pharmaceutical policy and health systems - world bank internet
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Pharmaceutical Policy and Health Systems
Lunch Time LectureApril 8, 2009
Andreas Seiter, HDNHE
Second biggest item in public expenditure for healthBiggest item in private expenditureKey for health outcomes
• Infectious diseases (malaria, TB, HIV)• Non-communicable diseases
Important for confidence in health system
Drugs Are a Key Input For Health Systems
Specific Sector Issues
Characterized by market failure, governance challenges Strong commercial influence on sector politics Nature of the commodities require adequate regulation
and enforcement Expenditures tend to grow faster than GNI and overall
health expenditures
Good medicines available and accessible in a system that uses resources efficiently
Regulation EnforcementSelection
Financing Manufacturing Procurement Distribution
Financing, PricingPayment SystemEducation
Manufacturing ProcurementDistributionPayment SystemIncentivesRational UseEducation
Policy Framework
Key Objectives for Drug Policy
For the poor (LIC): Access to affordable, effective and safe medicines
(limited to Essential Medicines concept)
For middle class (MIC): Protection against catastrophic cost of illnessCost containmentRational use of medicines
Determinants
DeterminantsDeterminants
DeterminantsDeterminants
Dete
rmin
ants
Dete
rmin
ants
Determinants
Acces
sibilit
y
Afford
abilit
yAcceptability
Interventions
Availability
Drug Supply-Type
-Quantity
Drug Demand-Type
-Quantity
UserLocation
Drug SupplyLocation
User'sAttitudes/
Expectationsof Products
and Services
Characteristicsof Products and
Services
User's IncomeAbility to Pay
Prices of DrugProducts and
Services
Quality ofProducts
& Services
Accessibility Availability
Acceptability( Source: MSH )
Affordability
What Do We Mean by. . . Access to Medicines?
Source: IMS Global Health (http://www.ims-global.com)
$0
$100
$200
$300
$400
$500
$600
2000 2001 2002 2003 2004
Expe
nditu
res
(in $
bill
ions
) Asia (exc. Japan),Africa, AustraliaLatin America
Japan
Rest of Europe
European Union
North America
Asia (exc. Japan), Africa, Australia, Latin America: 71.4% of world’s population 11.5% of medicines sales
Global Pharmaceuticals. . . The Market: 2000-2004
0
20
40
60
80
100
120
Bill
ion
USD
Bulgaria Novartis Pfizer Hungary
GNI/Sales
Source: World Bank country database, Annual Reports
Global Pharmaceuticals. . . Who Are We Dealing With?
Economic Importance. . . of the Pharmaceutical Sector
Supplier Induced Demand
“Information Asymmetry” in combination with financial incentives for providers lead to overprescribing and preference for newer, more expensive drugs
Marketing Pull
“Bonus” Push recommending specific brands
Push for high margin products
Non-rational demands
Incentives and Distortion
Kickbacks & Inducements
Discounts, bonuses
Counterfeit & Substandard
Products
Diversion
Fraud and Corruption
Discounts,bonuses
Conflicting economic and public health objectives Information asymmetry between industry, prescribers/pharmacists and
consumers Commercial incentives along the supply chain influence behavior Barriers to market entry (regulation, cartels, investment, patents, etc.) Opportunities for fraud and corruption, including wide circulation of counterfeit
drugs
Market Failure - Summary
Key Areas for Regulation
Market access (licensing) for products, manufacturers and distributors
Standards for manufacturing (GMP), distribution (GDP), testing (GLP)
Drug prices Distribution restrictions such as prescription only drugs versus OTC Pharmacovigilance – monitoring of quality breaches and side effects Clinical trials Advertising and promotion Treatment guidelines and formularies (drug lists) Reimbursement systems (which drugs used for which condition,
reimbursed at what price?)
