance are doctors working in communal surgeries or sharing medical equipment, as well as practicing in day-clinics. 8,356 or 61% of physicians have contracts with the social security insurers. Of these 4,373 are general practitioners (GPs) and 3,983 specialists. Report: The Austrian Pharmaceutical Market

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Table 2: GPs and specialists contracted by the health insurance funds, 1990 – 2002 Year

Total

1990 7,620 1991 7,600 1992 7,681 1993 7,766 1994 7,870 1995 7,973 1996 8,041 1997 8,138 1998 8,261 1999 8,418 2000 8,592 2001 8,738 2002 8,356 Source: Hauptverband data

GPs

Specialists

4,275 4,239 4,269 4,284 4,317 4,328 4,326 4,341 4,389 4,445 4,529 4,583 4,373

3,345 3,361 3,412 3,482 3,553 3,645 3,715 3,797 3,872 3,973 4,063 4,155 3,983

Physicians are free to open a surgery (Nierdelassungsfreiheit), while patients have the right to freely choose their doctors (principle of choice). If a patient receives medical care billed to the social security fund, he or she may not change the doctor to whom he or she has given his health insurance voucher within the same billing period (per quarter). Remuneration of ‘contract doctors’, i.e. those doctors that have signed contracts with the social insurance funds, is done on the basis of a contract between social insurance and the physicians’ association. In the case of ‘noncontract doctors’ the health insurance fund pays 80% of the cost that would have been incurred if a ‘contract doctor’ had provided the treatment. Remuneration of contract GPs is done on a lump sum basis (a fixed amount per health insurance voucher and per quarter) plus payment for individual medical services provided. Specialists are remunerated on a fee for service basis. The ratio of practicing GPs and specialists (both working in inpatient and outpatient care) to the population is one doctor to 262 inhabitants. This ratio is somewhat below the EU average. Meanwhile there are 615 inhabitants for every ‘surgery doctors’. Between 1990 and 2001 the number of doctors grew considerably. The number of ‘surgery doctors’ grew by 30%, while the number of inpatient doctors grew by 60% during the same period. Overall, the number of ‘contract doctors’ rose by 15% during the same period. Notably, the growth in the number of specialists outpaced that of GPs, whose numbers grew by 24% and 7% respectively. There is no usage of ICD 10165 in the outpatient sector. Graph 1: Trends in the numbers of ‘contract doctors’, 1990 - 2002

165

The Tenth Revision of the International Statistical Classification of Diseases and Related Health is used for the coding of national mortality and morbidity statistics by WHO Member States. Austria implemented the coding for mortality in 1998 and has yet to implement ICD-10 for morbidity statistics. Report: The Austrian Pharmaceutical Market

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Growth in the number of 'contract doctors' ( 1990 = 100 ) 130

124 120

115 110 107

100 1990

1991

1992

1993

1994 total

1995

1996

general

1997

1998

1999

2000

2001

specialists

Source: Hauptverband, own calculations

1.4 Inpatient Care Inpatient care is provided through 310 hospitals and around 71,700 beds (2001). With a ratio of 6.3 acute beds per 1,000 inhabitants, Austria has one of the highest availabilities of hospital beds in Europe. Hospitalisation rates of 29 per 100 inhabitants are very high by European comparison. Over half of available beds are operated by the states, while a quarter are provided by religious orders and local communities. Private individuals operate 15% of hospitals, or 4.6% of beds. Until the end of 1996, financing of hospitals was done on a fixed day fee basis. Since January 1997 medical care in hospitals is financed on the basis of services rendered and diagnostic related group (DRG). Deficits are covered by the public owners. 1.5 Employment Previously in Austria, general practice was organized such that GPs operated in single practices. At present, group practices are increasing in prevalence, where four/five doctors work together. Nurses must be paid out of doctors’ budgets. Most doctors have an assistant and some other employees for routine work who can write, but not sign prescriptions (Source: DI. Mair). As evident from Table 3 below, employment in the health sector in Austria is increasing in all areas. Table 3: Total Employment in the Austrian Health Sector, 1990-2001 1990 1991 1992 1993 1994 1995 Total hospital employment 102822 107784 113110 116627 120633 123956 Practising physicians 17189 17889 18737 19491 20528 21363 Female practice physicians 4451 4741 5092 5445 5866 6196 General practitioners 8394 8752 9126 9394 9729 9971 Practising specialists 8795 9137 9611 10097 10799 11392 Practising dentists 3317 3354 3422 3517 3607 3687 Practising pharmacists 3486 3582 3745 3871 4009 4071 Practising nurses 55802 59032 61940 63912 67479 68859 Source: OECD Heath Data, 2003 Report: The Austrian Pharmaceutical Market

1996 124675 22364 6662 10188 12176 3793 4180 70059

1997 124451 23318 7143 10438 12879 3848 4264 70970

1998 125371 24368 7703 10730 13638 3813 4337 71849

1999 126379 24505 7926 10625 13880 3721 4439 73084

2000 126829 25332 8392 10796 14536 3732 4532 74601 72

2001 126847 26286 8916 11081 15205 3838 4581 74948

2. Reforms of the Health care System Since the beginning of the 1990’s, efforts have been stepped up to increase efficiency in the health care system and to contain costs. The reforms to the hospital financing model were the cornerstone of reform efforts at the end of the 1990’s. Their primary aim was to ensure the financial viability of the health care system given high expenditure trends. A growing shift towards out-of-pocket financing is reflected in the high percentage of private co-payments made towards health care costs. 2.1.1 Overhaul of the Provision of Nursing Care In 1993, a comprehensive nursing care system came into effect. Under its provisions those dependent on nursing care have a right to a scaled nursing allowance. The size of the allowance is based on the need for nursing care and is calculated regardless of the patient’s income or wealth. People in need of nursing care have a legal right to the allowance which is financed through general taxation. The measure was partly designed to boost the numbers of nursing homes. The measure is also designed to increase nursing homes’ capacity for the supervision and care of the elderly, coupled with a reduction of this type of care being provided on an inpatient basis (‘outpatient care before inpatient care’). In exchange for the introduction of the federal nursing allowance, the states committed by contract to boosting their numbers of outpatient nursing homes. 2.1.2 Psychotherapeutic Care Psychotherapeutic care is treated in the same way as other forms of medical care and has been included in the health insurance funds’ catalogue of reimbursable services. However, putting this into practices hinges on the signing of a collective contract between the Federation of Austrian Social Security Institutions and the body representing the interest of psychotherapists. Because this has not yet occurred to date, access to psychotherapy treatment is limited. 2.1.3. Extension of Insurance Coverage In 1996, coverage by the health insurance system was extended to those working in similar conditions to employees but who had previously not been included either by the social security system for the employed or the self-employed. In 1998, these regulations were further refined to include two groups of workers: freelancers and the newly self-employed. Also included were persons who had previously not been included due to their income falling below a minimum threshold. At the same time, employers of persons earning below the minimum threshold were legally bound to make compulsory payments towards their health and pension insurance. Meanwhile, these low-income workers were also offered beneficial rates if they opted for becoming self-insured. 2.1.4 Co-Payments With the aim of consolidating the financial rehabilitation of the health insurance funds, a wave of new copayments was introduced in 1996 including a fee for the health insurance voucher and the introduction of copayments towards stays at spas and rehabilitation centres. Furthermore, prescription co-payments were significantly increased. Furthermore, the reimbursement of ‘non-contract doctor’ fees was lowered from 100% to 80%. One of the first policy initiatives of the governing coalition of the ÖVP (Austrian Peoples’ Party) and the FPÖ (Austrian Freedom Party) was the introduction an outpatient services user fee (Ambulanzgebühr), which came into force on 19 April 2001. An outpatient service user fee was levied at €10,90 if made on a doctor’s referral and €18,17 without a referral. The fee was levied up to a maximum charge of €72,67 per person, per year. However, due to charges of unconstitutionality the High Court has suspended the application of outpatient user

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fees. There are now plans to introduce a general co-payment fee which would replace all current patient copayments and which would cover around 20% of costs. 2.1.5 Membership Fees Membership fees for pensioners were raised, while additional fees were levied on all members of the insurance funds to cover for accidents that occur outside of work hours. Contribution payments made by employers and employees towards the insurance funds were fixed at a uniform 7.4% of income from 1 January 2002. 2.1.6 Reform of Hospital Financing In 1996, in the face of rising costs in the hospital sector, the federal government and the states agreed on reforms to the health sector and the financing model of hospitals valid for the years between 1997 and 2001. In January 1997, the hospital performance based financing model (LKF) was introduced to replace the old fixed day fee. To finance the hospitals, a federal structural fund was set up which was complemented by nine state funds. The size of payments made by the social security institutions to the state structural funds are directly linked to any growth in income by the health insurance funds (‘income-oriented expenditure policy’). The health insurance funds pay around half of costs incurred in the hospital sector; however, they have little influence over any of the sector’s regulatory bodies such as the Structural Commission of the Federal Government and the States (Strukturkommission des Bundes und der Bundesländer). The agreement of the nation-wide ‘Hospital Plan’ (ÖKAP) and the allocation plan for large (major) medical devices (GGP), which applies to around 70% of Austria’s pool of hospital beds, was designed to increase efficiency in the inpatient sector. 2.1.7 ‘Healthy Living Initiatives’ To encourage activities that promote healthier living, a legislative proposal was passed in 1998, which entails additional resources for projects that promote healthier lifestyles. The ‘Healthy Austria Fund’ has been entrusted with the implementation of this programme. 2.1.8 Administration (Social-Security ID) In 1999, preparations began to replace the health insurance voucher system with a social security ID-chip. Following several unsuccessful implementation attempts, plans are now underway for a nationwide rollout of the ID card in 2005. In recent years health insurance funds have had legal caps imposed on permitted administrative work. 2.1.9 Self-Government A restructuring of the social security sector, which did away with the autonomy at the federal level of the Federation of Austrian Social Security Institutions, was repealed by the High Court on grounds of unconstitutionality. 2.1.10 Quality Control A 2001 Doctors’ Act reform permits doctors to open group surgeries. To increase the quality and efficiency of medical services, the Austrian Medical Association has been given responsibility to control the quality of medical care. 2.2 Reforms in the Medicine Sector

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The only measure put into practice at the onset of the 1990’s was to implement a yearly adjustment of the prescription fee. From 1995, Austria implemented a series of targeted cost-containment measures in the medicine market. The rationale for this step was a growth in health insurers’ expenditure – in particular spending on pharmaceuticals – in the context of sluggish economic growth. In a ‘stability pact’ signed in 1993, the government and relevant ministries committed themselves to taking costdampening measures, to ensure that increases in prices for health care were kept below the general inflation rate. As a result in 1995, wholesale and pharmacy margins were legally lowered. Deficits run up by the health insurers in consecutive years (1995 and 1996) led to an ‘austerity pact’. The austerity measures included a rise in the prescription fee of 20%, the switch to OTC-status of several products, the exclusion of pharmaceuticals from the list of approved drugs and therapeutic products (the social insurers’ positive list), lower prices for pharmaceutical manufacturers, a renewed lowering of the wholesale and pharmacy margins as well as the implementation of a co-operative project to encourage the rational use of medicines. Following a further health insurance deficit of €250 million, a new ‘austerity pact’ was decided on. For a number of pharmaceutical products price discounts were negotiated with the industry. Furthermore, the Pharmacists’ Association and the Austrian Federation of Social Security Institutions agreed on a so-called ‘solidarity pact’. Under this agreement, pharmacies are obliged to make a solidarity payment if profits from the sale of health insurance reimbursable drugs increase. The ‘solidarity pact’ was signed to be valid for a five-year period. In 2000, 8% of the additional year-on-year profits were ploughed back into the health insurance system. From 2001, the solidarity payment amounted to 13%. Excluded from this pact were high-cost treatments (whose ex-factory price was above €130,80) (ÖBIG 2001). This agreement was scrapped at the end of 2003 by mutual agreement. The reason for this was the overhaul of the pharmacy margin regulations in the Austrian medicines price register. Consensus could not be reached with wholesalers, a fact which led to the imposition of a regulation based on law to reduce wholesale margins from June 2000. Patients were affected by the austerity measures in the form of a 22% rise in the prescription fee from 1 October 2000 (ÖBIG 2001). In Austria, the increased use of generics could lead to savings of around €727 million over the medium term (ÖBIG 2002). This dimension is deemed to optimistic from the perspective of the HV (Dr. Probst). Some health insurance funds (from Upper Austria, Steiermark, Burgenland and Vienna) have implemented their own measures to encourage the use of generics. The most recent health insurance reform envisages the explicit use of generics. In 2004, a new discount agreement was reached between the industry and pharmacies, which is supposed to see the transfer of €120 million annually back to the health insurance umbrella organisation. Formulated as a political aim, the increase in pharmaceutical expenditure over a period of four years should not exceed 3-4%. At the same time new regulations were applied to the process of including drugs in the insurers’ ‘positive list’ and incentives were provided for the increased use of generics. Table 4: Measures in the pharmaceutical sector, 1991-2004 Month/Year Measures Name

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Description

75

Month/Year Measures Name

Description

1991 – 1995

Adjustment of prescription fee

Yearly increment of the prescription fee

4/1995

Lowering of wholesale pharmacy margins

1/1996

Adjustment of prescription fee

8/1996

Extraordinary increment of the Rise of the prescription fee to € 3,05 (+ 20 %) prescription fee

1-12/1996

OTC Switches

OTC switch of numerous products

1996

Co-Operation Project

Co-operative project dubbed ‘rational medicine use’ (Arznei & Vernunft) bringing together the health insurance funds, the pharmaceutical industry, doctors, pharmacists and patients to foster the ration use of medicines

1996/1997

Exclusion of products from the Exclusion of around 50 pharmaceuticals from the health health insurers’ reimbursable list insurers’ list of approved drugs and therapeutic products and their subsequent loss of reimbursable status. (positive list)

1/1997

Loss of health insurers’ VAT The end to health insurers’ VAT tax exemption status. The social tax-exemption insurance sector now gets a fixed reimbursement.

1/1997

Price reductions pharmaceutical products

2/1997

Lowering of the wholesale and Maximal wholesale and pharmacy margins are lowered. pharmacy margins

1/1998

Adjustment of the prescription Adjustment of the prescription fee to € 3,12 (+ 2,4 %) fee

1998

Pharmaceutical industry price A price discount is negotiated between the health insurance reductions funds and the pharmaceutical industry for 85 pharmaceutical specialities

4/1998

Parallel-Imports

7/1998

Skeleton contract between the A contract between the pharmaceutical industry and the health pharmaceutical industry and the insurers regulates payment models and the inclusion process of pharmaceuticals into the insurers’ positive list health insurers

7/1998

Institution of the Federal The fusion of three existing federal institutes overseeing the Institute of Pharmaceuticals approval of drugs into one institute

1/1999

Adjustment of the prescription Adjustment of the prescription fee to € 3,18 (+ 2,3 %) fee

1999

Pharmaceutical industry price In the framework of negotiations over austerity measures reductions between health insurers and the industry, agreement is reached for the price reduction of 250 pharmaceutical products. This is designed to lead to savings of €0.13 billion

9/1999

Change in pricing rules

1/2000

Adjustment of the prescription Adjustment of the prescription fee to € 3,27 (+ 2,3 %) fee

1/2000

Solidarity pact between the In the face of growing pharmaceutical expenditure, the health insurers and the pharmacists’ association and the health insurers reached an pharmacists’ association valid agreement under whose terms pharmacies pay a percentage of

Report: The Austrian Pharmaceutical Market

and A switch from a fixed margin of 20% for the wholesale sector to a degressive system, while also lowering of the maximum wholesale and pharmacy margins Adjustment of the prescription fee to € 2,54 (+ 2,9 %)

of The agreement reached between the health insurers and the industry in 1996 to lower manufacturer prices comes into force. The price reductions encompass 79 pharmaceutical specialities.

First Parallel Imports into Austria

Introduction of a new pricing procedure applicable to all pharmaceuticals, a price notification procedure replaces the previous fixing of prices by the relevant ministry (this applies to all pharmaceuticals)

76

Month/Year Measures Name between 2000 and 2005.

Description their rise in profits to the health insurers. The five-year agreement came into force on 1.1 2000

4/2000

New Registration Fees

Fees levied on the registration of pharmaceuticals are overhauled and increased.

6/2000

Lowering of wholesale-margins

Authorised wholesale margins are cut

7/2000

Study of savings opportunities in Publication of a study of the savings potential of the increased the use of generics use of generics in Austria

10/2000

Extraordinary rise prescription fee

1/2001

Adjustment of the prescription Adjustment of the prescription fee to € 4,07 (+ 1,8 %) fee

2002

60. ASVG Reform

Rise in the prescription fee to €4,14 (+ 3,4 %); change in procedural rules, institution of an independent pharmaceutical commission as appeal instance.

2003

61. ASVG Reform

Rise in the prescription fee to € 4,25 (+ 2,7 %); Structural Changes (See: Excurs)

in

the Rise in the prescription fee to € 4,0 (+ 22,2 %)

ASVG Reform (Implementation Rise in the prescription fee to € 4,35 (+ 2,4 %) of 61 Reform) Source: ÖBIG Pharmaceutical expenditure: strategies for cost-containment, 2001 2004

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3. Regulatory Instruments in the Pharmaceutical Sector 3.1 Market registration policy for medications Manufacturers can only launch medicines on the market when official authorisation has been granted. The Federal Ministry for Health and Women (BMGF) is responsible for granting marketing authorisation of new medicines. The BMGF is supported by the Federal Institute for Medicines, which was founded in July 1998. The authorisation process also encompasses regulation concerning the wording of the patient leaflet and other technical information, whether or not a product requires medical prescription, as well as its distribution channels. Under the 1984 Medicines Act (amended several times) the manufacturer must prove that the claimed benefits of a new product outweigh its anticipated side effects. To this end the manufacturer must present analytical and preclinical data as well as the results of clinical trials. The Federal Institute of Medicines then verifies whether or not the proof regarding the quality, safety, and efficacy of the product meet the requirements stipulated under the 1984 Medicines Act. Pharmacoeconomic studies are not required for the authorisation. The ministries, departments, and institutes involved include: • Federal Ministry for Health and Women (BMGF) • Department III/A/1 - Quality assurance and Epidemiology of Infectious Disease • Department III/A/4 - Inspection of Blood and Tissue safety as well as pharmaceuticals • Department III/A/5 - Registration of pharmaceuticals human/veterinary • Department III/A/6 - Pharmaceutical monitoring, pharmaceutical information system • Federal Ministry for Pharmaceuticals The personnel in theses facilities are as follows: • Department III/A/1 - 12 persons • Department III/A/4 - 8 persons • Department III/A/5 - 28 persons • Department III/A/6 - 17 persons • Federal Ministry for Pharmaceuticals: ca. 120 persons In the European Union as in Austria, there are three basic forms of registration of specialty pharmaceutical products: 1. National Registration - In Austria, the Federal Ministry for Health and Women (BMGF) is responsible for this. 2. Decentralized Registration - Under the decentralized registration system, the applying company attempts to receive registration for the EU-sector, by having a member country act as a commentator, to whom the other countries (national registrations) can assent. This is regulated in the relevant legal groundwork of the European Union and termed the mutual recognition procedure (MRP). 3. Central Registration - The registration for certain medicine groups happens through the European Commission, the respective registration agency is the EMEA located in London. The majority of drugs are approved by the EMEA and the Austrian licensing agency is little used as either rapporteur or as reference country in many applications. Innovative products are usually registered at the European level (centralised registration) and Austria complies with the legally stipulated guidelines. Austria is within the legally stipulated deadlines for EU-licensed products. The licensing period of actual processing (without time delays due to queries, additional paperwork, etc.) is: 210 days for centrally authorised products and 210 or 90 days for the mutual recognition procedure (MRPs). National implementation of decisions from the EU-arbitration (referrals) takes place within the stipulated 30-day period. Report: The Austrian Pharmaceutical Market

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The national licensing procedure requires a full application: bibliographical application, combination drugs/preparations. Both new applications as well as changes requiring approval take far longer than the legally stipulated period of 210 days. Dr. Geisler (Pharmig) commented that in practice, a national application will take between one and three years and Frau. Dr. Wirthumer-Hoche (BMGF Unit for Marketing Authorization) commented that national market authorization usually takes two years for approval and EU mutual recognition takes two to three months. Currently, a quicker turnaround is possible for generic applications (according to para. 15a AMG); additionally, for certain herbal drugs there is also a simplified procedure (according to para. 17a AMG). Generics are licensed on the basis of dissolution or bioequivalence studies as elsewhere in Europe. Relatively few of the studies presented for such applications have been conducted in Austria – most are done elsewhere in the EU, US or Canada (Frau. Dr. Wirthumer-Hoche interview). The final decisions rest with an independent scientific board. In 2002, this category included around 2,234 pharmaceutical products (Österreichische Apothenkammer, 2003). At present, assessors for market authorization applications are based in different institutes, i.e. university assessors and doctors. The qualification for academics is a completed course of study in medicine, pharmacy, chemistry, biology or other natural science programs, and B-instructors with completed Matura. Furthermore, the departments include secretaries and administrative personnel for logistical purposes. There are separate units that monitor adverse drug reactions (ADRs), perform pharmacovigilance, and GMP inspections. The BMGF Unit has tried to hire more assessors and currently there are only 28 people in the administrative unit. These agencies are not dependent on fee income, which goes directly to the Ministry of Finance. The Ministry decides whether a substance is OTC or prescription only. There is a yearly discussion group made up of representatives from the ministry, industry, pharmacists, physicians, insurers, and other stakeholders. There have been attempts to increase the list of OTC products driven by the desire to match the lists with other EU countries. This decision to switch from prescription-only to OTC is influenced by what is available on other OTC markets; particularly the German – Austrian patients see widespread advertising of OTC medicines in German media which filter across, especially Germany (Frau. Dr. Wirthumer-Hoche interview). Registration of OTC products created by an individual pharmacy allows only their sale in that pharmacy. Some prescription-free drugs are reimbursable in Austria and are usually of very low cost (less than the cost of the co-payment). ÖBIG deals mainly with statistical problems. In addition to this, expert opinion from external sources, mainly from the university sector, is consulted for pharmaceutical product registration as well as for pharmacovigilance (Frau. Dr. Wirthumer-Hoche interview). There have been no problems with counterfeit products in Austria and no concern about the quality of products likely to come in from the new EU accession states. Already many patients in border area seem to cross into Hungary or the Czech Republic for less expensive medicines.

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Graph 2: Austrian Pharmaceutical System as of 2003

REGISTRATION

New Pharmaceutical

European Commission/EMEA and/or Ministry of Health and Women (BMGF) Federal Pharmaceutical Institute (BIfA) Functions: decides over marketing authorisation, prescription or OTC status and whether or not subject to sale by pharmacies only. Criteria: Quality, Safety, Efficacy (Legal guidline 2001/83 EG and.Medicine Act of 1984 as hereafter amended) distribution (Prescription drug law 2002, Sales Restrictions Guidelines).

OTCs

REIMBURSEMENT

approved Federation of Austrian Social Security Institutions,advised by the technical board Functions: decides over the inclusion into the approved list of drugs and therapeutic products which means automatic reimbursement by the health insurers, otherwise only granted on the authorisation of a senior physician) Criteria Medical-therapeutic and economic criteria

reimbursable

PRICE

Fedeartion of Social Security Institutions Functions: Price negotiations with the industry over the product’s inclusion into the positive list. Criteria: Cost-benefit analysis, price comparisons

Ministry of Health and Women Functions: Check the notified price Criteria: „economically justifiable price“ (Price Law)

Pharmaceutical products on the market Industry

SALE

Wholesale

Hospitals

Hospital pharmacies

Pharmacies

Dispensing Physicians

Drugstores, health food shops

Outpatients Source: ÖBIG, 2004

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In 2002 around 61% of product registrations were done under the normal procedures (70% in 1996) while 7% (8% in 1996) of new products were approved under the abbreviated registration procedures applicable to OTC products. Between 1990 and 1997, the number of registered pharmaceuticals had doubled and by 2002 it had nearly tripled. In 2002, some 15,400 human pharmaceuticals were granted registration (see Table 5). The particularly high growth (23%) in the number of registrations between 2001 and 2002 can be explained by the relatively high registration of homeopathic products. Table 5: Trends in the registration of human pharmaceuticals, 1996 and 2002 1996

Human Pharmaceuticals

2002

10,236

All pharmaceuticals

15,339

6,931

Standard Registration Process

9,418

839

Abbreviated Registration Process

1,033

2,201

Pharmacy-Own Products

2,251

68

Homeopathic Products

2,614

Graph 3: Evolution in registrations of human pharmaceuticals, 1990 - 2002

Registred Drugs (1990-2002) 2002

15,339

2001

12,443 12,633

2000 1999

12,255

1998

11,688

1997

10,891

1996

10,236

1995

9,671

1994

8,773

1993 1992 1991 1990

7,568 6,635 5,942 5,476

Source: Hauptverband, Pharmaceutical Data

The number of available drugs remained constant throughout the 1990’s. Because of a strong growth in the number of registered drugs, the percentage of available drugs to registered drugs has fallen significantly to reach 31% in 2002.

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Graph 4: Registered and Available Human Pharmaceuticals, 1990 to 2002

Registered and Available Drugs 15,339

11,688 8,773 5,476 4,215

1990

4,612

3,931

1994 registered

1998

4,721

2002

available

Source: Hauptverband, Pharmaceutical Data

Pharmaceuticals are placed into the following categories - available on prescription only, OTCs, and subject to sale in pharmacies only. A Ministry of Health and Women special commission decides over the status of each drug. All prescription drugs are automatically subject to sale in pharmacies only. Pharmacies make most of their revenues (around 90%) from products that are for sale in pharmacies only. Only a small number of OTC products – including vitamins and teas – are authorised for sale in health food stores and drug stores. (ÖBIG, 2001). In 2002, 68% of all available drugs were prescription drugs. Prescription drugs contain potentially harmful ingredients. Medicines are classified as prescription drugs if they are deemed to potentially endanger the life and health of the patient even when taken accordingly but without medical supervision. Therefore, prescription status applies if the nature of the disease or treatment requires medical intervention. Medicines that even when misused cannot harm the patient can be sold without a prescription. The prescription status is independent of the drug being reimbursable by the health insurers. Table 6: Trends in the number of OTC products, 1992-2002

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Year

OTCs

% of registered drugs

1992

1,068

16.1

1993

1,776

23.5

1994

2,654

30.3

1995

3,102

32.1

1996

3,971

38.8

1997

4,167

38.3

1998

4,381

37.5

1999

4,031

32.9

2000

4,571

36.2

2001

4,531

36.4

2002 4,911 32.0 Source: Hauptverband, Pharmig Facts and Figures, 2003

The nature of the drug registration process has led to a marked growth in the number of OTC products since the mid-1990’s. Currently around a third of all medicines can be sold without a prescription. Conversely, the percentage of prescription drugs has fallen during the same period. Without counting pharmacy-own products (around 2,251 in 2002) around 79% of available drugs require a prescription. Table 7: Registered, available, and prescription-only drugs, 1990, 1996 and 2002

Status of drugs

1990

1996

2002

registered

5476

10236

15339

available

4215

4464

4721

prescription-only

4854

6265

10428

Source: Hauptverband (Pharmaceutical Data), Pharmig

In conclusion, through the 1990’s the number of registered drugs has tripled, the number of prescription drugs has doubled while the number of available drugs in the market (excluding pharmacy-own products) has remained stable.

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3.1.1 Division of stakeholder responsibilities The Ministry of Health and Women (BMGF) is responsible for the application procedure for pharmaceutical products, including the price for medicines (see Appendix 4: An Overview of Commissions). The Hauptverband is responsible for reimbursement decisions. The regulatory power of the BMGF also includes the basic rules for prior authorisation. The extent is defined by law and the regulatory framework has to be negotiated between the Hauptverband and the physicians, but needs approval by the Ministry. The rules, based on law and the agreement with further clarifications has to be executed by the insurers. The height of the earnings in the distribution sector is determined by the BMGF. For pharmacies, this includes the Austrian drug tax (VAT) and for pharmaceutical wholesalers, the regulation of the highest possible surcharges in the wholesale sector. Furthermore, the government has the possibility to influence the design of the respective matters (e.g. in the pharmaceutical sector) by changing the laws in the social security law. The changes made by them concerning the duties of the chief physician are caused by respective changes in the social security law. In addition, the BMGF has the right/duty of supervision toward the social security holders. 3.2 Health Insurance Reimbursement The health insurers are legally bound to carry the cost of treatment as long as the pharmaceutical is “required for the sufficient and appropriate medical treatment while not exceeding the bounds of the necessary”. Reimbursement of the cost of a drug by the health insurers generally hinges on authorisation by a senior physician. The inclusion of drugs in the health insurers lists of approved drugs and therapeutic products (positive list) guarantees their reimbursement when prescribed by a ‘contract-doctor’ rendering individual authorisation by a senior physician unnecessary. 3.2.1 Procedures The decision over the inclusion of drugs into the ‘positive list’ is reserved for the health insurers’ umbrella organisation, the Federation of Social Security Institutions, which supports its decision on the recommendations of a special technical commission. Application to have a product included in the list must be made to the health insurers’ umbrella organisation by the drug’s manufacturer. Within 14 days of receipt of the application the federation must undertake to examine that it is complete and complies with all formalities, and a formal decision giving reasons must be given within 180 days. The authorised manufacturer must provide proof and ensure that the product can be supplied. Manufacturers have recourse to appeal against a negative decision by the Federation. The appeal may be lodged with the independent Pharmaceutical Commission, which is presided by a judge and has the final say (in terms of cassation rights). 3.2.2 Criteria for the Inclusion of Drugs into the Positive List When deciding whether or not to include a drug in the positive list of reimbursable drugs, the Federation of Social Security Institutions examines the basis of pharmacological, medical-therapeutic, and economic criteria an approximation of cost per unit of benefit. The main criterion is whether or not the product will be therapeutically beneficial to patients and not the evidence of a “new drug class” or “level of innovation”. As part of this process, the new product is compared to a similar product already on the positive list guided by the products’ indication, dosage and benefits. Thus, evidence of therapeutic benefit should accompany application to be included in the positive list. The comparison between the applicant product and an already approved product examines their comparative therapeutic effect (the same or different; therapeutic innovation) and their characteristics (active ingredient, strength of active ingredient, dosage and form of administration). In the case of a product providing a new form of treatment, the product’s therapeutic benefit is compared to existing treatment methods.

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3.2.3 Nature of Inclusion into Positive List The inclusion into the positive list can either apply to all prescriptions of the drug or have restricting conditions attached to it such as when prescribed to a certain age groups or patient groups. Further restricting measures can be applied by stipulating prescription by specialist doctors practicing in certain areas. Furthermore, a once renewable time limit can be imposed, as well as requiring the meeting of further pharmacological, medicaltherapeutic, or economic conditions. When including a product into the positive list, the Federation can also indicate the package size to be used for the acute and chronic treatment of diseases. Guidelines for economical prescribing include an exhaustive list of products excluded from reimbursement. These include: medical wines and all wine-containing preparations, mineral waters, bath essences without therapeutic effect, cosmetics, products used for the cleansing and care of the skin, hair, nails, teeth, mouth etc. as well as dyes, nicotine patches and products used to stimulate or increase sexual drive. In a separate positive list, products are listed whose reimbursement by the insurers hinges on authorisation by a senior physician. Please see Section 6.6 on Senior Physician Authorisation. 3.2.4 Status of Medicines Of the 4,721 available drugs, around 60% are included in the positive list. Around 50% of available drugs can be prescribed without the prior authorisation from a senior physician. In 2002, 3,013 medicines were included in the positive list, 2,569 of which are freely prescribable. Graph 5: Status of drugs, registered versus those included in the positive list, 1990 to 2002

Status of Drugs in 1,000 18

registered drugs

16

15,339

positive list drugs

14 11,688 12,255 12 10 7,568

8 5,942 6

9,671

12,443

8,773

10,236

6,635

5,476

4 2

12,633

10,891

2,691

2,675

2,775

2,965

2,941

2,798

2,761 2,766

2,626

2,595

2,979

2,864

3,013

0 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Table 8: Status of Drugs, 1990 to 2002 Year Registered Available 1990 1991 1992 1993 1994 1995 1996 1997

5,476 5,942 6,635 7,568 8,773 9,671 10,236 10,891

4,215 4,191 4,201 4,121 3,931 4,364 4,464 4,511

On Positive List 2,595 2,675 2,626 2,691 2,766 2,761 2,775 2,798

Report: The Austrian Pharmaceutical Market

As % of As % of Freely Prescribable available drugs available drugs 61.6 63.8 62.5 65.3 70.4 63.3 62.2 62.0 2,451 54.3 85

1998 11,688 4,612 2,864 1999 12,255 4,667 2,941 2000 12,633 4,668 2,979 2001 12,443 4,666 2,965 2002 15,339 4,721 3,013 Source: Hauptverband, Österreichische Apothenkammer

62.1 63.0 63.8 63.5 63.8

2,492 2,517 2,571 2,531 2,569

54.0 53.9 55.1 54.2 54.4

3.2.5 Control of Physicians’ Prescribing Habits Guidelines on economic prescriptions are defined by the Hauptverband. The Federation of Social Security Institutions’ publication ‘guidelines for the economical prescription of pharmaceuticals and therapeutic products’ targets the actual prescribing habits of ‘contract doctors.’ The positive list of reimbursable drugs includes an ‘economical list’ which details cost-effective alternative treatments available to doctors. Doctors are thereby encouraged to prescribe the most economical product out of several therapeutically similar alternatives. The positive list and the ‘economical list’ are available electronically for integration into surgery software programmes. Health insurers observe compliance of these guidelines. Selected ‘contract doctors’ are compared to the average prescription outcome of other doctors. If a specific doctor is seen to be permanently prescribing above the average, he or she may be required to pay the difference in cost. Health insurers’ supervision of physicians’ prescribing habits is done systematically using software programmes. According to the contract between the insurers and the association of doctors, as a first step in the case of non-adherence, the doctors will get information followed by a friendly talk to sort out possible solutions. If an agreement is not possible, the case can be brought to an arbitration board (Schlichtungsausschuss). Each party (doctor or insurer) can invoice the decisions and call upon the Paritätische Schlichtungsstelle. A detailed description of the health insurers’ controlling mechanisms over prescription habits can be found in Section 9.6, Health Insurers’ Cost Containment Measures. The funds collect a lot of data on the usage of medical services; however systematic reviews are rather rare. Initiated by the Hauptverband, Oberösterreich started a well-defined program on costs associated with utilisation of physicians (FOKO). This system recently was implemented also by other funds. FOKO was originally designed to control and monitor doctors prescribing behaviour. Information collected includes the kind of treatment, the use of other medical service, referrals, prescriptions, transport, etc. FOKO includes information on patients, including sex, age, occupational status, and address. Information on the development of volume and value of tariff-groups is available for each fund. With special regards to pharmaceuticals, Hauptverband annually provides information on the number of physicians under contract, public pharmacies, dispensing doctors, the value and number of prescriptions, number and status of insured persons, cases (vouchers, Krankenscheine), classification of drug, price classes of drugs, indication-groups, prescriptions according to age, volume and value of drugs which need prior approval, and generics (Heilmitteldaten). Following a recently established obligation for the doctors association, a special institute will be established to develop guidelines for quality in treatment and to enforce quality control among their members. According to the framework set out by law, the doctors association is responsible for the establishment and implementation. Also, Section 6.8 provides stakeholders’ views towards quality prescribing including physician guidelines, prescription monitoring, and computer support. 3.2.6 Information systems The work performed by the social insurance agencies in Upper Austria and Vienna will be collected per patient through the IT-standard product FOKO, as detailed above. FOKO records the costs associated with a physician visit or treatment, including referrals to hospitals and specialists, the use of pharmaceuticals or diagnostics. Report: The Austrian Pharmaceutical Market

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The insured will also be informed about the performances concerning them in the coming year within the framework of the EDV-standard product LIVE. LIVE collects information for all patients, including the treatments they have received in the past. At present, there are no comprehensive, population-based drug information systems in Austria. 3.3 Price Regulation Pharmaceutical prices in Austria are regulated at all stages of the distribution channel. 3.3.1 Ex-Factory Prices The regulation of ex-factory prices is based on the Price Act of 1992. Under this law, an ‘economically justifiable maximum price’ is set on ministerial instruction with the advice of the Price Commission. In the past, pharmaceutical companies had to apply for the price of a product to be fixed or for authorisation of a price increment at the responsible ministry. Since 1 September 1999, the principle of duty of notification prevails. In practice this means that the ministry must be informed of the sought price or price changes. If the price is deemed too high an official price fixing process can be initiated. If the ministry fails to give a reply within six weeks, the sought price is automatically granted. This form of price regulation was valid until 2003 and has been reformed in the wake of the 2004 reforms (see Section 3.3.3 for details of the new system). 3.3.2 Prices and the Positive List Manufacturers engage in separate price negotiations with the Federation of Social Security Institutions when applying to have their product included in the positive list. In practice this means that prices authorised (or notified) during the registration process may be undercut. When deciding over the inclusion of a product into the positive list the Federation draws on economical considerations alongside of pharmacological and medicaltherapeutic considerations. The procedure to determine which drugs are included in the positive list takes place four times a year. The economical assessment of a product includes a comparison of its costs on the basis of ex-factory prices with existing treatment alternatives. In this comparison the new product’s price is pitted against that of the cheapest alternative already included in the positive list. The product’s potential sales as well as its price in other European countries will also be taken into account. Only once the medical-therapeutic and economical evaluation process is concluded and consensus is reached over the product’s price with its manufacturer, will it be included in the positive list. Table 9: Inclusion into the positive list - criteria for the economical evaluation Therapeutic Effect

Active Ingredient New

Strength of Dosage Active Ingredient New

New

Economical Benefit: FAP/DAP depending on treatment -10% below the comparable product

identical/similar Identical

Identical

Identical 1. Product: 2. Product:

-30% of that of the 0riginal -10% of the first follow-upproduct

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Therapeutic advance

New

New treatment

New

New

New

nth Product:

economic advantages

Additional benefits:

max. 10% above

comparable product Special benefit: more than 10 %above comparable product

New

New

comparison with other treatments, and other EU countries Advance compared to alternatives-

FAP= Ex-factory price, DAP= Ex-warehouse price

The inclusion of follow-up products (identical/similar therapeutic effect and identical product characteristics) into the positive lists has repercussions on already included originator products and other follow-up products. Originator products are subject to a price ceiling of 10% above that of the first follow-up product, and 5% above the price of all other subsequent follow-up products. Since 1998 parallel imports of drugs are annexed to the positive list as long as they are directly comparable to positive list products that are either directly imported or produced in Austria and as long as their ex-factory or ex-warehouse price is at least 10% lower. There are currently 643 such products. For the years 2004, 2005 and 2006 pharmaceutical companies are obliged to give a 2% ‘industry rebate’ to the Federation of Social Security Institutions on revenues made from the sale of drugs to health insurers. Companies with a turnover of less than €2 million are excluded as well as the first €2 million made by a company exceeding this threshold. For 2004, the rebated was estimated to be €23 million. 3.3.3 Excurs: New Regulations 2004 The positive list’s legal foundations were overhauled in 2003. As before, the positive list (now known as the reimbursement code), applies to the reimbursement of drugs prescribed by surgery doctors; however, the drug categorisation is being changed in accordance with the World Health Organisation’s (WHO) ATC-Code (anatomical, therapeutic and chemical classification). Drugs in the new reimbursement code are divided into three categories: Only upon application, newly launched products remain in the red category for a period of 24 months (up to a maximum of 36 months). As a temporary measure, all products that have applied to be included in the yellow or green categories have been placed into the red category, unless the health insurers’ umbrella organisation refused reimbursement within 90 days. Drugs that are in the red category will only be reimbursed by the health insurers on condition of the health insurers’ senior medical advisor’s authorisation. Authorisation must be sought from the doctor treating the patient, while the cost of the drug cannot be transferred on to the patient. In case of a negative decision, the patient does have legal recourse to appeal. The price of a pharmaceutical is based on its average price in other EU countries. A price commission determines this price taking into account ÖBIG guidelines and the average European price of the product. To calculate the average EU price, the price commission will use information provided by the product’s manufacturer and check this against data provided by ÖBIG. From the time the average EU price has been established and the Federation of Social Security Institutions has been informed the product remains in the red category for a maximum of 24 months. As a result its reimbursement status hinges on authorisation from a senior physician. Based on the new legal regulation, the price commission of the BMGF is required to calculate

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the EU-average price for specialty medications in the red or yellow sector of the code of reimbursement. Their approach has been disclosed on the Internet at the following address: http://www.bmgf.gv.at/cms/site/detail.htm?thema=CH0008&doc=CMS1078931881119. If no EU average price can be established the manufacturer’s indicated price will be used for reimbursement purposes. In this case the price commission carries out a price evaluation every six months. If a price established in this way lies below that indicated by the manufacturer, the difference must be paid back to the health insurers. Such products remain in the red category for a maximum of 36 months. During this time period the Pharmaceutical Evaluation Commission will study the therapeutic benefits of the product in question, basing their analysis on pharmacological, medical-therapeutic, and health economic data. The commission then recommends the inclusion or not into the yellow or green categories. The Federation of Social Security Institutions gives its decision within 90 days (180 days in the case of an application to have a product’s status changed) from the date it receives the recommendations. In the case of a negative decision, the manufacturer has recourse to appeal to the independent Pharmaceutical Commission. The yellow category includes those products that carry fundamental therapeutic benefits or are considered an important therapeutic innovation. Inclusion into this category can be restricted to certain uses of the pharmaceutical including: • disease groups • specialist doctors • patient age groups • quantity or method of application For drugs in this category to be reimbursed the health insurers’ senior medical advisor must give his consent. This concept will be changed for drugs in the yellow and in the red box: The price of pharmaceuticals in the yellow category must not exceed the EU average price. The product’s price is also set by the Price Commission, taking into account ÖBIG guidelines. Applications for price increments are decided upon by the Federation of Social Security Institutions within 90 days of receipt of the Price Commission’s recommendations (in exceptional cases it may take a further 60 days to deliberate). In the newest version of the regulation, prior approval will be abolished and replaced by ex-post control. for all products in the yellow and red categories. The green category comprises those products that can be freely prescribed without the need for authorisation from a senior physician. Drugs concocted in pharmacies also fall into this category, unless the Medicine Evaluation Commission reaches a different verdict. The free prescription of drugs in the green category is considered medically and health-economically sound. The assumption is made that products in this category have identical or similar therapeutic effects to already available drugs. Inclusion into the reimbursement code can be restricted to certain drug usages. The price differential to a comparable product must be sufficiently high. A higher price compared to a similar product must be justified by proof of its superior therapeutic value. A so-called “negative list” (black category) contains products that are deemed unsuitable for use in medical care, either because they are used in a hospital setting under constant medical supervision or that are used for preventive or cosmetic purposes (list for illustration purposes not exhaustive). The Federation can decide to take products out of the reimbursement code, change their assignation to a category, or impose restrictions, in the wake of new pharmacological, medical-therapeutic or economic findings. The product’s manufacturer has a right to comment or complain against any such decision.

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As soon as a generic (defined as a bio-equivalent copy product of an innovator drug) becomes available the Federation of Social Security Institutions re-initiates price negotiations over the price of the originator product. The industry is obliged to notify the Federation of any patent expiries. • • • • •

Price negotiations with manufacturer of the originator product must agree to a 30% discount. Only then can the product remain included in the reimbursement code. The price of the (first) generic is set in such away that it is 25.7% below the price of the discounted originator product. In 2004 the value is 20%, in 2005 it will be 22.9%. All subsequent generics must have a sufficiently large price differential to the first generic. From the third price reduction triggered by the inclusion of generics, a new price discount is to be negotiated for the originator product. If agreement for such a price discount cannot be reached the product is to be taken out of the reimbursement code. If no generic is launched in Austria in the wake of a patent expiry, the Federation can -if recommended by the Pharmaceutical Evaluation Commission to do so-invite tenders for the active ingredient (or group of active ingredients). Generics’ lower prescription fees are designed to encourage their increased use.

These measures are designed to contain annual rises in health insurers’ expenditure on drugs to between three and four percentage points between 2003 and 2006. The new regulations also aim to ensure high quality standards are maintained in the pharmaceutical supply, link health insurers’ expenditure patterns to their income, and evaluate pharmaceuticals in the light of medical but also pharmacological and health-economic criteria. Table 10: Summary of coloured boxes in new reimbursement code Boxes • •

Red • • • • Yellow

• • •

Green

• •

Black (negative list)

•

Products and guidance Newly launched products and all products that have applied to be included in the yellow or green categories (unless HV refused reimbursement within 90 days) Remain for a period of 24 to 36 months o max. 24 months from the establishment of the avg. EU price o max. 36 months for products where no average EU price can be established, use manufacturer’s indicated price for reimbursement purposes and commission performs price evaluation every six months (any difference must be paid back to the health insurers) Pharmaceutical Evaluation Commission studies the therapeutic benefits of the product, basing their analysis on pharmacological, medical-therapeutic, and health economic data, then recommends inclusion or not into the yellow or green categories Products only reimbursed on condition of prior approval by a senior physician (chefarzt) sought by doctor treating the patient Products with fundamental therapeutic benefits or considered important therapeutic innovation Can be restricted to disease groups, specialist doctors, age groups, quantity or method of application only reimbursed on condition of senior physician authorisation. Documentation is organised by the different health insurance plans (the same rules are applied for noncontracting doctors). price must not exceed average EU price, applications for price increments are decided upon by HV within 90 days of receipt of the Price Commission’s recommendations products that can be freely prescribed, “normal pharmaceuticals”, and pharmaceuticals concocted by pharmacies (unless registered in the yellow box by the Commission) considered medically and health-economically sound, identical or similar therapeutic effects to already available drugs contains products that are deemed unsuitable for use in medical care, because they are used in a hospital setting under constant medical supervision or used for preventive or cosmetic purposes For products on this list that are used in hospitals, when the patient re-enters the

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community care setting, prior approval by senior physicians (chefarzt) is required to gain reimbursement. There is no regulated price for such products, but freely determined by industry respectively wholesalers or pharmacists.

Temporary measures are included in the law to apply to those pharmaceuticals included in the existing positive list. Table 11: Examples of changes In 2004 included in the positive list: ‘normal’ pharmaceuticals Pharmaceuticals concocted by Pharmacies Special pharmaceutical list Before coming into force only available with senior physician’s authorisation From 1.1.2004 registered and available

from 2005 (at the latest) in the reimbursement code green category green/yellow category yellow category red category regarding price: red category (exception: under agreement between Federation and manufacturer - green category)

3.3.4 Wholesale Prices Wholesale prices are legally regulated. Prior to 1.4.1995 the wholesale margin was uniformly set at 16.7%. From that date, wholesale margins were degressive. Wholesale margins were lowered both in 1997 and in 2000. In mid-2000 they were again lowered, following a failure to reach agreement with the health insurers. Most recently, maximum wholesale prices were fixed and lowered on 1.1.2000. Table 12: Reduction in Wholesale Margins, 1997 and 2000 Ex-factory prices in € Wholesale Margin in % 1997

2000

0,00 – 6,06

15.3

14.9

6,07 – 6,21

15.3 - 13.8

14.9 -12.7

6,22 – 12,11

13.8

12.7

12,12 – 12,32

13.8 - 12.3

12.7 - 11.1

12,33 – 53,78

12.3

11.1

53,79 – 54,75

12.3 -10.7

11.1 - 9.5

54,76 – 181,68

10.7

9.5

181,69 – 184,18

10.7 -9.1

9.5 - 8.3

184,19 – 339,14

9.1

8.3

above 339,15

32.70 €

30.52 €

As a result of the repeated reductions in the margins, the average wholesale margin (measured in the pharmacy cost price) has also come down. Table 13: Average Wholesale Margins, 1995, 1997 and 2000 Margin Reduction From April 1995 February 1997

Average Wholesale Margin around 14.3 % around 13.0 %

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June 2000 around 11.5 % Source: Austrian Pharmacists’ Association, 2003

Dr. Probst (Hauptverband) commented that the margins for pharmaceutical wholesalers are within the European average, because of the four decreases evoked by the Federation (Hauptverband) since 1995. From 1.1.2004, for pharmaceuticals included in the positive list (the yellow or green categories of the reimbursement code) and for all other pharmaceutical separate margins apply as illustrated in the table below. Table 14: Wholesale Margins, From 1.1. 2004 Wholesale Margins in % Ex-Factory Price in € Positive List Ex-Factory Price in € Others 0,00 – 6,06 13.4 % 0,00 – 6,06 13.4 % 6,07 – 6,22 13.4 % - 11.1 % 6,07 – 6,21 13.4 % - 11.1 % 6,23 – 12,11 11.1 % 6,22 – 12,11 11.1 % 12,12 – 12,32 11.1 % - 9.5 % 12,12 – 12,32 11.1 % - 9.5 % 12,33 – 53,78 9.5 % 12,33 – 53,78 9,5 % 53,79 – 54,75 9.5% - 7.8 % 53,79 – 54,75 9.5 % - 7.8 % 54,76 – 181,68 7.8 % 54,76 – 181,68 7.8 % 181,69 – 184,22 7.8 % - 6.5 % 181,69 – 184,18 7,8 % - 6,5 % 184,23 – 339,14 6.5 % 184,19 – 339,14 6.5 % Over 339,15 € 23.74 Over 339,15 € 23.74 Source: Austrian Pharmacists’ Association, 2003 Table 15: Wholesale Margins According to iwi, 1998, 2000, and 2001 Margins in Relation to Margins in Relation to Ex-Factory Price Pharmacy Purchase Price 1998 14.7 12.82 2000 11.8 10.29 2001 12.98 11.32 Source: Institute of Economic Research (iwi) (2003) The Austrian Pharmaceutical Wholesale Business, p 53 Year

Regulatory interventions undertaken in the years 1994, 1997 and 2000 are reflected in intermittent reductions in pharmaceutical wholesale prices. Compared to trends in the general consumer price index the pharmaceutical price index is characterised by small but sharp price increments. Graph 6: Trends in wholesale pharmaceutical prices compared to the general consumer price index, 1990 - 2002

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Pharmaceutical and Consumer Prices index ( 1990 - 2002 )

%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

5.0 4.1

4.0 3.3

3.0

3.6

3.3

Consumer prices

3.0

2.7 2.2

2.0 1.0

0.8

0.0

2.3 1.9

1.8 1.3

1.0

0.9 0.5

0.3

0.0

0.6 0.2

-0.3

-0.3

-0.2

-1.0 -1.7

-2.0

-1.2

Pharmaceutical prices

-1.7

-3.0 -3.7

-4.0

Source: Pharmig, Facts and Figures 2003

The intermittent effect of a reduction in wholesale margins is also reflected in health insurers’ expenditure trends. In years following a reduction, the rate of expenditure increases slowed; however, when regarded over time increments were significant. Graph 7: Reductions in Wholesale Margins and Pharmaceutical Expenditure

Pharmaceutical Expenditure growth rates in % ( VAT excl. )

% 16

13.4

14

13.3

12 10 8

Volumen rund € 35 8.3

Volumen rund € 80 Mio

Volumen rund € 50

6.5

6.2

6

5.7

5.3

4

8.0

4.8

3.7

2 0 1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Table 16: Ex-factory and pharmacy purchase price

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Ex-factory/warehouse price in € up to 6,06 6,07 – 6,21 6,22 – 12,11 12,12 – 12,32 12,33 – 53,78 53,79 – 54,75 54,76 – 181,68 181,68 – 184,18 184,19 – 339,14 above 339,15

Wholesale Margin as % Ex-factory price 17.5 % 14.5 % 12.5 % 10.5 % 9.0 % lump-sum € 420

Pharmacy Purchase Price in € 7,06 13,87 60,50 200,76 -

See Appendix 7 for the Regulation of the margins for wholesale and pharmacies and VAT in EU member states. 3.3.5 Pharmacy Margins The Federation of Social Security Institutions (HV) can come to agreements with the Pharmacists’ Association regarding the sale of reimbursable drugs. All pharmacies are then bound by such an agreement. The maximal size of pharmacy margins are officially fixed and recorded in the medicines price register. In 1995, 1997 and 2004 the pharmacy margin was lowered. Like wholesale margins, they are degressively staggered. An agreement reached between the Federation and the Pharmacists’ Association meant that from 1.1.2000 a percentage of pharmacies’ revenue increases had to be channelled back to the health insurers. The agreement is valid for five years. The 107th amendment to the medicines price register of 30.12.2003 also changed the pharmacy margin (see table below). Table 17: Maximum Pharmacy Margins, Valid since 1.2.1997 Pharmacy Margin in % of AVP up to 7,29 35.5 % 7,30 to 7,58 11,37 7,59 to 15,70 49 % 32.9 % 15,71 to 16,25 23,40 16,26 to 26,25 44 % 30.6 % 26,26 to 27,19 37,86 27,20 to 63,09 39 % 28.1 % 63,10 to 65,44 87,71 65,45 to 90,74 34 % 25.4 % 90,75 to 94,26 121,65 94,27 to 108,99 29 % 22.5 % 109,00 to 113,38 140,62 113,38 to 130,80 24 % 19.4 % 130,81 to 135,73 162,20 135,74 to 203,43 19.5 % 16.3 % 203,44 to 211,39 243,16 211,40 to 363,30 15 % 13.0 % 363,31 to 371,37 417,86 from 371,37 12.5 % 11.1 % Source: ÖBIG; AEP= Pharmacy Purchase Price. AVP=Pharmacy Retail Price AEP in €

Pharmacy Margin in % of AEP 55 %

AVP in €

Table 18: Pharmacy Margins Including and Excluding the Rebate (in %) AEP in €

Excluding Rebate

Report: The Austrian Pharmaceutical Market

Including 7.6% Rebate 94

35.5 30.1 0,00 - 7,29 35.5 - 32.9 30.1 - 27.3 7,30 - 7,58 32.9 27.3 7,59 - 15,70 32.9 - 30.6 27.3 - 24.8 15,71 - 16,25 30.6 24.8 16,26 - 26,25 30.6 - 28.1 24.8 - 22.1 26,26 - 27,19 28.1 22.1 27,20 - 63,09 28.1 - 25.4 22.1 - 19.1 63,10 - 65,44 25.4 19.1 65,45 - 90,74 25.4 - 22.5 19.1 - 16.0 90,75 - 94,26 22.5 16.0 94,27 - 108,99 22.5 - 19.4 16.0 - 12.6 109,00 - 113,38 19.4 12.6 113,39 - 130,80 19.4 16.3 12.6 - 9.3 130,81 - 135,73 16.3 9.3 135,74 - 203,43 16.3 - 13.0 9.3 - 5.8 203,44 - 211,39 13.0 5.8 211,40 - 363,30 13.0 11.1 5.8 - 3.7 363,31 - 371,37 11.1 3.7 Above 371,37 Source: Austrian Pharmacists’ Association, AEP= Pharmacy Purchase Price

DI. Mair (Upper Austria Insurance Fund) remarked that margins for pharmacists are high if you compare them with margins in other sectors and that margins should be decreased. He commented that the advantages and disadvantages of fixed fees per items and declining payment according to the sales volume of the pharmacy, should be evaluated. If there are advantages pharmacists could be paid by these methods. Univ. Prof. Dr. Hans-Georg Eichler, remarked that although margins have come down over the recent years the current incentives still stimulate the selection of more expensive products. Pharmacy margins applicable to the price of reimbursed medicines are 15% below those applied to end consumer prices. In addition, pharmacies are legally bound to give health insurers a rebate, the size of which is linked to the pharmacy’s revenues with drugs sold for a particular health insurer. On average the rebate was 7.5% in the years 1997, 1998, and 1999 and 7.6% between 2000 and 2002 (Pharmacists’ Association, ÖBIG). On submitting the prescription, the pharmacy gets the ‘health insurance price’ reimbursed from the health insurer. The table below groups pharmacies according to rebate groups and average rebates between the years 1997 and 2002. Table 19: Turnover and Structure of Pharmacies According to Rebate Groups, 1997 - 2002 Number of Pharmacies 1997 1998 Rebate ( Turnover) 20 18 1.0 % ( - 220,000 €) 9 9 3.0 % ( - 290,000 €) 174 139 6.2 % ( - 580,000 €) 320 290 7.3 % ( - 870,000 €) 527 609 7.7 % ( above ) 7.5 % 7.5 % Average Rebate Source: Austrian Pharmaceutical Association 2003

1999 24 7 102 253 700 7.5 %

2000 28 6 76 196 806 7.6 %

2001 17 4 65 188 852 7.6 %

2002 18 5 59 172 886 7.6 %

Due to rising pharmaceutical expenditure, a five-year agreement was reached in 1999, which obliges pharmacies to pay back a percentage of rising revenues from the sale of reimbursable medicines. For the year 2000, 8% of Report: The Austrian Pharmaceutical Market

95

revenue increases were paid back, while between 2001 and 2004 the ‘solidarity payment’ was an annual 13% of revenue rises. Table 20: Gross Profits from Reimbursable Drugs, 1990 - 2002 Gross Profits in % of Turnover from Reimbursable Drugs 1990 28.06 1991 27.89 1992 27.28 1993 27.05 1994 26.36 1995 26.19 1996 26.08 1997 24.68 1998 24.17 1999 23.83 2000 22.64 2001 22.27 2002 22.52 Source: Austrian Pharmaceutical Association 2003 Year

According to the pharmacists association, the degressive cuts in margins applied during the 1990’s has led to a 5.5% reduction in the in pharmacies’ gross profits, measured as a percentage of their turnover from the sale of reimbursable drugs. Growing pharmaceutical expenditure led to an agreement between the Federation of Social Security Institutions, pharmacists, wholesalers, and the industry to further cut pharmacy margins effective from 1.1.2004. In addition, a further rebate was introduced payable by pharmacies whose turnover from the sale of reimbursable drugs lies above the nationwide mean. The 2.5% rebate applies to all revenues above the national average. Low margin products (whose purchase price is above €200) are exempt from the rebate calculation. This has resulted in differential margins for ‘favoured customers’ (i.e. the health insurers) and private customers. Pharmacists and physicians who run an in-surgery pharmacy are entitled to adding to prices published in the medicines price register a 15% surcharge for private customers. Table 21: Pharmacy Margins From 1.1. 2004 ‘Favoured Customers’ (health insurers) AEP in € Excluding Rebate Including 2.5 % Rebate 27.0 % 25.1 % 0,00 – 10,00 27.0 % - 25.9 % 25.1 % - 24.0 % 10,01 - 10,15 25.9 % 24.0 % 10,16 - 20,00 25.9 % 24.2 % 24.0 % - 22.3 % 20,01 - 20,45 24.2 % 22.3 % 20,46 - 30,00 24.2 % - 21.9 % 22.3 % - 19.9 % 30,01 - 30,94 21.9 % 19.9 % 30,95 - 60,00 21.9 % - 18.7 % 19.9 % - 16.6 % 60,01 - 62,44 18.7 % 16.6 % 62,45 – 100,00 18.7 % - 15.3 % 16.6 % - 13.1 % 100,01 – 104,24 15.3 % 13.1 % 104,25 – 120,00 15.3 % - 12.3 % 13.1 % - 10.0 % 120,01 – 124,21 Report: The Austrian Pharmaceutical Market

Private Customers AEP in € Margins 0,00 - 7,29 35.5 % 7,30 - 7,58 35.5 % - 32.9 % 7,59 - 15,70 32.9 % 15,71 - 16,25 32.9 % - 30.6 % 16,26 - 26,25 30.6 % 26,26 - 27,19 30.6 % - 28.1 % 27,20 - 63,09 28.1 % 63,10 - 65,44 28.1 % - 25.4 % 65,45 - 90,74 25.4 % 90,75 - 94,26 25.4 % - 22.5 % 94,27 - 108,99 22.5 % 109,00 - 113,38 22.5 5 - 19.4 % 96

12.3 % 10.0 % 113,39 - 130,80 19.4 % 124,22 – 150,00 12.3 % - 9.1 % 10.0 % - 6.8 % 130,81 - 135,73 19.4 % - 16.3 % 150,01 – 155,45 9.1 % 6.8 % 135,74 - 203,43 16.3 % 155,46 – 200,00 9.1 % 5.7 % 9.1 % 5.7 % 203,44 211,39 16.3 % - 13.0 % 200,01 – 207,55 5.7 % 5.7 % 211,40 - 363,30 13.0 % 207,56 – 350,00 5.7 % - 3.8 % 5.7 % - 3.8 % 363,31 - 371,37 13.0 % - 11.1 % 350,01 – 357,07 3.8 % 3.8 % above 371,37 11.1 % Above 357,08 Source: Austrian Pharmaceutical Association 2003, AEP=Pharmacy Purchase Price

3.3.6 Value Added Tax (VAT) Since 1997, the sale of medicines is liable to the standard 20% VAT rate. VAT is paid by the health insurers and is calculated off the retail price. The Finance Ministry refunds part of the VAT to health insurers, the value of which is linked to the growth of health expenditure at social security. VAT refunds for hospital medicines are given to the insurers then to hospitals. Public medical services and private medical insurance are exempt from VAT; however, private user charges are not tax deductible, unless a ceiling is exceeded that usually only occurs for the very ill or very handicapped. Richard Gauss from the BMF Finance Ministry remarked that he did not wish to discuss the level of VAT, but understood that certain questions must be considered. These questions include: i) how to finance a decrease in VAT? and ii) what products would be covered by a reduced VAT rate? Because VAT provides significant social income, it is a sensitive issue for discussion. Furthermore, Mr. Gauss believed that the current level of VAT has no effect on pharmaceutical consumption. Dr. Eichler commented “the VAT rate in Austria is higher than other EU countries and has been a subject of debate between Ministry of Finance and insurance funds”. This latter point was emphasised by Dr. Pjeta and Dr. Brettenthaler (Austrian Medical Chamber) who stated the VAT rate is “permanently under discussion”. DI. Mair (Upper Austria Insurance Fund) felt that the 20% VAT rate “should be kept”. In comparison with other European countries, Austria’s VAT charge on medicines is relatively high. In Austria, in contrast to many other countries in the EU, no differentiation is made for the application of VAT to pharmaceuticals. Table 22: European Comparison of VAT Rates

Country

AUT (Austria) BEL (Belgium) CH (Switzerland) DK (Denmark) ESP (Spain) FIN (Finland) FR (France) GB (United Kingdom) GER (Germany) HEL (Greece)

Standard Rate %

Applied to Pharmaceuticals %

20

20

21

6 2.4 25 4 8 2.1 / 5.5 0 / 17.5 16 8

25 16 22 19.6 17.5 16 18

Report: The Austrian Pharmaceutical Market

Comments

plus pharmacy tax ( 7 % ) 2.1 % for reimbursable medicines 0 % for reimbursable medicines

97

IRL (Ireland) ITA (Italy) LUX (Luxemburg) NLD (Netherlands) POR (Portugal) SWE (Sweden) Source: ÖBIG

21 20 15 17.5 17 25

0 / 21 10 3 6 5.4 0 / 25

0 % for oral medicines

0 % for prescription medicines

3.3.7 Structure of Pharmacy Consumer Prices – An International Comparison An analysis of Austrian pharmaceutical pricing and surcharges (iwi, 2003) reveals that Austria’s average pharmacy retail price per unit (€14,69) lies above the European average (€13,86). This result can be explained through VAT charges on medicines. Austria’s average ex-factory price of €7,83 lies below the average mean of €8,53. Austria’s wholesale (€1,02 compared to European average of €1,02) and pharmacy margins (€3,39 compared to European average of €3,36) fall within the European average. In Austria an additional €1,51 is paid in VAT per package sold than in other European countries. Table 23: Structure of the Pharmacy Retail Price Per Package (incl. VAT), 2001 in € FAP GHZ AZ VAT AVP Country 21,45 12,42 1,78 6,76 0,48 CH (Switzerland) 18,95 10,44 1,34 4,56 2,61 GER (Germany) 18,72 11,97 1,7 3,99 1,06 NLD (Netherlands) 16,89 10,73 0,69 4,22 1,25 FIN (Finland) 14,69 7,83 1,02 3,39 2,45 AUT (Austria) 14,19 9,08 1,01 3,29 0,8 BEL (Belgium) 13,36 8,71 1,31 3,34 0 IRL (Ireland) 11,36 6,88 0,69 2,76 1,03 ITA (Italy) 10,89 7,46 0,83 2,07 0,52 POR (Portugal) 9,52 5,97 0,63 2,55 0,37 ESP (Spain) 8,63 5,76 0,72 1,65 0,5 UK (United Kingdom) 7,65 5,11 0,55 1,78 0,21 FR (France) 13,86 8,53 1,02 3,36 0,94 Mean Source: iwi, 2003, AVP= Pharmacy Retail Price, FAP= Ex-factory Price, GHZ= Wholesale Margin, AZ= Pharmacy Margin, VAT=Value Added Tax

Austria’s retail pharmacy price per package is above the European average. Per capita pharmaceutical expenditure is higher than the European average.

