Price control policy for patented medicines

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Price control policy

for patented medicines

Adun Mohara

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Window of opportunity

Agenda Setting Model (Kingdon, 1984)

POLICY

STREAM

POLICY

STREAM

PROBLEM

STREAM

PROBLEM

STREAM

POLITICAL

STREAM

POLITICAL

STREAM

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mPROBLEM STREAMExistence evident of problemPharmaceutical high price in Thailand (Chaonsin,

2009) The public sector procured innovator brands at 4.36 MPR The private sectors procured innovator brands at 11.6 MPR

Occurrence of prominent focusing events Thai’s government decision to grant CL Feedback of stakeholder from the grant of CL:

Positive feedback from patient and NGOs in support to access to drug

Negative feedback from PReMA and USTR in protest of IP infringement

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National Mood: the public debates and conflicts over CL policy

Visible participant

Ministry of public health Ministry of commerce

Hidden participant

NGOs PReMA?

Electoral politics

National strategy for

access to drug 9th June 2009

National strategy for intellectual property

9th July 2009

Content ofstrategies

Increase access to drug Affordable drug price, TRIPS Support R&D, generic policy Support Drug Act (draft)

IP protection Patent Act revision DIP exclusive dealing Patent information

Solution? Alternative measure for reduce drug price

without infringement intellectual property

and also achievement of industry incentives.

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Window of opportunity

Agenda Setting Model (Kingdon, 1984)

PROBLEM

STREAM

PROBLEM

STREAM

POLITICAL

STREAM

POLITICAL

STREAM

POLICY STREAM

• Feasibility of policy • Impact of policy

POLICY STREAM

• Feasibility of policy • Impact of policy

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mObjectivesGeneral objective of study To analyze mechanism for pharmaceutical price

regulation based on the lowest possible price at the level of a cost containment and also achievement of industry incentives.

Specific objective of study1. Feasibility analysis for introducing alternative

effectively policies 2. Assessing implication of selected feasible alternative

policies : Case study of seven issuing compulsory licensing

3. Formulating mechanism for pharmaceutical price regulation to be an alternative pricing policy in Thailand.

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1. Feasibility analysis Technical feasibility

Political feasibility

Economical feasibility

2. Scenario analysis Demand and supply analysis

Monopoly market equilibrium

Budget Impact Analysis

3. Policy analysis Content analysis

Stakeholder analysis

What is a readiness measure for implementing

appropriately (policy package) in Thailand ?

How much impact will occur if the measure implement

based on the lowest possible price and also

achievement of industry incentives ?

How does implement the measure in to practical

practices ?

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Global direction for access to medicines

Affordable prices can be pursued through the mechanism

• Generics policies

• Price information

• Equitable pricing

• Price competition

• Reduce profit/mark-ups

• Bulk procurement

• Taxes elimination

• The WTO/TRIPS agreement defines

Reference pricing

• International reference (1)

• Therapeutic reference (2)

• Parallel import (6)

• Compulsory licensing (7)

• Taxes elimination (5)

• Regional bulk purchase (4)

• Control price structure (3)

DR

UG

AC

T

(dra

ft)P

ATEN

T

AC

T

Appropriate implementation of TRIPS agreement

Strategy for access to drug

Affordable

pricing

• Reasonable

price

• Cost effective

• Transparency

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Strategies of policy affecting on price“7 candidates” Feasibility analysis for a readiness policy

Pricing strategies

Technical aspect

Economic aspect

Political aspect

1. International reference with equity pricing base

Working group for price study (Strategy plan)

Reduce household

expReduce Gov’t budget

National strategy of access to drug BE 2552

2. Therapeutic reference Pharmaco-economic

Working group for price study & Sub-committeeof pharmaco-economic

Reduce household

expReduce Gov’t budget

National strategy of access to drug BE 2552

3. Reduction or elimination of duties and taxes

Thai tariff on medicine was reduced lower than 10, some almost 0.

Reduce household exp Thai tariff Act BE

2549Loss of Gov’t revenue

4. Control price structure (cost-plus, profit control)

No information on price structure of medicine product?