Framework for Decision Making
Overall fiscal framework and economic growth Health financing model Governance and ethical framework – level of corruption Characteristics of existing health system and provider
payment system Regional standards, supra-national agreements (for
example ASEAN, EU) Health economics assessment capacity “Political economy” – what is doable, how can difficult
reforms be orchestrated
Navigating Between Two Rocks
Fiscal ruin by giving in to the pressure from providers and patients
Losing political support by rationing and restricting access
Logistics to the Boardroom Strategic Management: Reduce Intermediate points
Investments in Logistics and Information Systems (inventory management systems, bar codes, RFID technology, surveillance)
Focus on reducing total “landed” costs, not unit cost delivered to central warehouse
Establish Performance Measures: Monitor continually
Improving the Supply Chain
Before After
KEMSA - Kits $11.4 6%
KEMSA - Other Essential Drugs $11.4 6%
MOH - Other Products $17.1 9%
UNICEF $1.7 1%
DANIDA $3.6 2%
SIDA $0.44 0%
KfW $3.0 2%
UNFPA $3.4 2%
DFID - FP $1.10 1%
DFID - Malaria $25.5 14%
GF - Coartem $8.00 4%GF - Nets & Kits $20.1 11%
GF -TB $1.20 1%
GF HIV/AIDS $23.5 13%
DFID - Kits $0.70 0%
MSF $5.8 3%
PEPFAR $44.6 24%
KEMSA & MOHKits & Other Essential
Drugs, etc. $40.0 M
Contraceptives & Other Essential Drugs $13.4 M
MalariaCoartem, Nets,
etc. $54.7 M
HIV, TB & Other Opportunistic
Infections, etc. $77.1 M(includes lab & tests)
Total Value in US Dollars for Fiscal Year 2005/6: $185.2 Million
Donor Support in Kenya
Contra-ceptives and
RHequipment
STIDrugs
EssentialDrugs
Vaccinesand
Vitamin ATB/Leprosy
BloodSafety
Reagents(inc. HIV
tests)
DFID
KfW
UNICEF
JICA
GOK, WB/IDA
Source offunds for
commodities
CommodityType
(colour coded) MOHEquip-ment
Point of firstwarehousing KEMSA Central Warehouse
KEMSARegionalDepots
Organizationresponsible
for delivery todistrict levels
KEMSA and KEMSA Regional Depots (essential drugs, malaria drugs,
consumable supplies)
ProcurementAgent/Body Crown
AgentsGovernment
of Kenya
GOK
GTZ(procurement
implementationunit)
JSI/DELIVER/KEMSA LogisticsManagement Unit (contraceptives,
condoms, STI kits, HIV test kits, TBdrugs, RH equipment etc)
EU
KfW
UNICEF
KEPI ColdStore
KEPI(vaccines
andvitamin A)
Malaria
USAID
USAID
UNFPA
EUROPA
Condomsfor STI/
HIV/AIDSprevention
CIDA
UNFPA
USGov
CDC
NPHLS store
MEDS(to Missionfacilities)
PrivateDrug
Source
GDF
Government
NGO/Private
Bilateral Donor
Multilateral Donor
World Bank Loan
Organization Key
JapanesePrivate
Company
WHO
GAVI
SIDA
NLTP(TB/
Leprosydrugs
Commodity Logistics System in Kenya (as of July 2006) Constructed and produced by Steve Kinzett, JSI/Kenya - please communicateany inaccuracies to [email protected] or telephone 2727210
Anti-RetroVirals
(ARVs)
Labor-atorysupp-lies
GlobalFund forAIDS, TB
and Malaria
PSCMC(CrownAgents,GTZ, JSI
and KEMSA)
BTC
MEDS
DANIDA
Mainly District level staff: DPHO, DPHN, DTLP, DASCO, DPHO, etc or staff from the Health Centres,Dispensaries come up and collect from the District level
MEDS
Provincial andDistrictHospital
LaboratoryStaff
Organizationresponsible fordelivery to sub-district levels
KNCV
MSF
MSF
JSI/DELIVER
KEMSA
JSI
WHO
Example Kenya: Supply Chain Fragmentation
Alternative Supply Chain Options
Full or partial outsourcing to private logistics companies Integrated models (from procurement to retail) based
on a franchise or pharmacy chain concept (example: Community Outreach Pharmacies in Liberia)
Drug Selection – LIC Perspective
Purpose: set priorities for public spending Essential Drug List as a basis Treatment guidelines and drug list need to be
aligned Regulatory and procurement/logistics functions
need to collaborate well Lacking but important: partnership with private
sector to improve access and suppress illicit drug market
Drug Selection – MIC Perspective
Partial financing of drug benefit through health insurance
Drug benefit package key for financial sustainability Contracting with private service providers more
common More choices = more pressures Generics should have preference assuming quality
is in line with regulation Innovative branded drugs need to be assessed to
decide on inclusion But how does this assessment work in practice?
A Standard MIC Drug Selection Process
MOH or insurance fund appoint expert commission (membership? accountability for economic consequences of its decisions?)
Industry submits application (and runs a lobbying campaign)
Commission members review and debate Decision on inclusion, criteria for prescription,
reimbursement level Criteria and process lack predictability and transparency
How Can Decision Making Be Improved?