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98

Graph 8: Pharmacy Retail Price per package 2001 and Per capital pharmaceutical expenditure Pharmacy Retail Price Per Package, 2001 in € (incl. VAT) average

13.86

FR

7.65

UK

8.63

ESP

9.52

POR

10.89

ITA

11.36

IRL

13.36 14.19

BEL AUT

14.69 16.89

FIN

18.72

NLD GER

18.95 21.45

CH 0

5

10

15

20

25 Euros

Source: iwi, 2003

Per Capita Pharmaceutical Expenditure, in € Average

292.36

UK

163.84

IRL

238.67

NLD

249.95 255.95

ESP POR

260.43 287.93

FIN AUT

304.47

ITA

306.26

GER

307.85 321.99

BEL

386.76

FR

424.18

CH 0

50

100

150

200

250

300

350

400

450 Euros

Source: iwi, 2003

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Taking into account Purchasing Power Parity (PPP) does not change the findings outlined above. The pharmacy retail price and per capita pharmaceutical expenditure lie above those of European countries of comparison, due to Austria’s higher VAT rates. Overview of values Per Package in PPP€, 2001 in Euros FAP GHZ AZ VAT AVP Austria 7,83 1,02 3,39 2,45 14,69 Countries of Comparison 8,74 1,04 3,38 0,96 14,13 Overview per Capita Pharmaceutical Expenditure in PPP€, 2001 in Euros FAP Austria 162,35 Countries of Comparison 188,28

GHZ 21,07 21,97

AZ 70,31 72,42

VAT 50,74 19,61

AVP 304,47 302,31

Overview: Structure of Pharmacy Retail Price in %, 2001 in percent FAP GHZ AZ VAT AVP Austria 53,3 6,9 23,1 16,7 100,0 Countries in Comparison 61,9 7,4 23,9 6,8 100,0 Source: iwi, 2003, FAP= Ex-factory Price, GHZ= Wholesale Margin, AZ = Pharmacy Margin, VAT=Value Added Tax, AVP= Pharmacy Retail Price

The entire distribution margin is 30.01% of the pharmacy retail price (average mean of countries in comparison: 31.15%). Graph 9: Structure of the Austrian Pharmacy Retail Price

VAT 17%

FA P 53%

AZ 23%

GHZ 7%

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100

Graph 10: Structure of Pharmacy Retail Price in European Countries

VAT 7% AZ 24%

FAP 62%

GHZ 7%

Overview Wholesale and Pharmacy Margins Before Taxes AZ

GHZ

Total

FAP

VAT

in % AVP in % AEP in % AVP in % AVP Medicines Standard Rate Country 31.8 13.2 40.8 59.2 3.0 15.0 LUX (Luxemburg) 31.7 13.0 40.6 59.4 16.0 16.0 GER (Germany) 31.0 13.1 40.0 60.0 6.0 21.0 BEL (Belgium) 28.9 12.6 37.9 62.1 20.0 20.0 AUT (Austria) 27.9 9.6 34.8 65.2 4.0 16.0 ESP (Spain) 29.3 7.2 34.4 65.6 25.0 25.0 DK (Denmark) 21.4 14.5 32.8 67.2 6.0 17.5 NLD (Netherlands) 25.9 8.0 31.8 68.2 8.0 18.0 HEL (Greece) 27.6 5.6 31.7 68.3 2.1 19.6 FR (France) 28.8 4.0 31.6 68.5 8.0 22.0 FIN (Finland) 22.4 9.5 29.8 70.2 10.0 20.0 ITA (Italy) 20.0 11.0 28.8 71.2 5.4 17.0 POR (Portugal) 17.3 12.5 27.6 72.4 0.0 17.5 UK (United Kingdom) 20.0 3.0 22.4 77.6 0.0 25.0 SWE (Sweden) Source: ÖBIG, AVP= Pharmacy Retail Price, excluding VAT AEP= Pharmacy Purchase Price, excluding VAT AZ= Pharmacy Margin, GHZ= Wholesale Margin, FAP= Ex-factory Price

An analysis of the distribution margins before VAT shows Austria in the lead, with a distribution margin of 37.9% of the pharmacy retail price (pharmacy margin: 28.9% of the pharmacy retail price before VAT, wholesale margin 12.6% of the pharmacy purchase price before VAT).

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4. Production and Distribution 220 pharmaceutical enterprises produce and distribute medicines in Austria, supplying 35 wholesalers that operate over 52 distribution centres nationwide. Wholesalers make 71% of their turnover by supplying 1,135 public pharmacies that in turn supply the 989 physicians with in-house pharmacies. From the health insurers’ perspective, 83% of pharmaceutical units (84% of expenditure) are sold through pharmacies, 16% (14%) through in-house pharmacies, and 1.5% (2.5%) through hospital pharmacies. Pharmacies derive 72% of revenues from reimbursable drugs, and 28% from direct sales to end-consumers. Graph 11: Pharmaceutical Supply Channels, 2002

160 Pharmaceutical Companies ( Manufacturers and Distributors )

60 Manufacturing Pharmacies

35 Wholesalers with 52 Distribution Centres

roughly 71 %

83 %

1,135 Public Pharmacies

46 Institutional Pharmacies

Prescriptions 99.1mio SV

989 In-house Pharmacies

16 %

Patients 30,1 mio cases type § 2 insurers

36.531 Physicians ( 18.679 ‘Surgery Doctors, 8.356 ‘Contract Doctors’)

310 Hospitals

Pharmaceutical Warehouses in Hospitals

4.1. Pharmaceutical Production Between 1990 and 2001 pharmaceutical production rose by 118.7% to reach an estimated €1,653 million (Pharmig). In the 1990’s the volume of imports rose by 255.3%, only to be superseded by the growth in exports (335%). As a result Austria had a trade deficit in pharmaceuticals worth €343 million. As a percentage of exports, the trade deficit in pharmaceuticals was 15% in 2001 (41% in 1990). Table 24: Pharmaceutical Production, Imports, Exports and Trade Balance, 1990 and 2001(in € million) Year

Production

Imports

Exports

1990

756

743

528

Report: The Austrian Pharmaceutical Market

Trade Balance -215

% of Exports -40.7 102

1,653 118.7

2001 % Change

2,640 255.3

2,297 335.0

-343 59.5

-14.9

Graph 12: Pharmaceutical Production and Trade Balance, 1990 and 2001 Pharmaceutical Production, Trade Balance 3000

1990

1,653

1500

0 Production

Imports

Exports

-343

-215

528

500

743

1000 756

in € 1,000

2000

2,297

2,640

2500

2001

Balance

Source: Pharmig, Facts and Figures 2003

25% of the 160 pharmaceutical manufacturers and distributors’ annual turnover exceeded €7.5 million. The five largest companies hold a market share of around 30%. Table 25: Annual Turnover of Pharmaceutical Enterprises (in € million) up to 0.5 Annual turnover 39 Companies in % Source: Pharmig, Facts and Figures 2003

to 1.5 20

to 3.5 5

to 7.5 7

to 15 10

above 15 19

4.1.1 Domestic Production Austria manufactures 6,900 pharmaceutical formulations. Following a strong growth (+124%) in domestic production between 1990 and 1996, growth has been slower in recent years. The percentage of domestically produced medicines is with 42% back to its level of the beginning of the 1990’s. Table 26: Domestic Production of Pharmaceuticals, 1990-2002 - absolute figures, as % of all pharmaceuticals Year 1990 1991 1992 1993 1994 1995 1996 1997 1998

Domestic Production 2,537 2,761 3,374 4,096 5,004 5,442 5,683 5,837 6,021

Report: The Austrian Pharmaceutical Market

in % 41.9 42.2 46.4 49.6 52.6 52.1 51.4 49.6 47.6 103

1999 2000 2001 2002

6,169 6,131 5,833 6,914

46.4 44.7 43.1 42.0 in % production

Change in % 1990 – 1996 124.0 1996 – 2002 21.7 Source: Hauptverband, own calculations

9.5 -9.4

Graph 13: R&D spending in different countries R&D Spending (in €m) Ireland

52

Norway

94 213

Finland Spain

394

Netherlands

398

Italy

769

Denmark

814 994

Sweden Belgium

1179

Switzerland

2083

France

3351

Germany

3381 5145

United Kingdom Austria

60 0

1000

2000

3000

4000

5000

6000 in €m

Pharmaceutical Research & Development (R&D) expenditure in Austria is limited. With €60 million, Austria is at the bottom of the European league table. Additionally, the pharmaceutical industry employs 9,200 people in Austria. This is significantly lower than in other EU countries that have a stronger industry presence, i.e. the UK, France, and Italy. The overview below illustrates selected characteristics of Austria’s pharmaceutical market in the European comparison. Table 27: Overview of Key Statistics Pharmaceutical Market Country Austria Belgium Denmark Finland France Germany Greece Ireland Italy

Number of People Market Volume Employed (in € million) 9,200 1,862 24,137 2,850 15,131 1,131 6,810 1,282 96,300 18,674 114,959 20,151 11,500 1,924 18,000 840 78,770 13,265

Report: The Austrian Pharmaceutical Market

Production (in € million) 1,653 4,301 3,674 666 28,171 20,400 337 9,529 16,564

Imports Exports Trade Balance (in € million) (in € million) (in € million) 2,640 2,297 -343 9,355 10,486 1,131 1,206 3,790 2,584 849 330 -519 7,308 12,861 5,553 11,465 18,204 6,739 1,323 345 -978 1,913 9,075 7,162 8,498 8,860 362 104

Netherlands Norway Portugal Spain Sweden Switzerland Turkey UK

15,100 4,447 10,484 38,950 19,100 29,613 20,840 69,000

2,809 1,033 2,319 8,072 2,361 2,240 2,837 15,012

5,602 294 1,450 7,663 5,100 19,854 2,069 22,256

5,954 835 1,214 4,973 1,604 9,095 1,704 10,417

6,639 263 345 2,738 4,645 18,357 166 14,781

685 -572 -869 -2,235 3,041 9,262 -1,538 4,364

4.1.2 Promotional Activities The pharmaceutical industry's promotional activities and advertising are regulated in the Arzneimittelgesetz. There is ban on advertising for those drugs which are included in the positive list. Additionally, for other registered drugs information has to be given on possible side-effects. There is a self binding agreement on promotional activities. The groundwork is provided by the law of drugs, especially the §54 AMG which is however not very differentiated. The BMGF has promised in the political talks in the year 2003, that on the basis of §54 AMG more specific regulation shall be legislated. Dr. Probst (Hauptverband) stated that pharmaceutical sales representatives that often visit surgeries because of marketing reasons should be replaced by industry-independent institutions that can provide advice to physicians and patients in specific cases. He believes that this would help to improve the quality of prescribing. 4.2 Pharmaceutical Wholesaling Pharmaceutical wholesale is regulated by law in Austria such that public pharmacies as well as hospital pharmacies are allowed to receive their pharmaceutical products directly from the manufacturer, depositeur or the wholesaler. In practice, the market is shared by the manufacturers and the wholesalers. Wholesalers supply pharmaceuticals to public pharmacies and to self-dispensing physicians, whereas hospitals receive their drugs directly from the manufacturer. Almost 70% of the total revenue made through pharmaceutical products are distributed via wholesalers, of which, 83% are distributed to public pharmacies, 12% to self-dispensing physicians and 5% to hospitals. Hospitals without an in-house pharmacy are only allowed to receive their pharmaceuticals from another hospital pharmacy or from a public pharmacy. According to present legislation, self-dispensing physicians are only allowed to obtain drugs from public pharmacies. The most important data for the wholesale industry structure can be found in the table below: Table 28: Austria – Data of the wholesale industry structure, 1993-1996 Wholesalers No. of Companies No. of Industrial Plants No. of Plants/Companies

1993 13 32 2,46

1994 12 30 2,50

1995 11 31 2,82

1996 10 27 2,70

Residents/Plants 249.719 267.667 259.581 298.481 Public Pharmacies/Plants 30,94 33,33 32,84 38,30 Total Revenue in Billions Austrian n.o. n.o. n.o. 13,5 Schilling Source: Arge Pharmazeutika, cited in: Macarthur 1997, Herba Geschäftsberichte 1993 bis 1997, Mähr 1997, ÖSTAT Statistische Jahrbücher 1990 bis 1997, n.o. = data not obtainable

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After some mergers and acquisitions in 1996, pharmaceuticals were sold and distributed by 10 wholesalers with a combined total of 27 industrial premises. The market is dominated by a few big distributors. The three leading wholesalers have a combined market share of 84%. Table 29: Top three wholesalers in Austria by market share Wholesaler Market Share (in %) Herba Chemosan Apotheker-AG 50 Hestag Arzneiwarengroßhandel GesmbH 20 Kwizda GesmbH 14 Total 84 Source: Regulation Pharmacies and Physicians from ÖBIG-Publication: Pharmaceuticals Distribution in Europe. Vienna 1998

Herba Chemosan Apotheker-AG, the market leader, was majority-owned by the Austrian Pharmacists’ Association and was recently soled to GEHE. In 1994 the company, at that time still operating under its former name Herba Apotheker-AG, had a market share of approximately 30%. In the following months the company was restructured several times and in 1995 a strategic partnership with Sanacorp Pharmahandel AG was started. The Sanacorp AG (now owned by GEHE) participated with 27% at the Herba Apotheker-AG (1997: share of 28.61%). In 1996, the company merged with the wholesale company Paul Hauser and the Firma Aewige was acquired to 100%. Then in 1997, Chemosan-AG, Pharmazent and Herba Apotheker-AG merged to form the Herba Chemosan Apotheker AG. In 1998, the Herba Apotheker-AG started a cooperation with the IPSO-Gruppe. The IPSO group predominantly comprises pharmacy-owned or pharmacy-affiliated wholesale companies in Western Europe. The second largest wholesaler by market share, Hestag Arzneiwarengroßhandel GesmbH, is majority-owned by the Phoenix-Gruppe. While the third largest wholesalers, Kwizda GesmbH, is a family-owned company. The three market leaders operate all over the country, whereas the remaining seven companies only operate regionally. In 1993 the average product range of the Austrian pharmaceutical wholesale comprised of approximately 14,000 products (12,000 prescription-only products and 2,000 OTC medications). In 1995, nine wholesalers offered a complete range of pharmaceutical products. Pharmaceutical wholesale is a concessionary business. Important provisions can be found in the Medicines Act (AMG, BGBI. 185/1993 and in 657/1996). The wholesale profit margins/mark ups are regulated by law. 4.3 Distribution to end-consumers Medicines are sold to end-consumers through public pharmacies, institutional pharmacies and physicians with an in-house pharmacy. Legal norms apply to the sale of pharmaceuticals. All prescription drugs and the majority of OTCs can only be sold in pharmacies. The sale of OTCs in drug stores and health food stores is insignificant. Self-service dispensing of pharmaceuticals and supplying pharmaceutical products through mail order or teleshopping is not permitted. Excepted are special pharmacy-owned home delivery services. 4.3.1 Pharmacy Training and Practice To become a pharmacist in Austria requires six years of training; the pharmacy course is five years plus one year of practice. For a pharmacist to own a pharmacy five years of experience is required. In general, hospital pharmacy is not well supported by the curriculum of Austrian Schools of Pharmacy, which like Germany is very traditional and chemistry dominated. There is no clinical training for pharmacist, neither in hospitals nor community. Between 150 and 200 pharmacists qualify per year. Only fifteen new pharmacies are opened per year and these must meet defined criteria including a minimum distance requirement and appropriate number of persons (see next section). Pharmacists are the only dispenser of Report: The Austrian Pharmaceutical Market

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medicines, therefore there are between three and five pharmacists employed in each pharmacy and no lower professional category exists. Most new pharmacists work in community pharmacies. 4.3.2 Pharmacy Licensing Process Public pharmacies are able to receive drugs either from wholesalers or directly from the manufacturers; however, in practice they are commonly supplied by wholesalers and to a lesser extent directly supplied by the manufacturers. Except for a few medications, pharmaceutical products can only legally be sold and purchased in licensed pharmacies. An official licence is required to open a public pharmacy. Personal and material prerequisites are stipulated in the Austrian Pharmacy Act (Apotheken Gesetz, BGBI. 1993/1996). Personal prerequisites include Austrian (or EU) citizenship and a licence to practice (apprentice year or a minimum of five years work experience in a pharmacy). Further requisites include excellent knowledge of German, competency, and good health. Pharmacies are run as privately owned single firms, whose operating licence is bound to its holder, the pharmacist. A new pharmacy can only be opened in a location served by a practicing doctor (pharmacy law para. 10) and where the need exists. A constitutional court ruling of 2.3.1998 simplified the prerequisites needed for opening a new pharmacy. Whether or not there is a need for a new pharmacy is judged by its minimum distance to the nearest existing pharmacy and its minimum supply potential. The minimum requisites are: • minimum distance of 500 metres • potentially serving a minimum pool of 5,500 people A public pharmacy is permitted to operate one branch as long as it is located within a radius of 4km. The minimum size of a pharmacy is 143 square metres. Furthermore, a physician must have a permanent practice at the desired location for the new pharmacy. Under certain circumstances doctors are permitted to dispense medicines directly to their patients, while some doctors also operate in-surgery pharmacies. Pharmacy law para. 20 states that authorisation for the running of a pharmacy by a GP is to be given, only if there is no public pharmacy in town, or if the pharmacy is more than 6km (road distance) away. Given the importance of this distribution channel, a temporary ten-year arrangement was made for all in-house pharmacies that existed prior to 1.6.1998. Following acrimonious discussions between the pharmacists’ and doctors’ associations and a ruling by the constitutional court, the following compromise, regarding the future relationship between in-house pharmacies and public pharmacies, was reached in January 2001: • If more than 5,500 people are to be served within a radius of 4km a new public pharmacy can be opened. Existing in-house pharmacies are to be closed within three years from the new public pharmacy being granted its licence to operate. • In localities were within a 4km radius less than 5,500 are being served, existing in-house pharmacies remain responsible for the supply of medicines. • Where no in-house pharmacy exists, a new public pharmacy may be opened. Univ. Prof. Dr. Eichler commented that the regulation of pharmacies has been somewhat relaxed over past years, but pharmacies are still highly “protected”. DI. Mair (Upper Austria Insurance Fund) stated that there is limited access for people who want to run a pharmacy or be a dispensing doctor. He believes that there are approximately the right number of pharmacies and dispensing physicians in Austria; therefore there is not much supplier demand in this field (Keine angebotsinduzierte Nachfrage). Dr. Probst (HV) commented that under the current legislation, pharmacists are contracting partners to social insurance. In order to stimulate a degree of competition, insurance bodies should be able to make a contract dependent on certain conditions. They should also be allowed to conclude additional agreements on specific Report: The Austrian Pharmaceutical Market

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supply channels for chronically ill patients. Furthermore, a legal foundation should be laid, so that hospital pharmacies are able to dispense drugs also to outpatients. 4.3.3 Public Pharmacies Currently in Austria there are 1,165 community pharmacists and 50 hospital pharmacists (2004). The number of public pharmacies slightly increased in the 1990’s. In 1996, there were 74 more public pharmacies than in 1990 (see table 30). The number of people employed in pharmacies increased by 22% and the sales revenue increased by approximately 58% from 1990 to 1996. At the same time, sales revenue per employee increased by approximately 30%. The growth rate of sales revenue decreased from 1994/1995 onwards, which was probably due to the regulation enacted in 1995, which limited the profit margins on drugs. Table 30: Public pharmacy business data, 1990-1996 Pharmacies No. of public Pharmacies Residents/Pharmacy

1

1990

1991

1992

1993

1994

1995

1996

977 7.911

989 7.900

999 7.922

1.004 7.959

1.012 7.935

1.035 7.775

1.051 7.668

No. of employed persons2 8.337 8.487 8.909 9.245 9.629 9.837 10.146 No. of employed persons2/Pharmacy 8,5 8,6 8,9 9,2 9,5 9,5 9,7 Total Sales Revenue in Mio. ATS 12.285 13.364 14.808 16.221 17.372 18.306 19.348 Total sales revenue/employed persons 1,474 1,575 1,662 1,755 1,804 1,861 1,907 in Mio. ATS Total sales revenue /pharmacy in Mio. 12,574 13,513 14,823 16,156 17,166 17,687 18,409 ATS 1 including pharmacy branches 2 Total employment: self-employed and employed pharmacists and auxiliary personnel Source: ÖSTAT 1997, Österreichische Apothekerkammer 1997, Österreichische Apothekerkammer: ÖBIG-eigene Erhebungen

In order to receive a license to run a pharmacy the owner must have a university degree in pharmacy. Ownership of multiple pharmacies is not permitted. The operation of a branch pharmacy is only permitted under certain conditions: the location of the branch must not be distanced more than 4km from the public pharmacy and there has to be the previously specified demand. However, the owner of a public pharmacy is only permitted to operate one branch pharmacy. In 1996, there were a total number of 17 branch pharmacies (14 in 1990). The legal situation is that only pharmacists can own pharmacies but is possible in the form of a personal company, wholesalers can only own up to 49%. Anti-trust law only permits wholesalers to own 3% of the total market of pharmacies. The Austrian kartellgericht considered a case where wholesalers owned 49% of a pharmacy with a total market share of less then 3%. This was judged as being no threat for competition law166. Generally, foreign ownership of pharmacies is not permitted because operating a pharmacy has to follow the legal structure of a single-owned company. Nevertheless, this legislation might be circumvented because under certain conditions business partnership is allowed, which makes foreign ownership possible (if the owner of the pharmacy concession is in possession of more than 50% of the shares of the foreign pharmacy and if he has executive and procuration rights). It is only permitted to sell or pass on a pharmacy after it has been in operation for at least five years. According to the pharmacy statutes, following the death of a pharmacy owner the surviving spouse may run the pharmacy till remarriage or the expiration of five years (whichever comes first) because of the concession that was previously granted. The same applies to surviving children. The concession stays valid if one of the children 166

Gerichtstyp OLG Wien, Datum 20030424, Geschäftszahl 27Kt446/02

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studies or does an apprenticeship in pharmacy but only until they reach their 35th birthday. In all cases however, a fully trained and licensed substitute needs to be hired to run the business. The pharmacist has to run his business in person. If the legitimate pharmacy owner is temporarily prevented from being there (up to six weeks) a qualified substitute must be hired. If he is absent for longer than six weeks, the substitute must be assigned by the public authorities. The pharmacy profit margins and mark ups are subject to government control (provisions in the Austrian pharmaceutical tax (Österreichische Arzneitaxe). Generic substitution (see Section 4.3.8) and separating pills from packages with the intention to sell them as a single entity, is not permitted. However, certain pharmacy specialties and medicinal products are allowed to be produced and sold by the pharmacy. 4.3.4 Physicians’ In-house Pharmacies In 2004, around 1,000 General Practitioners (GPs) operate an in-house pharmacy, providing 14% of pharmaceutical supplies. As compared to public pharmacies, these dispensing doctors carry out a subsidiary function; meaning, in those areas where there is no public pharmacy for economic reasons, it is possible for a GP for supply reasons, to run a pharmacy from home. Thus, dispending doctors are mainly concentrated in rural areas and there are no such doctors in Vienna. Table 31: Distribution of Public pharmacies and dispensing doctors by region, 2004 Region Public pharmacies in % Dispensing doctors Vorarlberg 48 4,1 27 Tirol 104 9,0 75 Kärnten 80 6,9 70 Salzburg 75 6,5 46 Steiermark 164 14,1 206 Burgenland 36 3,1 52 Oberösterreich 162 13,9 243 Niederösterreich 199 17,1 270 Wien 294 25,3 0 Total 1162 100,0 989 Source: Die österr. Apotheke in Zahlen 2004, Apothekerkammer

in % 2,7 7,6 7,1 4,7 20,8 5,3 24,6 27,3 0,0 100,0

A recently completed study found systematic differences in prescription habits between physicians with an inhouse pharmacy and normal GPs. Details of the study’s findings and an analysis of the issues by the regional health insurer of Oberösterreich can be found below and in the Appendix 2. Hypotheses: • • • •

Patient behaviour and medicine demand changes/remains unchanged depending on the degree of urbanisation of a locality. Patient behaviour and medicine demand is the same/differs across Austria. Physicians with an in-house pharmacy prescribe according to a profit maximisation model. The lesser the availability of medicines in stock, the lower the prescription bill. Physicians with an in-house pharmacy prescribe fewer products that require authorisation by a senior physician.

Findings: The ‘cost in € per prescription’ is about the same whether they are issued by a physician with an in-house pharmacy or without one. This applies to patients of all ages and indication groups across Austria. There are however regional variations in the ‘cost in € per prescription’ between different states. In Vorarlberg, the ‘cost in € per prescription’ is 7.4% higher among physicians with in-house pharmacy than those without. Report: The Austrian Pharmaceutical Market

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The percentage of drugs prescribed that require a senior physician’s authorisation is lower across Austria among physicians with an in-house pharmacy than among those without. This is true both when measured as a percentage of the number and value of prescriptions. However, it is noteworthy, that this does not result in a change in the value of the ‘cost in € per prescription’. Physicians with an in-house pharmacy prescribe less than doctor’s in the control group, both in terms of frequency and number of prescriptions per patient, by 7.4% and 14.7%, respectively. The measure, ‘prescriptions per patients’ was analysed only for the states Steiermark and Niederösterreich. 4.3.5 Hospital Purchasing, Contracting and Drug Supply Hospitals are required by law to have a formulary and generic substitution is permitted. The pharmaceutical budget is part of the overall hospital or directorate budget and is largely based on historical expenditure and perceived clinical need per capita of overall treatment. There are new developments in this area with a move to a separate budget for pharmaceuticals. From the interviews it was explained that Vienna hospitals function partly as a consortium for drug purchase and contracting. Their 9,000 hospital beds have a combined budget of approximately €110 million (about 6% of total costs – in line with other countries). Of this, approximately 30% is spent on drug contracts which are negotiated collectively by a consortium of local hospitals to increase their negotiating power, and about 70% is negotiated by each hospital independently (this is broadly similar to the UK). The collective negotiations are done especially for very expensive drugs and for high volume drugs. There is no open tendering for medicines supply as yet, although the implications of this are under consideration. In general, hospital supply is a very diverse market in Austria with over 320 hospitals in Austria, usually buying direct from manufacturers in small quantities. Outside Vienna there seems to be little coordinated purchasing. This allows substantial negotiation around price but overall may result in poorer value to the health care system. Hospital prices are very confidential, commercial secrets not shared with other hospitals and certainly not with HV. To an extent, hospitals saw themselves in competition with HV in part because of the strategic approaches adopted by the pharmaceutical industry in marketing to hospitals, including loss leading in drug prices to hospitals, and partly due to the silo nature of budgets. The hospital view this such that their requirements for medicines only show about a 15% overlap with medicines funded by the HV (not clear whether this is by volume or cost or how measured), and therefore they represent discrete markets which should not be linked. Such a linkage might also be a breach of competition laws – there had been problems with attempts to collectively purchase one high cost drug across Viennese hospitals. 4.3.6 Distribution Data The total market volume was €1.7 billion in 2001 (based on ex-factory prices). Medicines sold outside the hospital sector made up 75% of the total market or €1.3 billion. Around 90% of drugs are sold through public pharmacies. Table 32: Market Segments, 2001

Market Segments Hospitals Extra-Hospital Sector Prescription Drugs OTCs Financing

2001 in € million 423.7 1,309.3 1,182.9 126.4

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1,125.8 Health Insurers 183.5 Patients Total Market Volume 1,733 Source: Pharmig, on basis of Ex-factory Prices Graph 14: Units Sold in Hospitals and Pharmacies, 1996 - 2001 Hospitals Pharmacies 19.8

20.6

19.6

160

19.1

180

18.9

200

20.2

Units Sold, 1996 - 2001

120 165.3

166.4

167.4

60

159.2

80

155.6

100 150.7

in m units

140

1996

1997

1998

1999

2000

2001

40 20 0

Source: Pharmig, Facts and Figures 2003

In 2002, patients obtain their medicines through 1,135 public pharmacies (19 of which have an additional branch), 46 hospital pharmacies for outpatients, and 989 physicians with an in-house pharmacy. There is one public distribution channel (public pharmacy or physician’s in-house pharmacy) to every 3,800 inhabitants. Meanwhile, on average there is one pharmacy for every 7,095 inhabitants. Measured in terms of the value and the volume of reimbursable drug sales, pharmacies are responsible for 84% and 83% respectively. Graph 15: Market Shares by Value, 2002 Market Shares in 2002 (Value) Institutional Pharmacies 2% Physicians 14%

Pharmacies 84%

Source: Hauptverband

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86% of the 210 newly opened pharmaceutical retail outlets between 1990 and 2002 were public pharmacies. Some 40% of new pharmaceutical retail outlets opened in places with no prior pharmaceutical retailer, 30% in places with one pharmacy, while the rest opened in state capitals (Österreichische Apothenkammer, 2003). Of the 11,900 or so employed in public pharmacies, 1,202 were self-employed pharmacists (48% of which are female); 10,710 (or 90%) of the total are employed. Of those, some 30% are pharmacists (84% women) and a further 40% have had pharmaceutical commercial training. Around 90% of all pharmacy-employees are female. Table 33: Pharmaceutical Retail Outlets, 1990 - 2002 Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Change 1990 - 1996 1996 - 2002

Public Pharmacies 954 963 975 989 996 1008 1023 1038 1070 1068 1096 1115 1135

InstitutionalPharmacies 48 49 50 50 51 50 50 50 51 51 49 46 46

Physicians’ In-house Pharmacies 958 951 957 965 977 984 985 986 989 991 978 976 989

Absolute Figures 69 112

2 -4

27 4

in % Change 7.2 4.2 2.8 1990 - 1996 10.9 -8.0 0.4 1996 - 2002 Source: Hauptverband, Österreichische Apothekenkammer, own calculations

Total 1960 1963 1982 2004 2024 2042 2058 2074 2110 2110 2123 2137 2170

98 112

5.0 5.4

31% of public pharmacies had an annual turnover of up to €1.3 million, 34% between €1.3 and €1.9 million, while 35% had over €1.9 million (see Table 33). The average total turnover of a public pharmacy was €1.665 million in 2001. 73% of this was made from health insurance reimbursable drugs, while 30% was derived from private sales (Österreichische Apothenkammer). Table 34: Pharmacies According to Size of Turnover, 2001 Turnover in €m Number up to 1.3 352 1.3 – 1.9 378 above 1.9 396 Source: Österreichische Apothenkenkammer

in % 31.3 33.6 35.1

4.3.7 Repeat prescribing/dispensing In Austria, a prescription, if not stated otherwise by the doctor, is valid for one year; within this one year a fivetimes repeat dispensation is permitted (law para. 4). Restrictions (e.g. single dispensation) for individual active ingredients are laid down in the prescription law and are established by the prescription commission during approval. Report: The Austrian Pharmaceutical Market

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From the interviews, Dr. Traxler (Apothekerkammer) believes that one prescription is valid for a long time although this is not routinely done in practice. Dr. Otto Pjeta and Dr. Reiner Brettenthaler (Austrian Medical Chamber) commented that “repeat dispensing by using one prescription is, in principle, possible. However, as the amount of dispensed medication within the social insurance system generally guarantees medication for 4-8 weeks, there is, at present, no call for action”. DI. Mair (Upper Austria Insurance Fund) stated “physicians should be involved in the process of prescribing to check whether the medication is still necessary and should check for efficacy or side-effects and if there are other illnesses”. 4.3.8 Generic substitution As mentioned, generic substitution is not permitted in Austria. From the interviews, Dkfm. Geisler (Pharmig) emphasised the point that there is currently no ‘aut idem’ regulation. Univ Prof. Dr. Hans-Georg Eichler, stated that at present, pharmacists played no role in generic substitution, but felt that this “may be feasible and useful”. Dr. Bachinger (NÖ Patientenanwalt) commented that at present, pharmacists do not play a decisive role in dispensing generic substitutes. He felt that it is “worth discussing an ‘aut idem’ solution, where pharmacists would be allowed to change to a generic product under the condition of prior acceptance by physician and patient”. DI. Mair (Upper Austria Insurance Fund) commented that “in respect of financing the health system, generic substitution is not very important as generics are normally only 10% cheaper than original products”. He stated that in Upper Austria, the share of generics (in the segment where generics are available) is nearly 60%. His concerns included that some patients may get confused if they get different medication from time to time. However, he advocated the use of “some financial incentive for pharmacists” to substitute a cheaper product than that prescribed by doctors, without agreement of doctors. Dr. Otto Pjeta and Dr. Reiner Brettenthaler (Austrian Medical Chamber) reject generic substitution by pharmacists for “reasons of pharmaceutical security and patient compliance, especially in the case of multiple prescriptions of the elderly”. They believe that with this population “there is an increased health risk, as mistakes happen quite frequently”. Dr. Probst (HV) commented that in regards to the “right of generic substitution by the pharmacist (‘Aut smilie Abgabe’), a field trial under scientific supervision would be preferable over an instant implementation of this measure”. Overall, reductions by award procedures are better and more efficient. Furthermore, he stressed that the long-term authorization by chief-physicians should be encouraged. 4.3.9 Advisory role of the pharmacist From the interviews, Dkfm. Geisler (Pharmig) stated that the advisory role of the pharmacist is “currently restricted to the OTC sector because of the current substitution ban”. Dr. Bachinger (NÖ Patientenanwalt) emphasized this point. “Pharmacist’s influence in dispensing OTC products is of great importance. Recently a pilot project titled “Pharmaceutical care by the pharmacist” has been started.”

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DI. Mair (Upper Austria Insurance Fund) commented that with regards to long-term treatment, “physicians should somehow be involved so that essential medical checks will be ensured.” He also recognized the possibility that “pharmacists recommend additional or alternative treatments without evidence (so that pharmacists increase their income)”. Dr. Otto Pjeta and Dr. Reiner Brettenthaler (Austrian Medical Chamber) stated that “the Austrian Medical profession, advocates intense cooperation with the profession of pharmacists, discerns in the area of OTC products a certain risk potential and an extension of the pharmaceutical market, rather than a relief of social health insurance. In a high quality health care system, chronic patients and people with long-term treatments require not only medication and recurring prescriptions, but also have to see their doctor for regular check-ups.” On this topic, Dr. Probst (Hauptverband) stressed, “in regards to chronically-ill patients, drug supply via mail should be considered. Insulin-dependent patients are already allowed to attain syringes and needles directly, however so far they are legally not allowed to order medications by mail.”

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5. Medicine Consumption 5.1. Volume Average per capita pharmaceutical consumption is 20.7 packages in 2001. The figure is 22.9 on average in selected European countries (iwi, 2003). Graph 16: Per Capita Pharmaceutical Sales (Packages), 2001 Packages per Capita, 2001 50.6

France Italy

27.0

Spain

26.9 23.9

Portugal Belgium

22.7

Austria

20.7 19.8

Switzerland United Kingdom

19.0

Ireland

17.9 17.0

Finland Germany

16.3

Netherlands

13.8 0.0

10.0

20.0

30.0

40.0

50.0

60.0

Source: iwi 2003 Graph 17: Units per Pharmaceutical Package, 2001

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Source: iwi 2003

With 44 units per package, Austria lies marginally below the European average of 45 units per package. Differences between selected European countries become apparent when considering the per capita sale of pharmaceutical units. France leads in the European comparison with 1,663.3 units per capita, while the Netherlands has the lowest per capita consumption with 554.4. With 912 per capita unit sales, Austria lies below the average of 979 (see Graph 18). Graph 18: Standard Units Sold Per Capita, 2001

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Source: iwi 2003, Pharmig, Facts and Figures

5.2 Pharmaceutical Prices Pharmaceutical prices have been falling in Austria since 1994. Taking 1990 as the base year (=100) pharmaceutical prices in 2001 are at 94. The average price of the 500 most sold medicines fell by 1.5% in 2001 (Pharmig, 2001, p 33). In contrast, the consumer price index (126 in 2001) and the wage index (137 in 2001) rose steadily throughout the 1990’s. Graph 19: Trends in Pharmaceutical Prices, 1990-2001

Comparative Price Evolution ( 1990 = 100) Wages 140 130 120 110 100

Consumer Prices

132

134

137

130 126 128 Pharmaceutical 126 123 123 120 Prices 120 121 116 118 119 116 111 114 111 106 107 103 100 98 97 96 100 102 101 95 94 100 101 101

90 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: Pharmig, Facts and Figures 2002

Between 1996 and 2001, the number of package sold rose by 10%, while pharmaceutical revenues rose by 47% during the same period. Graph 20: Rise in the Volume and Value of Pharmaceutical Sales, 1996 - 2001

150

Rise in the Volume and Value of Pharmaceutical Sales ( 1996 = 100 ) 147

145

140

140 133

135 130

Volume

Value

125

120

120 115 109

110 105 100

103 100 1996

1997

110

110

110

105 1998

1999

2000

2001

Source: Pharmig, Facts and Figures

5.3. Growth Factors of the Pharmaceutical Market Table 35: Growth Factors (Based on Ex-Factory Prices), 1990-2001

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Change in % Year

Total

Structural

Innovation

Price

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Mean Value Source: Pharmig, iwi

11.0 11.8 9.0 7.0 8.0 7.0 8.8 10.9 12.5 12.5 6.3 5.2 9.2

7.7 7.5 5.6 4.2 6.3 5.8 8.7 8.8 10.9 10.6 6.2 5.4 7.3

3.0 3.7 2.9 2.7 2.4 1.8 2.5 3.0 2.2 2.2 2.1 1.3 2.5

0.3 0.6 0.5 0.1 -0.7 -0.6 -2.4 -0.9 -0.6 -0.6 -0.9 -1.5 -0.6

Graph 21: Growth Elements in the Pharmaceutical Market, 1990 - 2001

Growth Elements (Based on Ex-Factory Prices)

%

Total

Structural

Innovation

Price

13. 11. 9.0 7.0 5.0 3.0 1.0 -

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

-

Clarification of elements (Prof. Clement): Price is a Paasche index based on a basket of drugs from 1989167, Innovation is defined as the impact of all drugs launched within the previous three years168, and Structural is everything else - demography, drugs after three years on the market, increased diagnosis of existing conditions, increasingly aggressive therapy for existing conditions, etc. Based on IMS data, the pharmaceutical market grew by an annual 9.2% throughout the 1990’s, according to Pharmig. Structural changes are the decisive factor driving the growth of the Austrian pharmaceutical market.

167

Not surprisingly the cost of this basket of drugs falls in later years as these drugs move on to generics or as generics force down the price of the branded preparations. Overall therefore price tends to fall as a growth factor. 168 This is probably unusually low in Austria (compared to Germany) because of the delays in the reimbursement of approval. However, anything which has been launched on the market for more than three years falls out of his category, innovation therefore seems to count for relatively small amount of the total rising cost because of how it is defined. Report: The Austrian Pharmaceutical Market

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This category comprises substitutions that are not included in the category of innovative products and growth in volume due to demographic shifts. The launch of new products accounts for around 2% of market growth. This category includes products with new active ingredients in their year of launch and the subsequent year. The price component indicates price changes of products already on the market compared to the previous period. Since the mid-1990’s the price component has had a dampening effect on market growth. An analysis by iwi of the factors underlying the 5.8% nominal growth in the market’s turnover between 2000 and 2001 reveals that price increments had a negative impact on growth of –1.41% , new product launches account for 0.87%, increases in volume for 0.35%, while 5.77% are explicable through structural changes. The demographic component (0.22%) takes into account just the change in the size of the population, not age-related use of medicines (iwi, 2003). 5.4 Volume and Cost in the Health Insurance Sector Table 36: Prescriptions and Expenditure, 1990 – 2002, (absolute figures) 1990=100 Year

Prescriptions

Cost in €

1990 81,147,000 100 715,464,052 1991 84,497,000 104 786,610,757 1992 88,284,000 109 877,451,800 1993 90,437,000 111 963,641,781 1994 92,398,000 114 1,044,017,936 1995 94,512,000 116 1,099,103,944 1996 93,196,449 115 1,166,952,633 1997 91,885,232 113 1,210,099,466 1998 96,403,598 119 1,372,017,922 1999 101,405,922 125 1,552,533,468 2000 101,432,457 125 1,643,869,373 2001 98,453,822 121 1,721,685,171 2002 99,129,812 122 1,835,683,190 Source: Hauptverband, own calculations, Expenditure excludes VAT

Cost per Prescription in € 100 110 123 135 146 154 163 169 192 217 230 241 257

8.82 9.31 9.94 10.66 11.3 11.63 12.52 13.17 14.23 15.31 16.21 17.49 18.52

100 106 113 121 128 132 142 149 161 174 184 198 210

In 2002, some 99.1 million packages are prescribed, translating into a total cost to health insurers of €1.835 billion, or €18,52 per package. In relation to prescriptions the cost of pharmaceuticals rose eightfold in the period between 1990 and 2002. The doubling in the cost per prescription can be explained by the increasing prescription of costly medicines. The table below illustrates the percentage change in the volume, cost, and cost per prescription compared to the previous year. Table 37: Percent Change to Previous Year, 1990-2002 Year

Prescriptions

Cost

1990 1991 1992 1993 1994 1995 1996 1997

2.2 4.1 4.5 2.4 2.2 2.3 -1.4 -1.4

7.2 9.9 11.5 9.8 8.3 5.3 6.2 3.7

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Cost per Prescription 4.9 5.6 6.8 7.2 6.0 2.9 7.7 5.2 119

1998 4.9 13.4 1999 5.2 13.2 2000 0.0 5.9 2001 -2.9 4.7 2002 0.7 6.6 Source: Hauptverband, own calculations

8.0 7.6 5.9 7.9 5.9

Graph 22: Prescription Trends in the Health Insurance Sector, 1990 - 2002

Prescriptions: Number and Value No. in millions

1990 - 2002

value in €

20

105 100 95 90 85 80

101.4 101.4 18.52 18 17.49 99.1 98.4 Number 16.21 16 96.4 15.31 94.5 93.2 14.23 14 92.4 91.9 13.17 90.4 12.52 12 88.3 11.63 11.3 10.66 84.59.94 Value 10 9.31 8.82 81.1 8

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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Graph 23: Increase in volume and value, 1990 - 2002

Increase in Volume and Value (1990 = 100)

26

25 24

24 23 22

21

20

16

16 14

14 12 10

19

19

18

10

11 10

12 11 10

13 12 11

15 14

12

13

11

11

11

16

21 18

17 16

14

11

11

12

12

12

12

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 packages

costs

c/p

Source: Hauptverband, own calculations

An analysis of the sale of reimbursable drugs reflects the cost-containment measures undertaken, such as the exclusion of drugs from the positive list, switches to OTC status, and extraordinary increments in the prescription fee. The doubling of the cost per prescription can be explained by a number of underlying factors: • Since 1997 a 20% VAT rate is applicable reimbursable drugs • The exclusion of drugs from the positive list and the OTC switches primarily did away with cheaper treatment options in the reimbursement system. Drugs below the fee are not counted, therefore increasing the fee increases the average prescription price. As a result, from the point of view of the health insurers, the average cost per prescription has been rising. A further factor is new and thus expensive pharmaceuticals increasingly being launched on the market (ÖBIG, 2001). 5.5 Pharmaceutical expenditure by carrier As a percentage of total pharmaceutical expenditure in 2002, private households paid 40.2% or €1,025 million. From this total private expenditure, €311 million was for prescription fees and €714 million for other types of private expenditure, such as self-medication, private prescriptions, and pharmaceutical expenditures of private insurance carriers. This position also includes pharmacy sales with dietary supplements and cosmetics on the scale of approximately 20% of private sales. Private household expenditure for prescription fees underlies an average yearly growth between +7.1% (2000-2002) and +8.1% (1990-1995) (see Table 38). Public spending on pharmaceuticals has increased 3.9% from 1990 to 2002; while private expenditure has decreased by the same amount - from 44.1% (1990) to 40.2% (2002). Table 38: Austria pharmaceutical expenditure according to finance carriers 1990-20021 (in € million)

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Year

Total pharmaceutical expenditure 2

Health Insurance expenditure

Private Households Prescription fee

Other Expenses3

Mio. €. 1990 = 100 Mio. €4 1990 = 100 in %5 Mio. € 1990 = 100 Mio. € 1990 = 100 in %5 1990

1.053,6

100,0

588,6

100,0

55,9

126,8

100,0

338,2

100,0

44,1

1991

1.147,6

108,9

649,5

110,3

56,6

137,2

108,1

361,0

106,7

43,4

1992

1.271,0

120,6

729,2

123,9

57,4

148,2

116,8

393,6

116,4

42,6

1993

1.390,5

132,0

801,7

136,2

57,7

161,9

127,6

426,9

126,2

42,3

1994

1.494,2

141,8

869,8

147,8

58,2

174,2

137,3

450,2

133,1

41,8

1995

1.579,6

149,9

912,2

155,0

57,8

186,9

147,3

480,5

142,1

42,2

1996

1.668,3

158,3

965,5

164,0

57,9

201,4

158,8

501,4

148,2

42,1

1997

1.736,7

164,8

993,8

168,8

57,2

216,3

170,5

526,6

155,7

42,8

1998

1.931,5

183,3

1.138,9

193,5

59,0

233,1

183,8

559,5

165,4

41,0

1999

2.149,7

204,0

1.298,0

220,5

60,4

254,5

200,7

597,2

176,6

39,6

2000

2.266,7

215,1

1.372,9

233,2

60,6

271,0

213,7

622,8

184,2

39,4

2001

2.391,3

227,0

1.414,0

240,2

59,1

307,7

242,6

669,6

198,0

40,9

2002

2.549,7

242,0

1.524,6

259,0

59,8

311,1

245,3

714,0

211,1

40,2

Yearly growth rate (in percent) 1990 - 1995

8,4

9,2

8,1

7,3

1995 - 2000

10,4

13,2

7,7

5,3

2000 - 2002

6,0

5,4

7,1

7,1

1

Excluding hospital market 2 Data from the drug statistic of the main association of the social insurance carriers, excluding sales tax less the prescription fee 3 Expenditure for self-medication, prescription drugs and pharmaceutical expenditures of private insurance carriers. This position also includes pharmacy sales with dietary supplements and cosmetics on the scale of approximately 20% of the private sales. 4 Excluding prescription fees 5 Portion of the health insurance expenditures in percent of the total pharmaceutical expenditures 6 Portion of the private households in percent of the total pharmaceutical expenditure

Source: Hauptverband der österreichischen Sozialversicherungsträger 10/1991 bis 10/2003; ÖBIG-eigene Erhebungen (ÖAK) und Berechnungen

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6. Physician Contact and Medicine Consumption 6.1 Physician Contact Table 39: Physicians and Physician Contact (Utilisation*), 1990 - 2002 Year

Doctors

Contact (in 1,000)

Total GPs Specialists Total GPs Specialists 1990 7,620 4,275 3,345 23,725 13,824 9,901 1991 7,600 4,239 3,361 24,392 14,129 10,263 1992 7,681 4,269 3,412 25,384 14,614 10,770 1993 7,766 4,284 3,482 26,091 14,923 11,168 1994 7,870 4,317 3,553 26,714 15,106 11,608 1995 7,973 4,328 3,645 27,241 15,296 11,945 1996 8,041 4,326 3,715 27,468 15,084 12,384 1997 8,138 4,341 3,797 27,243 14,678 12,565 1998 8,261 4,389 3,872 29,583 15,196 14,387 1999 8,418 4,445 3,973 30,076 15,920 14,156 2000 8,592 4,529 4,063 30,022 15,696 14,326 2001 8,738 4,583 4,155 30,455 15,694 14,761 2002 8,356 4,373 3,983 30,860 15,651 15,209 Source: Hauptverband, own calculations, *Utilisation is calculated on the basis of the number of health insurance vouchers settled between the health insurers and physicians.

