Introduction
The map of European pricing and reimbursement systems is quite complex. Each member state employs its own regime and governments continue to search for the ideal system, which would achieve cost savings while ensuring a fair rate of return to pharmaceutical manufacturers. The European pharmaceutical pricing systems are either free-pricing systems or price-regulated systems. The majority of the European countries have implemented price-regulated systems, typically in the form of reference pricing systems.1
The proposed new legislation concerning pricing of pharmaceuticals entails a major change in the current Finnish pharmaceutical reimbursement system. The Government Bill 100/2008 concerning the legislative amendments to introduce a reference pricing system was presented to the Finnish Parliament on 26 June 2008. If adopted by the Parliament, the proposed new legislation is set to enter into force as of 1 April 2009. The public debate has nonetheless been going on for some time already, and strong voices have been raised both in favour and against the proposed reference pricing system. Our purpose in this article is to examine the factors behind the new legislation and to present the main features of the proposed system.
Background
As in other European Union member states, healthcare costs have experienced a steady rise also in Finland in the last few years. Based on the statistics by the Finnish Social Insurance Institution, reimbursable drug costs have increased from 0.34% of GDP in 1990 to 0.68% of GDP in 2005. The real annual growth in during the period of 2000-2005 has ranged between 5 - 10%, the average being 8.4%. Finland has implemented several measures aimed at containing the rise in healthcare costs, including the introduction of the generic substitution in 2003, lowering of confirmed wholesale prices by 5% in 2006, as well as price checks by the Pharmaceuticals Pricing Board and the introduction of a patient deductible in connection with medicines subject to special reimbursement and additional reimbursements.
Despite these legislative efforts, healthcare costs have nevertheless continued to increase and it is to be expected that they will continue to rise as a result of the aging population, further development of pharmaceutical products and the increasing amount of diseases susceptible to drug treatment. The Finnish government has paid attention to the fact that reference or similar pricing systems are used in most European countries. Although Sweden and Norway have abandoned the true reference pricing system, they have introduced systems of generic substitution, which include pricing practices similar to those of a reference pricing system. In addition to reference pricing, most countries also employ generic substitution. Based on international experience, the combination of a reference pricing system and generic substitution has, according to the Government Bill, been found to strengthen each other's effect. Also, reference pricing systems have been found to promote rational use of medicinal products as well as cost awareness of both doctors and patients.
The reference pricing system has also been shown to reduce the use of more expensive medicines, thereby increasing the use of affordable reference priced products.2
Another reason behind the need for changes in reimbursement legislation is that the current reimbursement system is procedurally quite burdensome. Reimbursement status and wholesale prices must be confirmed by the Pharmaceuticals Pricing Board ("PPB") for each different package of all products, i.e. the originator and generic products, as well as products subject to parallel import. This procedure creates a substantial amount of work for the marketing authorization holders, as well as for the supervisory authorities PPB and the Social Insurance Institution. The decisions are valid for a certain amount of time and the maximum time is 5 years. In order to sustain their product in the reimbursement system, marketing authorization holders must submit renewal applications for each package of the product prior to the expiration of the preceding decision. The PPB re-assesses the reimbursability and reasonable wholesale price for each package based on the renewal application. In addition, the Social Insurance Institution gives its statement for each renewal application. It is evident that the renewal applications take up a significant part of the PPB's time. There is consequently a need to simplify the procedure, at least with regard to established products included in the sphere of generic substitution.3
Generic substitution and the patent system
Although generic substitution has generated cost savings in Finland both for patients and in terms of overall health insurance costs, Government Bill 100/2008, however, notes that the decision to exclude medicinal products protected by analogy process patents from the scope of generic substitution has weakened the effects of generic substitution and price competition caused by generic products. Due to this limitation, patients are in practice forced to pay the price of expensive originator drugs unless their doctors prescribe more affordable generic medicines.4
The Finnish Medicines Act was amended in 2006 so that medicines protected by analogy process patents were excluded from the sphere of generic substitution.5 The exclusion of analogy process patent protected medicines reflects the background of the Finnish patent legislation prior to 1995 when it was not possible to grant product patents for medicinal substances until 1995, but only so-called analogy process patents6. The limitation of generic substitution was based on concerns relating to the innovative pharmaceutical industry; the legislator did not, at that time, find it reasonable that generic substitution should apply also to those medicines for which an analogy process patent was still valid. Generic substitution automatically allowed generic medicines containing the same active ingredient but manufactured through a different process to enter the sphere of generic substitution, and this phenomenon was, at that time, deemed unreasonable from the originator company's point of view.7 This is consequently the situation in Finland today: generic substitution is limited where the originator product is protected by a valid analogy process patent or a supplementary protection certificate (SPC) based on that patent.