Reduce household exp

Reduce Gov’t

budget

Price of good & services Act BE 2542

5. Regional bulk purchasing No information on

regional demand for drug?

Reduce household exp

Reduce Gov’t

budget

ASIAN collaborations on medical pricing?

6. Parallel import No information on price of medicine in other countries?

Reduce drug exp (G&H)

Thai patent Act BE 2522

Shift of manufacturing based & employment rate

No information of legal allowed in other countries?

7. Compulsory Licensing

Insufficient information on generic version of medicine across the world

Reduce Gov’t budget

Thai patent Act BE 2522

Economic retaliation

Political sanction/PWL

Intervention frame for pricing control of patented drug

International reference pricing (Equity price)

Registration process(at reasonable price)

Reimbursement Pharmaco-economic evaluation

Price Negotiation

Therapeutic reference pricing/ Pharmacoeconomic

<100,000 ฿ /QALY (Including in National Essential Drug List)

100,000-300,000 ฿ /QALY (In-depth study for increasing accessibility)

Volume Agreement (regional bulk purchasing)

Adopting TRIPS agreement for increase accessibility

Parallel import

Failed

Reim

bu

rsem

en

t p

rocess

(at

aff

ord

ab

le p

rice)

Rational selection for including essential drug in NEDL

Breakthrough product

Price structure

Reasonable price

Direct price structure control- Profit control- Cost plus/ mark-up control

Patented drug in NEDL

Pharmaceutical tax elimination

Voluntary / Compulsory licensing

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What is an readiness measure for implementing




achievement of industry incentives ? (Pros & Cons?)


practices ?

1. International reference 1. International reference

pricingpricing•International drug price indicator guide (supplier) + shipping cost + Tariff + VAT •BNF(12.5% margin)* PPP + shipping cost + Tariff + VAT

2. Pharmacoeconomic 2. Pharmacoeconomic

(Therapeutic reference (Therapeutic reference

pricing )pricing )• Incremental cost effectiveness ratio/ICER, • ICER /QALY gained < 3 times of GDP/capita (WHO recommented)

Result from part 1 : The readiness policy package for implementing appropriately as drug price control measure in registration process is 1) International reference pricing

and2) Therapeutic reference pricing/

Pharmacoeconomic.

Input

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mPrice estimation

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1. International reference 1. International reference pricingpricing

International drug price indicator guide (supplier) + shipping cost

+ Tariff + VAT BNF(12.5% margin)*

Purchasing power parity (PPP)+ shipping cost+Tariff + VAT

2. Pharmacoeconomic pricing 2. Pharmacoeconomic pricing Incremental cost effectiveness

ratio ICER, WHO recommendation for developing countries,

the ICER per QALY gained not more than 3 times of GDP per capita (not cost effective)

AR, AC, P

D = AR

S = MC

MR

MPM

QM

Pe

O

Price at market equilibrium Price at market equilibrium (Pe :

Cutoff price)

Demand side (assumed as linear demand fn)QM : Demand at the time prior issuing CLPM : Price at the time prior issuing CLQA : Demand at maximize accessibility (CL)PN : Negotiation price (5% over generic version)

Supply side (assumed as linear supply fn)QM : Supply at the time prior issuing CLPo : Supply price (MC=MR) at optimum levelQA : Supply at maximize accessibility (CL)Ps : Supply price at negotiated priceNote: Marginal Cost = Market price* cost/price ratio (Ref: AIDS, 2006 and PPRS, 2006)

P = βO + β1 Q

3. Price at market equilibrium3. Price at market equilibriumThe welfare economic was applied for estimating of price at equilibrium market