It is important to note that during the interviews, some stakeholders gave examples of patients engaging in informal “capitation” arrangements whereby they provide a sickness fund voucher to “their” GP regularly even in the absence of any illness so as to preserve the relationship. A shift towards the use of specialists can be ascertained during the period under review. This is driven by increasing numbers of specialist doctors. Overall there were 736 more doctors in 2002 than in 1990. 87% of the additional doctors were specialists. The rise in physician contact (around 7.1 million cases more than in 1990) is to 75% accounted for by specialists. The frequency of physician contact (measured in the number of health insurance vouchers settled) has risen from 3,100 to 3,700 contacts per quarter. The use of specialists has risen more sharply, and since 1998 specialists are being used more frequently than GPs. In other words, while supplying 48% of all doctors, specialists are now responsible for around 49% of physician contacts (1990: 42%). Table 40: Frequency and Distribution of Use of Doctors, 1990-2002 Year

1990 1991 1992 1993 1994 1995 1996 1997 1998

Frequency per Doctor in 1,000 Total

GPs

3.1 3.2 3.3 3.4 3.4 3.4 3.4 3.3 3.6

3.2 3.3 3.4 3.5 3.5 3.5 3.5 3.4 3.5

Specialists

Specialists Percentage of all Doctors 3.0 3.1 3.2 3.2 3.3 3.3 3.3 3.3 3.7

Report: The Austrian Pharmaceutical Market

43.9 44.2 44.4 44.8 45.1 45.7 46.2 46.7 46.9

Percentage of All Physician Contacts 41.7 42.1 42.4 42.8 43.5 43.8 45.1 46.1 48.6 123

1999 3.6 3.6 3.6 2000 3.5 3.5 3.5 2001 3.5 3.4 3.6 2002 3.7 3.6 3.8 Source: Hauptverband, own calculations

47.2 47.3 47.6 47.7

47.1 47.7 48.5 49.3

Graph 24: Growth in Usage Rates of 'Contract Doctors’, 1990-2002 Usage Rates ‘Contract Doctors’ ( 1990=100 ) 130 124 Total

GPs

125

121

SPs

119 113

120

115

109

115 110

106

105

110

107

105

102 101

100 1990

1991

1992 1993

1994 1995

1996

1997 1998

1999 2000

2001

2002

Source: Hauptverband, own calculations; SPs = Specialists Graph 25: Usage Trends Contract Doctors, Change in %, 1990 - 2002 ‘Contract Doctors’ ( 1990 - 2002 ) % Change to Prior Year

%

Total GPs SPs

3.0 2.0 1.0 0.0 -1.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

-2.0 -3.0 -4.0 -5.0 Source: Hauptverband, own calculations Graph 26: Growth in Physician Contacts, 1990-2002

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Total

Physician Contact (1990 to 2002)

GPs

% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 8.0

SPs

6.0 4.0 2.0 0.0 -2.0 -4.0 Source: Hauptverband, own calculations Graph 27: Trends in physician contact, 1990- 2002

Trends in Physician Contact (1990 = 100)

160 150 140

154

Total

145

GPs SPs

130

130 125 120 116 110

113

109

100 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: Hauptverband, own calculations

6.2 Physician Contact and Prescriptions An analysis of physician usage rates in type §2 health insurers shows the correlation between usage rates (defined by the number of settled health insurance vouchers), the number of prescriptions, and the resulting costs. Increases or decreases in the usage rate result in near-parallel developments in prescriptions and costs. Table 41: Evaluation for Type §2 Health Insurers, % Change to Previous Year, 1990-2002

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Year

Physician Contact

Prescriptions

Cost

2.7 4.5 5.5 2.4 2.7 2.5 -1.1 -1.9 5.2 5.1 0.2 -2.6 0.8

10.0 10.0 12.4 10.0 8.8 5.4 6.5 3.7 13.7 12.9 6.2 4.8 6.8

1990 2.7 1991 2.8 1992 4.1 1993 2.8 1994 2.4 1995 2.0 1996 0.8 1997 -0.8 1998 4.9 1999 5.2 2000 -0.2 2001 1.4 2002 1.3 Source: Hauptverband, own calculations

Graph 28: Correlation between Usage Rates and Prescription, 1990-2002

Usage Rates, Prescriptions, Costs % Change to Previous Year 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

16.0

Usage

14.0

12.9

12.4 10.0

10.0

Cost

10.0

8.0

%

Prescriptions

13.7

12.0 10.0

2002

6.0 4.0

8.8 6.5

6.8

6.2

5.4

4.8 3.7

2.0 0.0 -2.0 -4.0

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Graphs 29: Doctors visits, packages prescribed and costs Doctors Visits and Packages Prescribed, 1990 - 2002 6.0 5.0 4.0

Packages

3.0 2.0 1.0 0.0 -1.0

-1.0

0.0

1.0

2.0

3.0 y = -0.1399x

-2.0

4.0 3

5.0

6.0

+ 0.9281x 2 + 0.2288x - 1.5507 R 2 = 0.8157

-3.0 Visits Visits and Cost 16.0 14.0 12.0

Cost

10.0 8.0 6.0 y = 1.6663x + 4.768 R 2 = 0.8525

4.0 2.0 0.0 -1.0

0.0

1.0

2.0

3.0

4.0

5.0

Visits

6.0

Packages and Costs Costs

14.0 12.0 10.0 8.0 6.0 4.0 y = 1.0675x + 6.3979 R 2 = 0.802

2.0 0.0 -3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0 Packages

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6.3 Prescriptions and Costs According to Age Groups Graph 30: Age and Pharmaceutical Costs, 2002

Age and Pharmaceutical Costs, 2002 €

Share in % 18.0

1000 17.1

901.95 900

16.0 Insurance Benficiaries

Costs 800

14.3

14.0 12.6

12.0

700

687.12

12.0

11.9 10.9

600

10.0

9.7 494.84

8.0

500 7.7

6.0

400

303.87

300

4.0

3.6 200

168.06 2.0

43.84 46.79

74.15

104.89

100 0

0.0 0-9

1o - 19

20 - 29

30 - 39

40 - 49

50 - 59

60 - 69

70 - 79

über 80 Age

Source: Hauptverband, own calculations

Graph 30 shows the age distribution (in % values) of insurance beneficiaries (both those making contributions and their dependents) and annual pharmaceutical costs per person by age group in 2002. Age-related costs grow disproportionably for the 50+ age groups. This correlation is particularly noteworthy, give the increasing percentage of elderly people in the insured group of patients. Overall, 25% of total cost and volume of pharmaceuticals in the health insurance sector go to the over 70 year olds. Graph 31: Correlation Pharmaceutical Expenditure in the Health Insurance Sector and Age - Accumulative Values, 2002 Accumulative Values %

100 90

Prescriptions

80

Costs

70 60 50 40 30 20 10 0 0-9

1O - 19

20 -29

30 - 39

40 -49

50 -59

60 - 69

70 - 79 über 80

Source: Hauptverband

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The share and cost of prescriptions rise with age. For the 0 to 9 year-olds, and the over 80 year-olds the value share lies below the volume share, for the 30 to 69 year-olds this relationship is inverse. Table 42: Regional Growth in the Over 60 Population, 1990 - 2002 Absolute Change 1990 -1996 1996 -2002 1990 - 2002

Bgld 2,684 5,424 8,108

Ktn Nö Oö Sbg 4,776 6,720 13310 5,081 12,277 38,096 29,430 12,681 17,053 44,816 42,740 17,762

Stmk T Vbg Wein 5,914 7,301 4,771 -28,127 23,101 18,549 9,647 15,754 29,015 25,850 14,418 -12,373

Total 22,430 164,959 187,389

Absolute Numbers in % 13.6 15.8 14.6 17.7 21.8 12.1 24.9 29.5 -3.5 12.1 Share 4.3 9.1 23.9 22.8 9.5 15.5 13.8 7.7 -6.6 100 Key to Regional Abbreviations: Bgld.=Burgenland, Ktn=Kärtnen, Nö=Niederösterreich, Oö=Oberösterreich, Sbg=Salzburg, Stmk=Steiermark, T=Tirol, Vbg=Vorarlberg

During the period under review, the number of people above 60 rose by around 187,000. Noteworthy is the strong increase in the second half of the 1990’s. Oberösterreich and Niederösterreich account for around 50% of the increase in absolute figures, while the growth dynamic is particularly marked in Tirol (+25%) and in Voralrberg (+30%). Inversely, Vienna only confronts a growth in the number of people above 60 from the middle of the 1990’s. Table 43: Number of Prescriptions per Insurance Beneficiary According to Age Groups Prescriptions per Insurance Beneficiary

index 1990=100

Age 0–9 10 - 19 20 -29 30 - 39 40 -49 50 -59 60 - 69 70 - 79 Above 80

1990 5.22 3.03 4.42 5.72 7.99 14.11 20.82 32.02 44.23

1996 4.19 2.70 3.67 5.07 8.13 14.86 20.89 34.74 44.73

2002 3.26 2.48 3.71 4.77 7.88 15.53 25.22 35.76 53.86

1996 80 89 83 89 102 105 100 108 101

2002 62 82 84 83 99 110 121 112 122

Total

10.97

11.03

12.13

101

111

Source: Hauptverband, own calculations

In 2002, a total of 12.1 packages were prescribed per person. The growth compared to 1990 becomes more marked from 1996 onwards. A comparison of age groups shows that there is a systematic difference in volume: the number of prescriptions is limited in the age groups up to 39 years, while the number of prescriptions rises disproportionately for age groups above 50 years. Table 44: Average Cost per Prescription According to Age Groups Cost Per Prescription Age 0–9 10 - 19 20 -29 30 - 39

1990 6.40 8.80 8.62 8.86

Report: The Austrian Pharmaceutical Market

1996 8.96 12.69 12.83 13.69

index 1990=100 2002 13.47 18.88 19.96 22.00

1996 140 144 149 155

2002 211 215 232 248 129

40 -49 50 -59 60 - 69 70 - 79 Above 80

9.01 9.32 9.52 8.97 8.11

13.88 14.00 14.25 13.51 12.10

21.33 19.56 19.62 19.21 16.76

154 150 150 151 149

237 210 206 214 207

Total

8.82

13.26

19.15

150

217

Source: Hauptverband, own calculations

During the period under review, costs per prescription have more than doubled. Growth rates rise even higher from 1996 onwards. Of note is the fact that the value per prescription rises disproportionately among the middleaged group. Prescriptions cost increases are particularly marked among the 30 to 50 age group. Table 45: Average Cost per Insurance Beneficiary According to Age Group Cost per Insurance Beneficiary in €

index 1990=100

Age 0–9 1° – 19 20 –29 30 – 39 40 –49 50 –59 60 – 69 70 – 79 Above 80

1990 33.43 26.65 38.14 50.83 71.96 131.53 198.17 287.29 358.72

1996 37.57 34.27 47.12 69.44 112.82 207.96 297.71 469.46 541.11

2002 43.84 46.79 74.15 104.89 168.06 303.87 494.84 687.12 901.95

1996 112 129 124 137 157 158 150 163 151

2002 131 176 194 206 234 231 250 239 251

Total

96.68

146.59

232.30

152

240

Source: Hauptverband, own calculations

Medicine costs per person have risen 2.4-fold. Growth is particularly strong in the over-60 age group, while it is less marked in the under 40 age group. In summary, costs have risen for all age groups, however, the difference between age groups has become even more marked. Table 46: Insurance Beneficiaries and Medicine Costs by Age Group, 2002, 1996 and 1990 2002 Age

1996

1990

% of Population Cost per Capita % of Population Cost per Capita % of Population Cost per Capita

0–9 10 – 19 20 – 29 30 – 39 40 – 49 50 – 59 60 – 69 70 – 79

10.9 11.9 12.6 17.1 14.3 12.0 9.7 7.7

43,84 46,79 74,15 104,89 168,06 303,87 494,84 687,12

11.6 11.7 15.7 16.6 12.9 11.8 9.2 6.7

37,57 34,27 47,12 69,44 112,82 207,96 297,71 469,46

11.7 12.7 17.1 14.0 13.6 10.5 10.4 6.4

33,43 26,65 38,14 50,83 71,96 131,53 198,17 287,29

Above 80

3.6

901,95

3.9

541,11

3.6

358,72

Total

100

232,30

100.00

146,59

100.00

96,68

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130

Graph 32: Medicine Costs by Age Group, A Comparison of the Years 1990, 1996 and 2002

Costs per Capita € 1000 900 800 2002

1996

1990

700 600 500 400 300 200 100 0

0-9

1o - 19

20 - 29

30 - 39

40 - 49

50 - 59

60 - 69

70 - 79

Over 80

Age

Source: Hauptverband, own calculations

6.4. Medicines by Price Category Table 47: Prescriptions and Cost by Medicine Price Category, 2002 Price

Cost

Cumulative % 0–3 11,659 0.7 1 3 – 10 221,617 12.4 13 10 – 20 320,977 18.0 31 20 – 50 722,656 40.4 71 50 – 100 174,381 9.8 81 100 – 200 142,428 8.0 89 200 – 350 33,295 1.9 91 350 – 700 65,216 3.6 95 700 and above 95,933 5.4 100 Source: Hauptverband, own calculations in €

in €1,000

%

Prescriptions Number 6,438,782 33,221,041 24,209,945 25,418,801 2,670,932 1,003,447 134,355 135,889 94,011

Cost per Prescription

% Cumulative % 6.9 35.6 25.9 27.2 2.9 1.1 0.1 0.1 0.1

7 42 68 96 99 100 100 100 100

in € 1.81 6.67 13.26 28.43 65.29 141.94 247.81 479.92 1,020.45

Medicines in the €20 to €50 price class account for around 40% of total costs (with a cost per prescription of €28,43), while the lion share of drugs prescribed belong to the €3 to €10 price class (with an average cost of €6,67). In contrast to costs, the main thrust of prescriptions are distributed more widely across three price groups. High cost products account for 1.4% of prescriptions (which translates into 18.9% of costs) while 75% of prescriptions are made for products in the below €20 price classes, representing only around 30% of costs. Graph 33: Prescriptions and Costs According to Medicine Price Categories, 2002

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%

Prescriptions and Costs According to Medicine Price Categories, 2002

105

Prescriptions

90

Costs

75 60 45 30 15 0 0- 3

3 - 10

1o - 20

20 - 50

50 - 100

100 - 200 200 - 350 350 - 700

700 und mehr Prices

6.5. Medicines According to Therapeutic Indication Fifteen indication groups account for 78% of costs and 64% of prescriptions. The average cost per prescription in these indication groups was €19,16. High cost medicines account for 1.2% of prescriptions, which represents 11.4% of costs. Cardiovascular and vascular indication groups stand out both in terms of the number of prescriptions and in terms of cost. They account for around 25% of prescriptions and costs. Table 48: Developments in the 15 Most Important Indication Groups, 1998 – 2002 Change 1998 - 2002 Costs in €1,000 Indication Group Absolute In % CARDIOVASCULAR 71,347 36.7 VASCULAR THERAPY 63,946 50.6 PSYCHO-PHARMACOLOGICAL 63,631 61.4 GASTRO-INTESTINAL 45,125 45.9 CYTOLOGICAL 35,448 74.9 ANTI-BACTERIAL THERAPY -9,565 -10.6 ASTHMA AND COPD 15,648 26.1 RHEUMATOLOGICAL 13,608 28.2 LOCOMOTOR SYSTEM 29,024 88.6 ANTI-DIABETIC 16,601 38.3 ANTI-NEOPLASM THERAPY 19,238 56.8 ANALGESIC 13,629 46.9 IMMUNE SYSTEM 12,362 45.1 UROLOGICAL 13,612 58.0 ANTI-VIRAL THERAPY 13,993 91.0 Total 458,190 34.5 Source: Hauptverband, own calculations

Report: The Austrian Pharmaceutical Market

Prescriptions in 1,000 Absolute in % 4,269 39.2 16 0.2 878 15.5 1,580 30.3 19 21.6 -545 -9.8 175 5.9 -402 -7.0 673 71.4 773 45.0 85 22.7 -126 -6.4 53 16.3 270 21.3 44 33.3 5,101 5.8

Cost per Prescription Absolute in % -0,31 -1.8 7,19 50.3 7,26 39.7 2,54 13.5 230,86 42.9 -0,14 -0.9 3,85 19.1 3,16 37.7 3,49 10.1 -1,42 -5.6 25,15 27.8 4,99 33.7 20,82 24.7 5,61 30.3 50,35 43.2 4,09 27.1

132

A time series analysis is made more difficult by multiple re-classifications of indication groups. The comparison below is therefore limited to the years where indication groups are comparable. Table 49: Growth in Costs, Prescriptions and Average Costs per Prescription 25 Indication Groups.

Costs in €1,000

Prescriptions in 1,000

Cost per Prescription

Absolute

in %

Absolute

in %

Absolute

in %

1990 - 1994

337,817

44.6

10,884

13.3

2,56

27.6

1994 - 1998

234,658

21.4

-4,342

-4.7

3,24

27.4

1998 - 2002

458,190

34.5

5,101

5.8

4,09

27.1

Source: Hauptverband, own calculations

Dividing the value and volume increases of the 25 most important indication groups into year-groups the slower growth in costs from 1994 onwards is notable. In comparison to the period between 1990 and 1994, the increase halved. The number of prescriptions issued to be paid by health insurers sank by 4.7% in absolute and in relative terms, not least because of the exclusion of cheaper products from the positive list. However, the measures did not have a long lasting effect, in the following interval, costs rose by 35.5% while prescriptions rose by 6%. As a result the cost per prescription has grown evenly by 27% per period. Graph 34: Change in the Volume and Cost of Prescriptions Reimbursed by the Health Insurers in Time Intervals 50

Change in %

40 30 20 10 0 -10

1990 - 1994

1994 - 1998

1998 - 2002

Costs

44.6

21.4

34.5

Prescriptions

13.3

-4.7

5.8

Cost/Prescription

27.6

27.4

27.1

Source: Hauptverband, own calculations

6.6 Senior Physician Authorisation In a report on the practice of senior physician authorisation, the Audit Office confirmed the economical importance of the authorisation requirement. However, at the same time it criticised the bureaucratic methods used, as they led to bottlenecks in the approval of these types of prescriptions. The sheer number of applications

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for authorisation is partly to blame for the delays (according to the Audit Office’s finding 67,000 were made per month). Overall some 7% of applications are turned down. Dr. Bachinger (NÖ Patientenanwalt) expressed the opinion that approval by a senior physician presents many disadvantages for the patient and imposes a high barrier of bureaucracy. He feels that as a consequence, a lot of patients do not get the medical treatment that would be most appropriate in their specific case. In practice there are significant differences between health insurers in their authorisation habits. The regional insurer for Tirol retrospectively grants almost all drugs requiring senior physician authorisation. The regional insurer for Kärnten has negotiated a special agreement with the Pharmacists’ Association to regulate the sale and retrospective authorisation of these drugs. Some regional insurers (Steiermark, Oberösterreich, and Vienna) allow authorisation to be made by Fax. The regional insurer for Vorarlberg has compiled its own positive list of medicines requiring senior physician authorisation which are reimbursed under certain circumstances. In general, senior physician authorisation can be granted for three, six , nine or twelve months. Between 1997 and 2002 the number of long-term authorisations has increased in all regional insurers. Table 50: Long-term Authorisation for Drugs Requiring Senior Physician Authorisation, Regional Insurers Regional Insurer 1997 Wein 10,650 Niederösterreich 7,012 (2000) Burgenland n/a Oberösterreich 3,089 Steiermark n/a Kärnten 4,969 Salzburg 1,985 (1999) Tirol 39 (2001) Vorarlberg n/a Source: Hauptverband, own calculations

2002 24,800 15,464 (2002) n/a 14,728 n/a 8,500 2,870 (2002) 1,156 (01,-10, 2003) n/a

% Change + 133 % + 120 % Decline +375 % Decline +71 % +45 % n/a

Medicines requiring senior physician authorisation (Schwarzpunkt Medikamente) account for 18% of costs and their total value has risen by around 64% over the last five years. These drugs account for around 4.4% of all prescriptions, a percentage that has been falling lightly. The cost per prescription of medicines requiring senior physician authorisation is €81,05, a sum that has risen by around 66%. By comparison, the cost per prescription of medicines in the indication groups 1-52 is €19,78 (an increase of around 66%). Table 51: Senior Physician Authorisation, 1998 - 2002 Costs in € 1998 1999 2000 2001 2002 Change 2002 - 1998 Prescriptions 1998 1999 2000 2001

SCHWARZPUNKT Percentage of Total Change to Previous Year 190,144,922.90 213,681,849.60 235,523,191.45 270,670,241.00 311,703,743.00 121,558,820.10

14.87% 14.67% 15.26% 16.48% 18.08% 27.31%

-+12.38% +10.22% +14.92% +15.16% +63.93%

SCHWARZPUNKT Percentage of Total Change to Previous Year 3,902,771 3,896,405 3,823,823 3,828,100

Report: The Austrian Pharmaceutical Market

4.70% 4.40% 4.30% 4.40%

--0.16% -1.86% +0.11% 134

2002 Change 2002 - 1998

3,845,843 -56,928

Cost per Prescription SCHWARZPUNKT

4.41% -1.36%

+0.46% -1.46% Change to Previous Year

1998 48.72 1999 54.84 2000 61.59 2001 70.71 2002 81.05 Change 2002 - 1998 32.33 Source: Hauptverband, own calculations. The values listed refer to costs groups 1-52

-+12.56% +12.31% +14.79% +14.63% +66.36% and prescriptions belonging to the indication

6.7 New legislation regarding prior approval and reimbursement The new law, which has been passed by both legislative chambers provides for an alternative mechanism for the prior approval process for pharmaceuticals in the yellow box (Source: 434/A XXII. GP – Initiativantrag). The drug committee (HEK) can specify certain products for which prior approval can be waived. If criteria can be specified, which ensure that a drug is prescribed appropriately and economically, prior approval can be waived and these criteria checked after reimbursement. These criteria can include diagnoses, diagnostic tests, etc. After the prescription has been dispensed, the Social Health Insurance Institutions can then check if the criteria were documented adequately. If this is not the case, then the prescribing doctor will face sanctions. First the doctor will be given warnings, if the doctor persists in failing to document the necessity for the use of the drug, then repayment of the drug will be required. Finally, the repeat offender will not be allowed to prescribe any drug without prior approval for up to three years. This type of "ex-post-approval" is an additional instrument and is not intended to fully replace prior approval (at least not for now). The difference between these products in the yellow box and those which at present may only be prescribed under certain conditions is that the present products are in the green box, i.e. subject to a more stringent pricing policy, whereas the products affected by the new law are in the yellow box, where the upper price level is the EU average, and the necessity of more detailed documentation by the doctor. Hauptverband has commented that this new system is inefficient, “because proving inappropriate prescribing is much more difficult than preventing it by prior approval, especially if it comes to litigation, which we fully expect.” Furthermore, from the viewpoint of social insurance such a change bears great risks because it will be implemented without a financial safety net (no financial responsibility for the prescribing physician and the pharmaceutical industry) and can therefore lead to further price increases. 6.8 Towards Quality Prescribing In Austria, there are several guidelines that are developed by various qualified or less qualified groups. The guidelines developed by the medical community are awarded a particular significance in Austria. The Federation of Social Security Institutions has launched the initiative “Drugs & Rationality” (Arznei & Vernunft), in cooperation with Pharmig (stakeholder agency of the pharmaceutical industry), the Austrian medical association, and the Austrian Pharmacists’ Association, which develops guidelines to specific clinical patterns on evidencebased criteria. Ad hoc experts may also be included. These “guidelines” are in fact recommendations for “good practice”; they are not compulsory and no sanctions are used. The paper, Concept for the creation of guidelines for medicines and rationality (in German) created by the Department FO-VM/38 (Front Office – Vertragspartner Medikamente) from 3.4.2003, defines guidelines as, “systematically developed statements to assist with medical decisions for appropriate health care under specific clinical circumstances”. These guidelines are “orientation aids in the sense of action and decision corridors, from Report: The Austrian Pharmaceutical Market

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which in certain cases can or even must be swayed”. They believe that “good guidelines are suited for transmitting the continually increasing amount of information on scientific evidence as well as expert opinions on ‘good medical practice’ to the supporting agents of the health care system (physicians, nurses, and other professionals) and to the public”. This document states that the main goal of guidelines is “to supply recommendations for the achievement of an optimal quality of health care provision”, and they are constructed through “consensus of a multidisciplinary expert group on a determined approach to medicine, after the procedure has been defined and made transparent”. These definitions were obtained from Supplement 1 of the “Zeitschrift für ärztliche Fortbildung und Qualitätssicherung”, January 2001, Urban & Fischer Verlag (Available at: http://www.leitlinien.de). A review of which guidelines need to be updated is to be conducted on a yearly basis. The project management suggests relevant suggestions to the steering committee, i.e. representatives from Hauptverband, Pharmig, and the associations of doctors and pharmacists. Suggestions for new topics can be submitted by everyone and will be collected by HV (FO-VM). The suggestions should be justified and complemented with information about disease burden and prevalence. To examine the epidemiological and economic relevance, indications of prevalence can often be obtained through data on the use of medicines (PEGASUS, the datawarehouse of HV). The absence of clinical guidelines should not be an exclusion criterion for the development of an A&V guideline. A review by the Evidence-Based Health in the main association (Hauptverband), in collaboration with FO-VM maintains that guidelines: • exist in German or English • are up-to-date - development or review within the last 5 years • sources must be listed in a traceable manner • should contain statements about the degree of the presented evidence and the category of the recommendation • should be developed by an independent and acclaimed committee; no products of a firm should be given preference in the guidelines. • should mainly be concerned with treatment options that are available in Austria Hauptverband makes recommendations based on the selection process as well as under consideration of the recommendations of the curia of solo practitioners and the committee of head physicians. Recommendations and the selection or rejection of a topic must be justified. The selection of recommendations form guidelines must consider the following: • What is the same/different in the individual guidelines? • Elimination of contradictions • What can be adopted unchanged? • What needs to be adapted? • How must it be adapted? • Justification for the adaptation • What is missing? • Determination of missing data • Addition with specification of evidence Guidelines are then synthesized and adapted for Austria according to the AGREE (Appraisal of Guidelines for Research and Evaluation in Europe) criteria 169 (see Appendix 8). A rough draft is released for internal examination and finally these guidelines are implemented by means of rollout (Milestone), layout and print, events, integration into the concepts of future training/education, the Internet and other media.

169

Development of a methodology for the planning of guidelines for optimal medical practice, Recommendation Rec(2001) 13 of the council of Europe and explanatory memorandum. Report: The Austrian Pharmaceutical Market

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Quality assurance is conducted in the A&V processes including external quality assurance, independent from the individual financer. The external quality assurance agent is obliged to report on the following to the steering committee for every Milestone: • Topic selection • Finalized guideline • Rollout • Evaluation plan • Evaluation results In consideration of stakeholders options towards efforts aimed at quality prescribing, Dr. Otto Pjeta and Dr. Reiner Brettenthaler of the Austrian Medical Chamber believe that doctors should regularly obtain information independent from the pharmaceutical industry on drug substances, action, side effects, interaction, innovation, as well as price comparison with similar drugs with same action. In addition, there is an interest that doctors are informed on an individual basis on the prescribing habits with regard to drug groups and in relation to other doctors. However, they reject all forms of threats, menaces, and drug budgets because “they cannot be regarded as an instrument in the pharmaceutical provision of the population”. In their view, “ i) only the medical profession should be involved in the development of guidelines, which should be independent of the industry and based on scientific findings, as well as the code of ethics”, ii) the term “information” should be used over the term “education”, although any information about market mechanisms and responsibility for health care financing makes sense, and iii) they advocate the use of computer support systems which inform the doctor, right at the moment of pharmaceutical decision-making, about economic prescribing. Univ. Prof. Dr. Hans-Georg Eichler believes that the development of physician guidelines and prescription monitoring should be developed through “a joint effort by learned societies, physicians associations, and payers”. He believes that physician education towards these goals should begin in medical schools as well as through guidelines and education on effective prescribing, which is not well developed at present. He believes that the “use of computer support systems in decision-making and monitoring is quite underdeveloped, and faces considerable resistance from prescribers”. Mag. Rosian (OBIG) acknowledged the guidelines published in the therapeutic index from the Association of the Austrian social insurance agency concerning prescription monitoring of pharmaceuticals and therapies. She believe that in addition to this, it would make sense to have an electronic version of the therapeutic index and to make an easy to use format available to physicians. Furthermore, instruments need to be developed ensuring compliance with the guidelines so that they are realizable. Dr. Probst of Hauptverband expressed the opinion that in order to increase the quality of prescriptions, the development of guidelines must be quickened. First, steps have been made by social insurance/the association, e.g. Arznei & Vernunft (Drug & Rationality) an evidence-based medicines approach. In this context a guideline for the treatment of diabetics is currently being developed (Source: DUR - Drugs Utilisation Review). The development of guidelines and the training of physicians should be made independently from the pharmaceutical industry. Without the utilization of IT, a country-wide assessment of physicians seems to be almost impossible (because of time and feasibility requirements). DI. Mair (Upper Austria Insurance Fund) commented that “guidelines are important to give physicians orientation on how to treat patients. To treat patients not according to the guidelines should be allowed but then the physicians have to state the reason.” He believes that all stakeholders including Hauptverband, physicians, pharmaceutical companies, pharmacists and patients should be involved otherwise the guidelines will never be followed. In addition, physicians should also bear responsibility for costs. There should also be established a responsibility of costs along with the guidelines. However, Dr. Mair noted that sometimes guidelines can be helpful, but may be more expensive, especially when treating chronic diseases: Furthermore, DI. Mair believes that a monitoring system has to be implemented to evaluate whether the guidelines are followed or not. He also believes that knowledge on effective prescribing “is very important and Report: The Austrian Pharmaceutical Market

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should be included in the training curriculum of physicians. It has to be done by independent staff and must not be influenced by the industry.” He commented that most of the physicians are using computer software that helps them to easily find the most economic drug (if generics are available), and that this tool is quite helpful. It could be extended to prescriptions within the same class of substances. He thinks it is not helpful to substitute the individual decision of a physician by software. Also, that the interaction between physician and patient is important and is part of the healing process (placebo-effect). Dr. Bachinger (NÖ Patientenanwalt) stated that what is needed are both general guidelines for physicians concerning the prescription of pharmaceutical products and measures of quality control. Guidelines should be formulated strictly in conformity with EBM and an independent board for quality control should be set up. 6.9 Financial and other incentives for physicians Univ. Prof. Dr. Hans-Georg Eichler believes that “physicians need more leeway in their dealings with payers, direct financial incentives may not be feasible at this time.” However, he advocates using incentives to increase generic prescribing and encouraging doctors to follow practice guidelines. With regards to incentives, Dr. Probst (Hauptverband) commented “reward schemes must be preferred over those that penalize”. He identified that “through the guidelines for economic prescribing, the contract partners already have incentives to choose the cheaper therapeutic alternative”. They receive support from the electronic medication index and the ÖKO-Liste for pharmaceutical products. In addition, guidelines and incentives are also part of the fee structure of the aggregate contracts. DI. Mair (Upper Austria Insurance Fund) believes that if financial incentives are established for physicians, then “there is a risk that patients sometimes may not get what they need. Therefore, it is essential to have a controlling system to ensure quality. Now we have none”. He also commented, “financial incentives could be granted to doctors who prescribe a high ratio of generics. But be aware that the difference in price between generics and original is normally only 10% so that the incentives cannot be high.” Doctors tend to shift from existing (cheap) drugs to newer much more expensive drugs even if the new drugs do not mean much benefit for the patients, due to intensive marketing activities by pharmaceutical companies. Therefore, doctors should be granted individual incentives (e.g. a financial bonus) if they prescribe the least expensive product among therapeutic alternatives. Other incentives, both positive and negative, could support: quality of treatment, prescribing behaviour, continuing education, and independent information on the efficacy of medication. One incentive could be to increase the fees for advisory talks significantly; however, this must first be compensated for by savings in medication reimbursement. Dr. Mair stresses that “with financial incentives and penalties there is a risk that doctors start to practise risk selection among patients”. Dr. Otto Pjeta and Dr. Reiner Brettenthaler (Austrian Medical Chamber) in principle, “advocate generic prescribing; this concerns first the so-called “pharmaceuticals dialogue” (dialogue between the Medical Chamber, the health insurance funds and doctors), and second, all cost-containing measures which have no influence on quality”. They believe that “generic prescribing is stimulated by: PR, also directed towards patients, information for doctors on the individual saving potential by generic prescribing in specific drug groups, as well as on the fact that reduction of total pharmaceutical costs leads to improvements in the range of services covered by social insurance”. They reject any direct financial incentives for the individual doctor for prescribing the least expensive product, respectively for non-medication, due to ethic and principle considerations. Also, they “advocate information instead of minimum/maximum standards, which can never overrule the individual decision of the doctor”. 6.10 Influence of hospitals on physician prescribing behaviour Hospitals in Austria receive special deals and excellent discounts (typically averaging around 40% of list price or better) from the pharmaceutical industry who loss lead to hospitals and hope to make their profits back later from the community. Hospitals are extremely influential in their choices of drug, and this will have a major knock on Report: The Austrian Pharmaceutical Market

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effect in community use and costs. GPs who may fail to meet their targets on expenditure because of the hospitals’ choice of drug do not seem to have any influence on this process. Univ. Prof. Dr. Hans-Georg Eichler believes that hospitals have a strong influence on the prescribing behaviour of physicians, with regards to the marketing strategies of the pharmaceutical industry. Because of the separation of hospital budgets and insurers’ budgets (covering outpatient prescription medicines), there is “a major opportunity for vendors to push products into the market through free sampling of hospitals, targeting hospital based opinion leaders, etc.” DI. Mair (Upper Austria Insurance Fund) also believes that the hospitals have a “huge impact”, because “pharmaceutical companies influence hospitals to prescribe the newest and very expensive drugs”. He stated “hospitals get lots of free samples or get pharmaceuticals for very little money so it is cheap for hospitals to treat patients with these drugs that cost them nothing or nearly nothing (though outside the hospitals these drugs are expensive)”. Moreover, “the industry also pays for continuing education for the doctors in hospitals and outside, sponsors physicians’ congresses, and makes physicians prescribe their new and expensive products by giving them perks”. Dr. Mair also noted that the frequency of hospital admissions in Austria (Krankenhaushäufigkeit), is extremely high in relation to other countries. Dr. Probst (Hauptverband) commented “the main problem of the Austrian health care system results from the marketing activities of the pharmaceutical industry paired with the hospitals’ influence on the resident physician”. He believes that “hospitals must adhere to the reimbursement code and the guidelines for economic prescribing” when it comes to prescription recommendations. Dr. Bachinger (NÖ Patientenanwalt) estimated the influence of hospitals on physician prescribing as “very important”. He stressed that patients who obtain a specific drug in hospital are usually interested in getting the same product outside hospital, in their further medical treatment. Dkfm. Geisler (Pharmig) noted, “innovations are often introduced by hospitals in advance that receive discounts in kind”. He stressed that the strict separation of finances between the in-hospital and out-patient sectors, “which means that following his discharge, the patient must get his hospital prescription ‘re-prescribed’ by the residential doctor or additionally needs to see the head surgeon”. Dr. Otto Pjeta and Dr. Reiner Brettenthaler (Austrian Medical Chamber) feel this influence is “important”, because hospitals obtain drugs free of charge from the pharmaceutical industry when a drug is introduced on the market. The medical profession advocates that “in the short hospital discharge letter there is also an indication that the attending doctor has the possibility of prescribing drugs similar to the ones mentioned (within the pharmaceutical package of social health insurances), respectively that the international product name is used instead of the brand name (generics)”. Mag. Rosian (OBIG) stated that hospitals have a “large” influence on prescription practices in the solo practitioner sector because a “large part of the pharmaceutical sales are achieved in Austrian hospitals (older data/estimates indicate 30% of total pharmaceutical sales in Austria)”. She stated that “generics play almost no part in hospitals” and commented that this occurs because “brand name pharmaceuticals - foremost for long term therapies - are donated, or rather given under very favourable conditions” to hospitals. Moreover, hospitals are where brand manufacturers place their products in the Austrian market. It is often very difficult for a solo practitioner to switch a patient to a different product other than that prescribed by the hospital (requires an explanation). For this reason, Mag. Rosian believes that “the hospital market is already occupied by the brand name manufacturers, even in the area of continuing training of the medical fraternity”. Generic manufacturers stress that even if they were to “give away” their product, they would have difficulty entering the market. The hospital also influences the prescription practices of solo practitioners during medical training (rotation). During their

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training in hospitals, the physicians on rotation almost only come into contact with brand name products, which they then use later on in their solo practices (Source: ÖBIG-study generics, Vienna 2000). Please see Appendix 3 on Repercussions of Prescription Practice in Hospitals on Non-Hospital Doctors (by Peter Wieninger) for a detailed presentation of study findings.

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7. Control of demand through co-payments 7.1 Patient co-payment for pharmaceuticals For medicines that are paid for by the health insurers, beneficiaries and their dependents pay a fixed prescription fee of €4,35 per prescription in 2004. The value of the prescription fee is adjusted on a yearly basis and was increased several times throughout the 1990’s. There are no regional differences in the co-payment for medicines; the fee is the same in all parts of Austria and for all funds. The exemptions are regulated by law, the criteria being unique; however, there are different patterns of exemptions in practice. Low-income and chronically ill patients and those suffering from infectious diseases are exempt from payment of the prescription fee. In this case, the pharmacy charges the prescription fee to the health insurers. In 2002, insurance beneficiaries paid on average €3,14 in co-payments per drug prescribed, and €5,92 per prescription. This is equivalent to €45,5 in co-payments per insurance beneficiary. Table 52: Legally Set Prescription Fee, 1990 – 2004 From

€

Valid for (no. of months)

01.01.1990

1.89

12

01.01.1991 1.96 12 01.01.1991 1.96 12 01.01.1992 2.03 12 01.01.1993 2.18 12 01.01.1994 2.33 12 01.01.1995 2.47 12 01.01.1996 2.54 7 01.08.1996 3.05 17 01.01.1998 3.12 12 01.01.1999 3.20 12 01.01.2000 3.27 9 01.10.2000 4.00 3 01.01.2001 4.07 12 01.01.2002 4.14 12 01.01.2003 4.25 12 01.01.2004 4.35 Source: Hauptverband, own calculations

Through the payment of prescription fees, patients paid around €311 million in 2002. This is equivalent to around 17% of the health insurers’ prescription drug bill. As of 1 January 2004, an amendment to the Austrian legislation (61.Asvg-Novelle) stated that Hauptverband is empowered to set a lower co-payment for certain group of drugs (§ 136, sec 3). For example, it is possible to have a lower prescription fee for generics to provide a financial incentive for their use, although this was not specifically mentioned. Graph: Medicine Expenditure and Co-Payments, 1990 - 2002

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Medicine Expenditure and Co-Payments 1990 - 2002

2000

1,552

1600 1400

963

1000 787

800

1,644

1,372

1,210 1,099

1200 in €m

1,836

1,722

1800

1,167

1,044

Selbstbehalte

Aufwand

877

715 600 400 200 0

126.8

148.2 137.1

203.2

174.3

186.8

161.9

271.0

233.0 216.3

253.9

311.0 307.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: Hauptverband, own calculations, Selbstbehalte = Co-Payments, Aufwand = Expenditure Table 53: Trends in Receipts From Prescription Fees, 1990 – 2002 Prescription Fees Year

in € million% Change Index 1990

1990 126.8 7.1 1991 137.1 8.1 1992 148.2 8.1 1993 161.9 9.2 1994 174.3 7.7 1995 186.8 7.2 1996 203.2 8.8 1997 216.3 6.4 1998 233.0 7.7 1999 253.9 9.0 2000 271.0 6.7 2001 307.5 13.5 2002 311.0 1.1 Source: Hauptverband, own calculations

100 108 117 128 137 147 160 171 184 200 214 243 245

% of total medicine expenditure 17.7 17.4 16.9 16.8 16.7 17.0 17.4 17.9 17.0 16.4 16.5 17.9 16.9

Compared to 1990, patient co-payments have increased two-and-a-half fold. The yearly increase has been of an average of 7%. Notwithstanding, as a percentage of total medicine expenditure, it has fallen. This outcome can in part be explained by the existing co-payment exemptions. The percentage of co-payment exempt medicines to all prescriptions has risen from 17% to around 24%. Notwithstanding the growth dynamic of the number of co-payment exempt products has been less marked than that of the other variables. Compared to the base year, the number of co-payment exempt medicines has grown less strongly, than total medicine expenditure and than co-payments, but more than the number of packages prescribed. Table 54: Prescription Fee Exemptions, 1990 – 2002 Report: The Austrian Pharmaceutical Market

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Prescriptions Without Co-Payments Year

in 1,000

% Change

Index 1990

%

100 104 111 115 125 135 139 150 156 157 164 163 171

17.1 17.3 17.6 17.9 18.9 20.0 20.8 22.9 22.7 21.7 22.6 23.3 24.2

1990 14,021 -1.4 1991 14,601 4.1 1992 15,551 6.5 1993 16,185 4.1 1994 17,474 8.0 1995 18,884 8.1 1996 19,423 2.9 1997 21,020 8.2 1998 21,843 3.9 1999 22,009 0.8 2000 22,931 4.2 2001 22,891 -0.2 2002 24,019 4.9 Source: Hauptverband, own calculations

The correlation between co-payments and developments in the level of medicine expenditure, and the number of prescriptions is anything but unambiguous. At first glance it could be assumed that the reduction in prescribed packages in the years 1993, 1996 and 2001 is associated with increases in co-payment charges. However, its has to be taken into account that the positive list was restructured in the years 1996, 1997, 2000 and 2001 which led to the exclusion of cheaper pharmaceuticals. Graph: Yearly Change in Co-Payments, Prescriptions and Costs, 1990 - 2002

Co-Payments and Usage % 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 14 12 10 8 6 4 2 0 -2 -4

Selbstbehalte

Packungen

Kosten

Source: Hauptverband, own calculations, Selbstbehalte=Co-payments, Packungen=Packages prescribed, Kosten=Costs Table 55: Increases in Co-Payments, Packages Prescribed and Costs, 1990 – 2002 % Change to Previous Year Year

Co-Payments

Packages Prescribed

Costs

1990

7.1

2.2

7.2

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1991 8.1 3.2 1992 8.1 4.6 1993 9.2 2.3 1994 7.7 2.2 1995 7.2 2.3 1996 8.8 -1.4 1997 6.4 -1.4 1998 7.7 5.0 1999 9.0 5.2 2000 6.7 0.0 2001 13.5 -2.9 2002 1.1 0.7 Source: Hauptverband, own calculations

10.1 11.4 9.8 8.4 5.3 6.2 3.7 13.4 13.1 5.9 4.7 6.6

Exemptions People (plus all dependents) who are exempt from the prescription charge include: Without application: • pensioners with income subsidies • persons, with transmittable diseases • “Zivildiener” and their dependants • persons who seek asylum • socially disadvantaged persons With application: • socially disadvantaged persons: depending on income. • Net amount limits: single persons €643.54; single persons with an increased drug requirement €740.07; married couples or persons in cohabitation € 965.53; married couples or persons in cohabitation with an increased drug requirement € 1,110.36; for each insured child plus € 68.49 7.2 Appropriateness in the level of user fees Dr. Otto Pjeta and Dr. Reiner Brettenthaler (Austrian Medical Chamber) believe that the present level of user fees and exemptions are appropriate; however, the level of the prescription fees can “lead to a serious financial burden for patients with multiple prescriptions”. Nevertheless, they feel that this form of patient co-payment, “with an average level of more than 20% of pharmaceutical costs, is rather unusual for a social insurance; therefore, the population has the impression that the limits of financial burden with regard to co-payment have been reached”. Also, the present system of prescription fee exemption is “generally accepted”. DI. Mair (Upper Austria Insurance Fund) observed, “user fees for medication is about 20% and growth rates are high”. For less expensive medicines, the patient has to pay nearly everything by himself. Furthermore, he commented “generics are not much cheaper than original products, so it is almost impossible to grant lower user fees for generic products”. He believes the problem is that doctors, who are influenced by the industry, prescribe many me-too products that are much more expensive than their therapeutic alternatives. The user fee for patients could reflect the “therapeutic effectiveness of the drug”, if this is possible to evaluate; therefore, if two drugs have approximately the same effectiveness, patients should cover the difference in price themselves, i.e. a higher user fees for drugs that differ mainly in price. Dr. Probst (Hauptverband) commented that the prescription fee has “primarily a financing function”, when it is possible to estimate that before increasing the prescription fee the pharmaceutical costs for the health care system are higher than after raising the prescription fee. He believes that under certain conditions, “a positive/directing effect could be achieved if the prescription fee varies with the medical/therapeutic value of the

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pharmaceutical product”. However, Dr. Probst stressed that “the prescription fee and its specific regulation must be seen (aspect of social compatibility) in a wider context with other prescription fees and their regulations”. Mag. Rosian (OBIG) commented that because only people with low incomes are exempt from the co-payment, all persons above the benchmark value pay the full prescription fee with no upper ceiling, which can be an “enormous financial burden for chronically ill people”. She feels that “this is where the ‘inequalities’ come into existence”. The current existing regulation of flat rate fees is very feasible in respect to the administrative costs, but it stands in an area of conflict between economic control and allocation. She recommends a discussion involving a “change in the direction with possible percent surcharge with upper ceilings”, which could also be used to force the use of generics. Mag. Rosian also mentioned that there is a plan to have a “lower flat-rate prescription fee for generics” and believes that in principle, the idea is good. However, she stressed the “potential danger” that patients may think that the medications are “worse” because they are “cheaper” and that the physician will face a higher demand for explanation, thus that the desired effect of increased use of generics would not take place. Univ. Prof. Dr. Hans-Georg Eichler believes that “user fess reflecting product price might stimulate increased cost awareness”, but this needs to be limited to a ceiling value, i.e. €X/year for chronically ill patients. He stated that the number of persons with exemptions is “probably too high”, while some patients with chronic disease requiring multiple medications “may be hit by a high number of prescription fees”. Dkfm. Geisler (Pharmig) mentioned the legal requirement of a lower prescription charge for certain groups of drugs (generics) (ASVG para 136 section 3), but specified that this is currently not yet implemented. Dr. Bachinger (NÖ Patientenanwalt) called for an “all-over-revision of user fees - as far as they should continue existing in general”. From the comments above it is apparent that some stakeholders (Eichler, Rosian, Pjeta and Brettenthaler) view the lack of an upper ceiling of the flat-rate co-payment as a financial burden for people with chronic conditions who require many medicines, because at present the only exemption is for people with “low incomes” below a benchmark value. Furthermore, some stakeholders mentioned the new legal requirement for a lower co-payment for generic drugs, which is an area that requires further investigation. In addition, various stakeholders (Mair, Probst) recommended a prescription fee that is dependant on the medical/therapeutic value of the pharmaceutical product. 7.3 Other cost sharing in Austria In Austria, cost sharing is described in the table below. Table 56: Classification of cost sharing in Austria Category

Cost sharing

Medical products

● Prescription charge for pharmaceuticals ● Therapeutic appliances and equipment: from 1996 on estimated on the basis of payments for and prescriptions of therapeutic products

Outpatient services

● Medical: physicians’ turnover minus social security payments for medical services plus VAT

Inpatient services

● Paramedical services: medical analysis laboratories, home care, psychotherapists etc. ● Sickness-certificate-charge for ASVG-insured ● Coinsurance for civil servants, self-employed, railway employees ● User charge outpatient care

Source: Statistik Austria, IHS HealthEcon (2003) Report: The Austrian Pharmaceutical Market

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The table below shows the years when cost sharing schemes were introduced. In 2005 it is planned to abolish the sickness certificate charge; the outpatient charge was abolished in April 2003. Table 57: History of cost sharing Cost sharing agreement Introduction Prescription-charge 1956 Sickness-certificate-charge 1997 Dental-certificate-charge 1997 User charge outpatient care 2001 Coinsurance (Civil servants 20%) 1967 Coinsurance (Self-employed 20%) 1966 Coinsurance (Railway employees 14%) 1971 *Resolution for abolition passed the National Council in June 2003

Abolition 2005* 2005* 2003 -

Medical Since 1 January 1997, an amount of €3.63 quarterly is charged per “sickness certificate”. Employers issue the sickness certificate and the patients can then choose their GP or specialists among contracted physicians. After submitting the certificate to a physician, people cannot change doctors within a payment period (quarter). Since 1997, Austrian farmers have been integrated in the ASVG-system; however, due to the strained financial situation of the farmers health insurance fund, their co-payment are higher (€6.99 quarterly per sickness certificate) 170 . These sickness certificates are a type of voucher plus fee for service payment for contracted physicians in the ASVG-system and physicians are paid per quarter. Three health insurance funds in Austria have a regulation in which the users pay a fixed proportion of the contracted doctor’s fee for visits to a GP or a specialist. Since 1967, civil servants have a co-insurance of 20%. The fund prescribes the amount and the patients use a payment form or a direct debit. Socially disadvantaged persons are excluded from paying the co-insurance. Similarly since 1996, self-employed people also have a 20% co-insurance. Exemptions for this group include socially disadvantaged persons and pensioners with income subsidies. In addition, children have been exempted from the co-insurance since 2000. Railway employees have a lower co-insurance of 14% of the doctor’s fee. Inpatient visits Regulations on user charges for inpatient stays in public hospitals vary in the nine Austrian states and differ among hospitals. Patients are required to pay a fixed amount per day. These payments are not revenues of the health insurance funds, but are received by the hospital to cover the costs for meals. Outpatient visits In 2001, the government introduced a fixed charge for visits to outpatient departments in public hospitals. Patients with referrals were required to pay €10.90 and those without €18.20. The goal was to redirect patients from outpatient departments to practising GPs and specialists because patients can access hospital outpatient departments directly by showing their sickness certificate. They departments are an important interface within the Austria health care system treating about six million cases annually in 1,500 outpatient departments. Many of these departments operate around the clock providing emergency services, acute care, post-treatment and preventive care. Between 1995 and 2001, outpatient care represented about 12% of total annual hospital costs.

170

Before 1997 farmers had a co-insurance of 20%.

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Evidence suggests that the introduction of an outpatient co-payment in 2001 did not steer demand to primary care providers (Rosian et al 2002)171. On the contrary, the growth rate of the number of inpatient stays still exceeds the growth in the number of cases in extramural settings (Hofmarcher and Riedel 2003) 172 . The outpatient user charge was abolished in March 2003.

171

Rosian I, Mildschuh S, Vogler S, Winkler P, Pichler E, Walter E (November 2002) Selbstbeteiligung, Internationaler Vergleich und Implikationen für Österreich, Research commissioned by Federal Ministry of Social Security and Generation, Österreichisches Bundesinstitut für Gesundheitswesen, Industriewissenschaftliches Institut, Wien. 172 Hofmarcher MM, Riedel M (2003) Impact of Case-Mix Hospital Payment Reforms on Health Systems: Case Study Austria, Research Report commissioned by the World Bank, Institute for Advanced Studies, Wien. Report: The Austrian Pharmaceutical Market

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8. Generic products 8.1. Share of Generics in Austria In the social security sector, generics account for around 12% of all prescriptions and 7.7% of pharmaceutical costs (H1 2003, see Table 58). The share of generics is highest in the regional insurer for Oberösterreich (15.4% of prescriptions, 9.9% of costs) and the farmers’ insurer (15.7% of prescriptions, 10.2% of costs). The lowest values are recorded in the health insurers for Vienna (10.4% of prescriptions, 6.6% of costs) and Vorarlberg (9.3% of prescriptions, and 5.8% of costs). With a cost per prescription of €12,37, generic prescriptions are €7,25 cheaper than all other drugs. The farmers’ insurer (€11,70) and the insurer for Steiermark (€11,90) have among the lowest costs per generic prescription. The average cost per generic prescription is highest in the civil servants insurer with €13,11. When applied to those products that could potentially be substituted by a generic, the share of generics is 39% of prescriptions and 28% of costs. The difference in average costs is reduced to €4,87, while the cost per prescription for generically substitutable drugs (€17,24) lies below the general average (€19,62). Table 58: Share of Generics in Total Prescriptions and Total Costs173 H1 2003 Insurers All GKK’s: Wein NÖ BGLD OÖ STMK KTN SBG T VBG

Share in % Prescriptions 12.2 12.3 10.4 12.9 14.5 15.4 13.6 10.8 11.5 11.6 9.3

VA-B SV-B VA-E VA-ÖD SVGW BKK`s Source: Pegasus

13.7 15.7 11.6 10.1 10.9 12.5

Costs 7.7 7.8 6.6 7.6 8.8 9.9 9.2 7.5 7.4 7.4 5.8 9.0 10.2 7.2 6.4 6.6 7.8

Table 59: Cost per Prescription, All Pharmaceuticals and Generics H1 2003 Insurer

Cost/Prescription in € All Pharmaceuticals Generics

Difference

173 Key to Regional Insurers (GKK's): Nö=Niederösterreich, Bgld.=Burgenland, Oö=Oberösterreich Stmk=Steiermark Ktn=Kärtnen, Sbg=Salzburg, T=Tirol, Vbg=Voralberg. Key to Professional Insurers (BKK's): VA-B Versicherungsanstalt des österreichischem Bergbaus (Miners’ Health Insurer), SV-B Sozialversicherungsanstalt der Bauern (Farmers’ Health Insurer), VA-E Versicherungsanstalt der österreichischen Esisenbahnen (Railwaymen’s Health Insurer), VA-ÖD Versicherungsanstalt des öffentlichen Dienstes (Civil Servants’ Health Insurer), SVGW Sozialversicherungsanstalt der gewerblichen Wirtschaft (Health Insurers of the Self-Employed).

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All GKK’s: Wein NÖ BGLD OÖ STMK KTN SBG T VBG VA-B SV-B VA-E VA-ÖD SVGW BKK`s Source: Pegasus

19,62 19,57 19,70 21,21 20,34 19,51 17,60 18,04 19,82 19,54 20,09

12,37 12,37 12,44 12,41 12,39 12,47 11,90 12,48 12,67 12,47 12,42

-7,25 -7,20 -7,26 -8,80 -7,95 -7,04 -5,70 -5,56 -7,15 -7,07 -7,67

18,59 18,12 20,17 20,60 20,26 19,36

12,13 11,70 12,50 13,11 12,34 12,04

-6,46 -6,42 -7,67 -7,49 -7,92 -7,32

Table 60: Share of Generics in the Generically Substitutable Segment H1 2003 Insurers All GKK’s Wein NÖ BGLD OÖ STMK KTN SGB T VBG VA-B SV-B VA-E VA-ÖD SVGW BKK`s Source: Pegasus

Share in % Prescriptions 39.0 40.1 31.8 41.2 43.8 54.8 45.2 37.2 39.2 40.8 28.2 41.5 48.9 34.5 30.5 32.3 37.3

Costs 28.0 28.8 23.1 28.3 32.4 39.2 32.5 27.9 29.2 29.1 19.9 30.1 34.6 24.8 22.1 22.9 26.4

Table 61: Cost per Prescription, generically substitutable products and generics H1 2003 Cost/Prescription in € Insurer Generically substitutable Generics All 17,24 12,37 GKK’s 17,18 12,37 Wein 17,10 12,44 NÖ 17,63 12,41 Report: The Austrian Pharmaceutical Market

Difference -4,87 -4,81 -4,66 -5,22 149

BGLD OÖ STMK KTN SGB T VBG VA-B SV-B VA-E VA-ÖD SVGW BKK`s Source: Pegasus

16,78 17,46 16,55 16,69 17,00 17,47 17,62

12,39 12,47 11,90 12,48 12,67 12,47 12,42

-4,39 -4,99 -4,65 -4,21 -4,33 -5,00 -5,20

16,75 16,52 17,39 18,12 17,37 17,00

12,13 11,70 12,5 13,11 12,34 12,04

-4,62 -4,82 -4,89 -5,01 -5,03 -4,96

Graph 35: Share of Generics in Prescriptions According to Regional Health Insurers, 2002

Share of Generics in Total Prescriptions, 2002

VGKK

8.5%

KGKK

8.8%

WGKK

8.8% 9.5%

SGKK

9.8%

TGKK

10.7%

Gesamt

11.5%

NÖGKK

12.2%

STGKK

13.0%

BGKK

13.5%

OÖGKK 0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Source: Pegasus, Vienna Regional Health Insurer, Gesamt = Total

8.2. Share of Generics in International Comparison Compared to other European countries, generics remain of reduced importance in Austria. Graph 36: Percentage of Generics to Total Prescriptions, An International Comparison

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150

Share of Generics in an International Comparison

11%

Austria

30%

Sweden

52%

Germany

58%

US

0%

10%

20%

30%

40%

50%

60%

Sources: Austria: Pegasus, Vienna Health Insurer; Sweden: LIF, Läkemedelsindustriföreningen: The Swedish Pharmaceutical Industry Association; Germany: Arneimittlereport; US: Pharmaceutical Research and Manufacturers of America (PhRMA).

