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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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mPOLICY STREAM
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
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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
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 ? (Pros & Cons?)
How does implement the measure in to practical
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
13
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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What is an 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 ? (Pros & Cons?)
How does implement the measure in to practical
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