Full transparency, publication of detailed minutes on the web
Clear criteria for inclusion, published Capacity building for pharmaco-economic assessment Algorithms and scoring systems for assessment of
primary and/or secondary data Review of new inclusions after 1-3 years? Pooling/sharing of knowledge between countries to
overcome capacity problems
Criteria for Inclusion of New Drugs
Decisions in countries with highly developed pharmaco-economic assessment capacity (UK, Australia, Canada etc.) Disease burden, public
health impact Now good treatment
alternatives Individual suffering
Impact on budget Cost acceptable
compared to current treatment Ability to deliver new
treatment according to guidelines Ability to limit “out-of-
label” use …
A Simple Score to Assess Drugs
Parameter Yes = 2 partially = 1 no = 0Positive NICE opinion
Positive opinion in Australia
Positive opinion in ….
Directly life threatening or debilitating disease
No satisfactory treatment available yet
New product has disease-modifying action
New product has strong action on symptoms
Current treatment costs high
High indirect costs of disease
High priority disease for public health
Not more expensive than current treatment
Infrastructure/knowledge for safe and effective use of product exist in country
Out-of-label use can be contained
Needs to be refined, tested and developed as a full scale instrument with detailed instructions for use
Selection Algorithm
Submission of application by manufacturer
Assessment and scoring by expert team
High score on priority list
Low score on priority list
Rejection, potential re-submission once more positive data are available
Low cost impact
High cost impact
Acceptance
Negotiations with manufacturer on volume controls or other risk sharing measures
Acceptance if solution found that fits into budget, otherwise rejection with possibility for re-submission
Pricing Regulation
For what purpose – saving public funds or protecting consumers?
Problem: information asymmetry; formation of provider cartels
Cross-border comparisons and referencing discourage price discounts for poor countries, charitable organizations
Potential unwanted effects of regulated generic prices: volume competition with hidden discounts in generic markets
Using Market Mechanisms and Public Purchasing Power
Open tenders for multi-source products (prequalification recommended to ensure equal quality standards)
Pooling, framework contracts (for example for hospital procurement, health insurance funds)
Negotiations with manufacturers to get better prices or share volume risk
Creating market conditions that support price competition for generics
Using Reimbursement Policy to Create Competition Among Generics
0
2
4
6
8
10
12
14
16
Brand 1 Brand 2 Brand 3 Brand 4 Brand 5 Brand 6
Patient co-paymentReimbursement
In this example, the reimbursement authority invites bids from makers of a given generic. Bidders have to state the maximum volume they can supply. Winners 1 and 2 together can supply the whole market and get higher reimbursement than all others (90%). Brands 3-6 only get 70% of the price of Brand 2 as reimbursement, creating a significant commercial barrier for these brands. Their manufacturers can come back with a better offer in the next round.
Influencing Provider Behavior
Policy tool kit for Rational Use of Drugs: treatment guidelines; formularies (example positive list, essential drug list) Effective management requires monitoring tool and
adequate incentives or sanctions “Natural” incentives are working against Rational Use –
providers make money on medicines!
Incentive Structure in the MarketManufacturer
Wholesaler Pharmacist
VolumeProfit marginRebateBonus/giftClient satisfactionQuality perception Patient expectations
Industry inducementsQuality perceptionProfit, bonusFines/sanctionsAdditional work
Co-paymentQuality perception
Rational Use of Medicines
Based on scientific evidence Following agreed guidelines (Standard Treatment
Guidelines) Taking into account cost-benefit aspects Adjusted to the specific situation and the economic
circumstances of the patient Transparent and open to peer (and payer) review
Effectively Influencing Providers
Drugs mainly purchased out-of-pocket: only limited possibilities through targeted interventions to educate providers and consumers
Third party payer: monitoring in combination with feedback, “academic detailing” and financial incentives can change behavior
Systems to Monitor Medicine Use
Information on doctor, pharmacy, drug and patient is coded on the Rx form and centrally collected
Online feedback in real time can inform doctors and pharmacists about deviations from formulary, drug interactions, pre-clearance requirements etc.
Synergy Between “Control Knobs”
Regulation alone is too static to bring order into a very dynamic environment created by private sector providers
Other “control knobs” need to be applied in a coordinated way, with dynamic monitoring and regular adjustments
Important: knowing where you want to end up! (clear definition of policy goals)
Example - Generic Drug Policy
Formulary based on generic drugs
Pharmacists can substitute, margins for pharmacists in favor of generics
Doctors informed about available quality generics
Patients trust generics
Strict regulatory control of generics
Regulatory/financing
Behavior Payment mechanism
Prices and retail margins favor generic competition
Reimbursement favors low cost generic option
Pharmaceutical Policy “Packages”
Essential drugs policy – LIC Generic drug policy – MIC Policy favoring innovative drugs – HIC Policy favoring national manufacturers Combination of the above with market segmentation