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9. Trends in Medicine Expenditure 9.1. All Health Insurers In 2002, the health insurers spent €1,812 million - an equivalent of 17.2% of their income, and 16.9% of the expenditure - on medicines. Over the last decade the share of pharmaceutical expenditure has risen by around 4%, while the volume of medicine expenditure has almost doubled. Income increased by 46% compared to 1993, while expenditure rose by 48% (1993=100). By contrast, the dynamic of medicine expenditure shows much greater increases of around 90% (see Table 64). Mag. Rosian (ÖBIG) expressed the opinion that the reason why drug expenditure is increasing is occurring because of new and expensive medicines. Table 62: Income, Expenditure and Pharmaceutical Expenditure, 1993-2002 in € million

1993 1994 1995 1996 1997 1998 1999 2000 2001

2002

Income

7,197 7,622 7,929 8,212 8,804 9,097 9,346 9,705 10,143 10,523

Expenditure

7,205 7,685 8,099 8,221 8,678 9,057 9,604 9,936 10,293 10,699

Pharmaceuticals

949 1,029 1,084 1,150 1,193 1,354 1,534 1,622 1,701 1,812

Source: Hauptverband, own calculations, Pharmaceuticals Excluding VAT Table 63: Percentage of Pharmaceutical Expenditure of Total Income and Expenditure, 1993-2002 Pharmaceuticals in % 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Of Income

13.2 13.5 13.7 14.0 13.6 14.9 16.4 16.7 16.8 17.2

Of Expenditure

13.2 13.4 13.4 14.0 13.8 14.9 16.0 16.3 16.5 16.9

Table 64: Trends in Income, Expenditure and Pharmaceutical Expenditure (1993 = 100) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Income

100

106

110

114

122

126

130

135 141 146

Expenditures

100

107

112

114

120

126

133

138 143 148

Pharmaceuticals

100

108

114

121

126

143

162

171 179 191

Graph 37: Trends in Total Income and Expenditure, and Expenditure on Pharmaceuticals (1993 = 100)

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Total Income and Expenditure, and Pharmaceutical Expenditure ( 1993 = 100 )

200 Income

190

Expenditure Medicines

180 170 160 150 140 130 120 110 100

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Source: Hauptverband, own calculations

In the period between 1993 and 2002, health insurers’ income rose by an annual average of 4.6%, while expenditure rose by 4.8%. By contrast, expenditure on medicines rose by an average of 7.7%. With the exception of 1997, the yearly increase in pharmaceutical expenditure exceeded that of the other two variables. As a result the yearly share of total expenditure spent on pharmaceuticals is rising. Overall, during the period under review, some 29% of additional income is spent on pharmaceuticals. Table 65: Increases in Total Income, Expenditure and Pharmaceutical Expenditure, Yearly Change in Absolute Figures in €million

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Income Expenditure Pharmaceuticals

497 511 84

425 480 80

307 414 55

283 122 66

592 457 43

293 379 161

249 547 180

359 332 88

438 357 79

380 406 111

Table 66: Total Income and Expenditure, Pharmaceutical Expenditure, Yearly Increases in % % Change to Previous Year

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Income Expenditure Pharmaceuticals

7.4 7.6 9.8

5.9 6.7 8.4

4.0 5.3 5.3

3.6 1.6 6.2

7.2 5.6 3.7

3.3 4.4 13.4

2.7 6.0 13.3

3.8 3.5 5.8

4.5 3.6 4.8

3.7 3.9 6.5

Table 67: Relative Share of Pharmaceutical Expenditure to Yearly Additional Income and Expenditure, 1993-2003 Pharmaceuticals in %

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Of Income Of Expenditure

17.1 16.6

18.7 16.5

17.8 13.5

23.7 50.9

7.3 9.4

54.6 42.3

72.5 33.0

24.6 26.6

17.8 21.9

29.3 27.4

Graph 38: Total Income and Expenditure, Pharmaceutical Expenditure, % Change to Previous Year, 1993-2002

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% Change to Previous Year Income

Expenditure

Pharmaceuticals

% 16.0

14.0

13.4

13.3

12.0

10.0

8.0

9.8

8.4

7.6

7.2 7.4

6.5

6.7 5.9

6.0

6.2

5.6

6.0

5.8

5.3 3.6

4.0

3.7

3.3

3.7

3.5

3.6

3.9

2000

2001

2002

2.7

2.0

4.5

3.8

4.4

4.0

4.8

1.6

0.0 1993

1994

1995

1996

1997

1998

1999

Source: Hauptverband, own calculations

Between 1993 and 1997, growth in pharmaceutical expenditure was subdued. However, the above average increases in the years 1998 and 1999 more than compensated for this. In recent years pharmaceutical expenditure also grew at a higher rate than increases in income. The increase in 2003 is estimated to have been of 8%. Hauptverband commented that pharmaceutical expenditure in 2003 we in the region of €2.3 billion and 14% of health care budget was spent on medicines. 9.2 Trends in Pharmaceutical Expenditure by Health Insurers Trends in increases in pharmaceutical expenditure, pharmaceutical expenditure per insurance beneficiary, cost per prescription, and the level of patient co-payments vary –in some cases considerably- between different health insurers and regional health insurers. This can in part be explained by the different demographic structure of the people insured by different health insurers. It appears evident, that a higher percentage of elderly people among insurance beneficiaries led to higher expenditure levels. Notwithstanding, a number of regional disparities cannot be explained by demographic factors alone. Below, a detailed breakdown is given by health insurer. Table 68: All Health Insurers: Pharmaceutical Expenditure (excl. VAT), 1993-2002 in € million

1993

Total GKK’s

949,5 706

1994

1995

1996

1997

1998

1999

1.028,8 1.083,6 1.150,5 1.193,5 1.353,8 1.534,3 768 809,1 863 895,8 1,019,8 1.153,3

Report: The Austrian Pharmaceutical Market

2000 1.622,5 1.222,7

2001

2002

1.700,5 1.811,8 1.283,4 1.369,8 154

Wein NÖ Bgld OÖ Stmk Ktn Sbg T Vbg

199 121,5 19,2 110,3 96,6 41,6 38,8 53,9 24,9

214,8 134 21,9 116,4 105,2 46 41,8 60,5 27,4

222,8 143,8 24 122,4 111,2 48,3 44,2 64,7 28,3

235 152,9 26,3 130,9 120,9 50,8 46,2 69,2 30,7

241,6 162 27,5 133,8 124 53,4 48,2 72,8 32,3

271,7 186,4 31,3 154,8 141,2 61,2 53,8 81,8 37,4

307,3 211,4 36,8 169,3 159,2 70,9 62,9 92,9 42,7

323,4 226,2 39,4 178,1 169,8 75,8 66,6 97,9 45,3

339,4 239 42,2 186,2 175,1 80,3 69,6 104,1 47,4

358,3 255,2 46 198 187,3 86,7 76,1 110,2 51,9

VA-B 10,6 11,7 12,2 13 VA-E 40,7 43,2 44,9 47,4 VA-öB 89,4 96 100 106 SVGW 53,8 58,2 61,3 63,8 SVB 49 51,7 55,2 57,5 Source: Hauptverband, own calculations

12,9 48,6 109,7 68,2 58,3

14,3 54 123,3 77 65,5

15,8 60,2 139 91,1 74,7

16,5 63,4 147,2 93,6 79,1

16,6 65,1 152,8 98 84,3

17,5 68,7 161,5 106 88,2

The regional health insurers account for around 75% of total pharmaceutical expenditure, the four large regional health insurers - Vienna, Niederösterreich, Oberösterreich and Steiermark - account for 55% of total spending on medicines. Year-on-year growth between 1993 and 2002 underlies similar trends, but on different levels and to different intensity. Among the regional health care insurers, Burgenland, Niederösterreich, Kärnten, Vorarlberg and Tirol lie above the average annual increase in pharmaceutical expenditure. Table 69: All Health Insurers, Yearly Increases in Pharmaceutical Expenditure, 1993 – 2002 Change in %

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Total

9.8

8.4

5.3

6.2

3.7

13.4

13.3

5.8

4.8

6.5

GKK’s Wein NÖ Bgld OÖ Stmk Ktn Sbg T Vbg

10.0 9.3 11.4 9.8 9.8 8.8 10.4 10.5 11.6 9.4

8.8 7.9 10.3 14.4 5.5 8.9 10.5 7.7 12.2 10.0

5.5 3.8 7.3 9.5 5.2 5.7 5.1 5.8 6.9 3.2

6.6 5.5 6.4 9.3 6.9 8.8 5.1 4.4 6.9 8.8

3.8 2.8 5.9 4.8 2.3 2.5 5.1 4.4 5.2 5.1

13.8 12.5 15.0 13.9 15.7 13.9 14.6 11.7 12.3 15.8

13.1 13.1 13.4 17.4 9.3 12.7 15.9 16.7 13.6 13.9

6.0 5.3 7.0 7.2 5.2 6.7 6.9 6.0 5.4 6.3

5.0 5.0 5.6 7.1 4.5 3.1 6.0 4.5 6.3 4.5

6.7 5.6 6.8 8.9 6.4 6.9 7.9 9.4 5.9 9.5

VA-B

7.6

10.5

4.8

4.0

1.4

10.8

10.7

4.4

0.3

5.6

VA-E

8.4

6.1

3.9

5.5

2.6

11.1

11.5

5.2

2.7

5.7

VA-öB

11.0

7.4

4.2

5.9

3.5

12.4

12.7

5.9

3.9

5.7

SVGW

9.5

8.3

5.2

4.2

6.8

12.9

18.4

2.7

5.0

7.9

SVB

7.8

5.5

6.8

4.2

1.3

12.4

14.1

5.9

6.6

4.6

Source: Hauptverband, own calculations Table 70: Increases in Pharmaceutical Expenditure, All Health Insurers 1993-2002 (1993 = 100)

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155

1993 = 100

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Total GKK’s Wein NÖ Bgld OÖ Stmk Ktn Sbg T Vbg

100

108

114

121

126

143

162

171

179

191

100 100 100 100 100 100 100 100 100 100

109 108 110 114 105 109 110 108 112 110

115 112 118 125 111 115 116 114 120 113

122 118 126 137 119 125 122 119 128 123

127 121 133 144 121 128 128 124 135 130

144 136 153 164 140 146 147 139 152 150

163 154 174 192 153 165 170 162 172 171

173 162 186 206 161 176 182 172 182 182

182 170 197 220 169 181 193 179 193 190

194 180 210 240 180 194 208 196 204 208

VA-B

100

111

116

120

122

135

150

156

157

166

VA-E

100

106

110

116

119

133

148

156

160

169

VA-öB

100

107

112

119

123

138

155

165

171

181

SVGW

100

108

114

119

127

143

169

174

183

197

SVB

100

106

113

117

119

134

153

161

172

180

Graph 39: Increases in Pharmaceutical Expenditure 1993 -2002 (1993 = 100)

V A -B

166

V A -E

169

OÖ

180

W ien

180

SVB

180

V A -Ö D

181

STMK G K K `s

194 194

SBG

196

SVG W

197

T

204

KTN

208

VGG

208

NÖ

210

B G LD ges am t

240 191

Source: Hauptverband, own calculations

9.3 Per Capita Pharmaceutical Expenditure

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156

In 2002, an average of €312,17 was spent in pharmaceuticals per beneficiary (excluding dependents). The regional health insurers of Oberösterreich (€256,57), Vorarlberg (€257,15), Salzburg (€260,97) and the health insurer for the self-employed (€274,93) were well below this average. Per capita pharmaceutical expenditure at the miners’ and railwaymen’s health insurers were above the average by 60% and 43% respectively. Above average pharmaceutical costs per head can also be detected in the civil servants health insurer (€371,94) and the regional health insurers of Burgenland (€354,52), Vienna (€332,37) and Niederösterreich (€323,64). Table 71: Pharmaceutical Expenditure per Beneficiary, 1993-2002

in € Total GKK’s Wein Nö Bgld Oö Stmk Ktn Sbg T Vbg

VA-B VA-E VA-öD SVA-GW SVA-B

1993

1994

1995

1996

1998

1999

2000

2001

2002

180,70 194,10 202,85 214,48 221,32

248,45

278,92

287,46

297,17

312,17

169,30 182,45 190,54 201,95 208,35

235,77

263,73

276,67

287,40

303,38

186,37 200,36 207,80 220,14 226,65

254,79

287,43

302,48

316,62

332,37

175,30 189,95 199,99 209,64 219,46

248,40

276,73

292,24

306,17

323,64

165,88 184,12 195,78 207,71 211,50

258,82

300,45

314,56

331,76

354,52

157,01 164,37 171,14 181,84 184,72

211,57

228,58

237,16

244,11

256,57

175,69 189,62 197,99 212,95 216,16

243,20

270,45

284,84

289,96

306,13

157,86 173,05 180,78 189,93 198,61

226,39

260,17

276,20

290,61

312,16

144,28 152,96 160,61 167,73 174,58

194,11

224,65

235,01

242,81

260,97

166,84 185,86 196,54 208,68 218,47

242,68

271,18

280,23

291,37

302,93

134,89 147,78 151,19 163,91 171,60

196,92

220,65

231,31

238,67

257,15

281,18 302,07 306,14 328,20 341,61

384,60

435,13

463,46

472,33

508,28

237,28 254,00 267,51 287,31 299,46

336,31

378,54

401,68

417,88

445,80

233,23 247,77 257,39 269,93 278,62

313,87

352,49

360,14

364,96

371,94

204,68 216,03 224,02 231,05 239,77

262,85

302,20

268,43

267,07

274,93

214,13 229,66 249,44 263,92 271,26

272,40

316,61

288,66

302,09

314,85

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1997

157

Table 72: Deviation from Average per Beneficiary Pharmaceutical Expenditure, All Health Insurers and Regional Health Insurers 2002 Total

Deviation

312,17

€

in %

GKK’s

-8,79

-2.9

W

20,20

NÖ BGLD OÖ STMK KTN SGB T VBG

11,47 42,35 -55,60 -6,04 -0,01 -51,20 -9,24 -55,02

VAB

196,11 64.6

VAE

133,63 44.0

VAÖ

59,77 19.7

SVGW

-37,24 -12.3

SVB

2,68

Regional Health Insurers (GKK's)

Deviation €

in %

GKK’s

303,38

100

6.7

W

28,99

9.6

3.8 14.0 -18.3 -2.0 0.0 -16.9 -3.0 -18.1

NÖ BGLD OÖ STMK KTN SGB T VBG

20,26 51,14 -46,81 2,75 8,78 -42,41 -0,45 -46,23

6.7 16.9 -15.4 0.9 2.9 -14.0 -0.1 -15.2

0.9

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Graph 40: Pharmaceutical Expenditure per Beneficiary by Health Insurer, 2002 P e r C a p ita P h a rm a c e u tic a l E x p e n d itu re in € , 2 0 0 2 3 1 4 .8 5

SVB 2 7 4 .9 3

SVGW VAÖ

3 7 1 .9 4

VAE

4 4 5 .8 0

VAB

5 0 8 .2 8 2 5 7 .1 5

VBG

3 0 2 .9 3

T 2 6 0 .9 7

SGB

3 1 2 .1 6

KTN STMK

3 0 6 .1 3

OÖ

2 5 6 .5 7 3 5 4 .5 2

B G LD

3 2 3 .6 4

NÖ

3 3 2 .3 7

W G K K `s

3 0 3 .3 8

a lle

€

3 1 2 .1 7 0

100

200

300

400

500

600

Graph 41: Deviation from Average Pharmaceutical Expenditure per Beneficiary all health insurers, in €, 2000 P e r C a p ita P h a rm a c e u tc a l E x p e n d itu re f: T o ta l= € 3 1 2 ,1 7

SVB -3 7 .2 4

2 .6 8

SVGW VAÖ

5 9 .7 7

VAE

1 3 3 .6 3

VAB

1 9 6 .1 1

-5 5 .0 2 VBG -9 .2 4

T

-5 1 .2 0 SGB K N1 -0T.0 STM K

-6 .0 4

-5 5 .6 0 OÖ 4 2 .3 5

BG LD NÖ

1 1 .4 7 D e v ia tio n in €

2 0 .2 0

W -8 .7 9 G K K `s -6 0

-4 0

-2 0

0

20

40

60

80

100

120

140

160

180

200

Source: Hauptverband, own calculations

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Graph 42: Deviation from Average Per Capita Pharmaceutical Expenditure, Regional Health Insurers, in €, 2002

Per Capita Pharmaceutical Expenditure Regional Insurers €303,38 Deviation in €

VBG

-46.23

-0.45

T

SGB

-42.41

KTN

8.78

STMK

2.75

OÖ

-46.81

BGLD

51.14

NÖ

20.26

W -60.00

-40.00

-20.00

28.99

0.00

20.00

40.00

60.00

Per Capita Pharmaceutical Expenditure, Regional Insurers Deviation in %

VBG

-15.2

-0.1 T -14.0

SGB KTN

2.9

STMK -15.4

0.9

OÖ BGLD

16.9

NÖ

6.7

W -20.0

-15.0

-10.0

-5.0

Report: The Austrian Pharmaceutical Market

9.6 0.0

5.0

10.0

15.0

20.0

160

Starting from a favourable position at the beginning of the 1990’s, the regional health insurer for Oberösterreich has improved its situation, while that of Vorarlberg and Salzburg have relatively worsened. Per capita pharmaceutical expenditure in the health insurer for the self-employed has been below the average since 1998. The regional health insurer for Kärnten has undergone the opposite trend: relatively low per capita expenditure in the first half of the 1990’s was replaced by above average spending in the years 2000 to 2002. The regional insurer for Burgenland has worsened its position markedly since 1998. Figures for the mining and railway insurers started from a high level at the beginning of the period under review and have increased further. Despite the fact that Vienna and Niederösterreich lie only marginally above the average, their impact on total expenditure is of great importance due to their relative size. Table 73: Standardised Comparison of Per Capita Expenditure: Total=100, 1993-2002 Total =100

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Total

100

100

100

100

100

100

100

100

100

100

GKK`s

94

94

94

94

94

95

95

96

97

97

Wien

103

103

102

103

102

103

103

105

107

106

Nö

97

98

99

98

99

100

99

102

103

104

Bgld

92

95

97

97

96

104

108

109

112

114

Oö

87

85

84

85

83

85

82

83

82

82

Stmk

97

98

98

99

98

98

97

99

98

98

Ktn

87

89

89

89

90

91

93

96

98

100

Sbg

80

79

79

78

79

78

81

82

82

84

T

92

96

97

97

99

98

97

97

98

97

Vbg

75

76

75

76

78

79

79

80

80

82

VA-B

156

156

151

153

154

155

156

161

159

163

VA-E

131

131

132

134

135

135

136

140

141

143

VA-öD

129

128

127

126

126

126

126

125

123

119

SVA-GW

113

111

110

108

108

106

108

93

90

88

SVA-B

119

118

123

123

123

110

114

100

102

101

Source: Hauptverband, own calculations

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161

The depicted trends reflect the different growth dynamics. If 1993 is taken as the base year, per capita pharmaceutical expenditure in the Burgenland insurer grew 2.14-fold (in total it grew 1.73-fold). Among the regional insurers, Burgenland is followed by Kärnten, Vorarlberg and Niederösterreich. The two insurers with the highest per capita expenditure also underwent the strongest growth: the railway insurer +188%, and the mining insurer +181%. Table 74: Increases in Per Capita Pharmaceutical Spending, 1993-2002 (1993 = 100) 1993=100 Total

1993 100

1994 107

1995 112

1996 119

1997 122

1998 137

1999 154

2000 159

2001 164

2002 173

GKK`s

100

108

113

119

123

139

156

163

170

179

Wien

100

108

111

118

122

137

154

162

170

178

Nö

100

108

114

120

125

142

158

167

175

185

Bgld

100

111

118

125

128

156

181

190

200

214

Oö

100

105

109

116

118

135

146

151

155

163

Stmk

100

108

113

121

123

138

154

162

165

174

Ktn

100

110

115

120

126

143

165

175

184

198

Sbg

100

106

111

116

121

135

156

163

168

181

T

100

111

118

125

131

145

163

168

175

182

Vbg

100

110

112

122

127

146

164

171

177

191

VA-B

100

107

109

117

121

137

155

165

168

181

VA-E

100

107

113

121

126

142

160

169

176

188

VA-öD

100

106

110

116

119

135

151

154

156

159

SVA-GW

100

106

109

113

117

128

148

131

130

134

SVA-B

100

107

116

123

127

127

148

135

141

147

Source: Hauptverband, own calculations Table 75: Growth Trends Health Insurers, 1993-2002 (1993 = 100) All GKK`s W NÖ BGLD OÖ STMK KTN SGB T VBG VAB VAE VAÖ

173 6 6 12 41 -9 1 25 8 9 18 8 15 -13

GKK`s 179 -1 5 35 -16 -5 19 2 2 11

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162

SVGW SVB

-38 -26

Table 76: Per Capita Pharmaceutical Expenditure, % Change to Previous Year, 1993-2002 % Change 1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

93 - 97

97 - 02

Total

9.0

7.4

4.5

5.7

3.2

12.3

12.3

3.1

3.4

5.0

6.0

6.5

GKK`s

8.9

7.8

4.4

6.0

3.2

13.2

11.9

4.9

3.9

5.6

6.0

7.1

Wein

9.2

7.5

3.7

5.9

3.0

12.4

12.8

5.2

4.7

5.0

5.9

7.2

Nö Bgld Oö Stmk Ktn Sbg T Vbg

9.6 6.6 8.8 7.9 8.7 8.8 9.7 8.8

8.4 11.0 4.7 7.9 9.6 6.0 11.4 9.6

5.3 6.3 4.1 4.4 4.5 5.0 5.7 2.3

4.8 6.1 6.3 7.6 5.1 4.4 6.2 8.4

4.7 1.8 1.6 1.5 4.6 4.1 4.7 4.7

13.2 22.4 14.5 12.5 14.0 11.2 11.1 14.8

11.4 16.1 8.0 11.2 14.9 15.7 11.7 12.1

5.6 4.7 3.8 5.3 6.2 4.6 3.3 4.8

4.8 5.5 2.9 1.8 5.2 3.3 4.0 3.2

5.7 6.9 5.1 5.6 7.4 7.5 4.0 7.7

6.5 6.4 5.1 5.9 6.5 5.7 7.5 6.7

7.6 9.6 6.0 6.3 8.7 7.7 6.5 7.9

VA-B

7.8

7.4

1.3

7.2

4.1

12.6

13.1

6.5

1.9

7.6

5.6

7.6

VA-E VA-öD SVA-GW SVA-B

9.1 10.0 8.8 10.0

7.0 6.2 5.5 7.3

5.3 3.9 3.7 8.6

7.4 4.9 3.1 5.8

4.2 3.2 3.8 2.8

12.3 12.7 9.6 0.4

12.6 12.3 15.0 16.2

6.1 2.2 -11.2 -8.8

4.0 1.3 -0.5 4.7

6.7 1.9 2.9 4.2

6.6 5.6 5.0 6.9

7.7 5.6 3.3 3.2

Source: Hauptverband, own calculations Graph 43: Per Capita Pharmaceutical Expenditure P e r C a p ita P h a rm a c e u tic a l E x p e n d itu re (T o ta l= 1 0 0 )

0 .9

SVB

-1 2 .3

SVGW

1 9 .7

VAÖ

4 4 .0

VAE

6 4 .6

VAB

-1 8 .1

VBG

-3 .0 T -1 6 .9

SGB KTN

0 .0

-2 .0S T M K -1 8 .3

OÖ

1 4 .0

B G LD

3 .8

NÖ

6 .7

W

-2 .9G K K `s -2 0 .0

-1 0 .0

0 .0

1 0 .0

2 0 .0

3 0 .0

4 0 .0

5 0 .0

6 0 .0

7 0 .0

D e via tio n in %

Source: Hauptverband, own calculations Report: The Austrian Pharmaceutical Market

163

9.4 Overview of Variables, All Health Insurers 2002 An over view of the different health insurers can be given taking into account the following variables: prescriptions, prescription fee exception, items prescribed, packages, and costs per beneficiary (excluding dependents). The depicted figures relate to the year 2002. Company insurers (Betriebskrankenkassen - BKKs) have also been taken into account. Table 77: Comparison of Selected Variables for 2002, All Health Insurers, Absolute Figures Figures Per Paying Insured Person Insurer

Prescriptions

Fee-Exempt Prescribed Expenditure Fee Prescriptions Packages in € in €

All

7.5

1.4

14.5

272.8

45.5

GKK`S Wien NÖ Bgld Oö Stmk Ktn Sbg T Vbg

7.4

1.4

14.3

263,2

44,1

8.0 7.7 8.4 6.6 7.4 7.5 6.4 7.7 6.0

1.2 1.3 1.8 1.3 1.8 1.9 1.0 1.4 0.9

16.9 14.7 16.2 11.5 14.4 14.1 12.3 14.0 11.8

303,4 281,2 303,0 213,0 259,5 266,0 226,1 257,1 216,6

51,5 49,1 48,5 36,6 40,7 39,6 38,9 42,4 38,7

1.4

21.2

409,1

72,4

0.4 0.2 1.4 1.3 2.2 1.9 2.4 2.6 2.0 2.8 1.8 1.0 0.3 1.5 2.8

22.7 17.7 24.9 17.6 22.5 18.9 20.3 24.4 20.0 23.2 17.0 19.0 15.8 11.7 14.5

421,8 407,3 430,5 411,8 424,3 413,8 343,9 390,6 385,6 425,2 336,2 387,9 347,0 238,7 260,1

89,4 69,2 85,6 60,8 72,6 58,0 58,9 71,5 63,5 72,8 55,3 66,7 64,2 33,1 38,0

10.6 BKK´s 11.5 Tabakwerke 8.4 Verkehrsbetriebe 12.6 Semperit 9.7 Neusiedler 11.6 Donawitz 9.6 Zeltweg 10.3 Kindberg 11.7 Kapfenberg 10.8 Pengg 12.3 VA-B 8.6 VA-E Abt. A 9.5 VA-E Abt. B 8.5 VA-öD 6.0 SVA-GW 7.7 SVA-B Source: Hauptverband, own calculations

Table 78: Comparison of Selected Variables for 2002, All Health Insurers, Relative Figures Figures Per Paying Insured Person All Insurers = 100 Prescriptions

Fee-Exempt Prescribed Expenditure Fee in Prescriptions Packages in € €

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164

All GKK`S Wien NÖ Bgld Oö Stmk Ktn Sbg T Vbg BKK´s Tabakwerke Verkehrsbetriebe Semperit Neusiedler Donawitz Zeltweg Kindberg Kapfenberg Pengg

100

100

100

100

100

99

100

99

96

97

107 103 112 88 99 100 85 103 80

86 93 129 93 129 136 71 100 64

117 101 112 79 99 97 85 97 81

111 103 111 78 95 98 83 94 79

113 108 107 80 89 87 85 93 85

141

100

146

150

159

153 112 168 129 155 128 137 156 144

29 14 100 93 157 136 171 186 143

157 122 172 121 155 130 140 168 138

155 149 158 151 156 152 126 143 141

196 152 188 134 160 127 129 157 140

200

160

156

160

129 71 21 107 200

117 131 109 81 100

123 142 127 88 95

122 147 141 73 84

164 VA-B 115 VA-E Abt. A 127 VA-E Abt. B 113 VA-öD 80 SVA-GW 103 SVA-B Source: Hauptverband, own calculations

The four insurers with the lowest per capita expenditure also write out comparatively less prescriptions per insured person. The figures are 6.0 prescriptions per insured person in Vorarlberg, 6.4 in Salzburg, and 6.6 in Oberösterreich. In the health insurer for the self-employed fewer prescriptions are issued per insured person. Trends among packages prescribed also differ between the health insurers. Meanwhile at the mining insurer the figure for prescriptions and prescribed packages is 1.6 times higher. The Vienna and Burgenland insurers also prescribe an above average high number of packages per insured person. 9.5. Age Structure of Insurance Beneficiaries The correlation between age and volume of pharmaceutical consumption was alluded to earlier in this study. Accordingly, insurers with a high percentage of elderly people have higher expenditure levels. The relatively favourable situation of the regional health insurers for Oberösterreich, Vorarlberg, and Salzburg can therefore in part be explained by its demographic structure. On the basis of age-standardised data, the Federation of Social Security Institutions has compiled a debit and credit comparison for pharmaceutical expenditure. This provides unambiguous proof that differences in per capita pharmaceutical expenditure cannot exclusively be explained by demographic realities (see Table 79). Table 79: Share of Older People Among Insurance Beneficiaries, 2002 Share

Above 50-year olds

Report: The Austrian Pharmaceutical Market

Above 60-year olds

Above 70-year olds 165

Older People in % Base Figure All Insurers 33.7 100 VA-B 63.8 189 VA-E 50.8 151 SVA-B 50.5 150 VA-öD 39.7 118 BGLD 37.4 111 SVA-GW 36.2 107 Nö 33.1 98 Wien 31.8 94 KTN 31.7 94 GKK`S 31.0 92 STMK 31.0 92 Oö 29.7 88 VBG 29.4 87 SGB 28.3 84 T 27.1 80 Source: Hauptverband, own calculations

in % 22.1 51.0 37.5 38.5 26.1 25.8 22.6 22.1 19.9 20.7 19.9 20.3 19.0 18.1 17.2 16.9

Base Figure 100 231 170 174 118 117 102 100 90 94 90 92 86 82 78 76

in % 11.9 32.6 22.6 23.4 14.9 13.8 12.2 11.3 10.5 11.1 10.3 10.7 9.9 8.7 8.6 8.5

Base Figure 100 274 190 197 125 116 103 95 88 93 87 90 83 73 72 71

In the whole social security sector, around 34% of insurance beneficiaries are above the age of 50, 22% above 60, and 12% above 70. A comparison of the age groups shows an inverse relationship: Insurers with a relatively high share of elderly people find that their share grows with increasing age (mining, railways and farmers). Inversely, insurers with a relatively younger demographic profile of insured people (Oberösterreich, Vorarlber, Salzburg and Tirol) find that their share decreases in the higher age groups. Graph 44: Pharmaceutical Expenditure per Insured Person, in €, 2002 Per Capita Pharmaceutical Expenditure, in €, 2002 902

900 800

687

700 600

495

500 400

304 232

300

168 47

74

105

44 0-9

10-19

20-29

30-39

1,000

200 100 0

alle

40-49

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50-59

60-69

70-79

80+

166

Table 80: Debit-Credit Comparison of Age-Standardised Expenditures per Insured Person, 2002 Per Capita – Base Figure Insurer

Debit

Credit

Debit-Credit

Total 100 100 SVA-B 145 101 -44 SVA-GW 108 88 -20 VA-B 179 163 -16 GKK-Oö 94 82 -12 Gkk-Vbg 91 82 -9 Gkk-Sgb 89 84 -5 VA-E 145 143 -2 Gkk-Stmk 97 98 1 Gkk-Ktn 98 100 2 Gkk-Bgld 111 114 3 Gkk-Nö 101 104 3 VA-öD 116 119 3 Gkk-Wien 98 106 8 Gkk-T 88 97 10 Source: Hauptverband. Debit = Per capita according to age of insurance beneficiary; Credit= Per capita 2002.

Accordingly, one would expect that following the age standardisation that the farmers insurer would spend 1.45 times per insurance beneficiary, however, in reality less than that was spent. This also applies for the insurer of the self-employed and that of the miners. The regional insurers Oberösterreich, Vorarlberg and Salzburg fall below the expected values by 5% points, while Vienna and Tirol fall above them. 9.6 Health Insurers’ Cost Containment Measures Systematic interventions to control prescription habits of ‘surgery doctors’ and increases in pharmaceutical expenditure were developed in the late 1990’s by the health insurers. Positive results from Oberösterreich’s Medikom-Programme led to an agreement between the Federation’s president and the Minister of Health on 22.12.2000 to make the Medikom-Programme compulsory in all health insurers. At the same time the Federation was charged with conducting negotiations with the Austrian Medical Association to ensure the introduction of electronic payment systems between the contracting parties nationwide by 2003. In addition, the Federation and the Austrian Medical Association came to an ‘agreement of principles’ over pharmaceutical expenditure on 30.5.2001. Putting into practice the Medikom-Programme, modelled on experiences made in Oberösterreich, was explicitly excluded and the autonomy of the social insurance institutions reserved. The declared aim of the agreement is ‘the implementation of nation-wide, co-operative programmes to bring about a significant reduction in the rate of pharmaceutical expenditure growth’. For agreements reached with the states the following framework conditions were included: • A so-called ‘pharmaceutical dialogue’ programme between insurers and ‘contract doctors’ modelled on the example of Oberösterreich or similar pilot projects was to be implemented in all states by 1.7.2001 at the latest. • The agreements at the state level include economic targets including pharmaceutical expenditure per health insurance voucher, costs per prescription, and total costs as a comparative variable. • Any cost savings made would partly be used to finance new medical services. • Particular attention was to be paid to the increased use of generics, the over-, under- or misuse of medicines, and the economical choice of package sizes. Regulatory bodies of equal representation at the federal and state-levels, reserve the right to evaluate and modify the measures. Report: The Austrian Pharmaceutical Market

167

9.7 Implementation of the ‘Agreement of Principles’ by the health insurers The listed measures were designed to bring about a reduction in annual increases in pharmaceutical expenditure. No agreements were reached with the regional insurers for Salzburg and Vorarlberg and the farmers’ insurer. Table 81: Survey of Agreements between Health Insurers and the Austrian Medical Association Contracting Parties Regional Insurer Vienna – Viennese Medical Association

Basis Target: Pharmaceutical CostsPharmaceutical-Dialogue Viennese Medical Association – Federation of Additional Agreement in Social Security Institutions – Regional Insurer addition to General ‘Agreement Vienna of Principles’ Regional Insurer Niederösterreich – Medical Co-ordinatory MeasuresAssociation Niederösterreich Pharmaceutical Consultation Continuation of the Project Medical Association Burgenland- Federation Pharmaceutical Agreement of Social Security Institutions – Regional Health Insurer Burgenland Additional Agreement 2002 Regional Insurer Oberösterreich – Medical Bonus For Reductions in Association Oberösterreich Pharmaceutical Expenditure Bonus for Medical Association Oberösterreich – Physician Fee Regulation Federation of Social Security Institutions– Regional Insurer Oberösterreich Physician Fee Regulation Medical Association Steiermark– Federation Physician Fee Regulation Part A, of Social Security Institutions– Regional Section XI Insurer Steiermark 7. Additional Agreement in Addition to General ‘Agreement of Principles’ Medical Association Kärnten – Federation of Additional Agreement 2002 in Social Security Institutions Addition to General ‘Agreement of Principles’ Medical Association Tirol – Federation of Physician Fee Regulation Social Security Institutions– Regional Insurer Section III Tirol Physician Fee Regulation Section IV 29. Additional Agreement in Addition to General ‘Agreement of Principles’ Austrian Medical Association- Federation of Additional Agreement in Social Security Institutions – Farmers’ Insurer Addition to General ‘Agreement of Principles’ Austrian Medical Association- Federation of Additional Agreement in Social Security Institutions –Railway Insurer Addition to General ‘Agreement of Principles’ Austrian Medical Association- Federation of 56. Additional Protocol in Social Security Institutions –Insurer of the Addition to General ‘Agreement Self-Employed of Principles’

Validity 01.01.2002 – 31.12.2003

01.01.2001 01.07.2002 – 30.06.2003 01.01.1999 – 30.06.2001 2002 and 2003 1999 2000 2002 2003 From 01.10.2000

2002, 2003, 2004 2000 2001 2002 and 2003 From 01.07.2001 From 01.07.2001 From 01.07.2001

Please see Appendix 9 on Reforms of regional and other health insurers. Report: The Austrian Pharmaceutical Market

168

9.8 Handling of Prescriptions Between 1995 and 2002 the number of prescriptions issued has fallen, while the number of people dealing with them has fallen due to a shift towards electronic reimbursement systems. As a result the number prescriptions handled per clerk has increased. However, the number of cases varies significantly between health insurers. Table 82: Prescriptions per Clerk in 2002, Change between 1995 and 2002 Prescriptions % Change1995 per Clerk 2002 242,1 214,995 172,4 233,938 52,0 167,198 2.1 30,8 251,947 53.7 6,9 217,741 55.2 21,0 314,240 81.1 31,1 189,555 23.2 9,2 280,860 27.0 5,0 213.4 465,054 10,8 312,134 44.1 5,6 285,453 53.7 2,8 178,109 66.4 12,8 140,373 40.5 26,1 157,184 60.5 3,0 25,0 39.3 102,460

Health Insurer All Prescriptions Clerks All GKK’s Wien Niederösterreich Burgenland Oberösterreich Steiermark Kärnten Salzburg Tirol Vorarlberg VA-B VA-E VA-ÖD SVA-GW* SVA-B

52,050,210 40,330,855 8,694,305 7,747,358 1,498,058 6,599,030 5,900,855 2,583,911 2,325,268 3,383,532 1,598,538 503,336 1,796,777 4,102,510 2,759,335 2,557,396

Source: Audit Office 2004. *SVA-GW prescription figures only for one quarter

9.9 Opinion of Stakeholders on Insurers Mag. Rosian (ÖBIG) detailed that there was no risk adjustment mechanisms among insurance funds. In the past, there was some adjustment but it was very incomplete and cancelled by the courts. She also stressed that physician payment schemes are different with each sickness fund, but an overall framework is dictated from Hauptverband. A physician may have patients from many different insurance funds and the fees received are not comparable. Historically, fees have been set for doctors by value but not volume, and negotiated with the chamber of physicians. Generally there is a lack of evaluation and evidence, no sanctions, and lack of action for missing targets. Moreover, a further concern was that prescriptions from non-contract doctors are reimbursed.

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10. Austria in European Comparison This section shows Austria in European comparisons in relation to a number of selected economic and demographic indicators such as Gross Domestic Product (GDP), health care expenditure, pharmaceutical expenditure, life expectancy, and percentage of elderly people to total population. To enable a better comparison of data, values are given in US$ Purchasing Power Parity (PPP). The basis for the data is the OECD’s 2003 Health Statistics. 10.1 GDP per Capita With a GDP per capita of US$PPP 28,324, Austria comes within the top 30% in the European comparison. The average GDP per capita in selected European countries is US$PPP 27,762 (all figures for 2001). Over the past 12 years GDP per capita has grown by 67%, slightly below the European average (72%). Table 83: GDP per capita, US$ PPP 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Austria Belgium Denmark Finland France Germany Greece Iceland Ireland Italy Luxembourg Netherlands Norway Portugal Spain Sweden United Kingdom

16947 16722 17097 16539 17623 18837 9389 17233 11743 16475 24528 16596 17658 9873 12184 18210 16228

17786 17633 18126 15853 18606 16202 10029 17766 12543 17251 26769 17180 18815 10754 13337 18015 15945

18807 19030 18764 15228 19366 18876 10820 18072 13890 18379 28463 18111 20532 11383 13708 18041 17116

19451 19947 19737 16083 19171 18873 11218 18487 14567 17914 30356 18480 21566 11960 13949 18033 17402

20402 20958 21297 16814 19633 20104 11791 19216 15990 18896 31846 19485 22084 12704 14200 18953 18136

21409 21917 22915 18837 20849 21411 12743 21791 18008 20136 33599 21251 23528 13662 15290 20632 19100

22309 22395 24198 19456 20890 21524 13311 22993 18792 20874 34202 21813 25729 14058 15972 21233 20519

23550 23701 25541 21263 21712 23045 14033 24389 22009 21762 37179 24020 27969 15626 16971 22563 22133

24578 23485 26695 22143 22587 23753 15012 25903 23203 23003 40697 25337 28802 15822 18084 22849 22676

25644 24776 27542 23224 23831 24592 15753 26925 25981 24026 43850 26581 29876 16854 19018 24342 23741

28046 26239 28734 25414 25594 26269 16481 28139 28200 25245 48537 27183 36248 16857 20080 26146 24933

28324 27775 29216 26438 26879 26199 16137 28879 30002 26345 48687 29391 36462 17560 21294 26052 26315

Europe

16111 16624 17564 18070 18971 20416 21192 22792 23802 25092 26961 27762

Source: OECD Health Data, 2003

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170

Graph 45: Comparison of GDP per Capita in US $ PPP, 2001

GDP per capita in US$ PPP, 2001 Luxembourg

48687 36462

Norway Ireland

30002

Netherlands

29391

Denmark

29216

Iceland

28879

Belgium

27775

Europe

27762

France

26879

Finland

26438

Italy

26345

UK

26315

Germany

26199

Sweden

26052

Spain

21294 17560

Portugal Greece

16137 28324

Austria 0

10000

20000

30000

40000

50000

60000

Source: OECD Health Data 2003. EU-15, Norway and Greenland

10.2 Total Per Capita Health care Expenditure Austria’s per capita health expenditure (in US$ PPP) lies above the average of the selected 15 European Union member states. In the 1990’s expenditure increases were relatively stronger. Compared to 1990 expenditure has risen by 85% (EU 76%).

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171

Table 84: Total per Capital Health Expenditure, US$ PPP 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Austria 1204 1271 Belgium 1245 1370 Denmark 1453 1520 Finland 1295 1416 France 1509 1635 Germany 1600 Greece 695 724 Ireland 719 821 Italy 1321 1440 Luxembourg 1501 1572 Netherlands 1333 1409 Portugal 611 729 Spain 813 917 Sweden 1492 1460 United Kingdom 977 1029 EU 1185 1237 Source: OECD Health Data, 2003

1416 1514 1586 1383 1751 1870 854 980 1542 1754 1522 794 990 1501 1184 1376

1542 1613 1729 1338 1810 1878 991 1016 1455 1895 1577 872 1053 1550 1208 1435

1617 1650 1817 1296 1841 2047 1139 1119 1479 1937 1636 930 1055 1552 1271 1492

1831 1900 1880 1414 1984 2263 1226 1223 1486 2138 1787 1134 1163 1680 1330 1629

1939 1983 2003 1486 1987 2340 1275 1239 1566 2192 1818 1195 1217 1779 1440 1697

1873 2013 2099 1548 2032 2465 1326 1417 1684 2204 1958 1341 1269 1855 1516 1773

1968 2008 2238 1528 2096 2520 1406 1438 1778 2361 2176 1365 1353 1903 1563 1847

2061 2144 2344 1608 2211 2615 1516 1623 1883 2685 2310 1469 1426 2053 1704 1977

2233 2293 2398 1699 2387 2780 1556 1793 2060 2719 2348 1519 1497 2195 1813 2086

2001

2503 1841 2561 2808 1511 1935 2212 2626 1613 1600 2270 1992

Graph 46: Per Capital Health Expenditure, (US$ PPP), 2000 Per Capita Health Expenditure, US$ PPP (2000)

GER

2780 2719

LUX DEN

2398

FR

2387

NLD

2348

BEL

2293

AUT

2233

SWE

2195

EU

2086 2060

ITA UK

1813

IRL

1793 1699

FIN HEL

1556

POR

1519

ESP

1497 0

500

1000

1500

2000

2500

3000

$

Source: OECD Health Data, 2003

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172

10.3 Health care Expenditure as % of GDP The share of GDP spent on health care is marginally below the average of other EU member states. Strong increases in health care spending in the first half of the 1990’s has served to narrow the gap. Table 85: Total Health care Expenditure (THE) as % of GDP, 1990 – 2000 1990 7.1 7.4 8.5 7.8 8.6 8.5 7.4 6.1 8.0 6.1 8.0 6.2 6.7 8.2 6.0 7.4

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom EU

1991 7.1 7.8 8.4 8.9 8.8

1992 7.5 8.0 8.5 9.1 9.0 9.9 7.9 7.1 8.4 6.2 8.4 7.0 7.2 8.3 6.9 8.0

7.2 6.5 8.3 5.9 8.2 6.8 6.9 8.1 6.5 7.5

1993 7.9 8.1 8.8 8.3 9.4 9.9 8.8 7.0 8.1 6.2 8.5 7.3 7.5 8.6 6.9 8.1

1994 7.9 7.9 8.5 7.7 9.4 10.2 9.7 7.0 7.8 6.1 8.4 7.3 7.4 8.2 7.0 8.0

1995 8.6 8.7 8.2 7.5 9.5 10.6 9.6 6.8 7.4 6.4 8.4 8.3 7.6 8.1 7.0 8.2

1996 8.7 8.9 8.3 7.6 9.5 10.9 9.6 6.6 7.5 6.4 8.3 8.5 7.6 8.4 7.0 8.3

1997 8.0 8.5 8.2 7.3 9.4 10.7 9.4 6.4 7.7 5.9 8.2 8.6 7.5 8.2 6.8 8.1

1998 8.0 8.5 8.4 6.9 9.3 10.6 9.4 6.2 7.7 5.8 8.6 8.6 7.5 8.3 6.9 8.0

1999 8.0 8.7 8.5 6.9 9.3 10.6 9.6 6.2 7.8 6.1 8.7 8.7 7.5 8.4 7.2 8.1

2000 8.0 8.7 8.3 6.7 9.3 10.6 9.4 6.4 8.2 5.6 8.6 9.0 7.5 8.4 7.3 8.1

Table 86: Total Health care Expenditure (THE) in Comparison, % Change 1990 -2000

LUX IRL FIN UK ESP AUT ITA DK SWE NLD BEL POR FR HEL GER EU

1990

2000

Difference

6.1 6.1 7.8 6.0 6.7 7.1 8.0 8.5 8.2 8.0 7.4 6.2 8.6 7.4 8.5 7.4

5.6 6.4 6.7 7.3 7.5 8.0 8.2 8.3 8.4 8.6 8.7 9.0 9.3 9.4 10.6 8.1

-0.5 0.3 -1.1 1.3 0.8 0.9 0.2 -0.2 0.2 0.6 1.3 2.8 0.7 2.0 2.1 0.8

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Graph 47: Health Expenditure as % GDP, 2000 Health Expenditure as % of GDP, 2000

8.1

EU

10.6

GER HEL

9.4

FR

9.3 9.0

POR BEL

8.7

NLD

8.6

SWE

8.4

DK

8.3

ITA

8.2 8.0

AUT

7.5

ESP

7.3

UK 6.7

FIN

6.4

IRL 5.6

LUX 0

2

4

6

8

10

12 %

Source: OECD Health Data, 2003

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10.4 Private Health care Expenditure Austria lies above the average with private health care spending as a percent of total health care spending of 30%. Various health care reforms implemented since the mid-1990’s have increased the extent of private co-payments and has contributed to the gradual shift of the financial burden of health care towards private households. Table 87: Private Health care Expenditure as % of Total Health care Expenditure, 1990 – 2001 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

29.4 28.2 17.6 24.2 23.9 23.2 47.0 28.6 28.2 7.2 33.8 35.2 27.6 13.1 17.1

29.1 29.5 17.7 23.9 23.8 24.7 47.2 25.4 27.8 7.5 32.2 35.1 27.5 14.2 19.9

28.6 29.4 18.0 23.7 24.0 25.2 47.9 23.5 28.2 7.6 35.6 34.4 27.8 14.2 19.8

30 28.9 17.8 24.7 24.0 25.2 46.6 27.2 28.0 10.5 36.7 32.4 27.9 14.3 19.5

30.3 28.8 17.5 24.9 24.2 25.0 43.9 26.7 26.6 10.5 36.6 31.5 28.3 15 19.1

25.6

25.7

25.9

26.2

25.9

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom

26.5

26.6

26.5

25.8

25.6

17.3 19.1 23.4 23.8 46.3 28.1 20.7 6.9 32.9 34.5 21.3 10.1 16.4

16.5 18.9 23.7 46.6 27.0 20.8 7.0 31.0 37.2 22.5 11.8 16.7

16.8 20.4 23.4 22.7 45.4 28.5 22.9 7.2 27.2 40.4 22.6 12.8 15.4

17.3 23.9 23.5 23.6 45.5 26.7 23.3 7.1 26.4 37.0 23.4 12.6 14.9

17.8 24.5 24 23.5 49.8 28.1 25.1 8.3 27.1 36.6 24.5 12.9 16.1

28.2 30.4 17.5 24.4 23.7 23.3 48.0 28.4 27.8 7.6 29.0 38.2 27.8 13.3 16.1

EU

23.4

23.6

23.7

23.6

24.6

25.6

2001

17.6 24.4 24.0 25.1 44.0 24.0 24.7 36.7 31.0 28.6 14.8 17.8 26.1

Source: OECD Health Data, 2003

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Graph 48: Share of Private Health care Expenditure (PHE) to Total Health care Expenditure (THE), 2001 PHE as % of THE, 2001

HEL

44.0 36.7

NLD 31.0

POR

30.3

AUT ESP

28.6

BEL

28.2

EU

26.1

GER

25.1

ITA

24.7

FIN

24.4

IRL

24.0

FR

24.0

UK

17.8

DEN

17.6 14.8

SWE 10.5

LUX 0.0

10.0

20.0

30.0

40.0

50.0

%

Austria, Belgium, and Luxemburg from 2000

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10.5 Pharmaceutical Expenditure In 2000, 15.7% of total health care expenditure was spent on pharmaceuticals. With this percentage Austria lies below the average of selected European countries (16.1%). Graph 49: Pharmaceutical Expenditure as % of Total Health care Expenditure (THE), 2000 Pha rm a ce utica l Ex pe nditure in % of THE (2000) 23.5

POR

22.6

ITA 20.5

ESP

20.1

FR 18.1

BEL 16.3

UK

15.7

A UT

15.5

FIN 13.8

GER SWE

12.1

NLD

11.8 9.6

IRL

9.2

DEN 0

5

10

15

20

25

Table 88: Pharmaceutical Expenditure as % of Total Health care Expenditure (THE), 2000 2000 DEN IRL NLD SWE GER FIN AUT UK BEL FR ESP ITA POR Average

as % THE 9.2 9.6 11.8 12.1 13.8 15.5 15.7 16.3 18.1 20.1 20.5 22.6 23.5 16.1

10.6 Life Expectancy at Birth In 2001, life expectancy at birth is 78.8 years, slightly above the European average. In the 1990’s Austria managed to move up in the life expectancy ranking. Compared to 1990, Austrians now live 3.1 years longer, while Europeans have on average gained 2.6 years. Report: The Austrian Pharmaceutical Market

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Table 89: Life Expectancy at Birth, 1990-2001

Austria Belgium Denmark Finland France Germany Greece Iceland Ireland Italy Luxembourg Netherlands Norway Portugal Spain Sweden United Kingdom Europe

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

75.7 76.1 74.9 74.9 76.9 75.2 77.1 78.0 74.9 76.9 75.4 77.4 76.6 73.9 76.8 77.6 75.7

75.7 76.3 75.3 75.3 77.0 75.5 77.2 78.0 75.1 76.9 75.6 77.1 77.1 73.8 77.0 77.7 75.9

76.0 76.5 75.3 75.6 77.3 75.9 77.2 78.7 75.5 77.3 75.2 77.3 77.3 74.4 77.4 78.1 76.3

76.2 76.5 75.2 75.8 77.4 76.0 77.5 78.9 75.4 77.6 75.8 77.0 77.2 74.3 77.5 78.2 76.2

76.6 76.8 75.4 76.5 77.8 76.4 77.7 79.2 75.8 77.8 76.5 77.5 77.8 75.1 77.9 78.8 76.7

76.9 76.8 75.3 76.5 77.9 76.5 77.7 78.0 75.7 78.1 76.6 77.5 77.8 74.9 77.9 78.8 76.6

77.1 77.2 75.7 76.8 78.1 76.8 77.8 78.9 75.9 78.4 76.6 77.5 78.2 74.9 78.1 79.0 76.9

77.5 77.4 76.0 77.0 78.5 77.2 78.2 78.9 76.0 78.1 77.0 77.9 78.3 75.2 78.5 79.3 77.2

77.8 77.4 76.4 77.2 78.6 77.6 78.1 79.6 76.3 78.7 77.1 77.9 78.5 75.3 78.6 79.4 77.3

78.1 77.6 76.6 77.4 78.8 77.7 78.1 79.6 76.5 79.0 77.9 77.9 78.4 75.7 78.6 79.5 77.4

78.3 77.7 76.9 77.6 79.0

78.8

79.7 76.7 79.4 78.1 78.0 78.7 76.2 79.1 79.7 77.8

78.2 78.7 76.9 79.3 79.8 78.1

76.3

76.5

76.6

77.1

77.0

77.3

77.5

77.8

77.9

78.2

78.7

76.1

76.7 78.1 79.3

80.2 79.8

Source: OECD Health Data, 2003 Table 90: Life Expectancy at Birth, 2001 2001

Life Expectancy

AUT DEN IRL 2000 POR BEL 2000 GER 1999 FIN HEL 1999 LUX 2000 UK NLD EU FR ESP ITA SWE

78.8 76.7 76.7 76.9 77.7 77.7 78.1 78.1 78.1 78.1 78.2 78.2 79.3 79.3 79.8 79.8

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Graph 50: Life Expectancy at Birth, 2001 Life Expectancy at Birth, 2001

SWE

79.8 79.8

ITA ESP

79.3 79.3

FR EU

78.2 78.2

NLD UK

78.1

LUX

78.1

HEL

78.1

FIN

78.1 77.7

GER BEL

77.7

POR

76.9

IRL

76.7

DEN

76.7

AUT

78.8 76

76.5

77

77.5

78

78.5

79

79.5

80

Years

10.7 Life Expectancy at 60 In 2001, the average life expectancy at 60 is 20.4 years for men, and 24.3 years for women. Since 1990, life expectancy at 60 for men has increased by 2.5 years. For women the additional life expectancy at 60 is of 2.1 years. As a result the life expectancy gap between the sexes has narrowed by 0.4 years. Table 91: Life Expectancy at 60, According to Gender, 1990 – 2001 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Females

22.2 22.2 22.3 22.5 22.8 22.9 23.0 23.3 23.6 23.6 23.9

24.3

17.9

18

18.1 18.3 18.6 18.7 18.8 19.0 19.3 19.5 20.0

20.4

Gender Gap 4.3

4.2

4.2

3.9

Males

4.2

4.2

4.2

4.2

4.3

4.3

4.1

3.9

Source: OECD Health Data, 2003

10.8 Share of Population Over 65 In 2001, 15.5% of the Austrian population was above the age of 65. The share has increased by 0.6% in the 1990’s. Austria lies in the European average.