QA

PNPO

PS

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AR, AC, P

D = ARMR

MPM

QM

Pe

O

D

A

B

CE

The Welfare Economics of Monopolyfor estimating market equilibrium

Qe

S= MC

Estimated price based on lowest possible price and maintain industry incentive

Estimated price based on lowest possible price and maintain industry incentive

Drugs

P origina

l PCEAP

comp P eq

EFV

23,991 CE 524,

59 ,264

LPV/r

149,81

8 N/A 1 98,

05

3 2894

Clopidogrel

27,375

15,47

511,29

9 10,68 4

Docetaxel

175,90

8 121,9

50 N/A47,96

1 Letrozo

le 85,

950

80,648

26,613

53,277

Erlotinib

330,00

0 N/A1 57,708 1

129,014

Imatinib

1,338,4

55 N/A 479,110

5 75,899

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No. of patientsPatients live with HIV/AIDSTotal Number of patient access to ARV drug (2008) Access generic drugs under CL policy (NHSO, 08) Access original drugs before CL policy (FDA, 07)

Public 82% : UC73%, Other 18% (NPA,06) Private 9% (DDC, 06)

PLWHA denied access to ARV

Patients with CHDTotal Number of patient access to clopidogrel

(2008) Access generic drugs under CL policy for 2ndprevention

of ischemic heart disease (Estimated, 08) Access original drugs before CL policy (FDA, 07)

Public 18% to prevent stent thrombosis (MOHP,06) Private 82%

Patients with cancerTotal Number of patient access to 4 cancers (2008) Access generic drugs under CL policy (NCI, 08) Access original drugs before CL policy (FDA, 07)

Public 64%, Private 36% (NHA, 05)

Drug priceNo measurePrice in public sectorOriginal price (DMSIC,06,07)Price in private sectorOriginal patient price (private Hospital 06,07)+ Mark up 20-30%

(Chaoncin,06)

Negotiation priceInternational comparison (IPIG,09/BNF,09 adjusted PPP)Pharmacoeconomic (3 times GDP/QALYs gain)market equilibrium (cut

point)(Price negotiation, 06,07)

CL policyGeneric price (MOPH,06,07)------------------------------------------Price of ARV, CHD; 2006Price of clopidogrel; 2006Price of cancer drug; 2007

Parameters for scenario analysis

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mScenario AnalysisTotal direct medical cost was forecasted during

next five years (discounted by 3%) to estimate

budget impact

compared in four scenarios as follows:

(1) Without pharmaceutical price control measure

(2) With pharmaceutical price control measure only for

public sector

(3) With pharmaceutical price control measure in

registration process (for both public and private sectors)

(4) With CL policy implementation

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mBudget impact analysis of 4 comparative scenarios

(million baths)

Scenario Assumption Budget 5 yrs

1. No measure

All patients who need the drug will get original drugs at conventional price

35,527

2. Control price in public sector

All patients in public sectors who need the drug will get original drugs at negotiated price All patients in private sectors who need the drug will get original drug at conventionally private price

21,684

3. Control price in registration process

All patients who need the drug in both public and private will get original drugs at negotiated price.

1 5,740

4. Issuance CL policy

Patients who have already accessed to drugs get original drug at conventional price. (public/private)Patients who access to generic drug under CL policy will get drugs at generic version. (public)

15,986

Scenario Analysis

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Negative impact from price regulation The policy has result in negative effect (less seriously than CL policy). Price regulation delays drug launches, distorts consumer choices

toward less innovative drug. (Danzon, 1997) Price regulation can lead to cost-shifting to other population

segments. (Daniel, 2003) Price regulation reducing manufacturers’ revenues will affect future

innovation. These innovation effects could hurt consumers. (Sood, 2008)

Positive impact from price regulation The policy for price regulation at launch has resulted in positive

effect.

Health expenditure of the whole society would be reduced into 19,787 million baths (comparable to compulsory licensing

19,541 million baths). Government and household expenditure would be reduced

into 13,843 and 5,944 million baths (5 years) respectively, by using a medicine at reasonable price.

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mPOLICY STREAM

What is an readiness measure for implementing




achievement of industry incentives ? (Pros & Cons?)


practices ?

Result of part 1: The readiness strategies for control price of medicine in Thailand is 1) International reference pricing and2) Therapeutic reference pricing/

Pharmaco-economic.