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Table 92: Share of Population above the Age of 65, 1990-2001 (in percent) 1990 1991 Austria 14.9 15 Belgium 14.9 15.1 Denmark 15.6 15.6 Finland 13.4 13.5 France 14 14.3 Germany 15 15 Greece 13.8 14.1 Iceland 10.6 10.9 Ireland 11.4 11.4 Italy 14.9 15.3 Luxembourg 13.4 13.4 Netherlands 12.8 12.9 Norway 16.3 16.3 Portugal 13.4 13.7 Spain 13.6 13.9 Sweden 17.8 17.7 United Kingdom 15.7 15.8 Europe 14.2 14.3 Source: OECD Health Data, 2003

1992 14.9 15.3 15.5 13.7 14.5 15 14.4 10.7 11.4 15.6 13.5 13 16.2 13.9 14.3 17.7 15.8 14.4

1993 14.9 15.5 15.5 13.8 14.7 15.1 14.8 11 11.4 15.9 13.8 13.1 16.1 14.1 14.6 17.6 15.8 14.6

1994 15 15.7 15.4 14 14.9 15.3 15.2 10.9 11.4 16.3 13.9 13.1 16 14.4 15 17.5 15.8 14.7

1995 15.1 15.9 15.2 14.2 15.2 15.5 15.6 11.2 11.4 16.6 14.1 13.2 15.9 14.7 15.3 17.5 15.9 14.9

1996 15.3 16.1 15.1 14.4 15.4 15.6 16 11.5 11.4 17 14.4 13.3 15.8 15.1 15.7 17.5 15.9 15

1997 15.4 16.4 15 14.6 15.6 15.7 16.4 11.4 11.4 17.3 14.3 13.4 15.7 15.4 16 17.4 15.9 15.1

1998 15.4 16.5 14.9 14.7 15.8 15.9 16.7 11.7 11.3 17.6 14.3 13.5 15.6 15.7 16.4 17.4 15.9 15.3

1999 15.5 16.7 14.8 14.8 15.9 16.1 17.1 11.6 11.2 17.8 14.4 13.5 15.4 16 16.6 17.3 15.8 15.3

2000 15.5 16.8 14.8 14.9 16.1 16.4 17.3 11.7 11.2 18.1 14.2 13.6 15.2 16.3 16.9 17.3 15.9 15.4

2001 15.5 16.9 14.8 15.1 16.2 16.9 17.3 11.6 11.2 18.4 14.0 13.6 15.0 16.4 17.0 17.2 15.9 15.5

Table 93: Share of 65+ to Total Population in 15 European Countries, 2001 2001 AUT IRL NLD LUX DEN FIN EU UK FR POR BEL GER ESP SWE HEL ITA

% 15.5 11.2 13.6 14.0 14.8 15.1 15.8 15.9 16.2 16.4 16.9 16.9 17.0 17.2 17.3 18.4

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Graph 51: Percent of population 65 and over, 2001 Population 65 and over in %, 2001

ITA

18.4

HEL

17.3

SWE

17.2

ESP

17.0

GER

16.9

BEL

16.9

POR

16.4

FR

16.2

UK

15.9

EU

14.6

FIN

15.1 14.8

DEN LUX

14.0

NLD

13.6

IRL

11.2

AUT

15.5

10.9 Mortality Rates In the 1990’s Austria’s mortality rates have fallen significantly. In 2001, the mortality rate is 596 per 100,000, equivalent to a 23% reduction since 1990. Table 94: Standardised Mortality Rate per 100,000 1990 – 2001

Austria Belgium Denmark Finland France Germany Greece Iceland Ireland Italy Luxembourg Netherlands Norway Portugal

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

772 754 829 824 648 805 711 645 890 704 794 715 738 892

768 744 804 796 638 791 702 659 870 701 777 707 711 888

756 735 810 787 625 759 707 622 844 675 768 695 701 851

742 744 827 787 624 761 688 618 862 664 767 723 715 882

717 714 807 729 601 737 674 600 828 653 710 691 673 816

705 709 821 735 598 724 673 661 847 636 691 691 679 835

692 692 792 716 594 713 664 629 818 614 699 690 651 847

673

654

644

622

596

769 703 578 688 644 614 803 604 673 669 652 822

743 691 597 672 648

679 591 658 641

665

786 603 672 666 640 824

798 585 633 670 642 827

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629

632

778 181

Spain 698 693 Sweden 680 669 United Kingdom 787 777 Source: OECD Health Data, 2003

661 651 754

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658 656 771

641 615 732

640 616 739

634 606 721

614 595 707

618 590 699

616 589 695

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Part 3: Conclusions, Recommendations and Options for Reform In this final part of the report, conclusions, recommendations and options for reforming the Austrian market are presented. A general discussion of the issues is presented, the conclusions are focused on broad categories, and recommendations are presented based on the analysis. Also included are the stakeholder opinions that were expressed through the interviews in Vienna and their answers to the questionnaires. In some instances where the measures are deemed appropriate, more detailed studies will need to be conducted, i.e. changing the method of paying pharmacists and providing incentives for physicians. However, these studies are beyond our terms of reference. The following topics are explored in this section: • Product registration • Pharmaceutical pricing and reimbursement and VAT rate • Regulation of the industry, wholesalers and pharmacists • Incentives for health professionals • Quality of care, continuity of care, disease management, and pharmaceutical care • Public awareness • Senior physician authorization • Increasing the use of generics • Creation of a Health care Interventions, Research and Policy Centre including national registries, information systems, monitoring and providing feedback to insurers, prescribers, and pharmacists • Hospital pharmacy and formularies 1. Product registration In general, there is little perceived need to change the system of product registration in Austria. The industry thinks it is slow as a result of understaffing but this is minor compared to their claimed difficulties with the reimbursement process. Many companies consider Austria a relatively easy market to get licensing in; even so it is often the second market (after the Germany) for new product launch. When registering a generic product, submission of clinical and pre-clinical data is not required. Apart from proof of bio-equivalence to the original, generic manufacturers can rely on documents previously submitted for the original product. This shortens the registration process of generics as the authorities already hold the majority of necessary documentation. There seems no evidence of regulatory capture (i.e. of undue industry “friendliness” either because of industrial imperatives from government or because of ministry staff moving to better paid posts in industry). Nevertheless, the regulators and the pharmaceutical industry should maintain a positive and co-operative relationship. Overall, there was an impression of a stable traditional system with little incentive to change. It seemed accepted that Austria would not be a major player in the European licensing process, because of competition from larger better staffed national agencies in Europe, and because of the lack of an indigenous industry or much indigenous pharmaceutical research. The Federal Ministry for Health and Women seems to express more enthusiasm in becoming more innovative and in attracting business. However, for Austria to become a major player in this arena, substantial investments to speed up the approval processes and improve quality of the decision-making process will be required. At present, there is no agency to perform the function of product registration, only a department within the Ministry for Health and Women. Either a substantial investment in individual expertise and human resource capacity is required to expand this department, or a different institutional framework, i.e. a new agency for product registration, could be created. If the latter option is selected, a detailed business plan will need to be developed. It would be useful for this department/new agency to coordinate their activities with all available scientific research in Austrian universities and research centres. This would be useful to identify the opportunities that Report: The Austrian Pharmaceutical Market

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exist and current resource capacity in the country. In addition, a mission to other countries that attract Mutual Recognition Procedure (MRP) applications, i.e. the UK, the Netherlands and Sweden, would be valuable so that they can discuss what expertise and infrastructure needs to be developed. This is an attractive option given the geographical position of Austria in the enlarged Europe. However, before the government establishes a separate agency, careful operational planning and study visits to other countries’ agencies should be undertaken. However, expanding the role of product registration in Austria may become less important when considering new legislation of the European Commission. Currently, the centralized procedure at the European Medicines Agency (EMEA) is compulsory for the authorization of all biotechnology products and products for orphan diseases; it is optional for other innovative products. The new rules will make the centralized procedure mandatory for pharmaceuticals designed to treat four therapeutic areas - AIDS, diabetes, cancer and neurodegenerative diseases - and may also play a role with the approval of generic products. In the future, this could further extend to cover medicines for autoimmune diseases and viral diseases. This process is seen as a fast-track approval procedure and is expected to make the EMEA more similar to the US Food and Drug Administration (FDA). In Austria, particularly for over the counter (OTC) products, better reporting systems should be in place for pharmacvigilance. Adverse events and side effects must be recorded considering the significant number of OTC products available on the Austrian market and the potential for further delisting. Furthermore, a system that allows patients to report any adverse reactions related to all pharmaceutical products could be implemented, which could include a card system that patients can fill out. 2. Pharmaceutical pricing and reimbursement decisions Because Austria is able to link the pricing of pharmaceutical products with the reimbursement system, the authorities possess significant bargaining power. Across Europe, three main forms of reimbursement exist, although other criteria may also be implemented: 1. Reference pricing 2. Listing 3. Overall health technology assessment Reference pricing is based on setting a fixed reimbursement level, above which the consumer must pay a user charge to cover the difference in cost. The Austrian fixed co-payment would have no meaning in this context. In addition, reference pricing does not link the medical benefit directly to any new drug and therefore may miss the goals of maintaining quality and evaluating products in terms of medical outcome and health economic criteria. Thus, a system that links pricing to reimbursement and the level of co-payment may be a better option, particularly since the Austrian system has these characteristics. [Except at present Austria does not define the prescription fee according to the therapeutic value of the drug (see Section 8.1)]. Utilisation through listing is dependent on the number of classifications, as the greater the number of classification categories the greater the discretion and manipulation. Such regulation is said not to be open to adequate consultation, discussion and discretion. Listing is also said to lack flexibility. Lists have been regarded as blunt regulatory instruments and incentives are very dichotomous – either products reach the list or they do not. Health technology assessment (HTA) is normally associated with evaluating a product’s therapeutic value and can include the use of cost-effectiveness assessment. Under this scheme, the new product is judged against an existing alternative to ascertain whether it represents good value for money, with the value for money criteria set by the regulatory authority. It can be flexible in that the alternative can be defined in a number of manners – next most common alternative, least expensive alternative, etc. It can also be targeted towards individual patient groups so that reimbursement can be defined for given sub-populations. The major advantage is that treatment

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costs are not restricted to drug prices, and treatment effects are made explicit. It is argued that the data constraints are imposing. If Austria is not normally the market of first launch within Europe, then reliance on other European reimbursement systems may be warranted. However, it must be recognised that reimbursement in other markets will reflect the goals of their health care systems and not those of the Austrian health care sector. The Red box may allow the entry of products at prices, which may not be compatible with the Austrian level of expenditure, especially if no comparator products are available to establish the price. The Red box appears to be a holding box for the establishment of price. However it may also allow the entry of products with limited therapeutic value, which will need to be withdrawn as they move to the Yellow or Green box. This ratchet effect, of allowing entry subject to withdrawal, is inefficient. The Red Box for newly launched products would appear to operate over a time scale which would allow full HTA to be undertaken174, and indeed extension of the existing role of the Pharmaceutical Evaluation Commission would be one direction that could be pursued. This would have clear advantages in allowing the authorities to gain information on the relevant population, to have reimbursement explicitly judged against the medical therapeutic effect, to see how the reimbursement level affected other health care costs associated with the specific treatment under consideration (the consideration of these full treatment costs allow a fuller budgetary impact), and through comparison with existing standard therapy to limit the number of “me-too” medicines175. This would also allow more control over the targeting of new products for explicitly stated health objectives. Moreover, if products are initially launched in the Red box, then the ex-factory price will probably be inflated if there is a lack of comparative country prices elsewhere in Europe. Although placing a product in the Red Box provides the advantage of collecting additional data and assessing the value of a product - provided the criteria are established and the infrastructure is available - it opens access to the market with probably higher prices. The fact that products in the Red box do not require prior authorization by a senior physician provides no assurance that these products are being rationally prescribed before the necessary assessment is completed. Additionally, products in the Red box must be priced according to the average EU price. If no EU average price can be established, the company suggests the price and these products undergo a price evaluation every six months by the Price Commission. When the established price is below that indicated by the manufacturer, the difference must be paid back to the health insurers. Challenges may arise if a product in the Red Box is later moved to the Black Box and a patient has previously received this therapy. The Yellow box does not appear to have explicit regulation for entry. Such discretion is useful, and there is a need to clearly define what constitutes “important therapeutic innovation”. HV could also examine examples of other countries that have attempted to define what is ‘added therapeutic value’, as in France and the US (see below). There is also a possibility of leakage into other disease groups – although this is countered by senior physician authorisation (see Section 9). If products have fundamental therapeutic benefit or important therapeutic innovation they are bound to have spent time in the Red box in which case there is scope for further price negotiations at the time of move into the Yellow box as the “average” price may have changed. The newest version of the regulation abolishes prior approval for all products in the Yellow and Red boxes. This creates concerns regarding the regulation and monitoring of medicines in these boxes and the monitoring. It would seem sensible to either incorporate prior authorisation completely within the box framework or to agree explicit, complementary criteria for these authorisations – for example to specify particular high risk patient populations for specific medications.

174

Dr. Probst (HV) advocated the need for investments in “Health Technology Assessment ”. DI. Mair (Upper Austria Insurance Fund) commented that “only about 10% to 15% of all new products are real innovations, about 85% of all new products are me-too drugs with only little or no additional therapeutics benefit”. Dr. Bachinger (NÖ Patientenanwalt) stated that what is needed is “a view on the health care system as a whole”. 175

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The Green box includes innovative drugs, products with added therapeutic value and a negotiated price176. It also includes a number of older but effective products and “me-too” drugs. As a residual it offers scope for late entry. While the Black box applies to the medicines that will not be listed, it also appears to give a circuitous entry to new medicines introduced initially into the hospital setting but then leaked into the GP setting. As such it appears to be possible to circumvent the Boxing system. The fact that Austria is introducing a Black box appears to be too rigid and may create challenges, such as decreasing the discretion of authorities for drugs that could have been reimbursed for a precise indication, disease group, or patient population. The Box system therefore appears to have some disadvantages: 1. The product price is dependent on other health care systems 2. The budgetary effect of the full treatment cost in the Red box, including the reimbursement cost, is not accounted for 3. There is scope for leakage of high cost drugs, e.g. through the hospital sector into the system 4. The holding box (Red box) seems to have no advantage other than establishment of EU average price and therefore may allow entry for some period after which the product must be withdraw 5. In some cases, the Yellow box may come too late (after entry has been made through the Red box) to adequately define the suitable at risk population for the medicine. To combat these challenges, a system of listing across the whole health care sector (primary and secondary care), which explicitly asks for health technology submissions, could be implemented. These should determine the population to be treated, the total treatment costs associated with the introduction of the new therapy (overall budgetary analysis), quantification of the outcomes, and establishment of price based on existing patterns of care within the Austrian health care sector. Companies could be required to provide forecasts and supply pharmacoeconomic data. This is to be undertaken either prior to entry or within the current timescale. After one year on the market, the impact of a new product should be evaluated. This would further extend the role of the Pharmaceutical Evaluation Commission. Health Technology Assessment Austria should consider HTA when evaluating a product’s therapeutic value and can include the use of costeffectiveness assessment. Austria could establish guidelines for cost-effectiveness studies and where possible make studies relevant to the Austrian context. Manufacturers could be required to provide forecasts and supply pharmacoeconomic data, either prior to entry or within the current timescale. The French system of reimbursement decisions could be examined. In France, after marketing authorization is granted, the decision by the Ministry of Health to include a drug on the positive list is based on advice from the Transparency Commission. The value of a drug is assessed from two perspectives. First, an Absolute value assessment is based on clinical data and particularly phase-3 clinical trials on which the market authorisation is based177. The Commission’s recommendations on reimbursement are expressed based on its “therapeutic value” - Service Medical Rendu (SMR as discussed in Part 1 of this report, Box 9). The three SMR levels are: 1major/important, 2-moderate, 3-low. Second, the Commission provides comparative therapeutic value assessments, where the new drug is compared with existing products for the same therapeutic indication. There are five ASMR ratings ranging from: 1-major therapeutic advance to 5-no improvement. Price negotiations then take place between the industry and an Economics Committee based on a number of elements including: cost of therapeutic alternatives, size of target population, and expected budgetary impact; only ASMR 1, 2, 3 have any prospect of achieving a premium price over comparator products. The level of SMR, along with the seriousness of the disease treated, is supposed to determine the reimbursement rate of each medicine. There are three

176

It is understood that in the Green box, drugs with superior therapeutic effects are priced 10% higher than comparable products, and drugs with similar therapeutic effects are priced at 10% lower. 177 Furniss J (2001) Price controls in France: Budgeting for medical benefit? Eurohealth, 7:2, Summer edition. Report: The Austrian Pharmaceutical Market

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reimbursement schedules: 100% reimbursement for ‘irreplaceable’ medical products, 35% for products that treat disorders that are generally not serious, and 65% for products that fall in between these two categories. In Austria pricing and reimbursement decisions consider the therapeutic value of the product. The boxing system allows the authorities to negotiate competitive prices with manufacturers. It is not recommended that Austria implement such a high co-payment level as France (i.e. 65% for some medicines), but if changes to the system of prescription co-payments are made, then one option could be that user charges can be linked to the therapeutic value of the product (see Section 8.1). Another system that utilizes therapeutic classes is that of the US Food and Drug Administration (FDA)178. Since the end of the 1970s, the FDA has been making judgments about the relative therapeutic value of drugs similar in effect and chemical composition to other drugs ("follow-on" products). The FDA goes beyond determining to what degree drugs are effective, and determines which drug is the most therapeutically useful between similar drugs179. In the Netherlands, the Health Council regularly reviews and carries out Health Technology Assessment (HTA) and produces clinical guidelines. This council is appointed by and reports to the government. It is assisted by the Netherlands Organization (TNO), which represents industrial stakeholders, the Council for Health Research, which provides horizon scanning for the government, and the Royal Dutch Academy of Sciences, which provides research capacity and expertise. Ethical, social, and legal issues and fiscal implications are all considered in the assessment. Based on the evidence, governments and insurers make decisions on whether to approve, not approve, or approve the treatment/service for limited use. If the treatment is approved it is included in the medical benefits package and clinical practice guidelines are disseminated. We suggest that in Austria, the proposed Health care Interventions, Research and Policy Centre (HIRPC) (see Section 11) carryout Health Technology Assessments. If cost-effectiveness criteria were to be considered, one option would be to adopt similar guidelines associated with the UK’s National Institute for Clinical Excellence (NICE)180 for such appraisals. Additionally, Austria should establish its own guidelines for cost-effectiveness studies based on the international experience, particularly from Sweden, the Netherlands, and France181. In terms of outcomes assessment, the French recommendations take a more cautious tone compared to NICE. Information coordination could be established with other European countries. This could be coordinated by Austria to evaluate the therapeutic value of new drugs and promote information exchange. Such coordination is already established to discuss activities in pharmaceutical policy at the European level through the Medicines Evaluation Committee (MEDEV). The MEDEV Committee is an expert committee of the European Social Health Insurance Forum and works under a cooperation agreement with the European Social Insurance Partners (ESIP) in Brussels which provides the secretariat, office and website facilities182. The principal purpose of MEDEV is to provide timely analyses about drug related trends and innovations, both at the national and European level, to national health insurance organizations183. Moreover, during the public consultation in Austria, many stakeholders advocated the use of pharmacoeconomic criteria when determining the prices for new drugs and establishing reimbursement lists184. Some believe that 178

US FDA website. Available at: http://www.fda.gov/ Nonetheless the FDA criteria are not used for reimbursement decisions. 180 NICE website. Available at: http://www.nice.org.uk 181 The French Guidelines for the Economic Evaluation of Health Care Technologies (2003) are available in English on the website of the College des Economistes de la Sante (the French Health economists association) at: http://www.cesasso.org/PagesGB/defaut_gb.htm 182 An updated website for the European Social Insurance Platform will be available at: www.esip.org 183 Source: Dr. Anna Bucsics from HV. 184 Dkfm. Geisler (Pharmig) felt that greater “transparency regarding (therapeutic) benefits, with the possibility to demonstrate integrated effects” was needed when determining reimbursement decisions. Furthermore, Univ. Prof. Dr. Eichler commented that there should be the “same standard of evaluation and reimbursement across all types of health care 179

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only “real innovations” should be made refundable by social security as many expensive me-too products are prescribed in the Austrian market. The Austrian authorities could allow the submission of products with similar effectiveness, but consider reimbursement levels to reflect the standard therapy currently used and the treatment resource levels. In the future, cost-effectiveness studies should be based on the unit costs used in the Austrian health care system. The Austrian authorities could, where straightforward conditions allowed – for example if there were clear evidence elsewhere that was easily transferable to the Austrian health care system – accept submissions to other European Health Technology Assessment boards as a means of circumventing the lack of capacity in HTA which reflects the current situation. These submissions would merely convert the costs elsewhere into Austrian resource costs but be required to undertake any necessary sensitivity analysis to ensure that the results of such submissions were robust the Austrian situation. The authorities could initiate assessment by not making the threshold for reimbursed products explicit, but reliant on a combination of evidence on effectiveness, cost-effectiveness, and budgetary impact. Submissions could be made for a variety of patient sub-populations or alternatively the authorities could insist that if made available, the therapy must be shown to be cost-effective for the whole relevant patient population. This type of assessment could be explicitly linked to the reimbursement decision ensuring a “value for money” dimension, as well as a budgetary constraint where explicitly considered. Detailing the relative costs weighted against the relative medical gain would allow more explicit information on the effectiveness of a new medicine, as compared to the current standard to be used in the reimbursement decision. A working group involving international experts could be set up to define the Austrian guidelines for costeffectiveness studies. This group could address specific challenges, such as the transferability of data to the Austrian setting. An increased capacity in universities for health services and health economics research will be needed to evaluate the additional data. This is also particularly necessary as the current Austrian pharmacoeconomic studies can be of varying quality. Other evidence should also be considered in the pricing and reimbursement negotiations. Moreover, it is not advisable to set explicit thresholds for reimbursement from cost-effectiveness studies. Overall, economic evaluation is only one part of the decision making process and other criteria should be taken into account, including budgetary impact, population coverage, and therapeutic value of products. Capacity in the expertise of HTA in Austria is an obvious constraint. As a first step, it could be suggested that submissions for cost-effectiveness be used as a useful companion alongside information on therapeutic benefit for new medicines. This could be asked of all newly marketed products, including generics and “me-too” products. The evidence for any claims should be cited in the submission. Over a period of time, as learning capacity within the authority was increased, more weight could be placed on this request for accompanying material. The clear benefit of moving in this direction is that an explicit “value for money” criteria is introduced, that the process can accommodate specific indications for a pre-defined at risk population, that guidance could be of increasing rigour over time and that the Austrian authorities could explicitly free-ride on pre-existing regulation elsewhere in Europe. Initially, outside evaluators could be used. Appeals process At present, in the case of a dispute with a reimbursement decision the manufacturer has recourse to appeal to the independent Pharmaceutical Commission. This committee is appointed by the minister and chaired by a judge.

interventions”. Additionally, he feels that the use of silo budgeting should be eliminated. DI. Mair commented “if there are for example, five products in one therapeutic class (e.g. ACE-Hemmer), social security should be allowed to put these products out to tender for e.g. 3 years”. Report: The Austrian Pharmaceutical Market

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The Pharmaceutical Appeals Committee is comprised of different stakeholders185 and is restricted to decide only on legal issues regarding the process of approval. Substance issues are not included in the competence of the Committee 186 . In, 2003, out of the 200 applications, 66 cases (33%) have been brought before the Appeals Committee. In 43 of these cases, a decision has been made. The Pharmaceutical Appeals Committee should only decide on legal issues, following a dispute of a reimbursement decision. Decisions regarding issues on the substance should not be considered, only challenges with the process of determining reimbursement status. The members of the Committee could undergo some legal training. Industry rebate For the years 2004, 2005 and 2006, an ‘industry rebate’ of 2% on revenues made from the sale of drugs to the health insurers is given to the HV. This rebate is calculated per company and rises with increases in health insurers’ expenditure on medicines. Companies with a turnover of less than €2 million are excluded as well as the first €2 million made by a company exceeding this threshold. For 2004, the rebated was estimated to be €23 million; however, there are currently 14 cases in court contesting this rebate. Twelve individual cases are in the constitutional court regarding the industrial rebate and two cases are regarding the legal basis. The main arguments are: • HV is arguing that the request for payment is based on law and constitutes a civil obligation. HV does not operate as a public office but on behalf of the different health insurance organisations. • The industry is concerned that the rebate violates the principle of equal treatment, free trade and entrepreneurship, and the basic property right. This measure was considered by the industry not to be in accordance with the law. This view is strictly rejected by HV. The industry rebate appears to be a reasonable and proportional measure. In the future, this percentage rebate could be adjusted upward or downwards depending on consumption, and may have to be weighted according to expenditure trends. 2.1 VAT rate In Austria, the high VAT rate may inflate the pharmaceutical expenditure. The 20% VAT rate on pharmaceutical products in Austria is high compared to the rest of Europe. All EU countries, with the exception of Austria, Denmark, Germany and Ireland have a reduced VAT rate for pharmaceutical products or prescribed/ reimbursed medicines (see Table 1). Table 1: VAT rate in EU countries for pharmaceuticals and normal products 185 Representatives from the pharmacological society, chamber of physicians, chamber of commerce (a health economist), OBIG (a health economist), chamber of labour (social economist), the HV (a doctor), and chamber of pharmacists (a pharmacist). 186 In the UK, a specially constituted Appeals Panel existed to support complaints against the Final Appraisal Determination from NICE. The Panel currently comprises three non-executive members of the Board, an independent member with experience of the relevant industry, and an independent member with experience of representing a patient or carer organisation. By 2001, eight of the 20 technology appraisals (or 40%) had been subject to an appeal. With the number of appraisals increasing to 50 per year, the Panel had to be changed. The new proposed Appeals Committee will have four categories of membership. All individuals must be appointed by the Board and serve for a period of three years. The total membership of the Committee would be approximately 25 and they would meet once per year. It is also possible to provide members with additional training on relevant matters, for example new or emerging legal issues. Appeals can be based on one or more of the following grounds: • The Institute has failed to act fairly and in accordance with the Appraisal Procedure set out in the Institute’s Interim Guidance to Manufacturers and Sponsors; • The Institute has prepared Guidance which is perverse in the light of the evidence submitted • The Institute has exceeded its powers.

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Country

VAT rate for products (in %) Pharmaceuticals Normal

Austria

20

20

Belgium

6

21

Denmark

25

25

Finland

8

France

1

22

2.1 / 5.5

2

19.6

Germany

16

16

Greece

8

18

Ireland

0 / 21 3

21

Italy

10

20

Luxembourg

3

15

Netherlands

6

17.5

Portugal Sweden Spain UK

5.4 4 0 / 25

17 5

25

4

16

0 / 17.5 6

17.5

1

plus an average of 7% pharmacy tax 2.1% for refundable and hospital exclusive pharmaceuticals, 5.5% for non-refundable pharmaceuticals 3 0% for oral pharmaceuticals; 21% for non-oral pharmaceuticals 4 5% sales tax for pharmaceuticals plus 0.4% charge for the pharmaceutical agency INFARMED 5 0 % for prescription pharmaceuticals, 25% for over the counter pharmaceutical 6 0% for refundable pharmaceuticals, 17.5% for non-refundable pharmaceuticals 2

The insurers recover a flat rate of the collected VAT, but this is considered inadequate. From the table below it is evident that the difference between the VAT collected and the rebate to insurers is increasing year on year. Between 1997 and 2003, the health insurers did not recover €185 million of the VAT collected. The rate of the rebate is linked to the growth of health expenditure at social security and not the actual pharmaceutical expenditure growth of the health insurers. The discrepancy between the annual growth rate in expenditure and the annual growth rate in the rebate can be viewed in Tables 2 and 3, below. Table 2: Pharmaceutical expenditure, VAT collected and rebate, 1997-2003 (in € million) Year 1997 1998 1999 2000 2001 2002 2003 Total 1997-2003

Total pharmaceutical VAT collected Rebate Difference expenditure 1,449 238 248 10 1,643 269 259 -10 1,862 305 281 -24 1,968 323 296 -27 2,062 338 307 -31 2,196 360 318 -42 2,341 384 323 -61 13,521

2,217

2,032

-185

Table 3: Annual growth in pharmaceutical expenditure and rebate to health insurers, 1998-2003

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Year 1998 1999 2000 2001 2002 2003

Annual percent growth in expenditure 13.4 13.3 5.7 4.8 6.5 6.6

Annual percent growth in rebate 4.4 8.5 5.3 3.7 3.6 1.6

A higher rebate could be given to the health insurers and the growth rate of the rebate could relate to the growth rate of pharmaceutical expenditure. Part of the VAT refunded could be earmarked to finance the proposed Health care Interventions, Research and Policy Centre (HIRPC) discussed in Section 11. 3. Regulation of industry promotional activities A few stakeholders stressed the need to address the strong influence of the pharmaceutical industry through their marketing efforts and the need to improve transparency in the study findings published (or not-published) by the industry. Examples were given on the extensive influence of the pharmaceutical industry over physician education in Austria187. Information and education aimed at physicians (counter-detailing) should be provided independent of the pharmaceutical industry188. Other views reflected the opinion that all the marketing activities of the industry should be published189. The insurers have designated doctors at the regional level to analyse data related to prescribing. Additionally, the HV produces comparative data for all insurers. In the future, the proposed Health care Interventions, Research and Policy Centre (HIRPC - see Section 11) could support activities related to prescribing patterns. An exact strategy for counter-detailing and improving prescribing could include the production of briefs for medical professionals on new drugs. These documents should be quite short and there should not be too many so as to prevent information overload and fatigue by physicians. Additionally, this should be linked to academic detailing efforts (see Section 7.4). The current ban on advertising prescription drugs directly to consumers should be maintained in accordance with European standards, and advertising should continue to be restricted to health professionals. In addition, during the education of health professionals, drug marketers should be prohibited from having direct access to students. There are three options for addressing the marketing efforts of the pharmaceutical industry. First, manufacturers could be allowed unlimited promotional expenditure, but must follow an established code of conduct. Second, the industry could be allowed a fixed percentage of sales to spend on promotion. A challenge with this option is that promotional expenditure may be creatively recorded, such that marketing efforts could be recorded as other activities, i.e. R&D expenditure. Third, promotional expenditure could be taxed. This is the case in Sweden and France, and decreases the problem of what is actually declared as promotional expenditure and companies may 187

Dr. Probst commented that “in the context of drug provisions, a fundamental starting point would be to reduce the influence of the pharmaceutical industry on education and training (keyword: pharmaceutical sales representative) and to reduce industry influence on scientific research (negative studies are not published)”. DI. Mair commented that if “excessive marketing activities” of the industry cause physicians to prescribe much more of a specific class of medicines than deemed necessary, “the industry should be forced to pay back money for the exceeding volume of prescriptions, and for the following year prices have to be reduced”. 188 Drs. Pjeta and Brettenthaler (Austrian Medical Chamber) advocate the distribution to doctors of “periodical information, independent of the pharmaceutical industry, on the therapeutic and financial value of newly introduced drugs, as well as ongoing reporting on the pharmaceuticals available in the pharmaceutical market”. 189 DI. Mair stated “pharmaceutical companies should be obliged to publish all their marketing activities and what incentives are granted to whom. In addition, pharmaceutical companies should also be obliged to publish all studies, including studies that did not show the expected results”. Report: The Austrian Pharmaceutical Market

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provide a more realistic figure. Many countries find promotional expenditure of the pharmaceutical industry difficult to monitor. The Austrian authorities should carefully consider different instruments to address the strong influence of the pharmaceutical industry through its promotional efforts and implement mechanisms that it deems would be most effective. Furthermore, activities aimed at promoting healthy lifestyles are currently lacking in the Austrian setting. More public and patient education is needed on the topics of self-medication, medical conditions and therapies. A joint committee could be established with insurers, patient groups, and consumer groups to discuss these issues. 4. Wholesale sector In Austria, wholesale margins are degressive. From mid-2000, wholesale margins ranged from 14.9% to 8.3% of ex-factory prices, with a maximum of €30.52. From 2002, these margins ranged from 13.4% to 6.5% of exfactory prices, with a maximum price of €23.74. In absolute terms, the wholesale margin is currently at 9.8%190. Since the introduction of degressive margins for wholesalers in 1995, these margins have been lowered four times, thus reducing the average wholesale margin as a percentage of pharmacy cost price from 14.3% in 1995 to 11.5% in 2000. In 2001, the wholesale margin in Austria made up 6.9% of the pharmacy retail price, and in 2003 this was around 7.5%. This wholesale margin is much higher than in other countries with a similarly high concentration of the market among the top wholesalers, i.e. in Denmark where the top three wholesaler occupy 100% of the market and the wholesale margin as a percentage of the retail price is 4.1% (see Table 4). The Austrian wholesale margin could be brought down to the Danish level. In 2003, the gross profit of wholesalers in Austria was €136.6 million and for the first quarter of 2004 it amounted to €33.8 million. Table 4: Market share of top three wholesalers and gross margins for wholesalers, 2003 Percent local share of top 3 wholesalers Austria 84 Denmark 100 Finland 100 (top 2) Sweden 100 (top 2) Source: Paterson et al, 2003191 Country

Margin calculated as percent of retail price 7.5 4.1 2.6 2.4

Some of the stakeholders expressed that wholesalers are very service oriented towards the pharmacy, often making three deliveries per day as well as incurring significant transport costs. However, these costs should not be much different than in other European countries. Furthermore, it should be considered whether the threetimes daily deliveries to urban pharmacies are entirely necessary. The top three wholesalers occupy the majority of the Austrian market, thus benefiting from economies of scale. 5. Pharmacy sector Pharmacy margins in Austria are officially fixed and degressively staggered. The most recent decrease in margins was effective from the start of 2004. As a product’s price increases, the percentage margin earned by the pharmacist is gradually reduced from 35.5% to 11.1% of the pharmacy purchase price for private consumers. Pharmacy margins applicable to the price of reimbursed medicines are more than 15% below those applied to end consumer prices192. The margin for products for ‘favoured customers’ (health insurers) range from 27% 190

Source: Prof. Mag. Krammer, Wirtschaftskammer Osterreich (Association of Wholesalers). Paterson I, Fink M, Ogus A, et al (2003) Economic impact of regulation in the field of liberal professions in different member states, Final report – Part 2, Study for the European Commission. Vienna: Institute for Advanced Studies (IHS). 192 For private prescriptions, pharmacists as well as dispensing doctors are entitled to add a 15% surcharge to prices published in the medicines price register. This has resulted in differential margins for the health insurers and private customers. 191

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(25.1% including rebate) to 3.8%. On average, pharmacy margins in Austria appear to be in line with other EU countries. The degressive cuts in pharmacy margins were successful in reducing pharmacies’ gross profits by 5.5% from 1990 to 2002, when measured as a percentage of their turnover from the sale of reimbursable drugs. Additionally from 2000, pharmacies had to pay back to the health insurers a percentage of their revenue increases from the sale of reimbursable medicines. This agreement is in place for five years and the ‘solidarity payment’ for 2001-2004 was 13% of revenue rises per year. In 2002, pharmacists received 22.5% gross profits from reimbursable drugs. In this year, when the previous rebate system was in place, the vast majority of pharmacies (78%) had a turnover of over €870,000 and were required to pay a rebate of 7.7% - the highest rebate category. In 2003, a further rebate was introduced for pharmacies whose turnover from the sale of reimbursable drugs lies above the nationwide average; while low margin (high cost) products above €200 are exempt from the rebate calculation. All pharmacists that have a turnover above the average must return 2.5% of the excess. In 2003, the gross profit of pharmacists in Austria was €655.7 million and for the first quarter of 2004 it amounted to €114.3 million (see Table 5). Table 5: Turnover and gross profit of pharmacists (in Euros), 2003 and Q1 2004 Turn over Ex-factory prices Wholesale prices Retail prices Gross profit Pharmacies

2003 1.238.249.882,57 1.374.816.671,46 2.030.468.070,00

1st Quarter 2004 322.087.377,22 355.861.401,39 470.112.408,00

655.651.398,54

114.251.006,61

Alternative methods to remunerate pharmacists are considered in turn. In general, the method of remunerating pharmacists should not be affected by the cost of the prescription, because dispensing a particular product should not influence profits. An alternative method to remunerate pharmacists would be with a single flat-rate fee per dispensed product, regardless of the product’s price. This flat-rate payment is thus linked to the services provided. An appropriate flat-rate fee must be estimated in order to compensate pharmacists at a suitable income level. Therefore if this method is selected, then a detailed study should be designed to realize and define a suitable flat payment to pharmacists. In the short-run, pharmacists would make the same income as they do at present. Over time, this payment would remain the same and pharmacists could be incentivised to engage in economic dispensing. Additional incentives can be provided if this is agreed upon politically. Pharmacists could have the potential to top-up their income through incentives to dispense lower cost drugs, e.g. generic products. Pharmacists in Ireland, the Netherlands, Sweden, the UK and most recently Germany all receive a fixed-fee per prescription. In the Netherlands and the UK, pharmacists are reimbursed at the list price for products and a clawback is in place. On a longer-term basis, substitution rights could be allowed for pharmacists, with or without the agreement of the prescribing doctor. This option should be discussed between the professions and should be limited to the substitution of a generic equivalent for an originator product rather than therapeutic substitution (see Section 10.1b). This would also depend on whether other measures are in place which stimulate doctors to engage in generic prescribing, in which case substitution might not be necessary. This is the situation in the UK, where there is a high level of generic prescribing by physicians. If the appropriate training is implemented, Austrian pharmacists could provide additional services. If there are challenges with the Working Times Directive and shortages of doctors, the role of the pharmacist could be extended to include health promotion, public health, and the provision of simple medical tests, i.e. testing blood pressure and diabetes patients. In the future, pharmacists may be able to prescribe for minor ailments and Report: The Austrian Pharmaceutical Market

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diseases as currently allowed in the UK. If the role of the pharmacist is extended, further incentives will need to be provided and pharmacists will need to undergo the appropriate training. This may be beneficial in Austria because there is a lack of continuity of care because patients are not registered with a specific doctor. Furthermore, as in some European countries, a combination of new government policies, changing professional aspirations, and rising public expectations - regarding not only health care, but also the maintenance of good health - could be sufficient to drive a major transition in the role of community pharmacy towards a more clinical orientation in the next five to ten years. During the interviews, we learned that some pharmacists are interested in extending their professional role to involve patient screening activities and other diagnostic testing193. An important point is that any extension of current professional boundaries should occur within the overall framework of the health service. Additional incentives could be created to extend the role of the pharmacist though their involvement with improving continuity of care, pharmaceutical care, and disease management programs (see Section 7), but not through a method of direct payment by patients. 5.1 Mail order Mail order of pharmaceutical products is currently forbidden in Austria. However, diagnostic equipment, such as needles for diabetics and glucose monitoring equipment are permitted to be dispensed by post. The Austrian authorities could consider the benefits of mail order pharmacy particularly for OTC products, but must also take into consideration the issues of safety and monitoring194. The topic of mail order pharmacy has been discussed in the European forum with the case of Doc Morris. Doc Morris is a Dutch Internet pharmacy that engaged in cross-border marketing of medicines, which could be ordered online and dispensed by mail. This case confirmed the validity of restrictions on e-commerce for prescription-only medicines195. However, for OTC products the principle of free movement of goods under the EC Treaty prevents a general ban on mail order business. Also, it remains to the discretion of the EU member state to decide on whether to allow such distribution channels for prescription-only products. In France, dispensing by mail is only permitted if a patient is unable to travel to a pharmacy; however, Internet pharmacies are not allowed. Austria could consider allowing mail order or home delivery of medicines from pharmacists to patients located in rural or remote areas and elderly patients without the necessary support; this is similar to the French system. 5.2 Repeat prescribing Repeat prescribing is defined by the UK National Prescribing Centre196 as: “a partnership between the patient and prescriber that allows the prescriber to authorise a prescription so it can be repeatedly issued at agreed intervals, without the patient having to consult the prescriber at each issue”. In the UK context, several benefits to patients and health professionals of repeat prescribing have been observed. These include: • convenient access to essential drugs for patients • patients knowing when and how to request the repeat medicine and how to collect it 193

Dr. Traxler (Apothekerkammer) commented that from the professional view there are moves into other areas - “patient screening activities, taking blood pressure, cholesterol, and blood tests, but are not meant to replace other professionals, i.e. nutritionists. Patients would be billed and pay for the service of the pharmacy”. 194 Dr. Probst (HV) commented that drug supply via mail order should be considered for chronically ill patients. 195 European Court of Justice, Case C- 322/01 Deutscher Apothekenverband v Doc Morris NV and Jacques Waterval [2003] ECR I-(11.12.2003). 196 NHS National Prescribing Centre (2004) Saving time, helping patients: A good practice guide to quality repeat prescribing. Available at: http://www.npc.co.uk/repeat_prescribing/repeat_presc.htm (accessed 27 August 2004). Report: The Austrian Pharmaceutical Market

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• • • • •

patients understanding how to take the medicine and how they can discuss their medication with a health professional at any time increased patient involvement in decisions about their health care, aiding self-management and improve concordance fewer visits to physicians more manageable workload for physicians resulting from improved efficiency appropriate and efficient use of professionals and practices.

There are also potential benefits to health insurers, which can include: • assurance that medicines are used in a safe, effective and appropriate manner • appropriate use of individuals’ particular skills, knowledge and responsibilities • efficient use of resources, with reduced waste • improved care outcomes, reduced and shorter hospital admissions with increased individual responsibility. Many of these characteristics exist in the Austrian system. Currently the system allows doctors to prescribe a two-month supply of medicines for patients with chronic conditions. Upon the dispensing of these prescriptions, the patient must pay two dispensing fees (€8.70). Another method requires patients to receive a prescription each month, but prior authorization can be granted for up to one year. In this case, the patient would pay the prescription fee each month. For chronic disease patients, the doctor’s prescription could be extended to a period of three months. This could be linked to the payment method of doctors, as it would be the same length of time as for the voucher system. Doctors could agree to this and have the option of making three month prescriptions, this would also require the patient to pay three-times the prescription fee. A pilot scheme could be initiated to monitor the potential benefits of this new system. Also, a study could be conducted to test the merits for repeat dispensing for certain medications197. The Austrian authorities could consider the potential benefits of setting up channels for repeat prescribing in the context of primary care. It is essential that the authorising prescriber ensure that arrangements are in place for monitoring usage and regular assessment of the continuing need for the repeat prescription for each patient. In addition, information systems will be necessary to ensure that patients are receiving their repeat medicines and that they undergo further physician appointments to check the dosage or determine if the treatment needs to be changed. 5.3 Pharmacy training and practice There is no preparation for clinical pharmacy practice in Austria, which in turn limits future prospects for involvement of pharmacists in efforts to improve prescribing. There is some enthusiasm for this development in Austria particularly among younger pharmacists. For instance, a number of Austrian students go on clinical pharmacy postgraduate course (MSc.) in the UK. Some UK universities regularly receive requests from Austrian undergraduate pharmacy students to do practical periods in UK hospitals. This need is not being met by the three Schools of Pharmacy in Austria - Vienna, Graz and Innsbruck. About half of hospital pharmacists are interested

197

For patients with stable long-term conditions, repeat dispensing allows a single prescription to be issued that can be dispensed in instalments by a pharmacist. These arrangements make it easier for patients with chronic conditions to obtain necessary repeat prescriptions, thus speeding up services and relieving pressure on GPs. In the UK, it was estimated that up to 330 million (80%) of all repeat prescriptions could eventually be replaced with repeat dispensing. This has the potential to save 2.7 million hours of GP and practice time. Furthermore, repeat dispensing provides an opportunity to make better use of pharmacists’ skills by helping patients get the most out of their medicines and reduce waste. (Source: UK Cabinet Office (2002) Making a difference: Reducing Burdens on General Practitioners (GP), Second Report. Available at: www.cabinet-office.gov.uk/regulation/PublicSector/ReducingGPPaperwork2.pdf) Report: The Austrian Pharmaceutical Market

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in increasing their role as clinical pharmacists, and professional training can be offered by the Pharmacists’ Association (though the extent or content of this is not clear). There are pockets of activity in Linz, Salzburg and Vienna where individuals have gone out into the wards to develop their practice successfully but the managerial and professional leadership are not championing the practice as much as they could. In this, the situation in Austria resembles that in the UK back twenty years or more, when clinical pharmacy started similarly but had to progress at an individual practitioner level because pharmacy managers had no clinical experience themselves on which to base their leadership approach. A further problem is lack of funding to allow pharmacists to undertake such extended roles, either in hospital or in the community. Finally, most hospital pharmacies are simply too small to allow such an extension of hospital services but technological developments, e.g. less preparation of extemporaneous (made in pharmacy) products 198 , more individual pack dispensing etc., may free up some pharmacy time and allow such developments. In some small hospitals at least, such services may pay for themselves: an example was quoted of where drug costs had been halved as a result. In general where such services exist, doctors are in favour of it. It is not clear that such clinical pharmacists as do exist in Austria benefit from close links to medical colleagues particularly in clinical pharmacology. Therefore, Austria could develop more clinical pharmacy training for pharmacists and stronger links need to be built between (clinical) pharmacists and doctors. 5.4 Dispensing doctors Austrian GPs are permitted to operate an in-house pharmacy if there is no public pharmacy in town, or if the nearest pharmacy is more than 6km road distance away. Therefore, these dispending doctors are mainly concentrated in rural areas and there are no such doctors in Vienna. In 2004, 989 GPs operated an in-house pharmacy (27.3% were located in Niederösterreich), providing 14% of pharmaceutical supplies199. Physicians who run an in-house pharmacy are entitled to add a 15% surcharge to prices published in the medicines price register. Currently, dispensing doctors purchase products from virtual pharmacies and from the wholesalers, thus two sets of margins may be added. In Lower Austria, dispensing doctors buy products from pharmacies. If the Austrian authorities decided to allow dispensing doctors to purchase products directly from the industry, then the income of the wholesalers and pharmacists that once dispensed these products would be affected. It has been shown that GPs with in-house pharmacies have a lower cost per prescription (see Table 6, below and Appendix 2); however, this can be explained by different factors. First, it is thought that these GPs dispense smaller package sizes. Furthermore, the cost per patient may be lower because these GPs may send patients who require high price products to pharmacies. Table 6: Prescription costs per patient by self-dispensing doctors and public pharmacies in Styria

Age Group 0 1 2 3 4 5 6 198 199

Self-dispensing doctors Patients Prescriptions Expenditure 10.816 37.976 382.459,31 11.997 34.807 547.485,11 11.191 38.293 763.450,07 14.839 71.966 1.335.690,14 13.852 109.445 2.035.557,65 10.010 163.759 2.814.174,55 9.729 247.207 4.073.581,54

Ex/Pat. 35,36 45,64 68,22 90,01 146,95 281,14 418,71

This seems disproportionately important in Austria - one interview, Dr. Traxler, quoted 3% of all prescriptions. Die österr. Apotheke in Zahlen (2004) Apothekerkammer.

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7 8 9 Total

7.688 3.130 503 93.755

299.441 158.694 26.783 1.188.371

4.826.505,22 2.230.079,90 290.865,13 19.299.848,62

Public Pharmacy Age Group Patients Prescriptions Expenditure 0 54.659 262.736 2.972.299,40 1 47.168 201.787 3.320.447,21 2 62.145 348.214 6.865.866,39 3 78.892 583.707 11.712.754,56 4 69.093 801.098 15.570.752,92 5 59.244 1.281.388 22.757.165,47 6 52.891 1.615.732 29.394.409,09 7 40.387 1.746.582 31.434.404,75 8 17.398 925.298 14.798.582,34 9 2.892 152.180 1.978.588,38 484.769 7.918.722 140.805.270,51 Total Source: FOKO, GKK-Stmk

627,80 712,49 578,26 205,85

Ex/Pat. 54,38 70,40 110,48 148,47 225,36 384,13 555,75 778,33 850,59 684,16 290,46

It is recommended that dispensing doctors be allowed to purchase medicines directly from the pharmaceutical industry, thus decreasing the margins applied to these products. 6. Incentives - Principles Incentives of various kinds are powerful motivators of change in practice. For busy doctors, even a small incentive can bring attention to a particular area and encourage better achievement of desired targets. Examples of this are targets for vaccinations and waiting times. Incentives have also been used to bring about changes in prescribing behaviour. However, such incentives must be used with care as they may bring about specific behaviour that is perverse to the good medical management of the patient, e.g. by encouraging doctors to prescribe inexpensively when this might be inappropriate. Therefore, incentives must be set up with care and their impact monitored to ensure that they do not have these adverse effects. Incentives must have several key characteristics. They must be: • Achievable, i.e. something that most doctors can attain to • Worth achieving (usually for the individual rather than for the group) - the kind of major incentive in the UK has been local prescribing incentive schemes and GP fundholding, which were quite successful at containing costs. More recent attempts to do the same in Primary Care Trusts 200 , i.e. a collective incentive have generally been less successful. There is at present no analysis of the effectiveness of such incentive schemes in the UK and indeed attempts to analyse such schemes are often confounded by their complexity in variation from place to place • Reasonably straight forward, and not complex so that they are difficult to understand • Not run contrary to good medical practice • Proportionate to what change is desired • Measurable • Bring a tangible benefit to the individual who is working to achieve it • Congruent with other activities, e.g. promotional campaigns and other targets 200

Primary Care Trusts (PCTs) are independent statutory organisations responsible for improving the health care of a local population. They will assess the health needs of the local population and will work to meet those needs within the resources made available to them by the UK government. (Source: Burnley, Pendle & Rossendale PCT (2003) What are Primary Care Trusts. Available at: http://www.bprpct.nhs.uk ). Report: The Austrian Pharmaceutical Market

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• •

Transparent to the public Doctors need feedback to assess their performance against incentive targets

The incentives operating within Austria for doctors should be considered in the light of these general principles. Section 6.1 considers those incentives aimed to promote particular prescribing behaviour by the health insurers, but there are other incentives which may run counter to these, such as those provided by the pharmaceutical industry. 6.1 Prescribing incentives in Austria A number of incentives have been introduced in Austria in relation to prescribing. It is important to place these in the context of the Austrian health care system, as incentives that work in other settings may be meaningless here and vice versa. In general, prescribing incentives in Austria have focused solely on reducing the costs of prescribing and have paid little or no attention to issues of quality of care, regarding these as the proper preserve of the doctors’ professionalism and autonomy. These schemes therefore assume that there is enough waste within the system that doctors can reduce prescribing costs (for instance by prescribing generically) without detriment to their patients. The extent of this assumption needs to be considered and what savings might be achieved by this mechanism. In the UK, the rate of generic prescribing is now 75-80% in many areas, and there are no further savings to make by increasing the rate further. Generic prescribing may therefore save money in the short term, while this “waste” is cut away, but ultimately the drivers of future prescribing costs are more structural, in the demography of the population and patterns of illness, and due to new therapeutic advances. Incentives in Austria have generally been an increase in doctors’ fees (a collective and not personal incentive) or an extension of the services funded by the sickness funds, again potentially increasing the doctors’ income, in return for achieving some defined targets in prescribing costs. There is a reluctance to adopt a personalised incentive, which would be seen as controversial and might imply that an individual doctor was getting better paid for less treatment of the patients and might undermine the doctor-patient relationship. These incentives have been negotiated between local Ärztekammer and the relevant Sickness Fund. These incentives have clearly been seen as professionally acceptable. These targets have usually been a reduction in cost per prescription rather than in numbers of prescriptions: doctors find it easier to change what a patient is prescribed rather than to change the decision to prescribe, and so it is easier to prescribe a less expensive generic rather than not to prescribe at all. Schemes therefore have usually been based on value rather than volume of prescriptions. There was support for national “guidelines” which might increasingly be considered a part of good practice but which should not be imposed as a part of contracts201. A complexity of schemes based in individual Sickness Funds is that most doctors were also treating patients from other funds, and found it hard to consider an incentive with only one fund’s patients. This undermines the application of the incentive and the desired behaviour. Therefore, better coordination across the funds so that each operated similar schemes would improve this (see Section 7 on Quality of Care and Incentives). Schemes have involved incentives but rarely sanctions that were realistic; sanctions were in theory possible under the contract but were rarely if ever applied. International experience is that sanctions can have a powerful effect but are very divisive and would probably run counter to the collaborative culture prevailing in Austria. There is the possibility of building more incentives into physician contracts, which are renegotiated every 1-2 years. Doctors are aware that the insurers are in a difficult financial situation and understand that insurers need to be financially healthy to raise doctors’ fees. It is therefore in doctors’ interests to moderate prescribing costs. 201

During the public consultation in Vienna, some interviewees took a narrower perspective regarding what is meant by “guidelines” - some interviewees seemed to interpret these as relating to choice of drug rather than to pathways of care - that is the context to which they are referred to here. Report: The Austrian Pharmaceutical Market

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Currently, in the event of great deviations in prescribing patterns, only collective contracts can be cancelled; however, this is politically and practically impossible. Additionally, individual doctors benefit from lifetime contracts. The Austrian authorities could consider implementing a system of selective contracting, which will work to increase competition in the health care sector. If this is not possible, the level of doctors’ fees could continue to be negotiated particularly in the event of a large increase in drug expenditure, as in the current system. Responses to incentives have varied: some positive examples are discussed below, but in contrast, doctors in Vienna have never met targets. Clearly there are major countervailing pressures here affecting not just prescribing but also patterns of consultations and referrals in Vienna with a very strong influence of specialists at every level. 6.2 Specific incentives and their effects Prof. Dr. Seyfried (Sozialversicherungsanstalt der Bauern, Farmers Fund) described the incentive operating in the Farmers’ Sickness Fund. This is one of the smallest funds but has undertaken an innovative programme involving elements of disease management, prescription monitoring, and patient and physician education. Part of the impetus for this within the sickness fund arises from the fact that this fund will also have to fund time off work for ill health, and therefore it is in its interests to actively promote good health in its members. Patients likely to incur high medical costs (e.g. patients with some chronic illnesses such as COPD, lipid lowering, gastric diseases, antibiotic area, asthma patients) may be invited to attend a clinical review where their medication and general management is considered. This may generate advice to patients and their physicians but application of this is not mandatory. Similar patients may also be targeted for specific educational and information activities. There is also a process of monitoring physician behaviour and engaging doctors in discussions about therapeutics, with a particular aim being to promote generic prescribing and the advice of a joint professional and managerial committee on specific prescribing interventions which might save money. DI. Mair (OberOsterrieich, Upper Austria Insurance Fund) described the regional scheme operated in Upper Austria. There was also a scheme to encourage doctors to consider costs and based on value rather than volume. The prescribers have remarkably demonstrated the lowest increase in per capita expenditures. The main provision of the scheme that was in operation was that if the Upper Austria insurance fund increases lay below the average of all regional insurers, there was to be a bonus in the form of higher fees. There was to be a penalty in the event of excess spending, resulting in lower fees. Both bonuses and penalties had an upper cap. This scheme did achieve a reduction in volume in 2000 but not in costs, but as this did not meet the agreed terms of the incentive, no increased payments to GPs were made. This was highly unsatisfactory for doctors and therefore a new system had to be devised. This was in part based on excellent information built up over many years. This allowed them to do some costing of prescriptions and to set retrospective benchmarks for prescribing costs for GPs based on the age of the patients seen by that GP and on his consultation claims - the values for prescribing by each age have been set after study of a patient data base over a prolonged period. Lower cost prescribing against this benchmark across the region results in a collective incentive with increased fees next year. “Naming and shaming” of doctors who might jeopardise the achievement of this collective incentive does go on. High prescribers get a telephone call about every six months or so depending on the amount of prescription and whether there is a perception of over prescribing. This scheme has resulted in fee increases three times in the past five years. The system however is now being changed to allow sanctions as well as bonuses. To support this scheme, there are four GP advisers (for a population of 1.3 million and 900 GPs) who make 200 to 300 contacts by telephone with high prescribers per year and send letters more often still. This contrasts with no communication or feedback at all eight years ago. There seems to have been slowing of growth rate in those contacted, although there is a danger of regression to the mean in interpreting this data. There is advice in newsletters and elsewhere on how to prescribe less expensively for local doctors and is loosely evidence based, but there are no reference clinical guidelines. There was some limited counter-detailing of Report: The Austrian Pharmaceutical Market

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industry messages by leaflets. Other regions have tried similar schemes but seem to have been less successful, in part, because they have involved perhaps less energetic or less well-supported individuals administering the scheme. Other keys to success in Upper Austria have been a good relationship with the doctors and good information. Peer pressure was thought very important, as was the theoretical threat of being able to sue a doctor to recoup excessive costs (but this is never applied). Hospitals were a problem in potentially undermining the schemes, and some form of incentive for hospitals to comply would be useful. For the future, the Upper Austria Insurance Fund is considering an incentive system to reward individual doctors. This would be an extra flat payment, but only for doctors who work collaboratively with the sickness funds in addressing prescribing costs. This is a new initiative and it will be important for insurers to reach a consensus on this. These schemes merit fuller detailed evaluation. There may be valuable lessons for other regions to learn. The overall recommendations are: 1. The incentive schemes currently in place in Austria need to be studied further; particularly those in Upper Austria, and it could be determined how these could be extended to other regions. 2. Incentives should be linked to improvements in quality of care, appropriate prescribing, increased generic prescribing and not just costs. Additional incentives could be in place to encourage good quality practice. 3. If disease management programs and continuity of care improvements are to be introduced (see Section 7) elements of these should be incorporated into the contracts of doctors. 7. Quality of Care and Incentives There is a potential for incentives to address quality of practice but first this would require a definition of what constituted good quality practice202. In Austria, there is a lack of practice guidelines to which practice could be benchmarked; therefore, medical practice is very much based on the personal knowledge and opinion of the doctor and the autonomy and power of the doctor in this is rarely challenged. This might tend to limit the acceptability of guidelines and a gradual process of culture change in medicine is necessary. The diminution of this autonomy in many other European countries is partly as a result of cost-containment measures but also because of concerns of unacceptable variability in practice, and the rise of a culture of evidence based health care. There have also been a degree of power struggles between managers and clinicians. Doctors in Austria were clearly aware that they had greater autonomy and authority than in many other countries, and were keen to preserve this. They saw working in collaboration with the sickness funds as part of this. This reflects a general pattern towards social partnerships in Austria as opposed to the antagonism between funders and providers of health care that exists in many countries. Some interviewees told of ministry plans for the formation of an Institute for Quality Control, where there would be equal professional and ministry representation and which would audit contract doctors every five years. Doctors failing the assessment could lose their contract. In the absence of clinical benchmarks and monitoring the quality of practice, the assessment criteria would revolve around process of care in the first instance, e.g. organization of the surgery, patient friendliness (through questionnaires), nature of equipment of practice, etc. Doctors expressed concerns about this not so much in relation to the possibility of losing their contracts, but more in terms of the added bureaucracy and the lack of infrastructural support in the practices to support this kind of assessment. Similarly, there were doubts about the ability of the ministry to actually monitor these criteria in the 17,000 GP practices across the country. Even after appropriate guidelines are developed, the use of these guidelines must be enforced and should be linked to financial incentives. The current role of the Institute for Quality Control appears to be limited as it does not produce guidelines, monitor clinical practice, or assess the appropriateness of care. Furthermore, it is controlled entirely by the 202

Dr. Bachinger (NÖ Patientenanwalt) commented, “measures of quality control and quality measurement should be implemented more strongly in our health care system, particularly with respect to the results – ‘outcome measurement’”. He also felt that “quality data should be more accessible and transparent”. Report: The Austrian Pharmaceutical Market

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chamber of physicians. The current Institute takes a narrow approach to monitoring and improving quality. The role of this Quality Institute should be extended or a new Institute could be formed. The role of this Institute should be expanded to include the establishment of national clinical guidelines with particular attention to the prescription of medicines. These guidelines will likely provide greater consistency between practitioners in the community care setting of different regions. Furthermore, at present medical errors in hospitals are not recorded where they occur and only documented with patient attorneys, and usually evaluated on a case-by-case basis203. This Institute can carefully record all medical errors and any adverse events from medicines, thus taking the role of pharmacovigilance. In Austria, practice guidelines should be developed with cooperation between the HV and the Ministry of Health, in conjunction with the chamber of physicians. Physicians are subject to many influences when acting as the prescriber of medicinal products to patients. These influences include: patient pressures, financial incentives, government directives, and marketing efforts by the pharmaceutical industry. Governments or third party payers are able to change physicians’ practice and influence prescribing. Persuading doctors instead of just telling them is a way to preserve professional autonomy, which allows the doctor to consider the patient ahead of the payer. A corollary of this is that any attempt to change behaviours by persuasion must be focused on creating a gain for the patient, as well as the doctor, and of course the payer. Austria can look to experiences and programmes in Australia, France, the Netherlands, Sweden, and the UK where prescribing guidelines have been implemented. Towards the quality use of medicines, other countries have explicitly defined what is required. In the National Medicines Policy204 of the Australian Department of Health and Ageing, it is stated: “To achieve quality use of medicines, people must be provided with the most appropriate treatment, and have the knowledge and skills to use medicines to their best effect. Health practitioners have a particularly important role to play in promoting the quality use of medicines, through good treatment choices, good communication with consumers, collaboration with other health practitioners, including across professional boundaries, the development and implementation of models of best practice, and maximising professional roles to provide optimal contribution from the various health practitioners”. The UK has established the National Institute for Clinical Excellence (NICE) to centrally generate guidelines. The openness and transparency of the process should help to generate credibility, but there remain problems of dissemination and implementation. For guidelines to be successful they have to be either closely monitored or prescribers have to be persuaded and educated to comply with them. The former can generate cynicism and suspicion such as with Health Maintenance Organizations (HMO’s) in the US, the latter is resource intensive. To combat some of the difficulties and expenses of keeping such guidelines up to date, disseminating them, and promoting their use, a solution might be making such guidelines available in GP computer systems. Guidelines for physicians consider the whole management of a condition and allow the application of evidence based decision making to a clinical situation. The effect of clinical guidelines on medical practice has been credited with showing significant improvements in care outcomes. A systematic review of rigorous evaluations of the effect of clinical guidelines on medical practice found that in 55 out of 59 (93%) studies, significant improvements in care outcome were detected 205 . Local rather than national guideline dissemination and development have been shown to be more effective; however, given the size of Austria, a single institute - the proposed Health care Interventions, Research and Policy Centre (HIRPC) (see Section 11) - could be useful in bringing together the relevant stakeholders and setting these guidelines.

203

Source: Dr. Bachinger, NÖ Patientenanwalt, Patient Association for Health. Australian Department of Health and Ageing (2000) National Medicines Policy, Canberra: Commonwealth of Australia. 205 Grimshaw JM, Russel IT (1993) Effect of clinical guidelines on medical practice a systematic review of rigorous evaluations, Lancet, 342: 1317-22. 204

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The following features have been shown to be necessary for acceptance and effective implementation of evidence based clinical practice guidelines206: • compatible with doctor’s existing values • defined precisely, with specific advice on actions and decisions in different cases • supported by an explicit description of the scientific evidence • straightforward and not conflicting • not demand too much change to existing practice • not too controversial. From a practitioners’ perspective, guidelines have been shown to be more acceptable and used by GPs if they were locally relevant, produced by people or groups that were known and trusted, included GP input so that there was a sense of “common ownership” as well as being brief, clear and simple207. There are also some potential limitations of guidelines. The most important weakness of guidelines is that the recommendation may be incorrect for individual patients. This can result from incomplete or incorrect interpretation of the scientific evidence, the influence of opinions and clinical experiences of the makers of guidelines, and consideration of other priorities beyond meeting the needs of patients208. Further challenges with the implementation of guidelines can include: i) the inertia of previous practice, such that physicians may not follow the recommended changes in practice, ii) practice barriers that physicians may be unable to overcome, such as lack of time, lack of reimbursement for following guidelines, or lack of staff209, and iii) information overload caused by the dissemination of too many guidelines that may discourage physicians from their use. An effective way of disseminating information to physicians is from direct visits from ‘academic detailers’ employed by government agency and visits from pharmaceutical company detailers. These visits allow the exchange of information, but also a degree of negotiation and persuasion so as to win the prescriber around to the detailer’s point of view. Academic details carry personal credibility when they visit prescribers, while company details are extensively trained for this task and offer small gifts to physicians. The seminal study on academic detailing was undertaken by Avorn and Soumerai (1983)210 in which pharmacists were trained in communication and influencing skills as well as clinical knowledge, and then made visits to physicians using specially designed support materials to reinforce the key points. A similar programme in the Netherlands showed that messages about acute situations that were clear and easy for GPs to implement were most successful211. This approach has also been followed in German studies and seemed to produce the most change amongst those doctors who previously had prescribed with minimum quality and cost consciousness. The academic detailer will be in a position to audit the response of the GP to the suggestions made, and can invoke local peer opinion to help change the practice of the recalcitrant GP. However, the academic detailers need to be careful in the messages they deliver: they must be credible, well communicated, brief, and repeated, because the effects of a single detailing visit are usually limited. These visits can be especially effective when tied into financial incentives of some kind but then the effects of each are difficult to distinguish. From the discussion above, the main issues to consider when attempting to changing physician prescribing practices include: i) sophisticated multifaceted approaches that are adapted to the needs of the individual 206 Grol R, Dalhuijsen J, Thomas S, et al (1998) Attributes of clinical guidelines that influence us of guidelines in general practice: observational study, BMJ, 317: 858-61. 207 Langley C, Faulkner A, Watkins C, Gray S, Harvey I (1998) Use of guidelines in primary care: practitioners’ perspective, Family Practice, 15: 105-11. 208 Woolf SH, Grol R, Hutchison A, Eccles M, Grimshaw J (1999) Potential benefits, limitations, and harms of clinical guidelines, BMJ, 318: 527-30. 209 Cabana MD, Rand CS, Powe NR, et al. (1999) Why don’t physicians follow practice guidelines? A framework for improvement, JAMA, 282: 1458-65. 210 Avorn J, SB Soumerai (1983) “Improving drug-therapy decisions through educational outreach. A randomized controlled trial of academically based ‘detailing’” New England Journal of Medicine, 308: 1457-63. 211 Veninga C. (1990) Improving prescribing in general practice, Netherlands: University of Groningen.

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practitioner or the situation, since single interventions have demonstrated limited effectiveness, and ii) academic detailing can be combined with administrative interventions such as the implementation of computer support and monitoring systems to support the desired changes. Any such interventions must be continuous, because the effects of any intervention are usually short term. If sustained for a prolonged period, they become habit and more engrained, and then acquire the status of established practice. 7.1 Improving continuity of care Improvements in continuity of care are particularly important in Austria because of the lack of a comprehensive primary care system, patient choice of provider, and the importance of keeping accurate and up-to-date medical records. Furthermore, in the Austrian health care system there is likely a discrepancy in continuity of care between urban and rural areas. Especially for patients with co-morbidities, continuity of care is necessary to manage the variety of conditions they have and prevent drug-drug interactions. Promoting continuity of care is difficult in a country where patients are not registered with a doctor. In the interviews, it was noted that GPs are often not aware of the other medical professionals that patients visit212. Also, it would be useful to examine the relationships between doctors in community practice and those in hospitals, as it is often the case that hospital doctors do not accept diagnostic tests (laboratory results, x-rays) from GPs. This has created the problem of overlap because hospitals may repeat tests, e.g. two HIV tests for one patient. This may be due to the payment structure in hospitals based on diagnosis related groups (DRGs). Continuity of care has many advantages, for instance: shorter consultations because of better prior knowledge of the patient and their history by the doctor, and generally more rational clinical decisions. In prescribing, such a relationship between a doctor and patient is probably essential if generic prescribing is really to thrive (see Section 10.1a on Generic prescribing). Continuity of care is especially important for patients with co-morbidities or multi-morbidities. These patients have more that one illness, each of which may impact on the course and management of the others. The occurrence and degree of co-morbidity has been shown to increase with increasing age, lower level of education, and lower public health insurance213. Therefore, addressing patients with co-morbidity is an important issue because it occurs disproportionately within populations that are socio-economically disadvantaged and in the elderly, and especially in for population that are both214,215. To address this challenge, innovative solutions based on care coordination and case management will be required. Additionally, a national registry of patients with comorbidities could be developed (see Section 11.2) and doctors could receive incentives for treating these patients over the long-term. The small percentage of the population with co-morbidities often makes up a disproportionate amount of the pharmaceutical consumption216. From a study in Carinthia, it was observed that 1.7% of patients contribute to one-quarter of expenditure, while 7% of patients make up 50% of expenditure; furthermore, 7% of patients contribute 26% of co-payments217. These particularly expensive patients could be closely followed. Targeting could be directed towards less than 7% of the patients as some of these expensive patients may be in their final year of life, or may have received costly treatment following an accident. 212

Source: Mag. Griesser, Vienna Insurance Fund. van den Akker M, Buntinx F, Metsemakers JF, Roos S, Knottnerus JA (1998) Multimorbidity in general practice: prevalence, incidence, and determinants of co-occurring chronic and recurrent diseases, J Clin Epidemiol, 51: 367-75. 214 Menotti A, Mulder I, Nissinen A, Giampaoli S et al (2001) Prevalence of morbidity and multi-morbidity in elderly male populations and their impact on 10-year all-cause mortality: The FINE study (Finland, Italy, Netherlands, Elderly), J Clin Epidemiol, 45: 680-6. 215 Watt G (2002) The inverse care law today, Lancet, 360: 252-4. 216 Reid R, Evans R, Barer M, Sheps S, Kerluke K, McGrail K, Hertzman C, Pagliccia N (2003) Conspicuous consumption: characterizing high users of physician services in one Canadian province, Journal of Health Services Research and Policy, 8(4): 215-24. 217 SELBSTBEHALTEANALYSE (2002) anhand der Versicherungsleistungen der KGKK (von Direktor Mag. Alfred Wurzer, Mag. Roswitha Robinig, OE Revision, OE-L Josef Rodler, OE Organisation). 213

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With no specific designation to a GP, these patients may seek therapy from different doctors who may be unaware of the other medicines they are taking and other conditions they may have. These patients may also receive care in a hospital setting, where more expensive therapies may be used. They will then likely request the same treatment when they return to a doctor of their choosing. Furthermore, a registry of such patients could be kept to identify people who could potentially be expensive for the health care system (see Section 11.2). Similar challenges exist in the treatment of patients with chronic conditions. The benefits of continuity may also be seen in prescribing costs - for instance, the lower costs of dispensing doctors who work in rural areas and who have greater continuity of care for their patients over urban doctors is in part attributed to stable care arrangements. The lack of continuity of care is a particular issue in urban areas (especially Vienna) where patients have wider choice of GP or of specialist. We advocate the use of patient choice; however, it is necessary for each patient to have a coordinating doctor to follow up with treatments, particularly for patients with multiple diseases. Maintaining continuity of care is clearly a concern for many patients and some stakeholders gave examples of patients engaging in informal “capitation” arrangements whereby they provide a sickness fund voucher to “their” GP regularly even in the absence of any illness so as to preserve the relationship. If the current voucher scheme is being used in this way by patients, it is not an efficient way of paying doctors for medical care. It may be necessary to move away from the voucher scheme overall and provide different incentives for doctors. If this option is accepted, a detailed study would have to be conducted to focus on the development of new incentives for physicians. For patient medical records, a system using personal electronic medical cards could be created where each doctor treating the patient records their history, diagnostic and treatment information. This would go some way to addressing the issue, but it would be necessary for doctors to look into what other physicians have recorded. Overall, a designated doctor is needed for each patient. 7.2 Disease management The management of chronic conditions should be an important policy consideration for the Austrian health care system. Disease management is the combination of evidence based medicine and a public health/population approach. Disease management aims to increase the use of proven therapy and eliminate ineffective care for specific conditions. Thus, it has been proposed as a strategy to improve the quality and cost-effectiveness of health care for common chronic conditions. A study in the United States by Druss et al (2001)218 showed that one quarter of the people under investigation had at least one of five chronic conditions (asthma, diabetes, heart disease, hypertension and mood disorders); but these people accounted for nearly half of all health care costs. Disease management is a targeted and scientific response to address the fact that several common and costly conditions have been poorly managed. The costs of disease management strategies are likely to be quite small in proportion to the costs of the illnesses which they target and the potential for savings. Disease management entails the following steps: 1. Identify the population of patients with the disease or condition - Disease registry (see Section 11.2). This is particularly important considering the proportions of health care costs incurred by these patients 2. Develop evidence based care guidelines and systems needed to support implementation - Treatment guidelines, protocols, formulary lists of effective drugs, and dissemination strategies

218

Druss BG, Marcus SC, Olfson M, Tanielian T, Elinson L, Pincus HA (2001) Comparing the national economic burden of five chronic conditions, Health Affairs, 20(6): 233-41. Report: The Austrian Pharmaceutical Market

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3. Improve coordination among different providers and assure integration and comprehensiveness of care Clinical pathways219,220 4. Stratify the population by risk and tailor care strategies according to this risk - e.g. Case management 5. Develop quality indicators and monitor performance 6. Evaluate these new approaches to care. Potential challenges that may need to be addressed in the process of implementing a disease management strategy include: i) low acceptance by physicians and staff, ii) need for greater information technology (IT) support, iii) lack of continuity of care for patients with chronic illness, iv) little linkage and coordination between primary, specialist, and hospital care, and v) failure to target or reach high risk patients. Finally, cost savings may be reduced or delayed if ineffective care is not reduced. Some other countries implement disease management programmes on a national level, such as Germany and the UK (see below). Germany’s Disease Management Programmes Various stakeholders in Germany (the sickness funds, hospital associations and physicians organisations) have agreed on Disease Management Programmes 221 , which were implemented in 2001/2002. The first four conditions to be covered are diabetes, breast cancer, asthma/COPD, and coronary heart disease/angina. Despite initial opposition from physicians, the first programmes have now been implemented for type 2 diabetes and breast cancer. Patients who enrol in these programmes are being managed according to a set of protocols, although the programmes also stress the importance of not interfering with clinical autonomy. For example, the diabetes programme includes regular examinations for the complications of the condition, such as retinoscopy and information for patients on diet and avoidance of risk factors. An important feature of these programmes is that they are funded through a change in the risk adjustment structure. In a departure from the usual fee-for-service model, this system creates incentives for physicians to enrol patients in these programmes by changing the reimbursement system for physician. This new structure identifies the fact that the traditional model - based on the concept of individual episodes of disease - is poorly suited to delivering the integrated care required by patients with complex chronic conditions. England’s National Service Frameworks In Europe, England probably has the most comprehensive policy on the management of chronic diseases under National Service Frameworks (NSFs)222. NSFs set national standards and identify key interventions for a defined service or care group, put in place strategies to support implementation, establish ways to ensure progress within an agreed time scale, and form one of a range of measures to raise quality and decrease variations in service223. NSFs are produced by the National Institute for Clinical Excellence (NICE) and developed with the assistance of health professionals, service users and carers, health service managers, partner agencies, and other advocates. NSFs exemplify the need to take a broad view of health improvement, encompassing primary and secondary prevention, diagnosis and treatment, and rehabilitation. For example, the coronary heart disease NSF identifies as immediate priorities the establishment of smoking cessation clinics, rapid access diagnostic facilities for patients with chest pain, quantified improvements in the speed of thrombolysis for those with myocardial infarctions, and enhanced use of drugs such as betablockers and statins for those recovering from an infarction. Subjects of English NSFs published or in preparation include: 219

Kesteloot K (1999) Disease Management: A New Technology in Need of Critical Assessment, International Journal of Technology Assessment in Health care, 15(3): 506-19. 220 Pilnick A, Dingwall R, Starkey K (2001) Disease Management: Definitions, Difficulties, and Future Directions, Bulletin of the World Health Organization, 79(8): 755–63. 221 Busse R (2004) Disease Management Programs in Germany’s statutory health insurance system. Health Affairs (Millwood) 23(3): 56–67. 222 McKee M, Nolte E (2004) Responding to the challenge of chronic diseases: ideas from Europe, Clin Med, 4: 336-42. 223 Department of Health, National Service Frameworks. Available at: www.doh.gov.uk (accessed 27 August 2004). Report: The Austrian Pharmaceutical Market

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• • • • • • • • •

Cancer Coronary Heart Disease Diabetes Mental Health Older People Paediatric Intensive Care Renal Services Long term conditions (focussing on neurological conditions) Children

Some European countries are facing a major challenge in implementing evidence based responses to the increasing burden of chronic diseases. Many difficulties exist including: • the weakness of the evidence base • health system characteristics, which determine how easy it will be to introduce new patterns of service delivery, and • the diversity of European health care systems (financing and provision) such that there are no universal solutions to the challenges of chronic disease. Developments in the United States of implementing disease management strategies have shown that certain elements are important to consider. These include the importance of exclusive relationships with providers, integration across health care interfaces, appropriate financial incentives, and explicit models for chronic disease management224. Austria should consider the implementation of Disease Management Programmes on the national level. These will likely require dedicated investments in information technology. 7.3 Pharmaceutical care Pharmaceutical care is defined by the American Pharmaceutical Association225 as: “a patient-centred, outcomes oriented pharmacy practice that requires the pharmacist to work in concert with the patient and the patient's other health care providers to promote health, to prevent disease, and to assess, monitor, initiate, and modify medication use to assure that drug therapy regimens are safe and effective”. The ultimate goal of pharmaceutical care is to attain positive clinical outcomes and optimize the patient's healthrelated quality of life, within realistic economic expenditures. Pharmacists take the leading role in developing pharmaceutical care initiatives and five major goals must be achieved226. First, a professional relationship must be established and maintained between the pharmacist and the patient. This relationship should be based on caring, trust, open communication, cooperation, and mutual decision-making. Second, “patient-specific medical information” must be collected, organized, recorded, and maintained in a confidential manner by the pharmacist. It is imperative that this information is timely, accurate, and complete as it will form the basis for the “drug therapy plan”, which is developed along with the patient and other health care providers as necessary. Additionally, the pharmacist must assure that the patient: i) obtains and appropriately uses all products in the drug therapy plan, and ii) has a detailed understanding of the disease and the therapy prescribed. After implementation, the pharmacist reviews, monitors, and modifies the therapeutic plan as needed and appropriate together with the patient and health care team. This final point may be particularly relevant in Austria given the lack of continuity of care. The pharmacist can share a patient’s information with other health care providers as the setting for care changes between the community setting, the hospital setting, and the long-term care setting. 224

Wagner EH (2004) Chronic disease care, BMJ, 328:177–8. American Pharmacists Association (AphA) Pharmaceutical care, Available at: http://www.aphanet.org (accessed 30 August 2004). 226 Adapted from: American Pharmacists Association (AphA) Principles of Practice for Pharmaceutical Care, Available at: http://www.aphanet.org/pharmcare/prinprac.html (accessed 31 August 2004). 225

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For example in Germany, a new program allows patients to choose a community pharmacy as their family pharmacy and sign up to this pharmacy for a set period of time 227 . All medicines (prescription and OTC), supplements, and devices are delivered by this pharmacy only; additionally, all personal and medication data is recorded and processed by this pharmacy’s computer. These pharmacists can also offer medication regime reviews and home delivery. In support of this program, the Federal Association of German Pharmacists (ABDA) has developed certified continuing education programmes for pharmacists (in accordance with physicians’ associations) and quality management programs, protocols, and manuals for each disease state. Also, pharmaceutical care software has been established. Towards this direction, the new incentive structure of Austrian pharmacists could be combined with the goals of pharmaceutical care. At present, it is not appropriate to remunerate pharmacists with degressive margins. They should receive a flat-fee per dispensed products and additional incentives for specific behaviours could be provided. Austrian pharmacists can take on a more prominent role in the Austrian health care system, first through smaller endeavours such as repeat dispensing and generic dispensing and could eventually extend to greater support in the management of medical conditions following the development of the necessary guidelines and protocols. These can be developed through the proposed Health care Interventions, Research and Policy Centre (HIRPC). A pilot could be organized to determine the extent of pharmacists’ involvement and the move towards pharmaceutical care. At this stage however, it is more important to do other things, such as focus on coordinating doctors particularly for patients with co-morbidities. 7.4 Further comments on the Austrian Incentive systems In Austria, there is a strong focus on the doctor as the prescriber and therefore a strategic reliance is needed between the doctors and the Federation of Social Security Institutions, not an antagonistic relationship. Careful incentives are therefore needed. There is some use of data at local level for benchmarking and typically such a locality is 20 to 25 GPs, there is a need to experiment more with this. Incentives for quality of care are so far very limited - those that are developing are predominantly process markers of patient satisfaction. A better perhaps method would be based around adherence to some reference guidelines which could be evidenced based228. It should be noted that such evidence based reference guidelines may not decrease pharmaceutical costs but might actually increase it – in at least some areas, though in other areas there would be cost saving. In terms of selling this to the profession therefore, it is important the profession realises that without saving money in some areas one cannot free up money to improve the quality of patient care in others, and that a balance has to be struck here. As an example, incentives in the UK have rarely focused solely on drug costs for fear that it might bring about some dramatic and potentially harmful changes in prescribing (this did happen in some practices during the hype of GP fundholding) 229 . So most incentive schemes involve a balance of a cost target as well as specific quality targets, usually related to meeting reference guidelines and staying within fixed budgets230. One of the difficulties in Austria is the influence of hospitals on prescribing, as there is no incentive for hospitals to be guarded in their advice or influences on GP prescribing when they can cost shift to primary care. We have had some evidence that GPs are beginning to resist this cost shifting and support needs to be given to the GPs to

227

ABDA - Federal Union of German Associations of Pharmacists (2004) Paid Community Pharmacy Services in Germany, Berlin: Centre for Drug Information and Pharmacy Practice, 12th January 2004. 228 Mag. Rosian (OBIG) sited the need for “heightened use of EBM (evidence based medicine) and Health Technology”. 229 However, Drs. Pjeta and Brettenthaler (Austrian Medical Chamber) “categorically reject any intentions directed towards drug budgeting or rigid prescribing guidelines solely motivated by economic considerations”. 230 DI. Mair advocated the use of a “combined budget for each GP which includes services and pharmaceutical products (standardised by age)”. In this case, “GPs can then spend more time treating patients themselves and may not find it not necessary to prescribe drugs. By doing so they would not exceed their budget. Social security would save money, patients will be more content”. Report: The Austrian Pharmaceutical Market

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adjust this balance of power between hospital and primary care. In the UK it was the whole new GP budgets which brought about this kind of change, since most of the hospitals depended on the funding from GP budgets. Furthermore, when medicines are prescribed in hospitals they are often of the branded variety, as hospitals receive these at a considerable discounts from pharmaceutical companies or even sometimes at no cost. The patient continues to use these costly medicines following discharge and the health insurer is now responsible to bear the cost of this treatment. In a study in Upper Austria (Oberösterreich) (Source: Alfred Mair, see Appendix 2) prescriptions made by hospitals were almost three times as expensive as those made by GPs. An additional challenge is the inclusion of ‘non-contract doctors’ within the incentive systems. In Austria, there are two types of non-contracted doctors: i) doctors with prescribing rights, who must follow the same rules as contracted doctors (e.g. economic guidelines), and patients are reimbursed fully for prescriptions, and ii) doctors with no contract can provide patients with private prescriptions (reimbursed at 80%) or prescriptions following authorization by an insurance fund (full reimbursement). The first type of doctors are monitored to some extent as they follow guideline, while the second type to doctors are somewhat monitored through the records from the reimbursement system. Thus, these non-contract doctors are particularly important as their prescribed medicines continue to be reimbursed by social insurance funds; however, the funds exert limited influence on their prescribing practices. In a study of prescribing habits of GPs and specialists in Upper Austria231 (see Appendix 2), it was observed that prescriptions made by ‘non-contract doctors’ were around 20% more costly than those made by GPs. An option would be to reduce reimbursement for private prescriptions issued by doctors without contract (i.e. from 80% to 60%) and increase co-payments for prescriptions issued by non-contracted doctors with prescribing rights. A further consideration is the practice of specialists making recommendations for prescriptions, which are then issued by the GPs232. This practice of specialists pushing prescriptions to GPs occurs so that they keep within economic guidelines. It was observed that 75% of all GP contacts resulted in a prescription, while specialists only prescribed 33% of the time. 8. Public Awareness There is little or no public discussion of incentives and most of the public are probably unaware of them233. Most doctors seem to feel that publicising physician incentives would reduce patient confidence in doctors. Some doctors did make a point of telling their patients when they prescribed a generic that they were doing this on the instruction of the Sickness Fund and some patients had complained to their funds. Also, some of the stakeholders commented that more public debate is needed on the affordability of health care234. Activities aimed at promoting healthy lifestyles are lacking in the Austrian setting235. Patients could be required to take a more active role in their good health. Towards this end more public and patient education is needed on the topics of self-medication, medical conditions and therapies 236 . Regarding particular pharmaceutical treatments, patients could be better informed on the subject of generic drugs to improve their acceptance of these 231

Source: DI. Mair (Upper Austria). Mag. Griesser (Vienna Insurance Fund) commented that although some specialists prescribe medicines, there is a tendency to push some prescriptions to GPs. The GPs are now complaining about this. 233 Dr. Bachinger (NÖ Patientenanwalt) commented and that there should be more opportunities for “patients’ representatives to participate in decision-making processes”. 234 For example, Dr Probst felt that it was important to “elucidated what percentage of GDP society is willing to spend on the health care system”. 235 DI. Mair (Upper Austria Insurance Fund) emphasized the need to “teach patients that they are co-producers of their state of health so that they realise that they are responsible for themselves”. He further highlighted the need to educate the population to look after their lifestyle. He feels that in Austria the sectors health care, social security, and education are completely separate and “this strict separation should be abolished”. 236 Mag. Wenty (Chamber of Labour) commented that to increase self-medication, the population must be better informed about medical conditions and therapies. 232

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treatments. The insurers should coordinate their activities with patient organizations and seminars can be organized on the rational use of medicines. 8.1 User charges and patient prescription co-payments In 2002, 30% of the almost €17 billion spent on health care was made up of private expenditure such as voluntary health insurance and out-of-pocket payments. Out-of-pocket payments comprise direct (user charges) and indirect cost sharing by private households (private payments). As a percentage of total pharmaceutical expenditure in 2002, private households paid 40.2% or €1,025 million. From this total private expenditure, €311 million was for prescription fees and €714 million for other types of private expenditure, such as selfmedication, private prescriptions, and pharmaceutical expenditures of private insurance carriers. This position also includes pharmacy sales with dietary supplements and cosmetics on the scale of approximately 20% of private sales. Private household expenditure for prescription fees underlies an average yearly growth between +7,1% (2000-2002) and +8,1% (1990-1995) (see Part 2). Public spending on pharmaceuticals has increased 3.9% from 1990 to 2002; while private expenditure has decreased by the same amount - from 44.1% (1990) to 40.2% (2002). The majority of stakeholders deemed the current level of prescription co-payment of €4.35, as reasonable. It was expressed that studies have been undertaken showing that co-payments do not play a major role as a steering mechanism, but rather as a financing mechanism237. Some stakeholders mentioned that this could be increased if it was explained to the population about demographic changes and the use of innovative medicines. Currently in Austria, people exempt from the prescription charge include: pensioners with income subsidies, persons with communicable diseases, and socially disadvantaged persons with net income limits (single persons €643.54). There is no upper ceiling in Austria on the total amount of prescription fees paid for by an individual in a year. The Austrian authorities could consider different options for the prescription co-payment: 1. The co-payment could be increased from €4.35, but exemptions could also include patients with serious chronic conditions. It should be clearly defined which serious chronic conditions are exempt from the co-payment (for example patients participating in continuity of care/disease management programmes (with a co-ordinating doctor), could be exempt from co-payments). Also, a ceiling for the maximum annual value of the prescription fees paid for by individuals could be set. 2. An increased prescription fee could be applied to patients depending on their income. 3. An increased prescription fee could be applied depending on the therapeutic value of a drug, or 4. An increased prescription fee could be considered for products in the Red box, as the value of these products has not yet been established. This may create an incentive to quickly move products into the other boxes. In Finland, a 50% co-payment for new products applies for the first two years before the therapeutic value is established. However, such drastic measures (i.e. high co-payment level) are not recommended. Whatever changes may be considered for the co-payment, equity dimensions must be taken into account and the distributional implications on different population groups. The whole prescription co-payment system should be reviewed, to consider the income threshold and potential changes to the current structure. A detailed study should be conducted on this topic. If the co-payment is gradually increased, a system could be devised for different co-payments for different income thresholds and an annual ceiling could also be implemented. However, those individuals who may understate their income would pay a lower prescription fee. For particularly expensive treatments, a cost-sharing scheme with the industry could be established238.

237

This has been argued by Dr. Bachinger. In the UK, a risk-sharing scheme was established for beta-interferon when it was not recommended for reimbursement by NICE. 238

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9. Senior physician authorization The previous method of prior authorization in Austria allowed a senior physician to grant a specific prescription for a patient either once or for an extended number of repeat prescription for up to one year. This method had been criticized for its bureaucratic approach, which led to bottlenecks in the approval process. According to the Audit Office (accountable to the parliament) there have been some unacceptable delays. However, overall only 7% of applications were turned down. This is thought to occur because doctors do not prescribe drugs that are likely to be turned down. Differences have been observed between the approval processes of the regional insurers. For example, the regional insurer for Kärnten has negotiated a special agreement with the Pharmacists’ Association to regulate the sale and retrospective authorisation of these drugs. Authorization by fax is permitted in the regions of Steiermark, Oberösterreich, and Vienna. While, the regional insurer for Vorarlberg has compiled its own positive list of medicines requiring senior physician authorisation, which are reimbursed under certain circumstances. The new legislation, which does not require prior approval for products in the Red and Yellow boxes weakens the current system and may create problems with monitoring and regulating the use of these medicines. Implementing a system of “ex-post approval” for some pharmaceuticals will not be helpful. If criteria such as diagnoses, diagnostic tests, etc. can be met, then prior approval can be waived, and these criteria are checked by the social health insurance institutions after reimbursement. If the necessary requirements are not met, then the prescribing doctor will face sanctions; first with a warning, then repayment of the drug, and eventually they will not be allowed to prescribe any drug from the Yellow box without prior approval for up to three years. Finally, in the case that the behaviour of the doctor does not change, his/her contract can be terminated. This is the only case where an individual doctor’s contract can be terminated otherwise collective agreements apply239. The advantages of the previous system for prior authorization included the increased bargaining power of the social insurers. Through the old system, the insures were able to control the volume of expensive drugs reimbursed and quality controls were in place as only specific patients received these medicines. In comparison, the new system is more convenient for patients, but if a drug is turned down the doctor will put the blame on the social insurer. However, to what level this has taken place remains unclear. Previously, the senior physicians of the social insurers could explain to patients their reasoning, either in person or by mail. Concerns of insurers arise regarding the inefficiency of ex-post approval and the lack of a financial safety net, which can therefore lead to further price increases. The lack of senior physician authorization also faces monitoring challenges considering the lack of detailed information systems in the Austrian setting. Tension may also be created between the social insurers and the doctors. Because of the potential for challenges with a system where no prior authorization is required for products in the Yellow and Red boxes (including inefficiency problems, the lack of a financial safety net, and the lack of detailed information systems), the government should monitor closely whether the new system is working over a two to three year period and may have to reconsider these reforms. 10. Increasing the use of Generics The current pricing system upon entry of a generic product appears to be a good measure. The system of HV reinitiating price negotiations over the price of the originator product following generic entry (30% discount), setting the price of the first generic (25.7% below the price of the discounted originator product), and ensuring that all subsequent generics have a sufficiently large price differential to the first generic, all work to achieve a lower price level for all bioequivalent products.

239

The new system will be implemented in early 2005 along with the e-cards.

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Even with a rational pricing system for bioequivalent products, incentives are lacking to encourage generic prescribing by physicians and generic dispensing by pharmacists. Some stakeholders have argued that health insurers will not achieve much cost saving by increasing the use of generic products because they are not much less expensive than comparable products in the Austrian market. This occurs because of the pricing system detailed above. However by increasing the volume of these products compared to higher cost branded products, cost saving can be achieved if appropriate mechanisms are put into practice. In addition, a lower prescription fee for generics could be designed to encourage their use. This financial incentive for patients is permitted under Austrian legislation (see Part 2, Section 7.1). Challenges with this option include favouritism towards older products. Moreover, even if the use of generics is increased by this method, consideration must be taken to evaluate whether the impact on revenue by lower co-payments may exceed lower expenditure by higher use of generics. 10.1a Generic prescribing There is no generic prescribing at present in Austria, but prescribing of branded generic products is acceptable. There seem to be no concerns about the quality of generics, and the main concerns were about acceptability of generics was changing the formulation for patients on chronic medication, and the risk of confusion particularly for elderly patients. This is a potential hazard best dealt with by disseminating patient information and especially discussions with the dispenser. Incentives will need to be provided to physicians to change their prescribing habits towards increased generic prescribing. As outlined before, doctors’ contractual agreements could include incentives for generic prescribing and they could receive financial incentives, retrospectively. This method of additional payments for doctors will require the use of information systems. 10.1b Generic dispensing At present, there is no generic substitution in Austria, thus a consideration could be to allow pharmacists to change the brand prescribed or eventually to permit substitution rights. These options should be discussed between the professions and should be limited to the substitution of a less expensive product (generic equivalent) for an originator product, rather than therapeutic substitution. First, if generic prescribing is increased as well as the dispensing of parallel imported products, a claw-back could be considered for pharmacists. This claw back should be developed with respect to the remuneration system for pharmacists and discussed with the association of pharmacists. Second, if pharmacists are to receive a fixed payment per dispensed product (as discussed in Section 5) additional incentives could be created for pharmacists who engage in productive dispensing behaviours. For example, if a pharmacist engages in generic substitution, he/she could receive an additional fee, for example: i) one-third the price difference between the original and the generic product (the Dutch version), or ii) an additional fixed payment. A study should be conducted to determine the type of substitution allowed and appropriate levels for this payment, as these are beyond the scope of our analysis. 11. Health care Interventions, Research and Policy Centre (HIRPC) Overall transparency needs to be increased for all aspects of the Austrian healthcare system. Within the social insurers, a Health care Interventions, Research and Policy Centre (HIRPC) should be formed to amalgamate the roles of the social insurers with regards to the coordination of activities. Important issues that should be addressed include regulating and monitoring the practices of doctors in the community and hospitals, collecting the appropriate information to engage in evidence based policy, addressing quality of care issues, and developing appropriate incentives for all stakeholders. This new Institute can undertake a number of functions, including: Report: The Austrian Pharmaceutical Market

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• • • • • • • • •

Providing educational information to physicians as well as the public Setting practice guidelines (along with physician associations), unless this role is undertaken by the Institute for Quality Control Performing health technology assessment and potentially cost-effectiveness analysis, evaluating costeffectiveness studies submitted by the pharmaceutical industry, and liaising with institution in other countries, e.g. NICE in the UK and the Economic Committee for Medical Products (CEPS) in France Facilitating the work of the committees responsible for determining the pricing and reimbursement status of products Monitoring physician prescribing patterns Unifying the information collected by different insurers Providing feedback towards increasing quality prescribing Supporting hospital pharmacy and the construction of national formularies Maintaining patient registries for patients with chronic diseases and co-morbidities

Because of the small size of the country, it would be useful to have all of these areas as functions of the HIRPC instead of under different organizations. This new Institute should be distinguished from the Institute for Quality Control that oversees med-technical care for physician practices and nurses, and will be wholly focused on medicines. 11.1 Continuing professional development In conjunction with providing educational information for physicians, the HIRPC can offer Continuing Professional Development (CPD) programs in cooperation with the Austrian Medical Schools, Medical Association, and Pharmacy Departments in universities. The Royal Colleges of Physicians of the UK runs a CPD Scheme for all post-training physicians, which covers development for both clinical and non-clinical physician roles. More information on this Scheme is available at the Royal College of Physicians website240 and contact can be made with this institution to learn more about their development mechanisms. The insurers should not fully sponsor CPD programs because it can be quite costly, but they should support academic detailing and counter-detailing efforts. The industry or health providers (i.e. hospitals) could support CPD programs, but the new HIRPC could define the content and approve the programs. Professional development could be incorporated into the collective agreement for physicians. If doctors do not adhere to this, an overhaul of the collective agreement could be made and appropriate incentives could be incorporated. Another option is to include a requirement for Austrian physicians to take part in CPD programs into their lifetime contracts. 11.2 National Registries Under the new HIRPC, national registries could be set up to record lists of patients with rare diseases, common chronic conditions, and co-morbidities. From the investigations, it is unclear what policies are in place regarding rare diseases in Austria. In Sweden, a knowledge database on rare diseases had been developed by the Swedish National Board of Health and Welfare. The concept of rare diseases is defined as, “disorders or injuries resulting in extensive handicaps and affecting no more than 100 individuals in one million inhabitants”. The objective of this database is to provide the latest information on rare diseases and information on the support and services required by these groups of people. The website Socialstyrelsen (available at: http://www.sos.se/smkh/indexe.htm) provides English translations of some of the 182 rare diseases already described in Swedish. The Austrian authorities could liaise with the Swedish centre to learn how the database was developed, how it is working, and the transferability of guidelines to the Austrian context. 240

Royal College of Physicians website. Available at: www.rcplondon.ac.uk/professional/cpd/

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It may also be useful to maintain a disease registry for patients with common chronic conditions, as there is no comprehensive primary care in Austria. Databases can be used to collect information on common medical conditions, help to establish guidelines for treatment, and allow treatment centres to be compared across the country. Furthermore, it is important to keep track of patients with co-morbidities in these registries, as they can make up a large portion of health care spending, particularly with the lack of continuity of care and patient choice of provider in the Austrian health care system. As an example, the Myocardial Infarction National Audit Project (MINAP) 241 in the UK provides data and information on the prevention of heart attacks. This working group, made up of cardiologists, nurses, managers and representatives of the Department of Health, established a core dataset for acute myocardial infarction for monitoring standards of care. This has been revised to include definitions for terms that would allow the collection of comparable data across the UK. So far, all of the hospitals in England and 84% of Welsh hospitals are supplying data and can view online their hospital's performance on specific targets compared to national aggregate data. On a long-term basis, registries for patients with co-morbidities can be formed that involve people suffering from several chronic conditions. 11.3 Information systems, monitoring and providing feedback There is a good system for the collection of information on reimbursed pharmaceutical products in Austria; however, there is a lack of population-based data and diagnoses are not recorded. Also, data on private consumption and the hospital sector are lacking. While there are some information systems on the physician level for some regional insurers, namely Upper Austria and Vienna, there are no patient specific or diagnostic related systems. From the interviews, it was revealed that the information system in Vienna has been in place for about a year, but is patchy. Because it is missing historical data, it is not possible to follow a patient over time. Furthermore, doctors have not been fully utilizing the potential of information technology (IT). Only 70% of Vienna doctors bill electronically and only 5% of these Vienna doctors could send and receive electronic information242. The HIRPC could be instrumental in updating and developing medical information systems in Austria. The reform process should begin with the implementation of comprehensive, population-based health care and drug information systems. These databases should capture all prescription information regardless of the payer, and be publicly administered. Data should be recorded in a timely and efficient manner. The purpose of these systems is to provide the rapid exchange of data between physicians, pharmacists, patients, and insurers. They can support improved clinical decision-making and quality guidelines, allow for utilization review243, and provide relevant patient information. This system can also be used to report feedback to regulators and the public, increase transparency in prescribing practices244, and lead to innovations in reimbursement policies. In addition in the UK, a framework is used to make NHS organizations accountable for quality improvements in services and protecting high standards of clinical care; this is called “clinical governance”. A Clinical

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Myocardial Infarction National Audit Project (MINAP). Available at: http://www.rcplondon.ac.uk/college/ceeu/ceeu_ami_home.htm 242 Source: Mag. Griesser, Vienna Insurance Fund 243 Dr. Probst (HV) stated “it is of strategic importance to strengthen the partnership between social insurance and the medical practitioners. Instruments such as DUR (drug utilization review), independent pharmaceutical counselling and an independent institute for quality assurance are necessary”. 244 Mag. Rosian (OBIG) commented “the analysis of pharmaceutical use and prices can result in a more focused demand for examination, i.e. examining compliance/wastefulness, quality of physician prescriptions, etc.” Report: The Austrian Pharmaceutical Market

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Governance Information Checklist245 is available to NHS organizations in order for them to check that they are meeting the necessary standards. This system uses colour codes (see Appendix 10). Also, a free service is provided to GP practices to assist them in improving patient care through the effective use of their clinical computer systems. This Primary Care Information Services (PRIMIS)246, provides primary care practices with: i) training in recording for data quality and information management skills, ii) analysis of data quality and comparative analyses on key clinical topics, iii) analyses of the results of data quality and comparisons, and iv) support in plans to improve data quality. Computer-based clinical decision support systems (CDSS) are defined as247: “any software designed to directly aid in clinical decision making in which characteristics of individual patients are matched to a computerized knowledge base for the purpose of generating patient-specific assessments or recommendations that are then presented to clinicians for consideration”. Simple systems covering one or two areas have been shown to work well, but real value would lie in the development of a more comprehensive system for primary care. The UK government funded the development of such a system called PRODIGY248, which was suitable given the already high levels of GP computerization funded by the state, where over 90% of GPs use computerized records. Following the entry of a patient diagnosis, Prodigy provides a comprehensive series of guidelines. When possible these guidelines are evidence based, or otherwise consensus driven. The system offers clinical advice and therapy recommendations for conditions commonly encountered in a general practice. Prodigy presents the facts about the conditions, treatments, and management options available. If the GP decides to prescribe to a patient, the system offers a choice of prescriptions, checks for allergies, contraindications, and interactions. It then prints a prescription and updates the patient record. It is less clear how valuable this system is. It is not widely used as many doctors and patients find the use of a computer during the consultation is intrusive. A recent UK trial of a system related to Prodigy found no significant effect on consultation rates, process of care measures (including prescribing) or reported patient outcomes249. In contrast however, studies in the Netherlands found the decision support tool to be effective, but in these circumstances there were financial incentives for GPs to use the system. Furthermore, it has been shown that if a CDSS is removed, physicians revert to their previous practice. Therefore to keep up the effect, the CDSS should be maintained. The Austrian authorities could organize a tour to visit national authorities in other countries that use sophisticated systems. Such authorities may include the UK National Prescribing Centre250 and similar organizations in the Netherlands and Belgium. The use of computer systems in general practice should be encouraged to ease the process of gathering information on patients, to allow reimbursement by insurance funds, and also as a means of collecting prescribing information. This later data could be used to benchmark physicians251. Incentives can be provided for physicians who engage in economics prescribing. The monitoring of physician prescribing can come under the responsibility of the HIRPC. Information will be needed to monitor physician performance with respect to the new quality of care guidelines. Furthermore, there could be a common database where all prescribing data is 245

NHS Information Authority website. Available at: http://www.nhsia.nhs.uk/clinicalgovernance/pages/cg_request.asp PRIMIS website. Available at: http://www.primis.nhs.uk/pages/default.asp 247 Durieux P, Nizard R, Ravaud P, Mounier N, Lepage E (2000) A clinical decision support system for prevention of venous thromboembolism: effect on physician behavior, JAMA, 283: 2816-21. 248 PRODIGY website. Available at: http://www.prodigy.nhs.uk 249 Eccles M, McColl E, Steen N, Rousseau N, Grimshaw J, Parkin D, Purves I (2002) Effect of computerised evidence based guidelines on management of asthma and angina in adults in primary care: cluster randomised controlled trial, BMJ, 325: 941. 250 UK National Prescribing Centre website. Available at: http://www.npc.co.uk 251 DI. Mair advocated the benchmarking of physicians such that “physicians who prescribe e.g. 30% or more above average (standardised by age) must prove why this was necessary, if they fail they should be obliged to pay money back to health insurance”. 246

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collected and stored. In other countries, such as the UK they have implemented the electronic transfer of prescriptions, so called e-pharmacy. 11.4 E-pharmacy and electronic transmission of prescriptions (ETP) ETP allows prescriptions to be sent electronically to a pharmacy of a patient’s choice, and will save the patient from having to come back to collect the prescription from the surgery. In the UK, electronic prescriptions are becoming prevalent in primary care. By 2008 or earlier, prescription data will be transferred between GPs, pharmacies, and the Prescription Pricing Authority using the NHSNet. ETP could enable community pharmacists to manage repeat dispensing more effectively. Medicines can be prescribed and dispensed electronically so long as proper safeguards and professional standards are in place. Professional standards for the provision of on-line pharmacy services have been developed by the Royal Pharmaceutical Society. Its core requirements are that: • patients' freedom to choose where to have their prescriptions dispensed is protected, and they are aware of the pharmacy's identity • the source of the electronically-transmitted prescription can be verified, i.e. it came from a practitioner authorised under the Medicines Act • the integrity of information transmitted is protected • confidentiality is ensured by encrypting sensitive information • a pharmacist assesses all prescriptions and medicine requests for suitability • patients or carers receive all information necessary for correct administration • medicines are delivered safely and promptly, under appropriate storage conditions. The e-card recently developed in Austria will contain a patient’s social health insurance coverage. Using the ecard, doctors could send a patient’s prescription to a server, the patient could then go to a pharmacy of their choosing, and the pharmacist would be able to download the prescription. This information should also be collected in a database. Currently, in Austria there are some publications providing population health data, the most comprehensive one is the annual report on the health status made to the parliament by the Ministry of Health. Austria should consider the implementation of a publicly administered, comprehensive, population-based health data system including medicines. The information system should develop a minimum data set for the health sector. The system can also provide the rapid exchange of data, support improved clinical decision-making and quality guidelines, allow for utilization review, provide relevant patient information, and lead to innovations in reimbursement policies. Studies can be developed to analyse data from hospitals, GPs, and specialists. The use of computer systems in general practice should be encouraged and the establishment of an e-pharmacy system could be a future goal. 12. Hospital pharmacy Based on ex-factory prices, medicines sold in the hospital sector came to €423.7 million in 2001 and made up 25% of the total market value252. From the health insurers’ perspective, 1.5% of pharmaceutical units (2.5% of expenditure) are dispensed to out-patients through 46 hospital pharmacies (2002). It is common in Austria for hospital pharmacies to receive their drugs directly from the manufacturer; however, hospitals without an inhouse pharmacy are only allowed to receive their pharmaceuticals from another hospital pharmacy or from a public pharmacy. As in many European countries, sub-specialization in hospital pharmacy (e.g. drug information services) is poorly developed partly because of a lack of critical mass in the smaller countries like Austria, and even within hospitals where the numbers of pharmacists per 1,000 beds are low (typically one pharmacist to 100-150 beds compared to the UK with a figure of around one pharmacist to 30-40 beds and also numbers of pharmacist 252

Source: Pharmig.

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technicians who do much of the actual dispensing). As mentioned earlier, hospital pharmacy is not well supported by the curriculum of Austrian Schools of Pharmacy, and there is no clinical training for pharmacist, neither in hospitals nor the community. Generic substitution is allowed in hospitals but there is little real incentive for this because of the low costs to the hospital of many branded drugs. The pharmaceutical budget is part of the overall hospital or directorate budget and is largely based on historical expenditure and perceived clinical need per capita of overall treatment. From January 1997, medical care in hospitals is financed on the basis of services rendered and diagnostic related group (DRG). There are new developments in this area with a move to a separate budget for pharmaceuticals. 12.1 Hospital formularies Formularies are restricted lists of medicines to which prescribers are encouraged or required to adhere. Formularies help the consistency of prescribing, ensure that doctors are familiar with a range of medicines, and may be a useful cost-containment measure by restricting the use of more expensive medicines and encouraging the use of generic medicines253. In Austria, hospitals are required by law to have a formulary: in Vienna, this typically means about 800 active drugs across 1,500 preparations. From the interviews, it was observed that there is a lack of transparency with respect to hospital formularies. A pharmacy committee generally sets the hospital formulary. In Austria, these committees are medically dominated, and at present there is one per hospital - there are moves to consolidate this into fewer committees or commissions to concentrate expertise. Where there is more than one drug available in a therapeutic area, the pharmacy committee selects drugs from a class by ranking them in order of clinical preference. A separate committee then negotiates the price and the final drug chosen, so as to achieve best value for the hospital budget. The main principles behind hospital formularies, include254: • medical staff of an institution work through a Formulary and Therapeutics Committee, to evaluate and select drug products that are considered to be the most efficacious, safe, and cost effective • products should be rationally selected to maximize therapeutic benefit through examinations of morbidity, consumption, and treatment costs • a limited list of drugs is established that is approved for procurement and use in hospitals • the hospitals can develop a formulary manual - a concise reference book containing basic drug information about each drug on the formulary list • the Formulary and Therapeutics Committee is responsible for all aspects of the formulary system, including: o establishing policies and procedures for selection and use of drugs o developing drug information o designing and conducting ongoing monitoring and evaluation programs that ensure proper use of drugs in the facility • the formulary system is a mechanism to streamline procurement activities, minimize institutional costs and optimize patient care. From a survey of the use of various techniques to control drugs costs in 103 US hospitals, Sloan et al. (1997)255 found that most hospitals used some form of therapeutic interchange and generic substitution, but only used cost-

253

Pearce MJ, Begg E (1992) A review of limited lists and formularies: are they cost-effective, Pharmacoeconomics, 1: 191-202. 254 Savelli A, Schwarz H, Zagorski A, Bykov A (1996) Manual for the Development and Maintenance of Hospital Drug Formularies, Arlington: Management Sciences for Health. Available at: http://erc.msh.org/newpages/english/dmpmodule/formul_en.pdf (accessed 15 September 2004). 255 Sloan FA, Whetten-Goldstein K, Wilson A (1997) Hospital pharmacy decisions, cost-containment, and the use of costeffectiveness analysis, Social Science and Medicine, 45(4): 523-33. Report: The Austrian Pharmaceutical Market

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effectiveness as a minor decision-making tool. Another study has attempted to describe the process of priority setting for new drugs in a hospital formulary256. In hospitals the procurement of medicines involves the direct supply from manufacturers and contractual arrangements with wholesalers. In most EU countries, regional purchasing groups are established and national tendering of contracts is made with suppliers. Additionally, groups of hospitals often seek to arrange contracts through cooperative purchasing agreements whenever possible, in order to secure the best purchasing power. The hospital pharmacy committees in Austria should work together and in cooperation with the social health insurers to evaluate and select drug products that are considered to be the most efficacious, safe, and cost effective. The establishment of hospital formularies should be coordinated across the whole country. Interhospital committees could establish principles of good practice, establish policies and procedures for selection and use of drugs, provide drug information to hospital physicians, and design and conduct ongoing monitoring and evaluation programs that ensure rational use of drugs in Austrian hospitals. General purchasing principles should also be established to meet health insurers’ objectives. 12.2 Prices of medicines in hospitals Austrian hospitals receive special deals and discounts from the pharmaceutical industry (around 40% of list price). The industry supplies lower cost products to hospitals and hopes to make their profits back from the continued use of these products following patient discharge. From the interviews, it is evident that drug choices in hospitals have an influence on community use and costs. The discrepancy in price for some products, which have a low price in hospitals and a higher price in the community, creates a disadvantage for the health insurers. Hospitals may recommend products that are less effective or me-too products with higher prices instead of existing alternatives that may be less expensive. It is also not surprising, that hospitals are much faster to use new medicines than the community. HV does not like these discounts but in general can do nothing to stop them because of the silo nature of budgeting, i.e. hospital budgets are independent of budgets for community medicines use. A similar situation applied in the UK until the advent of unified budgets – hospitals in the UK now must always consider the costs to the community of their drug choices, since excessive drug costs in the community may limit the ability of the health authority to buy hospital services. Hospital prices are very confidential, commercial secrets not shared with other hospitals and certainly not with HV. To an extent, hospitals saw themselves in competition with HV in part because of the strategic approaches adopted by the pharmaceutical industry in marketing to hospitals, including loss leading in drug prices to hospitals, and partly due to the silo nature of budgets. The hospital view this such that their requirements for medicines only show about a 15% overlap with medicines funded by the HV (not clear whether this is by volume or cost or how measured), and therefore they represent discrete markets which should not be linked. Such a linkage might also be a breach of competition laws – there had been problems with attempts to collectively purchase one high cost drug across Viennese hospitals. The transfer of patient care between the hospital and community setting is often a major weakness in health care systems generally and particularly in pharmaceutical care. As discussed, this is a particular problem in the Austrian system especially when the new reimbursement code will be implemented. Hospital-only products that fall into the Black box for reimbursement often continue to be required by patients in the community care setting. Because these products remain on the “negative list” they forgo the pricing controls for products on the Red and Yellow list and thus may be particularly expensive for health insurers, who do not achieve the significant level of discounts achieved in hospitals.

256

Martin DK, Hollenberg D, MacRae S, Madden S, Singer P (2003) Priority setting in a hospital drug formulary: a qualitative case study and evaluation, Health Policy, 66: 295-303. Report: The Austrian Pharmaceutical Market

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Also, of great importance is the transfer of information between hospital specialists and community physician such as drug histories, co-morbidity information, incomplete details of treatment changes, diagnosis and patient follow-up requirements. The Austrian authorities should carefully assess the challenges occurring from silo budgeting and the knock-on effects to the community from the use of drugs initially procured in the hospital setting. Further areas to address are issues of continuity of care between the hospital and community health care settings and the market occupied by outpatient hospital pharmacies. Increased transparency is needed and a change in the legal framework may be necessary. 13. Conclusions Pharmaceutical policy in Austria has been primarily focused on pricing and reimbursement decisions, the regulation of distribution margins for wholesalers and pharmacists, and in some cases incentives for doctors. The Austrian authorities have managed to regulate pharmaceutical expenditure as a percentage of total health expenditure. This regulation needs to continue and become more sophisticated (Table 8 summarises our recommendations). From 1990 to 2002, public expenditure on pharmaceutical has increased from 55.9% to 59.8% of total pharmaceutical expenditure, and private expenditure has decreased from 44.1% to 40.2%. In Austria, it is particularly important to create appropriate incentives for each stakeholder so that they behave in a manner congruent with the objectives of equity, efficiency, and quality, as well as the important aim of costcontainment. There is a need to increase transparency in the Austrian pharmaceutical policy and the health care system in general. Examples of specific issues that need to be addressed include: • The influence of prescribing in hospitals on the community • Lack of communication between primary and secondary care, such as the repetition of diagnostic tests • Lack of continuity of care and disease management, particularly in the coordination of care for patients with many diseases • Good patient choice although in the Austrian context this may create the potential for patients to use their vouchers to see any doctor or go directly to hospital • Making the distribution chain more competitive • Proving incentives for generic prescribing • The need for greater computer support systems and monitoring of prescribing There is little perceived need to change the current system of market authorization. It would be useful for the current department to coordinate their activities with all available scientific research in Austrian universities and research centres. If the Austrian authorities are considering creating a new agency for market authorization to attract more applications, they must carefully consider the expanding role of the EMEA and the significant use of the mutual recognition procedure in other countries, such as the UK, the Netherlands, and Sweden. An improved patient reporting system for adverse reaction could be implemented. Adverse events and side effects should be recorded considering the significant number of OTC products available on the Austrian market and the potential for further delisting. Also, a card system could be implemented in Austria to allow patients to directly report any adverse events. The process of linking pricing and reimbursement provides good negotiating power for the health insurers. The current pricing system for products with generic equivalents, where negotiations on the price of similar products must be below the price of the original and also, that the price of the originator product is reduced, appears to be quite sensible. Further incentives are needed to encourage the use of generic products and to promote generic prescribing by physicians and generic dispensing by pharmacists. This may also be undermined by hospitals where products with equivalent therapeutic value or me-too products may be prescribed instead of generics. Austria establishes the average European price when setting prices for new products. If Austria is not normally the market of first launch within Europe, then reliance on other European pricing systems may be warranted. Report: The Austrian Pharmaceutical Market

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However, it must be recognised that product pricing in other markets will reflect the goals of their health care systems and not those of Austria. Some challenges exist with the boxing system for reimbursed drugs. Some products in the Red box may not have an average European price and consequently the price is defined by the industry. The industry rebate can work to correct this, by requiring the industry to payback any difference once the price is established, although this may be challenged. The Black box limits the flexibility to prescribe medicines only for particular patients. The changes to the system of senior physician authorization to a system of ex-post approval have reduced the level of control for products in the Yellow box. It is a good measure that prior approval is retained for the Red box to encourage rational prescribing. Although, ex-post approval is helpful for patients, it may create problems between doctors and health insurers, and reduce the negotiating power of the insurers. This new system should be carefully monitored and evaluated. If it is deemed unsuccessful, the previous system of prior should be reestablished. In consideration of reimbursement lists for medicines, a system of listing products across the whole health care sector could be considered. Health technology assessment submissions should be encouraged; including studies in the Austrian context and guidance can be provided on pharmacoeconomic studies. A working group involving international experts could be set up to address specific challenges, such as the transferability of data to the Austrian setting. An increased capacity in universities for health services and health economics research will be needed to evaluate the additional data. For these reimbursable drugs, important characteristics should also be identified, e.g. the population to be treated, the total treatment costs, and quantification of the outcomes, etc. This role could be undertaken by the Pharmaceutical Evaluation Commission and the proposed Health care Interventions, Research and Policy Centre (HIRPC). The Pharmaceutical Appeals Committee should only decide only on legal issues, following a dispute of a reimbursement decision. Decisions regarding issues on the substance should not be considered, only challenges with the process of determining reimbursement status. The members of the Appeals Committee could undergo some legal training. The VAT rebate given back to the insurers could be aligned with the growth rate of pharmaceutical expenditure. Some of the VAT rebate can be earmarked to fund the proposed HIRPC. There is a current lack of control over the significant promotional activities of the pharmaceutical industry. These should be addresses either through the required reporting of such marketing activities or taxing these activities. Academic and counter-detailing efforts to educate physicians in rational prescribing could be enhanced and linked to the proposed HIRPC. In Austria, there is a lack of continuity of care because there is no designated primary care physician for individuals. Continuity of care could be promoted in the Austrian setting if there is a designated primary care doctor for each patient. Improvements in continuity of care could allow a physician to have better knowledge about the patient and thus make rational clinical decisions. Furthermore, there is a lack of disease management programs. This is especially important for patients with co-morbidities and those with chronic diseases. Disease management programs could be based on best practice relevant to Austria to increase the use of proven therapy and eliminate ineffective care. These will likely require dedicated investments in information technology. The new system of using personal electronic medical cards could provide doctors with the patient’s record including their medical history, diagnostic, and treatment information. There were examples of patients engaging in informal “capitation” arrangements with vouchers being given to physicians in consideration of future treatment. Therefore, a study should be conducted to determine if physician payments should be reconsidered. Appropriate incentives could be provided for physicians and linked to improvements in quality of care, appropriate prescribing, and increased generic prescribing. The incentives implemented in Upper Austria could be studied and expanded to other regions. Austrian authorities could consider building more incentives into the collective contracts of physicians, including continued professional development. For deviations in prescribing patterns, only collective contracts can be cancelled but this is thought

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to be politically and practically impossible. There is no selective contracting of individual physicians and a debate on this option could be initiated. At present, information to physicians is disseminated irregularly and through mail or by marketing efforts of the industry. Counter-detailing the marketing efforts of industry and allowing information exchange with prescribers is necessary. Information to physicians can be provided through direct visits from ‘academic detailers’ employed by government agency. National guidelines can be developed, which might increasingly be considered a part of good practice and provide better coordination across the insurers. Additionally, prescibers could receive feedback through the proposed Centre and the implementation of computer systems. Regarding product distribution, the wholesale margin is much higher than in other countries with a similarly high concentration of the market among the top wholesalers. Thus, the wholesale margin could be reduced to the Danish level (around 4.1%). Also, it should be considered whether the three times daily visits to urban pharmacies are entirely necessary. The method of remunerating pharmacists should not be affected by the cost of the prescription, and dispensing should not be associated with profits. Instead of degressive margins for pharmacists, they could receive a single flat-rate fee per dispensed product, and a study could be conducted to ensure that their current level of income would be maintained. If pharmaceutical care is to be increased, pharmacists could be provided with the necessary training in clinical pharmacy and additional incentives. Also, the potential for repeat dispensing could be considered. The Austrian authorities could consider allowing dispensing doctors to purchase products directly from the industry, in which case a clawback similar to that of pharmacists could be maintained. In addition, the Austrian authorities could consider the benefits of mail order pharmacy particularly for OTC products and for patients who cannot get to a pharmacy, such as patients in remote locations and patients who are not mobile. However, issues of safety and monitoring must also be considered. The current prescription fee of €4.35 with exemptions, applies in Austria; however, there is no upper ceiling on the total amount of prescription fees paid for by an individual in a year. The Austrian authorities could consider a gradual increase the prescription fee, based on: i) an individual’s income, ii) the therapeutic value of the product, or iii) a higher fee particularly for products in the Red box. Patients with serious chronic conditions could be exempt from the prescription fee and these groups would need to be clearly defined. For particularly expensive treatments, a cost-sharing scheme with the industry could be established. Activities aimed at promoting healthy lifestyles are lacking in the Austrian setting. More public and patient education is needed on the topics of self-medication, medical conditions and therapies, and the use of generic drugs. The insurers should coordinate their activities with patient organizations and seminars can be organized on the rational use of medicines. Of particular importance is the creation of the proposed Health care Interventions, Research and Policy Centre (HIRPC) within the social insurers to amalgamate their roles with regards to the coordination of activities. This centre could address important issues in pharmaceutical management, such as: prescriber education, national guidelines, assessment of health technology submissions, facilitating pricing and reimbursement decisions, the implementation of information systems, collecting data and monitoring prescribing patterns, providing feedback to prescribers, hospital pharmacy, continuing professional development, and national patient registries. Within the HIRPC, a Health Technology Assessment group can be formed to eventually establish guidelines for reimbursement decisions using therapeutic advantage considerations and eventually pharmacoeconomic evaluations. There is a need for the development and implementation of comprehensive, population-based drug information systems in Austria. These systems could provide linkages between physicians, pharmacists, patients, and insurers, support improved clinical decision-making and quality guidelines, and allow for monitoring and evaluation of drug utilization. In addition, hospital formularies should be developed through coordination of the pharmacy committees in different hospitals with responsibility for evaluating and selecting the most efficacious, safe, cost effective and therapeutically beneficial drugs for use in hospitals. Further areas to address are issues of Report: The Austrian Pharmaceutical Market

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continuity of care between the hospital and community health care settings and the market occupied by outpatient hospital pharmacies. Moreover, general purchasing principles should also be established in hospitals. To ensure that Austria’s pharmaceutical policy is developed and implemented in a rational and integrated way, each aim must be coordinated with other objectives in pursuit of the overall goals of equity, efficiency, quality, and cost-containment. The Federation of Social Security Institutions should work to ensure that all policies integrate into other components of a national health strategy. Additionally, it is important that HV support and assist regional and other insurers’ efforts to manage drug utilization and costs. Challenges can occur when attempting to integrate the objectives of the policy and these need to be identified and addressed. This can best be addressed through a partnership approach with the various stakeholders.