Result of part 2: Price control policy in registration process can causePros: provide significant positive impact on budget saving to society

19,787 Mil ฿ (Saving cost nearly to

CL policy/ societal perspective). Cons: delay product launch into the market ( Political & economic sanction less than CL policy)

Input

Part 3: Policy analysis for making policy

of price control measure in registration

process practical in Thai’s context.

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Flow of drug control at launchRegistration

Price regulationWorking group for

price study (MOPH)

Drug regulation committee

ReimbursementNLEM selection

committee

15 sub Committee

Economic committee

High price High effectiveness

<100,000B/QALYs : Accept

>300,000B/QALYs : Reject

Budget Impact Analysis (Price volume agreement)

Pharmacoeconomic

100,000 - 300,000B/QALYs

Demand for drug data based

Price for reimbursement

- Group 1Group 1 • Breakthrough• Therapeutic improvement

- Group 3 Group 3 • Me-too drug• No improvement

Act: Classify drug into 3 groups and identify its comparable product

- Therapeutic classification- Identify new product for patent registration

- Group 2Group 2 • Technical improvement• Slightly therapeutic improvement

International referenceInternational drug

price Data based

Group 1 and 2

Therapeutic referenceGroup 3

Price regulation committee (DIT)

Price regulation at launch

Pharmacoeconomic

Group 1 and 2The price should not higher

than 3 times/GDP

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mInternational reference pricing (Equity pricing)

Prices at different points in the supply chain Ex-manufacturer price Wholesale* Public price

Methodology used to make the comparison Bilateral comparisons Multilateral comparisons

Pharmaceutical characteristics Active ingredients*, Strength* Trade name, Manufacturer* Dosage form* and Package size Salt or ester

Source: The Pharmaceutical Price Regulation Scheme, 2005

Important factors for international price comparison

Parameters for adjusting price index- Volume weights (in case information

available)

- Purchasing Power Parity /PPP*

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mTherapeutic reference pricing and Pharmacoeconomic pricingImportant factors for recommending the level of therapeutic improvement compare to its alternativesFactors of therapeutic

advance Increase efficacy Reduction in adverse

reactions

Pharmacoeconomic

pricing

In developing countries, WHO recommended that the ICER per

QALY gained of medical interventions Below 1 time of GDP per capita is

very cost effective, Between 1 and 3 times of GDP per

capita may be cost-effective* More than 3 times is not cost

effective

ICER = (C1-C2)/(E1-E2)23

Factors of technical advance Route of administration Patient convenience Compliance improvements Caregiver convenience Time to the optimal effect Duration of treatment cause

Therapeutic reference+ co

paymentMe-too product Salt, ester Therapeutic reference pricing

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Flow of drug regulation at launchRegistration

Price regulationWorking group for

price study (MOPH)

Drug regulation committee

ReimbursementNLEM selection

committee

15 sub Committee

Economic committee

High price High effectiveness

<100,000B/QALYs : Accept

>300,000B/QALYs : Reject

Budget Impact Analysis (Price volume agreement)

Pharmacoeconomic

Demand for drug data basedPrice for

reimbursement

- Group 1Group 1 • Breakthrough• Therapeutic improvement

- Group 3 Group 3 • Me-too drug• No improvement

Act: Classify drug into 3 groups and identify its comparable product

- Therapeutic classification- Identify new product for patent registration

- Group 2Group 2 • Technical improvement• Slightly therapeutic improvement

International referenceInternational drug

price Data based

Group 1 and 2

Therapeutic referenceGroup 3

Price regulation committee (DIT)

Price regulation at launch

Pharmacoeconomic

Group 1 and 2The price should not higher

than 3 times/GDP100,000 - 300,000B/QALYs

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Pharmaceutical products has special characteristics over other products. Consumers have insufficient knowledge for making decision to choose the products by themselves. The asymmetric information may cause unreasonable pricing system occur in monopoly market of patented drugs.

New direction of consumer protection in area of health product should be pay attention to making pharmaceutical pricing system transparent for consumer in the whole society.

Conclusion

Price control policy for patented medicines

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