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Table 8: A summary of key issues in the Austrian pharmaceutical market Policy Product registration/ Market authorization

Patient reporting

System for reimbursement

Comments Little perceived need to change the current system. If the authorities want to attract more applications to Austria this is an attractive option given the geographical position of Austria in the enlarged Europe.

Adverse events and side effects should be recorded considering the significant number of OTC products available on the Austrian market and the potential for further delisting. The process of linking pricing and reimbursement provides good negotiating power for the health insurers. The Red box may allow entry of products at prices, which may not be compatible with the Austrian level of expenditure, especially if no comparator products are available to establish the price. Another challenge is the potential for political issues that may arise if a product in the Red box is later moved to the Black box and a patient has previously received this therapy.

Future Directions Would be useful for the current department to coordinate their activities with all available scientific research in Austrian universities and research centres. If the authorities are considering forming a new institute, then they should consider the expanding role of the EMEA and the significant use of the mutual recognition procedure in other countries, such as the UK, the Netherlands, and Sweden. Before the government establishes a separate agency, careful operational planning and study visits to other countries’ agencies should be undertaken. A system that allows patients to directly report any adverse reactions on a card system could be implemented in Austria.

For the Yellow and Red boxes, it would be useful to either incorporate prior authorisation completely within the box framework or to agree explicit, complementary criteria for these authorisations. The Black box appears to be too rigid and may create problems, such as decreasing the discretion of authorities for drugs that could have been reimbursed for a precise indication, disease group, or patient population. To combat these challenges, a system of listing across the whole health care sector (primary and secondary care), which explicitly asks for health technology submissions, could be implemented. These should determine the population to be treated, the total treatment costs associated with the introduction of the new therapy, quantification of the outcomes, and establishment of price based on existing patterns of care within the Austrian health care sector.

The Yellow box does not appear to have explicit regulation for entry. Such discretion is useful, but comes with a possible lack of transparency. If there is no prior authorisation for products in the Yellow and Red boxes, then there are concerns of regulation and monitoring of these products. The Green Box includes innovative drugs, products with added therapeutic value and a negotiated price.

Pricing

The Black box appears to give a circuitous entry to new medicines introduced initially into the hospital setting but then leaked into the GP setting. Austria establishes the average European price when setting prices for new products. If Austria is not normally

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It must be recognised that pricing in other markets will reflect the goals of their health care systems and not those of the Austrian health care sector. 222

the market of first launch within Europe, then reliance on other European pricing systems may be warranted.

Pricing generic products

Pharmaceutical Appeals Committee VAT rebate to insurers

Industry rebate and promotional activities

There is a lack of health technology assessment (HTA) in Austria. Other systems such as France and the US that consider therapeutic advantage of new products should be considered. There is also a lack of cost-effectiveness studies for medicines. The current pricing system upon entry of a generic product appears to be a good measure. If appropriate mechanisms are put into practice, the volume of generic products compared to higher cost branded products can be increased and cost savings can be achieved. The Pharmaceutical Appeals Committee should only decide on legal issues, following a dispute of a reimbursement decision. The 20% VAT rate applies to medicines and a rebate is given to insurers that is linked to the growth of health expenditure, and not pharmaceutical expenditure of social insurance funds. The industry rebate on the sale of drugs to health insurers appears to be a reasonable and proportional measure. There is a current lack of control over the significant promotional activities of the pharmaceutical industry.

Physicians and Prescribing

There is a lack of continuity of care because there is no designated primary care physician for individuals. There is also a lack of disease management programs. For deviations in prescribing patterns, only collective contracts can be cancelled but this is thought to be politically and practically impossible. Incentives are lacking to encourage

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Austria should consider HTA when evaluating a product’s therapeutic value and can include the use of cost-effectiveness assessment. Austria could establish guidelines for cost-effectiveness studies and where possible make studies relevant to the Austrian context. Companies could be required to provide forecasts and supply pharmacoeconomic data. This is to be undertaken either prior to entry or within the current timescale. Also, establish a working group of international experts.

A lower prescription fee for generics could be designed to encourage their use. Even if the use of generics is increased by this method, consideration must be taken to evaluate whether the impact on revenue by lower copayments may exceed lower expenditure by higher use of generics.

Decisions regarding issues on the substance should not be considered, only challenges with the process of determining reimbursement status. The members of the Committee could undergo some legal training. A higher rebate could be given to the health insurers and the growth rate of the rebate could relate to the growth rate of pharmaceutical expenditure. Part of the taxes refunded could be earmarked to finance the proposed HCIRP. The level of the rebate could be adjusted upward or downwards according to expenditure trends. The promotional activities of the industry should be addressed either through recording such marketing activities or taxing these activities. Academic and counter-detailing efforts to educate physicians in rational prescribing could be enhanced and linked to the proposed HIRPC. Activities aimed at promoting healthy lifestyles are currently lacking in the Austrian setting. More public and patient education is needed on the topics of self-medication, medical conditions and therapies. The insurers should coordinate their activities with patient organizations and seminars can be organized on the rational use of medicines. Need to improve continuity of care as this promotes better knowledge about the patient and more rational clinical decisions. This is especially important for patients with co-morbidities and those with chronic conditions. Overall, a designated doctor is needed for each patient. A system using personal electronic medical cards could be created where each doctor treating the patient records their history, diagnostic and treatment information. Also, the relationship between doctor and patient is essential if generic prescribing is really to thrive. The management of chronic conditions should be an important policy consideration for the Austrian health care system. Disease management programs could be based on best practice relevant to 223

generic prescribing by physicians and dispensing by pharmacists. Information is disseminated irregularly and through mail or by marketing efforts of the industry . Examples of patients engaging in informal “capitation” arrangements with vouchers. In Upper Austria, it was observed that prescriptions made by ‘non-contract doctors’ were around 20% more costly than those made by GPs.

Distribution chain

The degressive wholesale margin is much higher than in other countries with a similarly high concentration of the market. The degressive margins for pharmacists create challenges as they should not be affected by the cost of the prescription.

Mail order

Senior physician authorization

Prescription fee

Health care Interventions,

Currently, dispensing doctors purchase products from virtual pharmacies and wholesalers. Mail order of pharmaceutical products is currently forbidden in Austria. It remains to the digression of the EU member state to decide on whether to allow such distribution channels for prescription-only products. The new system of ex-post approval weakens the current system and may create problems between social health insurers and doctors. The advantages of the previous system included the increased bargaining power of the social insurers. The current prescription fee of €4.35, with exemptions, applies in Austria. There is no upper ceiling on the total amount of prescription fees paid for by an individual in a year.

There is a lack of overall transparency for all aspects of the Austrian health

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Austria to increase the use of proven therapy and eliminate ineffective care. These will likely require dedicated investments in information technology. Produce national guidelines, which might increasingly be considered a part of good practice and provide better coordination across the insurers. Incentives should be linked to improvements in quality of care, appropriate prescribing, increased generic prescribing and not just costs. Possibility of building more incentives into physician contracts for continuing professional development. If the voucher scheme is being abused, it may be necessary to move away from this scheme. A detailed study would have to be conducted to focus on the development of new payments for physician and a debate could be initiated about selective contracting for physicians. Non-contracted doctors: An option would be to reduce reimbursement for private prescriptions issued by doctors without contract (i.e. from 80% to 60%) and increase co-payments for prescriptions issued by non-contracted doctors with prescribing rights. It should be considered whether the three-times daily visits to urban pharmacies is entirely necessary and also margins could be reduced to the Danish level. Pharmacists could receive a flat-rate fee per dispensed product and additional incentives for economic dispensing and additional services. A study should be conducted to estimate an appropriate flat-rate fee in order to compensate pharmacists at an appropriate income level. Consider allowing dispensing doctors to purchase products directly from the industry. The Austrian authorities could consider the benefits of mail order pharmacy particularly for OTC products and for patients who cannot get to a pharmacy, similar to the French system. Issues of safety and monitoring must be taken into consideration. The government should monitor closely whether the new system of expost approval is working over a two to three year period and may have to reconsider these reforms.

Could gradually increase the prescription fee, based on income, therapeutic value, or particularly for products in the Red box. Patients with serious chronic conditions could be exempt from the prescription fee and an annual maximum ceiling could apply. Furthermore patients participating in continuity of care/disease management programmes (with a co-ordinating doctor), could be exempt from co-payments. For particularly expensive treatments, a cost-sharing scheme with the industry could be established. Austria could implement a Health care Interventions, Research and Policy Centre (HIRPC) to provide a variety of function in the Austrian 224

Research and Policy Centre (HIRPC)

Hospital sector

care system. A centre within the social insurers (HV) could be developed to amalgamate their roles with regards to the coordination of activities. Important issues that should be addressed include regulating and monitoring the practices of doctors in the community and hospitals, collecting the appropriate information to engage in evidence based policy, addressing quality of care issues, and developing appropriate incentives for all stakeholders. Hospital prices are very confidential, commercial secrets in Austria. Hospital formularies are developed regionally and challenges occur from silo budgeting and the effects of expensive treatments for the community that are initially used in hospitals. Continuity of care is lacking between the hospital and community settings.

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health care system, including continuing professional development, national registries, and the implementation of information systems, monitoring and providing feedback.

Increased transparency is needed and a change in the legal framework may be necessary. The hospital pharmacy committees in Austria should work together and in cooperation with the social health insurers to evaluate and select products that are considered to be the most efficacious, safe, and cost effective. The establishment of hospital formularies should be coordinated across the whole country. General purchasing principles should also be established to meet health insurers’ objectives.

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Appendix 1: Measures to cap increases in pharmaceutical expenditure

Taken by the Regional Health Insurer for Oberösterreich, Author: Alfred Mair

1. Point of Departure Over the last decade, all health insurers experienced a rise in pharmaceutical expenditure that outpaced expenditure on all other medical goods and services. This led the regional insurer for Oberösterreich (OÖGKK) in 1999 to actively seek ways in which these strong cost increases could be lowered. That it succeeded is borne out by recent trends in per capita pharmaceutical expenditure. Starting from a low per capita level in 1993 and a comparably lower rate of increase up to 1998 (see Graph 1), meant that in subsequent years it achieved the lowest increase in pharmaceutical expenditure of all insurers. Graph 1: Deviation from the Average Per Capita Pharmaceutical Expenditure Standardised Comparison, All Health Insurers= 100; 1993-2002

100 95

GKKs OÖ Sbg Vbg

90 85 80 75 70 1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Note: For greater clarity the average of all regional insurers and the three occupational insurers with the lowest per capita pharmaceutical expenditure are included in the graph only. Table 1: Per Capita Expenditure Increases in %, Regional Health Insurers 1993-2002 (1993=100)

Regional Health Insurers OÖ Stmk Wein Sbg T NÖ Vbg Ktn Bld

1993 – 1998 39 35 38 37 35 45 42 46 43 56

1998 - 2002 40 28 36 41 46 37 43 45 55 58

1993 – 2002 89 65 74 78 81 82 85 91 98 114

Below is an account of the different measures that led to this outcome.

2. Fee Contract with the Physicians’ Association

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For the first time in 2001, a flexible fee structure for physicians could be negotiated that takes into account increments in pharmaceutical costs. For Austria, an innovative fee agreement ensures that economical prescribing habits on the part of ‘contract doctors’ is positively rewarded in their fees. This agreement established for the first time a collective inducement for economical prescribing. The index for the year 2001 was costs per prescription. This value was not supposed to rise by more than 5.4% (2001). In subsequent years, similar agreements were reached with the Physicians’ Association of Oberösterreich. Increases in per capita pharmaceutical costs in OÖGKK in comparison to the average increases in all regional insurers were taken as the index. The following was agreed: Should the OÖGKK’s increases lie below the average of all regional insurers, physicians are entitled to a bonus in the form of higher fees. The reverse situation leads to lower fee increases. Both bonuses and penalties have an upper cap. The following results were achieved: In 2001, the increases in costs per prescription exceeded the average. The percentage by which the average was exceeded was deducted from physicians’ fee increments. In the two subsequent years, a bonus of an additional fee increment could be paid to doctors. Through a flexible fee system, an incentive was given for doctors to reduce increases in the volume and cost of pharmaceuticals.

3. Pharmaceutical-Dialogue between OÖGKK and the Physicians’ Association of Oberösterreich

The ‘pharmaceutical-dialogue’ is of particular importance for increasing acceptance for pharmaceutical cost containment measures among doctors. To implement this initiative, the physicians’ association and the OÖGKK jointly: • organised the sending of circulars containing pharmaceutical-economical information to doctors • discussed practical pharmaceutical cost containment measures at local ‘pharmaceuticaldialogue’ meetings • offered further training with particular emphasis on the economical use of pharmaceuticals, and • published therapy suggestions for cost relevant pharmaceutical groups.

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Examples of publications include a publication with the title ‘Pharmaceutical Dialogue-Paper’, which gives suggestions to optimise the treatment of patients with hypertension taking into account economical aspects, and also guidelines for the prescription of anti-depressives belonging to the group of Selective Serotonin Reuptake Inhibitors (SSRI).

4. Measures Undertaken by the OÖGKK to Put Economical Use of Medicines Into Practice In addition, the OÖGKK developed its own measures and communications to put economical use of medicines into practice without a resulting loss in medical quality for the patient. 4.1 ‘Medikom’-Telephone Calls

This was achieved by paying attention to the concrete prescription habits of individual ‘contract doctors’. From July 1999 onwards, doctors of the OÖGKK have called ‘contract doctors’ with high per patient pharmaceutical costs to discuss - on the basis of previously circulated documents - ways in which drug therapies could be improved. Agreed changes were put in writing in a confirmation letter. These letters served as a basis for follow-up discussions after a period of around half a year, to see where positive developments were in evidence and where there remained room for improvement.

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Graph 2:

Doctors With and Without Telephone Advice Change in Medicine Costs per Case Q1 1999 to Q1 2000 65

60

} Savings of €1m in the Quarter

€

55

50

45

40 Contacted Doctors (n=260) Non Contacted Doctors (n=385) Contacted As Not Contacted *

* Assumption: Contacted doctors would have behaved like those not contacted

Source: OÖGKK; FOKO Evaluation

An internal evaluation of the phone calls showed an overwhelmingly positive reaction to this new form of communication on the part of ‘contract doctors’. 98% of ‘contract doctors’ were prepared to talk, while 92% reacted positively to the call to change their habits. The overwhelming majority of ‘contract doctors’ (82%) were well prepared for the conversation. Since the beginning of the direct communication with ‘contract doctors’ – mainly by telephone – 1,500 contacts (initial and follow-up) took place with GPs and specialists between July 1999 and the end of 2001.

4.2 Hospital Communication In 2002, communication was stepped up with hospitals. Oberösterreich’s hospitals can prescribe and have through their medication recommendations an important impact on ‘contract doctors’. Often ‘contract doctors’ were the ones keen to see greater communication between the OÖGKK and hospitals. Until the end of 2002, discussions took place with all medical hierarchies in three hospitals in Linz and one hospital in Wels. Topics touched on in these discussions included writing prescriptions, generics, therapy suggestions (discharge letter) and problems arising from a patient’s transfer from hospital back to his or her GP (Schnittstellenproblematik).

4.3 Communication With Specialists

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From 2002 onwards, special attention was given to prescription by specialists. Following a close analysis of the whole group of specialists, individual meetings and telephone conversations were held. Topics addressed included not only generics, small package sizes and others, but also drawing attention to the enormous influence that a specialist’s initial prescription has on subsequent prescriptions made by the GP. So far successful discussions have been concluded with lung-specialists, ear-, nose-, and throat specialists, and psychiatric and neurological specialists.

4.4 Generics A large part of the OÖGKK’s economical prescription division’s activities concentrates on the increase of generics in prescriptions. This aim is also included in the government’s manifesto and stated in the paragraph on medicines: ‘Austria’s use of generics should be raised to the European average’. In order to achieve this aim, it is necessary to ensure 100% usage of generics in areas where generic substitutes are available. In the absence of an ‘aut idem’ regulation - which obliges pharmacists to substitute for a generic - a measure which automatically leads to 100% use of generics where these are available - the OÖGKK introduced in 2003 a number of measures to encourage the prescription of generics (genericcirculars, circulars written in conjunction with Oberösterreich’s Medical Association, contractual partner newsletter ‘Economy in Practice’, top ten generics lists, contact by telephone and in person with ‘contract doctors’). The OÖGKK’s efforts to achieve the highest possible share of generics were successful. Thanks to the energetic support of the majority of ‘surgery doctors’, in the first half of 2003, the OÖGKK achieved the highest participation of generics in the generically substitutable group of drugs (see Graph 3). Applied to all prescriptions, generics accounted for 15% in the first half of 2003. Graph 3: S h a r e o f G e n e ric P re s c r ip tio n s i n th e G e n e r ic a l ly S u b s titu ta b le G ro u p o f D r u g s H 1 2 0 0 3 b y R e g i o n a l In s u r e r

5 4.8%

4 5 .2 %

4 3.8% 40 .2 %

39 .2 %

40 .8 %

37 .2 % % 2 8.2%

a

NÖ

B g ld

OÖ

S tm k

K tn

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Tir ol

Vb g

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Appendix 2: Study of doctors’ prescribing habits

Special Evaluation for the Regional Insurer Oberösterreich (OÖGKK), Author: Alfred Mair, OÖGKK The following data is based on an evaluation undertaken by the OÖGKK. In 2003, the OÖGKK cared for around 800,000 insured persons (235,000 of which were retired) and 300,000 dependents. Medical care was provided by the OÖGKK’s 660 GPs and 370 specialists.

1. Share of Physician Contacts that Lead to a Prescription To calculate this, not only the number of health insurance vouchers was used as a measure of the number of physician contacts, but also doctors’ statements of accounts. To determine the number of physician contacts, the number of health insurance vouchers and the number the account item 1a appeared in statements was used (1a stands for weekday consultation from the third visit and any further visits). Doctors itemise this entry from a patient’s third visit (and any subsequent visits) in the same quarter of a year. The only unknown variable, which had to be guessed, were patients’ second visits. It was found that in 2002 GPs had 2.7 million cases (= health insurance vouchers) and slightly more than 7 million contacts. Specialists had a frequency of 2.4 million contacts. GP’s issue a prescription in 3/4 of all contacts, specialists in 1/3 of cases (the latter often make recommendations for prescriptions, which are then issued by the GP). In terms of cost per prescription GPs lie above specialists. Prescriptions made by ‘non-contract doctors’ are around 20% more costly than those made by GPs, while prescriptions made by hospitals are almost three times as expensive (see Tables 1 and 2). Table 1: Contacts and Costs per Prescription by Physician Groups (in millions)

Contacts

Cases (Insurance Vouchers)

Medicine Costs

GPs Specialists 1 ‘Non-contract doctors’ Inpatient and hospital discharge medication

7.1 2.4 n/a

2.7 1.5 0.2 2)

156.4 21.9 4.8

8.9 1.3 0.2

Costs per Prescription in € 17.51 17.04 18.43

1.4

n/a

16.4

0.4

47.53

Total

10.9

4.4

199.5

10.8

2

3

Prescriptions

18.47

Source: FOKO, 2002; own calculations. In-Patient Contacts: Hauptverband 2002, ‘Non-Contract Doctors’: Controllingbericht Wahlarzthilfe der OÖGKK 1 - GPs and Specialists 2 - Not insurance vouchers, but itemised bills. The majority of ‘non-contract doctor’s do not settle accounts on a quarterly basis, but can settle accounts on a shorter or more long-term basis 3 - medicine costs are given in the health insurers retail price (=excluding VAT, the average pharmacy discount for insurers of 7.3% has not been deducted, nor the prescription fee) - medicines subject to prescription fee have only been included where they were issued to insured persons exempt from paying the prescription fee.

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Table 2: Share of Contacts with Prescription, and Prescriptions per Contact GPs and Specialists Number of Contacts Prescriptions per Share of Contacts Prescriptions per With Prescriptions Case With Prescriptions Contact (in million) (=insurance voucher) GPs 5.3 74% 3.25 1.26 Specialists

0.8

31%

0.85

0.53

Source: FOKO, 2002; own calculations

2. Prescription Habits of GPs With and Without In-House Pharmacy Given there are differences in prescription habits between GPs in towns and GPs in rural areas, doctors were divided into three groups: GPs in towns (without in-house pharmacy), GPs in rural areas with inhouse pharmacy, and rural GPs without in-house pharmacy. In terms of costs per case, rural GPs with an in-house pharmacy are the most cost-effective. This is mainly due to the low number of prescriptions issued. Table 3: Prescription Habits of GPs With and Without In-House Pharmacy Medicine Costs (million)

Cases Prescriptions (Insurance Vouchers (million) (million)

Cost Per Prescription

Prescriptions per Case

Cost per Case

Town Doctors Without In-House Pharmacy

38.7

2.2

0.6

17.68

3.86

68.29

Rural GPs without In-House Pharmacy

77.6

4.5

1.4

17.34

3.2

55.51

Rural GPs with InHouse Pharmacy

40.1

2.3

0.8

17.67

2.88

50.89

Total

156.4

8.9

2.8

17.51

3.25

56.82

Source: FOKO, 2002; Town Physicians are GPs in Linz, Wels and Steyr

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Appendix 3: Repercussions of prescription practice in hospital on non-hospital doctors

Author: Peter Wieninger

1. Market Shares The Austrian Ministry of Health writes in its study ‘Medicines, Their European Distribution (1998)’: ‘According to the Institute for Medical Statistics (IMS) pharmaceutical turnover in ex-factory prices in 1996 was 17.3bn Austrian Shillings (ATS). ATS10.3bn or 60% of the total was generated through public pharmacies, ATS5.4bn or 31% through hospitals, and ATS1.6bn or 9% through doctors’ in-house pharmacies.’ Differing from this, Pharmig values the hospital’s market share at €423.7 million or 25% of the total turnover in 2001. According to an evaluation by the insurance -hospitals the value of pharmaceutical turnover in 2001 is €406.4 million.

2. Prices Prices in the ‘surgery doctor’ market (private and health insurance market) are subject to legal regulations. In the hospital sector, the determination of prices is not subject to a binding legal framework. Furthermore, hospitals are characterised by large price discounts. The Austrian Ministry of Health writes in its study ‘Pharmaceutical Use in Austrian Hospitals’ commissioned by the Ministry for Work, Health and Social Matters, in October 1998 on page 27 the following: ‘Purchase conditions differ widely in practice. Depending on the product, quantity, frequency, and purchase volume, bulk discounts, loyalty discounts, discounts in kind and cash discounts are granted. As could be verified in conversations with experts, discounts can reach up to 100%. All experts polled highlighted the importance of discounts in kind in hospital pharmaceutical purchases. ‘ The Austrian Federal Health Institute reaches a similar conclusion in its study on generics (Vienna, 2000, ‘Generics’, p 63) ‘Generics have almost no role to play in the hospital sector. The reason for this is the fact that hospitals can obtain originator products – mainly for use in long-term therapies- from manufacturers ‘for free’ or to extremely advantageous terms and conditions. Generic producers highlight that even if they were to give their products away almost for free, they would have difficulties in penetrating the market.’ These findings are congruent with those of the Federation of Austrian Social Security Institutions or the health insurers.

3. Impact on Prescription Practices Under the current legal framework, doctors in hospitals are only very loosely bound by guidelines for the economical prescription or the social insurers’ positive list when prescribing medication. The relevant passage of the Federal Hospitals Act merely stipulates these factors to be ‘taken into consideration’. The successful marketing of pharmaceuticals often hinges on hospitals’ prescription practices, which through their treatment recommendations have considerable influence over the prescription habits of ‘surgery doctors’. In a study on generics, the Austrian Ministry of Health Report: The Austrian Pharmaceutical Market

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describes the hospitals’ influence on prescription habits on ‘surgery doctors’ (on the basis of interviews) as follows: ‘Hospitals are a market through which pharmaceutical companies launch their products onto the Austrian market. Switching a patient from a product other than the one prescribed in hospitals is often wrought with difficulties for ‘surgery doctors’. The hospital sector is therefore dominated by the research-based manufacturers, as well as the area of doctors’ further training. The hospital, through doctors’ post-qualification training (on a rota basis), significantly moulds the prescription habits of ‘surgery doctors’. In the course of the post-qualification training, doctors come into the near-exclusive contact with originator products, which they then tend to prescribe in their surgery. In a further study –‘Pharmaceutical Use in Austrian Hospitals’ commissioned by the Ministry of Work, Health and Social Matters, the Austrian Federal Health Institute comes to the same conclusions: ‘…After pharmacies, hospitals are the second most important purchasers of medicines. Beyond that, the nature and volume of hospitals’ pharmaceutical use has an impact on the prescription practice or habits of the ‘surgery doctor’ -via therapy recommendations and via further professional training. Hospitals therefore occupy a key position in the area of pharmaceuticals, a fact which was spotted a long time ago by the pharmaceutical industry…’. According to this study, the impact hospitals have on ‘surgery doctors’ and therefore on pharmacies goes beyond this: …’A change in medication prescribed by GPs when their patients are hospitalised is a frequent occurrence and can often lead to problems in the co-operation with hospitals’ (…) The team of scientists comprised by Wolfgang Himmel and Michael Kochen made the observation that the hospitalisation of patients often leads to a change in the medication prescribed by their GP. It often appears as if hospitals’ prime aim is – particularly university hospitals’ – to switch a patient’s entire previously prescribed medicines and to discharge the patient with an overhauled medication profile. The University of Göttingen dedicates two studies to examine this prescription practice, which offers much room for criticism. An initial survey carried out in 1996, polled 129 doctors in surgical and internal medicine departments (response rate of 69%) as to the ‘importance of GPs’ prescriptions for in-patient pharmaceutical therapies.’ The results show that GP prescriptions are changed because: • an insufficient drug therapy had led to the hospitalisation of the patient • generally originator products were preferred to generics • the product had not been listed in the hospital’s list of approved drugs and was therefore not stocked by the hospital’s pharmacy. A more in-depth evaluation showed that attitudes towards carrying on the GPs prescriptions depended on doctors’ specialisation (surgery and internal medicine) and their hierarchy (assistant medical director or assistant doctor). While a significant 82% of Surgeons were prepared to take over the GP’s prescriptions, a mere 25% of Internists were prepared to do so. Furthermore, in a follow-up study the team of scientists tackles the topic of ‘The Scope of Medicine Switches in Hospitals and Their Repercussions on All Persons Involved’. 130 Patients referred by a rural surgery were polled. The patients had had 420 different long-term medications prescribed – 14% of which were generics. The outcome was that: Report: The Austrian Pharmaceutical Market

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• • •

on the part of hospitals about half of GPs’ drug therapies were adhered to, while the share of generics also halved new products were used and recommended for follow-up prescription post-discharge patients’ GPs adhered to two-thirds of drugs prescribed in hospital.

The health insurer for Burgenland comes to similar conclusions in an empirical study to examine the correlation between drug therapy recommendations made by hospitals upon discharge and prescription practices in free surgeries. The study concentrated on cardio-vascular medicines. The study found a high degree of similarity in the distribution of substance classes for the diagnosis of hypertension in hospitals and ‘surgery doctors’. These findings are also confirmed by an analysis of individual patient case histories. ‘The FOKO’s evaluation of individual patient case histories confirms that cardio-vascular medication used in hospitals is carried on in prescriptions in surgeries’. The study’s final conclusion is: ‘In summary it can be noted that internal medicine departments set the trend for cardiovascular drug therapies…’ All things considered, it can be noted that the prescription practice of hospital doctors - which is influenced in a targeted way by the pharmaceutical industry - is a key factor for the pharmacy market and therefore for the entire pharmaceutical market.

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Appendix 4: An overview of commissions

1. Pricing Commission, Ministry of Health and Women Legal Framework: § 9, Paragraph 1 and 3 to 5, Price Act 1992 Chair: The Minister of Health and Women, or a competent employee of the ministry acting as a deputy for the minister. Other Members: 1 Representative of the Ministry of Health and Women 1 Representative of the Department of Interstate Trade 1 Representative of the Conference of the Presidents of the Chambers of Agriculture 1 Representative of the Federal Chamber of Labour 1 Representative of the Federal Agricultural Ministry Aims: Advice the Minister of Health and Women on the price setting process Miscellaneous: For the purpose of setting the price of medicines in the red and yellow categories of the reimbursement code, the price commission determines the European Union average price.

2. Medicine Price Register Commission Legal Framework: § 8 Austrian Medicines Price Register Chair: The Minister of Health and Women, or a competent employee of the ministry acting as a deputy for the minister. Other Members: 2 Representatives of the Austrian Pharmacists Association 2 Representatives of the Federation of Austrian Social Security Institutions 2 Representatives of the Austrian Economic Chamber 2 Representatives of the Federal Chamber of Labour 2 Representatives of the Austrian Trade Union Federation 1 Representative of the Austrian Medical Association 1 Representative of the Conference of the Presidents of the Chambers of Agriculture Aims: Advice the Minister of Health and Women in medicine price register matters Other Responsibilities: For the purposes of determining all prices regulated by the Austrian price register of 1962 the commission can form a sub-committee, which will comprise two members and two substitute members both of the Austrian Pharmacists Association and the Federation of Austrian Social Security Institutions. A representative of the Ministry of Health and Women will hold the chair.

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3. Prescription-status Commission Legal Framework: § 5 Prescription Drug Act Chair: A civil servant of the Ministry of Health and Women appointed by the Minister of Health and Women Other Members: The head of an Austrian University Faculty for Pharmacology 1 Representative of the Austrian Pharmacists Association 1 Representative of the Austrian Medical Association 1 Representative of the Austrian Chamber of Veterinary Surgeons 1 Representative of the Federation of Austrian Social Security Institutions 1 Representative of the Federal Institute for Medicines 1 Expert on the Manufacturing of Pharmaceutical Products Aims: Advise the Minister of Health and Women on matters relating to making products subject to prescription-only status.

4. Sales Restriction Commission Legal Framework: § 60 Medicines Act Chair: A civil servant of the Ministry of Health and Women appointed by the Minister of Health and Women Other Members: The head of an Austrian University Faculty for Pharmacology The head of an Austrian University Faculty for Pharmacognosy 2 Representatives of the Austrian Economic Chamber 1 Representative of the Austrian Pharmacists Association 1 Representative of the Austrian Chamber of Veterinary Surgeons 1 Representative of the Federal Chamber of Labour 1 Representative of the Federation of Austrian Social Security Institutions 1 Representative of the Federal Institute for Medicines Aims: Advisory committee for questions relating to sales regulations contained in § 59 of the Medicines Act (sales restricted to pharmacies, or including drug-stores etc.)

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Appendix 5: List of stakeholders sent questionnaire Institution Bundesarbeitskammer Bundesministerium für Finanzen Institut für phramaökonomische Forschung Krankenanstalten

Type of Stakeholder Expert Interest group Hr. Mag. Wenty Interest group Hr. SC Dr. Wolfgang Nolz

Österreichischer Gewerkschaftsbund Patientenanwälte Wirtschaftskammer Österreich ÖBIG Pharmig (+ WKÖ) Wirtschaftskammer Österreich/Arzneimittelgroßh andel Bundesministerium für Gesundheit und Frauen (Zulassung) Bundesministerium für soziale Sicherheit und Generationen Fachbeirat für Arzneimittelwesen Hauptverband der österreichischen Sozialversicherungsträger Krankenversicherungsträger (Oberösterreichische Gebietskrankenkasse, Wiener Gebietskrankenkasse, Sozialversicherungsanstalt der Bauern Österreichische Apothekerkammer Österreichische Ärztekammer (Hausapothekenführende Ärzte) Österreichische Ärztekammer

Interest group

Univ. Prof. Dr. Werner Clement

Interest group Interest group

Hr. Dr. Gerold (Wiener Krankenanstaltenverbund) Hr. Mag. Bernhard Achitz

Interest group Interest group

Hr. Dr. Gerald Bachinger Hr. DDr. Königshofer

Industry Industry Industry

Fr. Mag. Rosian Präs. Dr. Dressler (Fa. Aventis) Hr. Prof. Mag. Krammer

Insurer

Fr. Dr. DI Christa Wirthumer-Hoche

Insurer

Hr. Dr. Walter Pöltner

Insurer

Hr. Prof. Dr. Hans-Georg Eichler (Medizinische Universität Wien) Hr. GF Dr. Josef Probst

Insurer Insurer

Hr. Dr. Christian Rothmayr Fr. Mag. Ursula Griesser Hr. Dr. Seyfried

Pharmacy

Hr. Präs. Dr. Cabana

Physician

Hr. Dr. Pjeta

Physician

Hr. Präs. Dr. Brettenthaler

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Ansprechpartner

Hr. Dkfm. Geissler

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Appendix 6: Responses to stakeholder questionnaire Views regarding pharmaceutical policy in Austria: Stakeholder Name

Mechanism of pharmaceutical product registration and price setting

Mechanism and criteria for gaining: i) acceptance to the positive list for reimbursement, ii) prior approval for specific drugs from Chefarzt

Univ. Prof. Dr. Hans-Georg Eichler, Vizerektor für Forschung und Internationale Beziehungen

-innovative products are usually registered by EMEA, for noninventive products, registration is still national; length of approval is presumably very long (backlog at the regulatory agency) -price setting and negotiations may be lengthy procedures

i) main criterion is therapeutic benefit to patients (as opposed to “new pharmacol class” or “level of innovation”, economic criterion has been (for recent decisions) an approximation of cost per unit of benefit ii) this may vary across insurance funds (i am not the right person to answer this)

DI. Alfred Mair, Upper Austria (Oberösterreichi sche Gebietskranken kasse)

-in Austria, manufacturers are free to set a price on whatever level they like -if a drug is judged reimbursable by social security the price is set (reduced) to the average European price. (nonreimbursable are e.g. hair restorer) -normally Austria is not the first country where products are registered within the EU. so always possible to calculate an average European price -length of approval depends on quality of studies provided by the pharmaceutical companies

i) efficacy, security and cost effectiveness are taken into account -would be helpful to calculate the additional costs of new drugs as well as the additional benefits (not done in practice) -one should also calculate the number needed to treat (NNT) and evaluate this measure - price of the drug very important for inclusion, there is a negotiation on the price (Heilmittelverzeichnis) ii) All registered and reimbursable drugs can be subject to prior approval. (There are some exemptions for drugs exclusively provided by hospitals or for products like hair restorer) -reimbursement of these drugs is dependent on nation-wide diagnosisspecific criteria. These criteria can be rather tight so that in some cases there are only few diagnoses where these drugs are reimbursed (e.g. with viagra or xenical) -prevent doctors from prescribing these drugs easily. So increases in

Report: The Austrian Pharmaceutical Market

Difference between the reimbursement price for sozialversicherung and other purchasers -“other purchasers” presumably being those in other EU countries: less formal definition and appraisal of CE criteria, reimbursement prices in Austria are presumed to be at the lower end of the spectrum in (the old) EU

-price social security pays for drugs is 20% lower than the price private customers have to pay -most hospitals get drugs for free or they get very high discounts. -dispensing physicians buy drugs from wholesalers and get very high discounts too, especially in therapeutic classes where several similar drugs are available -drugs prescribed by dispensing physicians are reimbursed by social security at prices 20% lower than the price for private consumers -social security

current level of VAT on pharmaceutica l products

margins allowed for: i) wholesalers ii) pharmacists

Number and location of pharmacies and dispensing physicians

Physician guidelines and prescription monitoring i) who develops ii) educating physicians iii) computer support

-higher than in other EU countries, has been a subject of debate between MoF and insurance funds

-margins have come down over the recent years; however, current incentives still stimulate selection of more expensive products

-has been somewhat relaxed over past years, but pharmacies still highly “protected”.

-current level is 20% -this should be kept

-margins for pharmacists are high if you compare them with margins in other sectors -margins should be decreased -advantages and disadvantages of fixed fees per items and declining payment according to the sales volume of the pharmacy should be evaluated. If there are advantages pharmacists could be paid by these methods.

-limited access for people who want to run a pharmacy or be a dispensing doctor -there are approximately the right number of pharmacies and dispensing physicians in Austria -therefore there is not much supplier demand in this field (Keine angebotsinduzie rte Nachfrage)

i) joint effort by learned societies, physicians assoc. and payer ii) medical schools, followed by the above should educate physician on effective prescribing, not well developed at present iii) use of computer support systems in decision-making and monitoring quite underdeveloped, considerable resistance from prescribers -guidelines are important to give physicians orientation how to treat patients. To treat patients not according to the guidelines should be allowed but then the physicians have to state the reason i) all stakeholders should be involved otherwise the guidelines will never be followed (Hauptverband, physicians, pharmaceutical companies, pharmacists and patients) Physicians should also bear responsibility für costs. There should also be established a responsibility of costs along with the guidelines. Furthermore a monitoring system has to be implemented to evaluate whether the guidelines are

239

Dkfm. Geisler, Pharmig – Tagespolitik/ Hauptverband

1) Licensing: period of actual processing without clock stops due to queries, additional paperwork, etc: a) EU-Licensing (MRP and centralised): -Austria is within the legally stipulated deadlines (centralised: 210 days, MRP 201 or 90 days) -national implementation of decisions from the EUarbitration (referrals) takes place within the stipulated 30-day period/ deadline. b) National applications/proposal: -new applications as well as changes requiring approval however take far longer than the legally stipulated period (=210 days) -in practice a national

Report: The Austrian Pharmaceutical Market

costs can be kept down. Keeping a product out of the positive list because the price of the drug is high is always a means of putting pressure on pharmaceutical companies -must lower their prices before being included in the positive list. After being included in the positive list (with or without restrictions) companies are always successful in increasing the volume of prescriptions. iii) every year an increasing number of drugs to be prescribed only under special conditions is included in the positive list (e.g. only for children under 14, to be prescribed only by a group of specialists, to be prescribed only with certain diagnoses). But in many fields the rules are vague and it is difficult to control whether doctors follow the rules or if they don’t. So it is easy for doctors to dodge the criteria by just stating the facts social security wants to hear. By doing this doctors can prescribe expensive drugs easily and costs spent for medication will go up. Pharmaceutical companies encourage doctors to prescribe that way. During the last few years a shift into prescribing these products has been widespread. i) -application to the Association for liberal/free prescribing (no head surgeon approval required, possible restrictions: specialist, IND) or admission to the “special drugs list” (approval by head surgeon). -in both cases the following is required: evidence of approval, medical-therapeutical explanation and documentation, pharmaceutical explanation and documentation … building on that: economic evaluation (EU price comparison, FAP comparison with comparable drugs, maybe pharma-economical studies -post approval in both cases: regular price evaluation by the association ii) a) possibility to receive prior “head surgeon approval” for a drug: -Special drugs list b) head surgeon approval for the

should negotiate higher discounts with dispensing physicians

Pharmacy market: FAP the same, margins different for association and private customer Hospital market: free pricing

followed or not. ii) Knowledge on effective prescribing is very important and should be included in the training curriculum of physicians. It has to be done by independent staff and must not be influenced by the industry. iii) Most of the physicians are use computer software that helps them to easily find the most economic drug (if generics are available) This tool is quite helpful. It could be extended to prescriptions within the same class of substances. We think it is not helpful to substitute the individual decision of a physician by software. Also the interaction between physician and patient is important and is part of the healing process (placeboeffect).

currently 20%, standard taxation

i) margin for wholesalers: 2003:on average 11.3% for all recipients 2004:not yet known, but since 1.1.04 different margins for preferential recipients (social insurance service) and private sales ii) margin for pharmacies: 2004:on average 20.5% for preferential recipients (social insurance service), on average 43.94% for all other recipients

i) public pharmacies: Pharmacy law para. 10: there has to be a practising doctor in the borough/ municipality where there is to be a public pharmacy There cannot be a doctor’s pharmacy within 4 (road) km The number of people to be served by the pharmacy has

-monitoring of doctor’s prescribing habits: guidelines for costeffective prescription dispensing by the association

240

application will take between 1 to 3 years, on average at least 2 years -generics applications a quicker turnaround is currently possible Licensing procedures: a) EU- procedure (MRP and centralised procedure) b) National procedures i) full applications: bibliographical application, combination drugs/preparations, ii) reduced procedures (eg applications for generics according to para. 15a AMG), iii) simplified procedures (eg for certain herbal drugs according to para. 17a AMG) Administrative work: keep with EU harmonisation, shorter processing periods could be achieved for EU procedures. However, parallel to this, administrative work for industry as well for the authorities has drastically risen because of higher demands/ specifications (such as guidelines, SOPS???, regulations, national requirements). One could call this bureaucratisation: every little detail is regulated by guidelines/SOPS. The administrative work increases while individual “freedom” is systematically diminished. Pricing prior to market entry: -hospital drugs, prescription and non-prescription drugs: pricing decision (by the pricing commission): the price announcement procedure is on the basis of FAP -the pricing commission examines whether the price is too high in relation to comparable Austrian products, if there is no response/ reaction from the pricing commission within 6 weeks, the price can be considered approved at the Austrian ceiling/maximum price Reimbursability of

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patient: all drugs, which aren’t listed in the medical directory or are not listed on the special drugs list within it, only by direct approach to the head surgeon

to exceed 5,500 or The distance to the nearest public pharmacy has to exceed 500m or with the opening of a new pharmacy, the number of people supplied by a nearby public pharmacy cannot fall below 5,500 -Doctor’s pharmacies: Pharmacy law para. 20 Authorisation for the running of a pharmacy by a GP is to be given, only if there is no public pharmacy in town, or if the pharmacy is more than 6km away

241

Dr. Bachinger, NÖ Patientenanwalt

Dr. Otto Pjeta (Head Pharmaceutical Department), Dr. Reiner Brettenthaler (President, Head International Department), Austrian Medical Chamber (02/07)

prescription and nonprescription drugs: -application to the association of Austrian social insurance agencies for entry into the medical directory: medicaltherapeutical, pharmaceutical evaluation, pricing decision on the basis of FAP in relation to existing drugs listed in the medical directory. Post approval: regular pricing evaluation by the association. -complies with the requirements of EU-standards and is of high quality -guarantees best quality of the product and therefore the highest possible degree of safety for the patient

-pharmaceutical regulation under the Pharmaceutical Act by way of official procedure -pricing takes into consideration: the selling price ex works, the pharmacy wholesale price, the pharmacies’ selling price, and individual pricing for pharmaceuticals covered by health insurances -margins regulated by law -calculations are used to obtain a price which is economically justified -where appropriate, the Main Association of Austrian Social Insurances may negotiate lower prices, leading to the fact that health insurance fund doctors are free to prescribe them freely

Report: The Austrian Pharmaceutical Market

i) must pass registration process, must be proved to have an additional therapeutic benefit for the patients, meaning that it represents a real innovation in comparison to the products, that are already available -only a few criteria for judging this positive and innovative effect are generally recognized and verifiable. ii) -many disadvantages for the patient and imposes a high barrier of bureaucracy. -as a consequence a lot of patients do not get the medical treatment that would be most appropriate in their specific case i) therapeutic advantage, as compared to existing pharmaceuticals (innovation) and an adequate price quote -additional factors are public relation activities by the pharmaceutical industry, publications and hospital recommendations ii) -need PA if the drug is required for the treatment, and if no comparable drug is available within the package of pharmaceuticals covered by health insurance funds, respectively, in the case of predefined, specific disorders (indications)

no answer

no answer

no answer

-guarantees sufficient supply with pharmaceutical products.

Need both general guidelines for physicians concerning the prescription of pharmaceutical products and measures of quality control -guidelines should be formulated strictly in conformity with EBM -an independent board for quality control should be set up

-the reimbursement price for social insurance, in principle, is subject to negotiations, the margins are regulated by law, margins, i.e. the level of surcharges are regulated by law

-at present 20% VAT, permanently under discussion

i) fixed margins ii) margins in terms of the price: expensive products allow less percent, less expensive products allow more percent -there is a “Tagesabschlag” (tax discount) for pharmacies and dispensing by doctors, comparable to a rebate programme

-catchment area of more than 5,500 people and a minimum distance to the next pharmacy of at least 500m - requirement for dispensing doctors to open a pharmacy is a road distance of 6 km -the authorisation to dispense is withdrawn when a public pharmacy is opened within a distance of 4 km

-doctors should regularly obtain information independent from the pharmaceutical industry on drug substances, action, side effects, interaction, innovation, as well as price comparison with similar drugs with same action. -there is an interest that doctors are informed on an individual basis on the prescribing habits with regard to drug groups and in relation to other doctors -we reject all forms of threats, menaces and drug budgets as they cannot be regarded as an instrument in the pharmaceutical provision of the population i) in our view, only the medical profession should be involved in the

(further details, pls. refer to the Main Association of Austrian Social Insurances)

242

Mag Rosian, ÖBIG

- pharmaceutical product registration, no comment -price setting methods, the new “EU-method of average price setting” was implemented as of 1.4.2004. The implementation has barely taken place. It is necessary to have adequate implementation experience in order to make an assessment.

Report: The Austrian Pharmaceutical Market

i) the criteria for evaluating the medical and economic effectiveness of inclusion in the therapeutic index, alternatively the new codes of reimbursement, are recorded in the code of procedure for the publication of the therapeutic index § 351g ASVG – VO-HMV. These codes of procedure are effective until the end of June 2004. As of 30.4.2004 the codes of procedure for the publication of the codes of reimbursement according to § 351g ASVG – VOEKO will be effective. ii) ambiguities result from the experiences with the currently effective codes of procedure: it concerns the classification of medications according to § 7 (1). Under this, categories are differentiated e.g. medications with the same or similar therapeutic effect, specialty medications with new components and/or new component strengths (with therapeutic advancement) (see code of procedure). The difficulties or rather the discord between applying pharma companies and the health insurance association (Hauptverband) is 1. into which category the medication should be classified – how to carry out the argumentation and how to rank it and 2. it follows from this, whether or not

There is a 15% lower surcharge for medications that are reimbursed by the social insurance than on those that are bought privately.

VAT=20%

Please refer to our ÖBIG-Publication: “Pharmaceutical Expenditures. Strategies for cost control in the European Union, 2001” for the international comparison. Attached please find the relevant results for regulation and average margins.

Please refer to enclosure 2 regarding the regulation of wholesales/ pharmacies and dispensing physicians. Even though the data is not completely up to date, the regulations and basic trends still apply

development of guidelines, which should be independent of the industry and based on scientific findings, as well as the code of ethics ii) we favour the term “information” over the term “education”, although any information about market mechanisms and responsibility for health care financing makes sense iii) we advocate the use of computer support systems which inform the doctor, right at the moment of pharmaceutical decisionmaking, about economic prescribing There are the guidelines published in the therapeutic index from the main association of the Austrian social insurance agency concerning prescription monitoring of pharmaceuticals and therapies. Adding to this though, it would make sense to have an electronic version of the therapeutic index and to make an easy to use format available to physicians. Instruments need to be developed, ensuring compliance with the guidelines so that they are realizable. When are efficiency and usefulness not a given? What happens if a physician does not abide by the guidelines?

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Dr. Probst (HV)

Due to quality reasons (eg. in reference to the existing documents as well as the EPAR) the numbers of central admissions should be increased. In order to counterbalance the monopoly position of the pharmaceutical industry especially with highly innovative pharmaceutical products, it would be targetorientated, that in line with central admissions also the degree of innovation of the submitted pharmaceutical product specialty in comparison to possible therapeutic alternatives is established. The degree of innovation should be measured in regards to the additional benefit to the patient. The pricing, particularly on the social security systems, should be reserved to the member states/social insurances of the European Union. In order to be able to react to the monopoly/oligopoly position of the pharmaceutical industry,

Report: The Austrian Pharmaceutical Market

the medication should be permitted a “higher” or precisely not a higher price. This is where it would be beneficial to come up with a mechanism in order to design the classification more clearly. Here too there is a slightly modified regulation as of 30.04.2004 (see code of procedure for publication of the code of reimbursement according to § 351 ASVG – VO-EKO, § 24 (1). It is to be assumed however, that the above described basic problems will remain. The health economic evaluation is regulated in the new code of procedure in § 25 (1). An evaluation of this regulation can only be made after some experiences (most likely after approximately one year). Most likely there will often be differentiating perceptions about the “comparison prices”, and the classification into the different categories will not always be unambiguously possible. i) The pathway taken by social insurance, which comprises the evaluation of the pharmacological, therapeutic and economic value of a pharmaceutical product, should be maintained in the future. The decisive criterion is the additional patient benefit gained in comparison to existing alternatives. However, the automatism that an additional patient benefit always translates into a higher price needs to be scrutinised. In the former approach the productivity gain, etc. is left aside. In other industries, e.g. the computer industry, it can be observed that a gain in productivity can also be accompanied by a lower product price. ii) The approval by the chief physician serves two main functions: i) it ensures product quality for the patient and ii) it has an economic dimension. This “barrier” is therefore to be maintained, unless better existing alternatives may be evidenced. In the course of the reorganisation of the pharmaceutical product domain falling under the yellow area reimbursement code, the Federal Minister for Health

This difference has to be affirmed because from an economic perspective social insurance is a bulk purchaser. Furthermore, the social dimension of social insurance needs to be taken into account. Hence it is understandable that single private purchasers pay higher prices – and this is not due to the differences in the highest possible surcharge (Provision for the highest possible surcharge of pharmaceutical wholesalers, Austrian pharmaceutical/ drug tax for pharmacies). The association (Hauptverband) also negotiates in the

Under the current regulation there is only incomplete compensation of the sales tax burden of the social insurance by the Federal Finance Office (Bundesministe rium für Finanzen, BMF), which amplifies the economic disequilibrium in social insurance. Also, the 20% sales tax on pharmaceuticals in Austria is among the highest in international comparisons. Therefore, it

The margins for pharmaceutical wholesalers are within the European average, because of the four decreases evoked by the association (Hauptverband) since 1995. It remains questionable if pharmacy margins are also European average. By all means, in the future there should be a change from surcharge percentages to fixed margins because there is no change in cost for the pharmacist no matter if he sells a drug costing 10000 € or 2 € (apart from the pre-financing burden resulting from the procuration of the more expensive drugs, which is usually anyways undertaken by the pharmaceutical wholesaler).

Under the current legislation, pharmacists are contracting partners to social insurance. In order to stimulate a degree of competition, insurance bodies should be able to make a contract dependent on certain conditions. They should also be allowed to conclude additional agreements on specific supply channels for chronically ill patients. Furthermore, a

In order to increase the quality of prescriptions, the development of guidelines must be quickened. First steps have been made by social insurance/ the association [e.g. Arznei & Vernunft (Drug & Rationality): in this context a guideline for the treatment of diabetics is currently being developed; the evidenced-based medicine approach of the Arznei & Vernunft concept and the previously mentioned guideline can be found in the supplement; DUR – Drugs Utilisation Review]. The development of guidelines and the training of physicians should be made independently from the pharma industry. Similarly, pharma sales representatives (that often visit surgeries merely because of marketing

244

buying syndicates including several EU member states should be allowed.

and Social Affairs is presently planning to change legislation concerning the prior approval of the health insurance bodies through the chief physician. It is to be replaced by an ex-post control exerted by the health insurance body over the prescribing medical practitioner. A bill is to be passed in the Austrian National Assembly in the beginning of July accordingly. From the viewpoint of social insurance such a change bears great risks because it will be implemented without a financial safety net (no financial responsibility for the prescribing physician and the pharmaceutical industry) and can therefore lead to further price increases.

Report: The Austrian Pharmaceutical Market

course of taking up pharmaceuticals in the drug register/ reimbursement code (yellow and green area) with authorized distributors about the level of the factory/depot selling price. However, from a public economics viewpoint the difference in price between the social insurance (for the resident doctors area) and the hospitals (because of marketing purposes, products are supplied at the zero-profit margin) is not understandable, because it increases the cost for the social security system as a whole.

must be aspired to e.g. either halve the sales tax on pharmaceutical products or ensure complete compensation for social insurance. However, this is especially in Austria a political issue.

legal foundation should be laid, so that hospital pharmacies are able to dispense drugs also to outpatients.

reasons) should be replaced by industryindependent institutions that can provide advice to physicians and patients in concrete cases. Without the utilization of IT, a country wide assistance of physicians seems to be almost impossible (because of time and feasibility requirements).

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Stakeholder Name

Influence of hospitals on physician prescribing behaviour

Univ.Prof.Dr. HansGeorg Eichler, Vizerektor für Forschung und Internationale Beziehungen

-strong -separation of hospital budgets and insurer’s budgets (covering outpatient prescription meds) is a major opportunity for vendors to push products into market (free sampling of hospitals, targeting hospital based opinion leaders...) -huge impact -pharmaceutical companies influence hospitals to prescribe the newest and very expensive drugs -hospitals get lots of free samples or get pharmaceuticals for very little money so it is cheap for hospitals to treat patients with these drugs that cost them nothing or nearly nothing (though outside the hospitals these drugs are expensive) -the industry also pays for continuing education of the doctors in hospitals (also outside hospitals), sponsors physicians‘ congresses and makes physicians prescribe their new and expensive products by giving perks to the doctors

DI. Alfred Mair, Oberösterreichische Gebietskrankenkasse

Please note also: The frequency of Austrians staying in hospitals (Krankenhaushäufigkeit) is extremely high in relation to other countries

Report: The Austrian Pharmaceutical Market

Financial and other incentives provided for physicians: i) increase generic prescribing ii) follow practice guidelines iii) prescribe the least expensive product among therapeutic alternatives i) YES, ii) YES, iii) NO -physicians need more leeway in their dealings with payers, direct financial incentives may not be feasible at this time

Role of pharmacists i) the potential for generic substitution ii) advisory role iii) repeat prescribing

Level of user fees and exemptions

Necessary policy measures? Current system needs changes?

i) no role at present, may be feasible and useful ii) quite well developed, incentives to pharm. are obvious iii) not sure

-more public debate on the affordability of health care -same standard of evaluation and reimbursement across all types of health care interventions -getting rid of silo budgeting

- if establish financial incentives there is a risk that patients sometimes may not get what they need. Therefore it is essential to have a controlling system to ensure quality. Now we have none i) financial incentives could be granted to doctors who prescribe a high ratio of generics. But be aware that the difference in price between generics and original is normally only 10% so that the incentives cannot be high. ii) sometimes guidelines can be helpful. But to follow guidelines can be more expensive in relation to the situation now especially when treating chronic diseases iii) doctors tend to shift from existing (cheap) drugs to newer much more expensive drugs even if the new drugs do not mean much benefit for the patients. This is due to intensive marketing activities by pharmaceutical companies. Doctors should be granted individual incentives if they prescribe the least expensive product among therapeutic alternatives.

-in respect of financing the health system, generic substitution is not very important as generics are normally only 10% cheaper than original products -in Upper Austria the share of generics (in the segment where generics are available) is nearly 60% -furthermore some patients may get confused if they get different medication from time to time -there could be some financial incentive for pharmacists substituting a cheaper product than that prescribed by doctors (without agreement of doctors) ii) with regard to long term treatment physicians should somehow be involved so that essential medical checks will be ensured -chance that pharmacists recommend additional or alternative treatments without evidence (so that pharmacists increase their income) iii) physicians should be involved in the process of prescribing to check whether the medication is still

-user fess reflecting product price might stimulate increased cost awareness -needs to be limited to a ceiling value (i.e. € X/year for chronically ill patients) -number of persons exempt is probably too high, while some patients with chronic disease requiring multiple meds may be hit by high number of prescription fees -user fee for medication is about 20%., growth rates are high -For cheap pharmaceutical products the patient has to pay nearly everything by himself -Generics are not much cheaper than original products. So it is almost impossible to grant lower user fees for generic products -The problem is that doctors (influenced by the industry) prescribe many me-too products that are much more expensive than their therapeutic alternatives -if there is a way to evaluate the therapeutic value of drugs the user fee for patients could reflect the therapeutic effectiveness of the drug - if one drug has approximately the same effectiveness as another drug patients should cover the difference in price themselves (= higher user fees for drugs that differ mainly in price). -it is more important that me-too drugs should be paid by social security only if the price reflects the additional value (it is not like this now) -if there is not much additional benefit products should only be slightly more expensive than existing ones. -if there is nearly no advantage then the price should be the same as for the reference drug

-only real innovations should be made refundable by social security -only about 10% to 15% of all new products are real innovations, about 85% of all new products are me-too drugs with only little or no additional benefit. These drugs should be reimbursed by social security only if the prices are the same as already existing products (not higher) -efficacy studies should be conducted to evaluate the value of new products in relation to existing drugs -pharmaceutical companies should be obliged to publish all their marketing activities and what incentives are granted to whom -pharmaceutical companies should also be obliged to publish all studies, including studies that did not show the expected results -if doctors prescribe much more pharmaceuticals of one class than said to be necessary (e.g. because of excessive marketing activities of the industry) the industry should be forced to pay back money for the exceeding volume of prescriptions, and for the following year prices have to be reduced -benchmarking of physicians: Physicians who prescribe e.g. 30% or more above average (standardised by age) must prove why this was

246

-incentives could be a financial bonus for physicians prescribing economically -one could also think of incentives to support • quality of treatment • prescribing behaviour • continuing education • independent information on the efficacy of medication

necessary and should check for efficacy or side-effects and if there are other illnesses

necessary., if they fail they should be obliged to pay money back to health insurance -if there are e.g. 5 products in one therapeutic class (e.g. ACE-Hemmer), social security should be allowed to put these products out to tender for e.g. 3 years -there could also be a combined budget for each GP which includes services and pharmaceutical products (standardised by age). GPs can then spend more time treating patients themselves and may not find it not necessary to prescribe drugs. By doing so they would not exceed their budget. Social security would save money, patients will be more content. -teach patients that they are coproducers of their state of health so that they realise that they are responsible for themselves. Educate them to look after their lifestyle. -in Austria the sectors health care, social security and education are completely separate. This strict separation should be abolished.

-one incentive could be to increase the fees for advisory talks significantly; however, this must first be compensated for by savings in medication reimbursement -incentives should be positive and negative. With negative incentives we think of warnings and in the case of repetition of penalties -with financial incentives and penalties there is a risk that doctors start to practise risk selection among patients Dkfm. Geisler, Pharmig – Tagespolitik/ Hauptverband

-strict separation of financial pots, which means that following his discharge, the patient must get his hospital prescription “re-prescribed” by the residential doctor or additionally needs to see the head surgeon -innovations are often introduced by hospitals in advance (that receive discounts in kind)

Dr. Bachinger, NÖ Patientenanwalt

-estimated as very important -patients, who obtain a specific drug in hospital are usually interested in getting the same product in their further medical treatment outside

Report: The Austrian Pharmaceutical Market

i) currently no aut idem regulation ii) currently restricted to OTC sector because of the current substitution ban iii) prescription law para. 4: a prescription, if not stated otherwise by the doctor, is valid for 1 year; within this one year a 5x repeat dispensation is permitted -restrictions (e.g. single dispensation) for individual active ingredients are laid down in the prescription law and are established by the prescription commission during approval i) at present, don’t play a decisive role in dispensing generic substitutes -worth discussing an “aut idem” solution, what means that pharmacists would be

-prescription charge currently EUR 4.35 for all drugs refundable by the national health service -legal requirement, but currently not yet implemented: lower prescription charges for certain groups of drugs (generics) (ASVG para 136 section 3) -rates/fees upon application to the association: too high for small and medium sized companies; the question remains which services should be covered by the rates in the case of large companies.

-transparency regarding [therapeutic] benefits, with the possibility to demonstrate integrated effects

-all-over-revision of user fees – as far as they should continue existing in general – would be necessary and desirable

-need a view on the health care system as a whole -more expenditures in medication do not necessarily lead to rising cost in the system altogether. Patients, who obtain appropriate medical treatment

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hospital

Dr. Otto Pjeta (Head Pharmaceutical Department), Dr. Reiner Brettenthaler (President, Head International Department), Austrian Medical Chamber (02/07)

-important: hospitals obtain drugs free of charge by the pharmaceutical industry when it comes to market introduction of a drug -the medical profession advocates that in the short hospital discharge letter there is also an indications that the attending doctor has the possibility of prescribing drugs similar to the ones mentioned (within the pharmaceutical package of social health insurances), respectively that the international product name is used instead of the brand name (generics)

Report: The Austrian Pharmaceutical Market

allowed to change to a generic product under the condition of prior acceptance by physician and patient ii) pharmacist’s influence in dispensing OTC products is of great importance. Recently a pilot project titled “Pharmaceutical care by the pharmacist” has been started.

-in principle, we advocate generic prescribing, this concerns first the so-called “pharmaceuticals dialogue” (dialogue between the Medical Chamber, the health insurance funds and doctors), and second, all costcontaining measures which have no influence on quality i) generic prescribing is stimulated by: PR, also directed towards patients, information for doctors on the individual saving potential by generic prescribing in specific drug groups, as well as on the fact that reduction of total pharmaceutical costs leads to improvements in the range of services covered by social insurance -due to ethic and principle considerations, we reject any direct financial incentives for the individual doctor for prescribing the least expensive product, respectively for nonmedication ii) we advocate information instead of

i) we reject generic substitution by pharmacists for reasons of pharmaceutical security and patient compliance, especially in the case of multiple prescriptions of the elderly, there is an increased health risk, as mistakes happen quite frequently ii) The Austrian Medical profession, advocates intense cooperation with the profession of pharmacists, discerns in the area of OTC products a certain risk potential and an extension of the pharmaceutical market, rather than a relief of social health insurance. In a high quality health care system, chronic patients and people with long-term treatments require not only medication and recurring prescriptions, but also have to see their doctor for regular check-ups iii) In Austria, repeat dispensing in using one prescription is, in principle, possible. However, as the amount of dispensed

-present system is appropriate, however, the level of (prescription) fees can, in individual cases, lead to a serious financial burden for patients with multiple prescriptions -nevertheless, this form of “patient copayment” (prescription fee) with an average level of more than 20% of pharmaceutical costs is rather unusual for a social insurance; therefore, the population has the impression that the limits of financial burden with regard to co-payment have been reached -present system of prescription fee exemption is generally accepted

of high quality prescribed by a physician, at first sight cause higher expenses compared to a patient who doesn’t get this kind of best medication. In effect such policy may even reduce cost for the system altogether, as it possibly may prevent to a certain degree more expensive hospital-care. Ways must be found to take this effect into consideration. -measures of quality control and quality measurement should be implemented more strongly in our health care system, particularly with respect to the results (“outcome measurement”). In addition quality data should be more accessible and transparent -more possibilities for patients’ representatives to participate in decision-making processes would be desirable -progress means expenditure, what we consider important in this context is that funds are not used for pseudoinnovations (“me-too” drugs) or for excessive marketing/advertising strategies -we favour that doctors receive periodical information, independent of the pharmaceutical industry, on the therapeutic and financial value of newly introduced drugs, as well as ongoing reporting on the pharmaceuticals available in the pharmaceutical market -in principle, the Austrian Medical Chamber is in line with the current provision system, but categorically rejects any intentions directed towards drug budgeting or rigid prescribing guidelines solely motivated by economic considerations

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minimum/maximum standards, which can never overrule the individual decision of the doctor. iii) see i and ii Mag Rosian, ÖBIG

A large part of the pharmaceutical sales are achieved in Austrian hospitals (older data/estimates indicate 30% of total pharmaceutical sales in Austria). Because of this, hospitals have a large influence on prescription practices in the solo practitioner’s sector. Generics play almost no part in hospitals. The reasons being that in the hospital sector the brand name pharmaceuticals – foremost for long term therapies – are donated, or rather given under very favorable conditions. Hospitals are where brand manufacturers place their products in the Austrian market. It is often very difficult for a solo practitioner to switch a patient to a different product other than that prescribed by the hospital (requires an explanation) For this reason, the hospital market is already occupied by the brand name manufacturers, even in the area of continuing training of the medical fraternity. Generic manufacturers stress that even if they were to “give away” their product, they would have difficulty entering the market. The hospital also influences the prescription practices of solo practitioners during medical training (rotation). During their training in hospitals, the physicians on rotation almost only come into contact with brand name products, which they then use later on in their solo practices (see ÖBIG-study generics, Vienna 2000)

Report: The Austrian Pharmaceutical Market

medication within the social insurance system generally guarantees medication for 4-8 weeks, there is, at present, no call for action Considers this a question for the pharmacists

There is a flat rate fee on prescription medications. People with “low incomes” (=benchmark value) are exempt from the payments. This means however, that all persons above the benchmark value pay the full prescription fee with no upper ceiling. Which can be an enormous financial burden for chronically ill people. This is where the “inequalities” come into existence. The current existing regulation of flat rate fees is very feasible in respect to the administrative costs, but it stands in an area of conflict between economic control and allocation. A change in the direction, possible percentual surcharge with upper ceilings, could be up for discussion which could also be used to force the use of generics. It is planned to have a lower flat rate prescription fee for generics. In principle the idea is good. There is a potential danger however that, patients think that the medications are “worse” because “cheaper” and that the physician will face a higher demand for explanation, and that the desired effect of increased use of generics would not take place.

1.Always control price and quantity growth and undertake timely and guiding interventions 2.In order for 1 to occur in a timely and efficient manner it is essential to develop a Pharmaceutical-MonitoringSystem. In addition to this, a Reporting-System needs to be established (a) Reporting with feedback to regulators (b) Reporting to the public (c) to increase transparency 3.Analysis of pharmaceutical use and prices can result in a more focused demand for examination, i.e. examining compliance/wastefulness, quality of physician prescriptions, etc. 4.Heightened use of EBM and Health Technology

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Dr. Probst (HV)

Drawing on the available information of the association, the main problem of the Austrian health care system results from the marketing activities of the pharma industry (see point 7) paired with the hospitals’ influence on the resident physician. In regards to the public economic significance of this approach, reference should be made to the previous questions. Here the aim must be a fundamental change of the system. At least when it comes to prescription recommendations hospitals must adhere to the reimbursement code and the guidelines for economic prescribing. A knowledge deficit exists whether and to what extent financial incentives might also lead to opposite psychological effects (cp. Organisationspsychologie by Kirchler).

Report: The Austrian Pharmaceutical Market

Generally, reward schemes must be preferred over those that penalize. Through the guidelines for economic prescribing, the contract partners already have incentives to choose the cheaper therapeutic alternative. In regards to pharmaceutical products, they receive support from the electronic medication index and the ÖKO-Liste. In this regard, guidelines and incentives are also part of the fee structure of the aggregate contracts.

In regards to the Aut smilie Abgabe (right of generic substitution by the pharmacist), a field trial under scientific supervision would be preferable over an instant implementation of this measure. Overall, reductions by award procedures are better and more efficient. Furthermore, the long-term authorization by chiefphysicians should be encouraged. In regards to chronically-ill patients, drug supply via mail order should be considered; insulindependent patients are already allowed to attain syringes and needles directly, however so far they are legally not allowed to order medications.

The prescription fee currently paid by patients in Austria has primarily a financing function; an effect is only evident insofar as it is estimated that before increasing the prescription fee the pharmaceutical costs for the health care system will be higher than after raising the prescription fee. Under certain conditions, a positive/directing effect could be achieved if the prescription fee varies with the medical/therapeutic value of the pharmaceutical product. However, the prescription fee and its specific regulation must be seen – aspect of social compatibility - in a wider context with other prescription fees and their regulations.

First of all it needs to be elucidated what percentage of GDP society is willing to spend on the health care system. Principally, it must be expected that health care costs will increase due to demographic changes and innovative technological developments. However, this is not a law of nature. In the context of drug provisions, a fundamental starting point would be to reduce the influence of the pharmaceutical industry on education and training (keyword: pharmaceutical sales representative) and to reduce industry influence on scientific research (negative studies are not published). Both measures should increase the extent of a more beneficial application and utilization of pharmaceuticals. Also, it is of strategic importance to strengthen the partnership between social insurance and the medical practitioners. Instruments such as DUR (drug utilization review), independent pharmaceutical counseling, and an independent institute for quality assurance are necessary. To make investments in Health Technology Assessment (NICE, etc.) would also be supportive.

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Appendix 7: Regulation of distribution margins and tax in Europe Table: Summary of Regulation of the margins for wholesale and pharmacies and sales tax rates (2001) Country

Belgium

Wholesale Legally regulated for Regulation

Pharmacies Legally regulated for Regulation

Turnover tax on AM normal

all

all AM 9 9

(in %)

erst.

Rx

9

linear margin

Denmark

Germany

free pricing

91

Finland

(9)2

France

9

Greece UK Ireland

9 95 9

9

Italy

Luxembourge Netherlands

9

Austria

9

Spain

9 2

(9)

9

91

linear margin linear margin linear margin

9

Rx

9

9

9

98

linear margin provided by predetermined wholesale prices for reimbursement

9

degressive scheme with the highest possible surcharges linear margin provided by predetermined whole sale prices for reimbursement degressive scheme

9

9

9 9

9

(in %)

linear margin

6

21

digressive scheme with the highest possible surcharges degressive scheme with the highest possible surcharges degressive scheme with the highest possible surcharges

25

25

16

16

83

22

2,1 / 5,54 8 0 / 17,56 0 / 217

19,6 18 17,5 21

10

20

3 6

15 17,5

20

20

5,49 0 / 2510

17 25

4

16

degressive scheme

9

linear surcharges

(9)2

Portugal Sweden

degressive scheme with the highest possible surcharges Provided by predetermined wholesale prices for reimbursement degressive scheme

erst.

linear margin flat rate payment flat rate/VO for refundable AM; private sales: highest possible surcharges degressive scheme for centrally approved AM, linear margin for decentralized and nationally approved AM linear margin flat rate/prescription plus one third of savings for dispensing generics degressive scheme with the highest possible surcharges linear margin degressive scheme with the highest possible surcharges degressive scheme

Source: ÖBIG (2001) Pharmaceutical expenditures. Strategies to control cost in the European Union, ÖBIG-self inquiry AM = pharmaceuticals, AEP = pharmacy purchasing price, AVP = pharmacy sales price, erst. = refundable, FAP = factory sales price, GH = wholesale, Rx = prescription pharmaceuticals, VO = prescription

Report: The Austrian Pharmaceutical Market

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1

for prescription medications in principle not legally regulated, but set by determining the maximum wholesale price for refundable pharmaceuticals 3 plus an average of 7% pharmacy tax 4 2,1 % for refundable and hospital exclusive pharmaceuticals; 5,5% for non-refundable pharmaceuticals 5 regulated by the Public Policy Rules (PPRS), with the exception of generics and parallel imports 6 0% for refundable pharmaceuticals; 17,5% for non-refundable pharmaceuticals 7 0% for oral pharmaceuticals; 21% for non-oral pharmaceuticals 8 legal regulation which earmarks a minimum margin for non-refundable pharmaceuticals 9 sales tax for pharmaceuticals of 5 %, plus charge for the pharmaceutical agency INFARMED of 0,4 % 10 0 % for prescription pharmaceuticals; 25 % for over the counter pharmaceutical 2

Report: The Austrian Pharmaceutical Market

252

Figure: Summary of Average margins for wholesale and pharmacies, 1999 13.1

B

31.0 7.2

DK

29.3 13.0

D

31.7 4.0

SF

28.8 5.6

F

27.6 8.0

GR

25.9 12.5

GB

17.3 15.0

IRL n.v. 9.5

I

22.4 13.2

LUX

31.8 14.5

NL

21.4 12.6

A

28.9

11.0

P

20.0 3.0

SWE

20.0 9.6

E

27.9 0

5

10

15

20

25

30

35

Prozent Apothekenspanne in % des AVP

Großhandelsspanne in % des AEP

AEP = pharmacy purchasing price, AVP = pharmacy sales price, n.v. = not available Pharmacy margins in % of the pharmacy sales price; wholesale margins in % of the pharmacy purchasing price Source: ÖBIG (2001) Pharmaceutical expenditures. Strategies to control cost in the European Union, ÖBIG-self inquiry Comments: Denmark: wholesale margins for the year 1998. France: wholesale and pharmacy margins refer to the refundable market. Great Britain: wholesale margins refer to the refundable market; pharmacy margins for the year 1997. Denmark, the Netherlands, Sweden: decrease of the pharmacy margins in 2000. Austria: decrease of the wholesale and pharmacy margins in 2000.

Report: The Austrian Pharmaceutical Market

253

Appendix 8: The appraisal instrument for guidelines developed by the AGREE Group

(Appraisal of Guidelines for Research and Evaluation in Europe) Scope and purpose 1. The overall objective(s) of the guideline is (are) specifically described. 2. The clinical question(s) covered by the guideline is (are) specifically described. 3. The patients to whom the guideline is meant to apply are specifically described. Stakeholder involvement 4. The guideline development includes individuals from all the relevant professional groups. 5. The patients’ views and preferences have been sought. Rigour of development 6. Systematic methods were used to search for evidence. 7. The criteria for selecting the evidence are clearly described. 8. The methods used for formulating the recommendations are clearly described. 9. The health benefits, side effects and risks have been considered in formulating the recommendations. 10. There is an explicit link between the recommendations and the supporting evidence. 11. The guideline has been externally reviewed by experts prior to its publication. 12. A procedure for updating the guidelines is provided. Clarity and presentation 13. The recommendations are specific and unambiguous. 14. The different options for management of the condition are clearly presented. 15. Key recommendations are easily identifiable. Applicability 16. The target users of the guidelines are clearly defined. 17. The potential organizational barriers in applying the recommendations have been discussed. 18. The potential cost implications in applying the recommendations have been considered. 19. The guideline is supported with tools for application. 20. The guideline presents key review criteria for monitoring and/or audit purposes. 21. The guideline has been piloted among target users. Editorial independence 22. The guideline is editorially independent from the funding body. 23. Conflicts of interest of guideline development members have been recorded.

Report: The Austrian Pharmaceutical Market

254

Appendix 9: Reforms of Health Insurers

Regional Insurers: 1. Vienna 2002 and 2003 Foundation: Target Agreement ‘Pharmaceutical Costs- Pharmaceutical-Dialogue Aims: long-term: Stabilisation of increases in pharmaceutical costs; short-term: Significant reduction in pharmaceutical cost increases Basis: Cost of mechanical pharmaceutical billing 2001 (billed by public pharmacies). Definition of Cost Containment: 2001 Expenditure +3% Distribution: 40% Physicians, 60% Regional Insurer Vienna Enforcement: A state-level regulatory group (physicians and Regional Insurer Vienna) defines values for total pharmaceutical expenditure and per physician pharmaceutical expenditure, monitor and evaluate the project, and provide data. 2004 Foundation: I. Additional Protocol, and Additional Agreement to General ‘Agreement of Principles. Aims: long-term: To realise the entire generics potential short-term: increase share of generic-potential products to 63% (2003, 2005) for 2004, double the share of generics from their 2003 level Guidelines for Contract Doctors: When a choice between two products with the same effect is made, the cheaper product is always to be prescribed. When a choice between effect equivalent/ generically substitutable products exists, the number of prescriptions of generically substitutable products should not exceed 55% per quarter. Pharmaceutical Discussion Groups: The Austrian Medical Association organises pharmaceutical discussion groups for which participating doctors receive €150 from the insurers (minimum attendance: two times). Enforcement: A regulatory group (physicians and Regional Insurer Vienna) caries out regular monitoring and controlling of overall trends and intervenes when individual doctors do not comply with the guidelines. The insurer provides the necessary data. Excurs: Physicians’ and Pharmacists’ Attitudes Towards The Use of Generics A representative survey polling GPs and pharmacists was undertaken in the second half of 2003 in preparation of the Viennese generics initiative. Almost 95% of practicing doctors and 64% of pharmacists found the increased use of generics ‘sensible’ (see graphs, below). Over 60% of doctors said they would in future increasingly include generics into prescriptions. A clear majority of doctors believes that generics and the original products are equally effective.

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255

D o y o u b e lie v e th e in c r e a s e d u s e o f g e n e r ic s is s e n s ib le ? 9 4 .7 % 1 0 0 %

D o c to rs P a r m a c is t s

8 0 %

6 3 .5 %

6 0 %

4 0 %

2 3 .8 % 1 2 .7 %

2 0 %

2 .2 %

3 .1 %

0 % Y e s

N o

N o A n sw e r

Source: WGKK; n (Doctors) = 451, n (Pharmacists) = 59 Do you consider Generics and Originator Products Equally Effective?

80%

63.4%

60%

40%

22.6% 14.0%

20%

0% Yes

No

No Answer

Source: WGKK; n (Doctors) = 451 A r e y o u p r e p a r e d to in c lu d e g e n e r ic s in c r e a s in g ly in y o u r p r e s c r ip tio n h a b its ?

6 4 .1 %

80%

60% 3 5 .3 % 40%

20%

0 .7 %

0% Yes

No

N o A nswer

Source: WGKK; n (Doctors) = 451

2. Niederösterreich

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Basis: Agreement of Pilot Project ‘Coordinating Measures- Pharmaceutical Advice’. Agreement regarding the continuation of the pilot project. 1.1.2001 – 30.6.2002 Aims: Reduce increases in pharmaceutical costs Measures: • Additional bonuses for GPs to take on co-ordinating tasks, €10,54 for 6% of cases per doctor and per quarter • Health insurer monitors prescribed medicines • Compulsory installation of a computer-assisted pharmaceutical programme for ‘contract doctors’ with IT facilities • Installation of an information and advice centre by the regional insurer Niederösterreich. • ‘Contract doctors’ receive monthly pharmaceutical statistics updates for their information, additional pharmaceutical statistics can be requested from the regional insurer Niederösterreich. 1.7.2001 – 30.6.2003 Aim: Lasting reduction in pharmaceutical cost increases and any follow-up costs, also to include specialists. Additional Measures: Specialists in internal medicine and paediatricians to be included in the coordinating tasks, €10,54 for a total of 6% of cases per doctor per quarter, while the volume is raised to 8% of cases for GPs. Footnote: This is designed to reward those cases that require intensive co-ordination with other doctors and medical institutions, as well as require additional medical services such as medical organisation, further test results enquiries, or medication modifications. 3. Burgenland Basis: Additional agreements to the general agreements of principles agreed with doctors 1999 Aims: Pharmaceutical cost savings to compensate for overshooting in physician fees in previous years. Reference: Pharmaceutical expenditure per insured person Criterion: Changes in the regional insurer Burgenland in comparison to the average of all other regional insurers in the period between 1.1.1999 and 30.6. 2001 Evaluation: Cost savings made from lower increases in pharmaceutical spending in Burgenland will serve to compensate for previous overshooting. 2000 In October 2000, Burgenland started pharmaceutical project dubbed ‘better therapy at better prices’ to put into practice economical prescription habits. The project began by being applied to costly ACE-inhibitors and high-blood pressure therapies. The authors of the initiative – the physicians association of Burgenland and the regional health insurer for Burgenland – defined the project’s aim as the first-line prescription of the generic enalapril for patients starting or switching to ACEinhibitors. The project was scientifically accompanied and evaluated by the Austrian Institute of Health (ÖBIG). Through the co-ordinated implementation of the project including all relevant Report: The Austrian Pharmaceutical Market

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players (e.g. ‘surgery doctors’ and hospital doctors), the generic share of enalapril was raised from zero (no generic existed prior to the programme) to 62% of prescriptions within one year. The active generic policy led to cost savings to the tune of 18% of costs in the ACE-inhibitor group of therapies (ÖBIG October 2001, Generics Model Burgenland). 2003, 2004 Aim: Savings in the pharmaceutical area, up-dating of the insurance catalogue of benefits, and structural measures Reference: Pharmaceutical expenditure 2002 (excluding VAT) Criterion: For 2003 the permitted rise is 5%, for 2004 of 0.25% compared to 2002. Evaluation: Smaller increases are considered savings. 30% of these savings are passed on to doctors for updates to the service catalogue and for structural measures. Range: In case cost savings are not adhered to, doctors loose entitlement to money saved in costs, within pre-established bandwidths: Share for Doctors 10% 20% 30%

2003 106 - 107 105 - 106 -105

2004 112.36 - 114.49 110.25 - 112.36 -110.25

Number of Insured People: Should the number of insured people in Burgenland rise faster than that in other regional health insurers, 50% of the increases will be added to the increases in pharmaceuticals. Inversely, should the number of insured people fall compared to the previous year, half of the fall will be deducted. 4. Oberösterreich Basis: Additional agreement to the Physician’s Fee Regulation Aims: Lower the rate of increase of pharmaceutical expenditure, no limits to costs shifted onto patients 1999 Reference: Lower increase in pharmaceutical expenditure per prescription compared to previous year. Evaluation: A third of the monetary difference is retained by the health insurer, a third goes to ‘contract doctors’ as a one-off payment, while the remaining third will be used for contractual services. 2000 Basis: As in 1999. In addition, the higher prescription fee is taken into account and the starting parameter widened by €0.14 (higher prescription fees raise the cost per prescription, as cheaper prescriptions drop out). Extraordinary price cuts do not count towards the amount saved. 2001 From 2001, increases in pharmaceutical expenditure are tied to the frequency with which physician fees are reviewed: flexible fee reviews taking into consideration rates of increase in pharmaceutical expenditure.

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Reference: Year-on-year increase in cost per prescription of 0.5%, minus extraordinary price and margin cuts, while tax-exempt prescriptions are not included in the calculations. Evaluation: Are cost increases undercut this raises physicians’ fee reviews, while excessive price increases are deducted. Outcome 2001: Fee Review 1.9% Frequency Increase: 0.5% Excessive Pharmaceutical Increases: 1.43% (Guaranteed) Fee Increase: 0.5% Because of the increase in frequency and the pharmaceutical overshooting, only the guaranteed fee increase was applicable. 2003 and 2004 Reference: Year-on-year increase in pharmaceutical expenditure per insured person in Austria’s regional health insurers. Calculation of Savings: Pharmaceutical costs per insured person in Oberösterreich (OÖ) 2001……...(1) Insured Persons in OÖ 2002………………………………………………….(2) Increases in Costs per insured person in OÖ (2001/2002 in %)……………...(3) Increases in Costs per insured person in all regional insurers………………..(4) Difference OÖ: regional insurers = (3) – (4)…………………………………(5) Evaluation for Increases in Physician Fees: Pharmaceutical costs 2001……………………………………………………(6) Bonus (absolute figures) = (1) * (5) * (2)…………………………………….(7) Applied to Mechanised Pharmaceutical Billing=(7)*79.3%…...…………….(8) Additional Fee Increase in %: (8) : (6)….....…………………………………(9) In 2002, a pharmaceutical bonus of 1.5% of the additional fee increase (2.8%) is paid. The 2002 pharmaceutical bonus paid on account is taken into consideration during 2003’s fee increases (1.5%): Is the actual cost saving lower, the fee increase is reduced to a maximum of 1%; is it higher, the fee rises by a maximum of 2%. Excessive frequency rates (i.e. above 0.8% in 2002, and above 1% in 2003) are taken into account in the fee review. Credit: In case of overshooting of the measuring staff (i.e. pharmaceutical cost increases per insured person are higher in OÖ), the insurer is credited with a one-off payment in 2003. In case of undershooting (i.e. pharmaceutical cost increases per insured person are higher in the regional insurers), the one off payment is made to the Medical Association. From 2004, compensatory payments are determined through physician fee reviews. 5. Steiermark Basis: Additional agreements in addition to general ‘agreement of principles’ Aim: Reduce increases in pharmaceutical costs Reference: Year-on-year increase in pharmaceutical expenditure per insurance voucher Evaluation: Cost savings per insurance voucher * Total number of insurance vouchers Bonus: 45% of cost savings are used to update the catalogue of medical services, while the use of a further 10% are determined by mutual agreement. 6. Kärnten

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Basis: Additional agreement in addition to the general ‘agreement of principles’ Aim: To minimise increases in pharmaceutical expenditure and to use costs savings to finance new services and undertake structural reforms Pharmaceutical-Dialogue • Public campaigns designed to contribute towards a more conscious and more economical handling of pharmaceuticals, while not worsening patients’ access. • Analyse and Evaluate agreed measures by a common regulatory committee. ‘Agreement to Economise’ Reference: Pharmaceutical cost increases compared to 2001. Criteria: Authorised increases for 2002 +4% for 2002 +8.16% for 2004 +12.49% Unforeseen events - such as cuts in margins, extraordinary price developments, significant changes in the prescription fee, flu epidemics, innovative medicines, and prescription habits of hospital doctors – will be taken into account. Inducement: In case the authorised increases are undercut within predefined bands, part of the savings are passed on to doctors in the form of updates to the catalogue of services. Cost savings from previous years are deducted in subsequent years. Share for Contract Doctors 2002 2003 2004 10% 105 -106 110,25 - 112,36 115.76 - 119.10 20% 104 - 105 108,16 - 110,25 112.49 - 115.76 30% -104 -108.16 -112.49

7. Tirol Basis: Additional agreements to the Tirol general agreement of principles Aim: Bonus for cuts in pharmaceutical costs 2000 Structural reforms are financed through savings in pharmaceuticals, psychotherapy, and transport. Payments are tied to compliance with the 2000 fee guidelines. 2001 Reference: Smaller year-on-year pharmaceutical cost increases Inducement: 50% of the monetary difference is spent on structural improvements and new services in the contract medical area. Savings made from higher prescription fees and extraordinary price cuts are included in the calculations. Additionally, savings must exceed the fee increases of 2001. 2002 In 2002, ‘contract doctors’ receive a one-off retroactive bonus payment of €0.28 per medical consultation. 2003

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Reference: Percentage increase in pharmaceutical costs in Tirol in comparison to pharmaceutical cost increases in all regional health insurers: • The index in Tirol lies below that of all other regional insurers • The percentage increase between 2003/2002 lies below that of 2002/2001 • Should this value be equal or higher but below the regional insurers’ average, a bonus is payable for the difference in increases between that of Tirol and the other regional insurers Increases in the prescription fee and extraordinary price cuts are taken into account. Inducement: Doctors receive 50% of the cost savings (up to €700,000) in the form of a bonus for contractual work. Other Insurers: 1. Civil Servants’ Health Insurer Basis: Additional agreement in addition to general agreement of principles. Aim: Significant and long-lasting reduction in the rate of increase of pharmaceutical expenditure. Reference: Pharmaceutical costs per medical consultation in a year-on-year comparison. Evaluation: Difference between cost of individual cases to all medical consultations. Inducement: 45% of savings are spent on updating the Physician Fee Guidelines. A further 10% are spent by mutual agreement. 2. Railwaymen’s Health Insurer Basis: Additional agreement in addition to general agreement of principles. Aim: Significant reduction or adherence to already reduced rates of increase in pharmaceutical costs. Reference: Pharmaceutical costs per health insurance voucher during the ‘austerity period’ compared to a ‘control period’. Evaluation: Cost savings per health insurance voucher to total of patient vouchers during the ‘austerity period’. Inducement: 45% of cost savings are spent on updating the medical service catalogue, while a further 10% is spent by mutual agreement. Regulation: A regulatory body of equal representation evaluates the measures and their application. 3. Health Insurer of the Self-Employed Basis: Additional agreement in addition to general agreement of principles. Aim: Significant reduction or adherence to already reduced rates of increase in pharmaceutical costs. Reference: Pharmaceutical costs per insurance voucher during the ‘austerity period’ compared to a ‘control period’. Evaluation: Cost savings per insurance voucher to total of insurance vouchers during the ‘austerity period’. Inducement: 45% of cost savings are spent on updating the medical service catalogue, while a further 10% is spent by mutual agreement. Regulation: A regulatory body of equal representation evaluates the measures and their implementation. 4. Farmers’ fund The contract between insurers and physicians is negotiated on a regional basis for the gebietskrankenkassen. The farmers’ fund do not negotiate separately (one exemption being Report: The Austrian Pharmaceutical Market

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Vorarlberg). Within different regions the relevant gebietskrankenkasse (Burgenland, Wien, Kärnten, Salzburg, etc.) do have a mandate to negotiate and to present a proposal for a new agreement. The contract needs the agreement/commitment from the farmers fund and is actually signed by the regional chamber of doctors and the Hauptverband on behalf of all health care funds who are covered by the agreement. There is no national contract in force for the farmers fund although they are established as a national fund. The social insurance agency of the farmers switched from the regulation of the specialty insurance carriers into the §2 fund area, because lower tariffs are calculated in the framework of the §2 funds, so that it resulted in a reduction of costs. Mr. Seyfried mentioned an increase in utilisation since 1998 as a consequence of reimbursement procedure. Before 1998 patients had to pay before and had been reimbursed 80% of total treatment costs. This created a strong disincentive to go to the doctor (barrier to access). Since then payment is done directly to the physicians. According to Mr. Seyfried, utilisation in Styria increased from 394.237 in 1997 to 660.555 in 1999, he attributes some of this increase to the greater use of diagnostics, i.e. laboratory, radiologists, but there is no evidence that people are healthier. There are two branches of monitoring within this insurance fund: i) patients are invited to a special conference where medical evaluations are considered, and ii) physicians are monitored. In the past, the main focus was on physician fees and changing overall treatment, not so much on pharmaceutical costs. Monitoring was targeted at very high cost patients and considered their working environment, i.e. COPD, lipid lowering, gastric diseases, antibiotic area, asthma patients, education-based and information dissemination project to patients by disease group. There were no guidelines for physicians, and the fund cannot intervene with doctors, but share the responsibility of care. The Farmers Fund had an incentive to keep patients healthy because they are also responsible for pensions. The farmers’ fund covers 300,000 people, including dependents. The ratio of actively employed persons to pension claimants is 1:1 (in other industries usually 2 workers: 1 pensioner). At present, there are discussion underway towards how to finance insurance contribution rates will increase from 6.5% to 7.4%. If a farmer had other income, this was not considered, but will be in the future. Within the fund, there is a group that does pharmacoeconomic aspects, such as encouraging generic dispensing by the doctor which saved €40,000 for the use of Norvasc. Another program for generic substitution is for Seropram, but as yet the affects have not been studied because evaluation is done by quarter. Mr. Seyfried commented that some doctors think it is difficult to switch patients from original products to generics and some do not. One must consider the dispensing physicians with limited products available to them.

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Appendix 10: UK Organization involved in Clinical Governance Risk Description National Patient Safety Agency A Special Health Authority which co-ordinates the efforts of the NHS to report and to learn from adverse events. The NPSA website should be consulted regularly. The National Reporting and Learning System (NRLS) has been developed by the NPSA to collect reports of patient safety incidents in the NHS but this is not part of SUI reporting. www.npsa.nhs.uk NHS Controls Assurance A team within the DoH requiring information on corporate governance and clinical risk management. Online submissions are made via The Controls Assurance Support Unit. See www.doh.gov.uk/riskman.htm and www.casu.org.uk Clinical Negligence Scheme for Trusts Run by NHSLA, a Special Health Authority handling claims and indemnifying NHS bodies in respect of both clinical negligence and non-clinical risks. See the website for current procedures for claims and general standards. CNST compliant NHS organisations are entitled to a discountwww.nhsla.com Nation/clinicalgovernance/idential Enquiries, managed by the National Institute for Clinical Excellence Four current enquiries. see www.nice.org.uk for news The Department of Health requires data from acute hospitals on their rates of hospital acquired infection, particularly methicillin-resistant Staphylococcus aureus (MRSA). This is co-ordinated through the Healthcare-Associated Infection and Antimicrobial Resistance Division For information on data to submit see the Department of Health Healthcare Acquired Bacteraemia Surveillance: Statement at http://www.doh.gov.uk/hai/habs.htm For information about the Public Health Laboratory Service role in collecting data see http://www.phls.co.uk/dir/cdsc/hcai.htm Research and Effectiveness Description Department of Health Research Directorate A central directorate of the DoH, the Department invests in research to support government objectives for public health, health services and social care, as well as contributing to the government science strategy. The Department requests Research Governance Local Implementation Plans and Annual Reports. Current submissions are in electronic format. This information is required to continue receiving DoH funding for research. www.doh.gov.uk/research Clinical Audit Description The Office for Information on Healthcare Performance (part of CHI) is responsible for national clinical audit. The Commission for Health Improvement (CHI) has a statutory responsibility to review progress with the implementation of National Service Frameworks. CHI has developed a methodology for gathering data from Trusts; see www.chi.nhs.uk for latest news. National Clinical Audit Support Programme A data collection, analysis, and feedback servicewww.nhsia.nhs.uk/phsmi/pages/ncasp.asp Local Commissioners Periodically, via ad hoc reporting mecha/clinicalgovernance/local commissioners /clinicalgovernance/ request information from clinical audit or IM&T departments. They may use this data to answer specific clinical quality or IM&T implementation questions. All local commissioners can be found at http://www.nhs.uk/root/localnhsservices/default.asp Information Management Description Report: The Austrian Pharmaceutical Market

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The Department of Health requires information gathered from Central Returns to monitor service provision at a high level and to support trend analysis for health service activity and health needs assessment. For central returns forms and associated guidance see the Central Statistical Returns Office website http://www.doh.g/clinicalgovernance/tats/rocr see also the NHSIA data dictionary for guidance on completion of central returns and data descriptions www.nhsia.nhs.uk/datastandards/pages Information Policy Unit Require submission of Information Governance (Caldicott) reports and ICT Capability reports from Trusts and Local IM&T Implementation Strategies from health economies

www.doh.gov.uk/ipu

Local Commissioners Periodically, via ad hoc reporting mechanisms, local commissioners will request information from clinical audit or IM&T departments. They may use this data to answer specific clinical quality or IM&T implementation questions All local commissioners can be found at www.nhs.uk/root/localnhsservices.default.asp. Patient and Public Involvement Description The (CHI) Office for Information on Healthcare Performance will be responsible for national patient and NHS staff surveys. www.chi.nhs.uk Currently, this information is collected by the Department of Health. Guidance available on www.doh.gov.uk/acuteinpatientsurvey/index.htm see also: http://nww.nhsia.nhs.uk/def/home.asp

Central Statistical Returns Office For guidance on submission of complaints figures required by the Department of Healthhttp://www.doh.gov.uk/stats/rocr Mental Health Act Commission The MHA Commission visits Trusts to meet detained patients and to check that they are being treated in accordance with the provisions of the 1983 Act. A Self Assessment Reporting tool, to be completed in advance of a visit can be found on: www.mhac.trent.nhs.uk Strategic Health Authorities The SHAs now have a role in monitoring the complaints systems of local organisations See www.nhs.uk for links to SHAs

Education and Training Description Royal Colleges and other professional bodies Not all professional bodies accredit training but some do request information from NHS Organisations (particularly medical and nursing Royal Colleges). A list of most professional bodies is provided on the NHSIA clinical governance website for conveniencewww.nhsia.nhs.uk/phsmi/clinicalgovernance Workforce Development /clinicalgovernance/rations/Strategic Health Authorities Workforce Develo/clinicalgovernance/onfederations were established on 1 April 2001 following consultation on A Health Service of all the Talents. Confederations play a key role in driving forward work to increase staff numbers and change the way in which staff are trained and educated. www.doh.gov.uk/workdevcon Strategic Health Authorities will undertake performance monitoring of NHS Trusts on behalf of the Workforce Development Confederations. They may require information on recruitment, retention, turnover and staff training. Contact details for Strategic Health Authorities may be found at: http://www.nhs.uk/root/localnhsservices/default.asp Staffing

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Description Central Statistical Returns Office For guidance on submission of workforce figures required by the Department of Healthwww.nhsia.nhs.uk/datastandards/pages/ ddm/nav_bookcenret _starta.htm Workforce Development Confederations/Strategic Health Authorities. Workforce Development Confederations were established on 1 April 2001 following consultation on "A Health Service of all the Talents". Confederations play a key role in driving forward work to increase staff numbers and change the way in which staff are trained and educated. www.doh.gov.uk/workdevcon Strategic Health Authorities will undertake performance monitoring of NHS Trusts on behalf of the Workforce Development Confederations. They may require information on recruitment, retention, turnover and staff training. Contact details for Strategic Health Authorities may be found at www.nhs.uk/localnhsservices Department of Health, Human Resources Directorate: For guidance on the evidence to submit for Improving Working Lives accreditationhttp://www.doh.gov.uk/iwl/accrediation.htm

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Appendix 11: Financing of pharmaceutical expenditure in Austria (ÖBIG contribution) Public/private expenditure and the OTC market 1. Financing of pharmaceutical expenditure in Austria 1.1

Background

The pharmaceutical market during the last decade is characterized by massive increases in expenditures. The growth rate for pharmaceuticals in Austria during the observation period exceeds the growth rate of the gross national product as well as the growth rate of the expenditures for the whole health care system during the observation period. In the year 2002 pharmaceutical expenditure (excluding pharmaceutical expenditure from health care institutions) amounted to nearly 15% of the total health care expenditures. This chapter will depict the development of pharmaceutical expenditure as well as pharmaceutical financing during the period from 1990-2002. 1.2

Overview

The development of the expenditure in the pharmaceutical sector shows the following: • The pharmaceutical expenditures in Austria during the observation period recorded an average yearly increase of 7,6 percentage points, whereby the average yearly growth rates are regressive (see Table 1.1). • The average yearly growth rates of pharmaceutical expenditures in the sector of the insurance carriers during the periods 1990-1995 and 1995-2000 were greater than the growth rates of the total pharmaceutical expenditures. The low growth rate of expenditures of the health insurance carriers in 2000-2001 follows from the extremely low increase from +3% in the year 2001, in the following year the health insurance carriers has to accept again a percentile increase of the total pharmaceutical market (compare Tables1.1 and 1.2). • The expenditures of the private households for prescription fees underlie an average yearly growth between +7,1% (2000-2002) and +8,1% (1990-1995). In the period of 1990-1995 the expenditure growth was accompanied by a numerical increase of the regulations. The years 1996 and 1997 resulted/amounted to an absolute reduction of the regulations, the increase in expenditure is a result of the increase in prescription costs (see Picture 1.1). • The other pharmaceutical expenditures of private households – the position includes the private sales of pharmacies – lists the lowest growth.

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Table 0.1: Austria – Pharmaceutical expenditure according to finance carriers 1990–20021

Year

Total Pharmaceutical expenditure2

Health Insurance

Private Households Out-of-pocket Payment3

Other Expenses4

Mio. €.

1990 = 100 Mio. €5

1990 = 100 in %6 Mio. € 1990 = 100 Mio. € 1990 = 100 in %7

1990

1.053,6

100,0

588,6

100,0

55,9

126,8

100,0

338,2

100,0

44,1

1991

1.147,6

108,9

649,5

110,3

56,6

137,2

108,1

361,0

106,7

43,4

1992

1.271,0

120,6

729,2

123,9

57,4

148,2

116,8

393,6

116,4

42,6

1993

1.390,5

132,0

801,7

136,2

57,7

161,9

127,6

426,9

126,2

42,3

1994

1.494,2

141,8

869,8

147,8

58,2

174,2

137,3

450,2

133,1

41,8

1995

1.579,6

149,9

912,2

155,0

57,8

186,9

147,3

480,5

142,1

42,2

1996

1.668,3

158,3

965,5

164,0

57,9

201,4

158,8

501,4

148,2

42,1

1997

1.736,7

164,8

993,8

168,8

57,2

216,3

170,5

526,6

155,7

42,8

1998

1.931,5

183,3

1.138,9 193,5

59,0

233,1

183,8

559,5

165,4

41,0

1999

2.149,7

204,0

1.298,0 220,5

60,4

254,5

200,7

597,2

176,6

39,6

2000

2.266,7

215,1

1.372,9 233,2

60,6

271,0

213,7

622,8

184,2

39,4

2001

2.391,3

227,0

1.414,0 240,2

59,1

307,7

242,6

669,6

198,0

40,9

2.549,7 242,0 1.524,6 259,0 Yearly growth rate (in percent)

59,8

311,1

245,3

714,0

211,1

40,2

2002

1990 - 1995 8,4%

9,2%

8,1%

7,3%

1995 - 2000 10,4%

13,2%

7,7%

5,3%

2000 - 2002 6,0% 5,4% 7,1% 7,1% excluding hospital market 2 Data from the drug statistic of the main association of the social insurance carriers, excluding sales tax less the prescription fee 3 prescription fees 4 Expenditure for self medication, prescription drugs and pharmaceutical expenditures of private insurance carriers. This position also includes pharmacy sales with dietary supplements and cosmetics on the scale of approximately 20% of the private sales. 5 excluding prescription fees 6 Portion of the health insurance expenditures in percent of the total pharmaceutical expenditures 7 Portion of the private households in percent of the total pharmaceutical expenditure 1

Sources: Main association of the Austrian social insurance carriers 10/1991 to 10/2003; ÖBIG investigation (ÖAK) and calculation, Mio. = Millions

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Table 0.2: Pharmaceutical expenditure according to finance carriers – growth rates in %

Year

Total Pharmaceutical expenditure

Health Insurance 2 in %

Out-of-pocket Payment3 in %

Other expenses4 in %

1991

8,92

10,34

8,14

6,73

1992

10,76

12,28

8,05

9,04

1993

9,40

9,94

9,23

8,46

1994

7,45

8,49

7,61

5,45

1995

5,72

4,88

7,28

6,74

1996

5,61

5,84

7,78

4,34

1997

4,10

2,92

7,40

5,03

1998

11,22

14,60

7,77

6,26

1999

11,30

13,97

9,17

6,73

2000

5,44

5,77

6,48

4,29

2001

5,50

3,00

13,53

7,51

Privat Households

2002 6,62 7,82 1,10 6,63 excluding hospital market 2 excluding sales tax, less prescription fees 3 Prescription fees 4 Expenditure for self medication, prescription drugs and pharmaceutical expenditures of private insurance carriers. This position also includes pharmacy sales with dietary supplements and cosmetics on the scale of approximately 20% of the private sales. 1

Sources: Main association of the Austrian social insurance carriers 10/1991 to 10/2003; ÖBIG investigation (ÖAK) and calculation

1.3

Pharmaceutical expenditure of the health insurance carriers

The increase of pharmaceutical expenditure of the health insurance carriers in the last decade lies decidedly above the increase of the total pharmaceutical expenditure. The efforts of the health insurance agencies as well as of the civil loan to curb the increase in expenditure is reflected by the data. The growth rate of the public pharmaceutical expenditures is nearly cut in half by the measures for cutting costs as of 1995 (change of the spread scheme, exceptional increase in prescription fees, cooperation project “Drugs and Reason”, numerous switches and decreases of the wholesales and pharmacy additional fees) (see table 1.2). Following the double digit increases in the years 1998 and 1999, the “solidarity agreement” between the pharmacists association and the main association was again able to lessen the growth rate of pharmaceutical expenditure the statutory decrease of the wholesale supplement as well as the extraordinary increase of the prescription fees in the year 2000. A detailed description of the measures used to contain costs in the pharmaceutical sector can be found in „Arzneimittelausgaben – Strategien zur Kostendämpfung in der europäischen Union“ (ÖBIG 2001). The regulations/by-laws of the health insurance carriers have only increase moderately in comparison to the expenditure development, as is made apparent in Graph 1. The increase of the number of regulations of around 20 percent points in the time period of 1990-2002 is juxtaposed to the increase in costs of 150 percent points. The absolute decline in the number of regulations in the years 1997 and 2001 mirrors among other things the extraordinary increase of prescription fees and the thereby caused account of the reimbursement of drugs, whose prices lie under the prescription fee).

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Graph 0.1: Austria – Regulation and expenditure of the health insurance carriers for pharmaceuticals 1990–2002 (indexed)1 280 260 240

1990=100

220 200 180 160 140 120 100 80 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 KV-Arzneimittelausgaben

Verordnungen

KV = Health Insurance 1 Expenditure according to the drug statistic of the main association of the Austrian social insurnace carriers, excluding sales tax, less prescription fees. KV-Arzneimittleausgaben = Health Insurance pharmaceutical expenditure Verordung = Regulation Sources: Main association of the Austrian social insurance carriers 10/1991 to 10/2003; ÖBIG calculations

1.4.1

Prescription fees

In the observation period, the prescription fee was adjusted yearly according to the appreciation number, additionally it was uncommonly raised twice. The yearly revenue growth rates of the registers from these fees laid during the observation period between 1,1 percent in the year 2002 and nearly 14 percent in the year 2001. The exceptional increase in August 1996 (+20%) and in October 2000 (+22%) introduced the relative revenue development of the prescription fees at least selectively to the development of the drug expenditure of the insurance agencies (compare Graph 1.2): the private households spent in 2002 a larger part of their income on prescription fees than in 1990. The relative percent of revenue of the health insurance carriers from prescription fees for their pharmaceutical expenditure has only insignificantly increased since 1990. It was between 16,5 and 17,9 percent during the observation period measured on the drug expenditures of the insurance agencies (see Graph 1.2)

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Graph 1.2: Percent of the out-of-pocket payments to the health insurance carriers expenditures for pharmaceuticals 1990-20021 19

Prozent

18

17

16

15 1990 1

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

drawn from the expenditures of the health insurance carriers according to the drug statistic of the main association of the Austrian social insurance carriers excluding the sales tax

Sources: Main association of the Austrian social insurance carriers 10/1991 bis 10/2003; ÖBIG calculations

1.4.2

Other expenses of private households for pharmaceutical products

Under this category are included the expenditure for self medication, the expenditures of the private insurance carriers but also the expenditures for those prescribed medications, that lie under the prescription fees and have to therefore be paid for privately. The other expenses of private households for pharmaceutical products show as compared to a register market, a moderate increase. The average yearly growth rates of expenditure in this market sector also lie however over the BIP growth rate as well as the increase in total health care expenditure. The yearly growth rates were between + 4,29 % in the year 2000 and + 9,04% in the year 1992. As the counterpart to the low growth rates of the register market in the year 2001, a growth of +7,5 % as compared to the year 2000 can be observed in the private sales of the pharmacies. 1.5

Conclusion

The rapid cost development in the pharmaceutical sector led to a shift in the financing burden to the health insurance carriers, despite increases in prescription fees, numerous prescription exemptions and the exclusion of pharmaceuticals from the drug catalogue. The drug packet 2000 was able to stop this development in the short term due to the minor growth rates in the register market. In the year 2002 the participation of the cash registers amounted to nearly 60 percent, the private financing participation was about 40 percent of the total expenditure (see Table 1.1) 2

Development of the market for prescription free pharmaceuticals

The total revenue with pharmaceutical in pharmacies was recorded with increases between +6% in the year 1996 and +11,6% in the year 1999 according to the market data of the European trade association of the pharmaceutical manufacturers (AESGP) between 1996 and 2002. In the following the development of the OTC market as well as the self-medication between 1995 and 2002 is depicted. 2.1

Definition of the OTC Market

The OTC (Over-the-Counter) sector includes •

self-medication for prescription free registered pharmaceuticals, as well as

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•

by the doctor prescribed prescription free products.

Due to a re-organization in the collection of OTC-Data in the year 2000, no timeline for the observation period 1995-2003 can be established. The analysis is based on sales data, which have been published by the European trade association of pharmaceutical manufacturers (AESGP) as well as on data from the Institute for Medical Statistics (IMS) of the OTC Market (Value and Amount) that have thankfully been made available to ÖBIG. 2.2

Development of the OTC market from 1995-2002

In the international comparison the percent of the OTC sales to the total pharmaceutical sales in Austria is minor. According to the data of the European trade association for pharmaceutical manufacturers around 9% of the total pharmaceutical sales in 2003 were obtained through OTC products. The total pharmaceutical sales rose in 1995 to 1999 (basis AVP included USt.) by 43%, the OTC market could, according to the data from ACSGP in the same timeframe only record a growth of +12%. The expenditures for self-medication recorded in 1990-1995 a growth of +31%. In the year 1997 alone, an increase in the expenditure for self-medication of +16% could be observed, conditional upon the numerous prescription exemptions in the year 1996 as well as the extraordinary increase of the prescription fees (Table 2.1) Table 0.1: Development of the pharmaceutical market in pharmacies, of the OTC-Market and of self-medication – growth rates compared to the previous year in %1

Year

Drug total sales in %

OTC total sales in %

Self-medication Umsatz in %

Sales on prescribed prescription free drugs in %

1995 / 1996

+ 6,0

-0,2

+ 6,6

-15,8

1996 / 1997

+ 9,2

+ 2,7

+ 16,0

-35,5

1997 / 1998

+ 10,7

+ 3,9

+ 2,7

+ 9,8

1998 / 1999

+ 11,6

+ 5,6

+ 3,0

+ 18,2

2000/ 2001

+ 4,4

+ 2,5

+ 2,2

+ 4,9

2001 / 2002

+ 10,4

+ 4,7

+ 3,5

+ 14,4

2000

2

1

Estimated at pharmacy sales prices including sales taxes In the year 2000 there was a re-organization of the data collection – it is therefore not possible to create a continuing timeline. 2

Sources: AESGP 1997 – 2003; ÖBIG-self calculations

As apposed to the strong increase in the self-medication sector, the expenditure for the health insurance carriers on prescribed OTC-Products were halved between the years 1995 and 1997. From the year 1998 onward, the sales of prescribed prescription free products were showing a moderate increase in growth. Also, in the timeframe 2000-2002 an growth increase could be shown on the OTC-Market, whereby in this period the sales of the prescribed OTC-drugs developed more dynamically than the total OTC-Market (see Table 2.1) Observing the sales and the sales volume of the OTC-Market, the following picture arises – according to the data from the IMS: • In the year 2003 the sales of OTC-Products totaled approximately € 312,7 Mio (estimated at pharmacy sales prices including USt.). About 86% of the sales were in the sector of self-medication, 14% were obtained in the area of prescribed prescription free drugs. The average pharmacy sales price per sold package rose between 2000 and 2003 in the sector of the prescribed OTCs of about

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+14% from € 6,61 to € 7,51, in the area of self-medication this value showed an increase of around +85 and rose thereby from € 5,83 in the year 2000 to € 6,32 in the year 2003 (see Table 2.2). Table 0.2: Development of OTC-Market according to Value and Quantity 2000-20031 OTC Market2

Self-medication sales3

Jahr

Prescribed prescription free drugs

in Mio. €

in Mio. Pkg.

in Mio. €

in Mio. Pkg.

in Mio. €

in Mio. Pkg.

2000

268,6

45,4

238,1

40,8

30,4

4,6

2001

276,7

45,4

242,9

40,4

33,8

5,0

2002

291,6

46,1

251,7

40,9

39,9

5,2

2003

312,7

48,4

271,6

43,0

41,0

5,5

+ 34,8

+ 18,6

Growth 2000-2003 in % + 16,4

+ 6,6

+ 14,1

+ 5,3

Pharmacy sales price / Package 2003 in € 6,45

6,32

7,51

1

exclusive hospital markets and house pharmacies. Price basis: Pharmacy sales price including sales tax OTC-Market = Self-medication with registered OTC products and prescribed OTC products 3 Position contains registered OTC products Sources: IMS Health; ÖBIG self inquiry and calculations, Pkg. = Package, Mio. = Millions;

2

Graph 2.2: Self-medication 2002 – Percent Indications groups in %

Haut- und Schleimhautmittel

10,52%

Magen- und Verdauungsmittel

10,64%

Schmerz- und Rheumamittel

15,38%

Vitamine und Mineralstoffe

15,47%

Husten- und Erkältungsmittel

1. 2. 3. 4. 5.

26,58%

Skin and Mucous products Stomach and digestive products Pain and rheumatism products Vitamins and Minerals Cough and cold products

Sources: AESGP 2003; ÖBIG-self calculations

2.3

Conclusion

The OTC-Market shows in comparison to the total pharmaceutical market a moderate growth. The halving of the sales with prescribed OTC products from the year 1996 onwards can be ascribed to the cost containing measures used health insurance carriers. As of 1998 there are obvious growths to be recorded in this sector.

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The self-medication mirrors these measures in the over-average growth rates in the years 1996 and 1997 and show as of 1998 the yearly growth rates between +2,2% in the year 2001 and + 3,5% in the year 2002.

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