The proposed new system
The Finnish Government has, in its government programme, committed itself to containing the rise in healthcare costs, and the proposed reference pricing system aims to do just that. The reference pricing system is expected to reduce the use of more expensive medicinal products and, correspondingly, to increase the use of more affordable reference-priced medicines, thereby lowering the costs for patients as well as containing the pressure to raise health insurance payments.
The proposed system is a generic reference pricing system, i.e. a pricing system based on categorization of medicines with the same active ingredient into so-called reference groups. The reference group classification is based on bioequivalence. The medicinal products in one reference group contain the same amount of the same active ingredient in the same form and they are of a similar package size. The formation of a reference group requires that there is at least one substitutable reimbursable generic product for sale, in addition to the originator product. This means that in relation to originator products for which there are no generic alternatives, the current system of confirmation of reimbursement status and wholesale prices would continue.
According to the legislative proposition, the reference prices are based on wholesale prices presented by the pharmaceutical companies and the retail prices based thereon, including value added tax (VAT). The reference price would equal the most affordable retail price of the reference group added by EUR 1.5. Where the price of the most affordable product is EUR 40 or more, the reference price would equal that price added by EUR 2.
It is noted in the Government Bill that in countries with a reference pricing system, the reference price is often determined on the basis of the lowest wholesale price(s). Such a model may, in the view of the Finnish government, lead to higher patient deductibles than a model in which the reference price takes account of a price range such as the one applied in the current system of generic substitution. The proposed price ranges for determining the reference price would, according to the proposition, increase the reference-priced alternatives and ensure the availability of reference-priced products. According to the planned system, the reference prices would be set quarterly and they would be in force for 3 months at a time.
The reference price for the medicines belonging to one reference group would be the highest price, based on which the amount of reimbursement for a medicinal product of that group could be calculated. Any cost exceeding the reference price would be paid by the patient.
The implementation of a reference pricing system will enable a simplification of the procedures related to pricing decisions and reimbursability decisions for products which have been present on the market for some time, and thereby allow the PPB to focus more resources on the assessment of new medicines.8
In addition to the proposed introduction of a reference pricing system, the Finnish Government proposes to abolish the limitation of generic substitution introduced in 2006 by including also products protected by analogy process patents within the sphere of generic substitution. The Government Bill states that a well-functioning and efficient pharmaceutical reimbursement system requires that all corresponding products which have been legally introduced on the Finnish market may be included in the reference pricing system. The exclusion of certain pharmaceuticals from the sphere of generic substitution has been found to weaken the price competition on the pharmaceutical market, despite the fact that more affordable generic products have entered the market. Consequently, the government wishes to extend generic substitution so that analogy process patents would no longer be an obstacle to substitution status for the pharmaceutical product in question.9 It is mainly this last-mentioned proposal which has been the subject of debate ever since the legislative proposal was published.
Expectations and concerns
Those in favour of the proposed reference pricing system, including the representatives of the public sector and the generic pharmaceutical industry, await for great costs savings both for the patients and the society. According to the Minister of Social Affairs and Health Liisa Hyssälä, the annual cost savings achievable through the introduction of the proposed reference pricing system are estimated to be EUR 85 million in total, of which the patients' share would be approximately EUR 33 million. It is hoped that the change would have positive implications on competition in the pharmaceutical market, as competition is currently affected by the fact that pharmaceuticals are paid to a large extent by the social and health authorities through the reimbursement system and not by those who actually prescribe or use them. In the public debate, it has been argued that the current reimbursement system and the scope of patent protection in Finland is used to circumvent the provisions of competition legislation in order to protect the interests of the originators and thereby to prevent effective competition in the market. Those in favour of the proposed system also point out that there are already 18 European countries where the reference pricing system or a corresponding system has been successfully introduced, including many European Union Members States.
On the other hand, the representatives of the pharmaceutical industry in Finland remain strongly opposed to the proposed reference pricing system. According to Pharma Industry Finland, the proposed changes are contrary to the principles of generic substitution and they also ignore the role played by patents in innovation policy. The originators' patent protection can be circumvented by synthesising the pharmaceutical substances by means of a different method from the one used by the originator of the medicine. Furthermore, Pharma Industry Finland has voiced its concerns that the United States Trade Representative (USTR) monitoring the respect of the company-level intellectual property rights throughout the world has already quoted Finland in its national report and that Finland may be transferred to the Special 301 Report Watch List similarly as Norway was in connection with the introduction of a reference pricing system in Norway, which could threaten the image of Finland as an innovation friendly country.
Finnish doctors have paid attention to the fact that patients would not have a right to refuse generic substitution in favour of a more expensive pharmaceutical. Therefore the price and delivery method of a pharmaceutical should be carefully taken into consideration by the doctors when deciding upon the treatment of patients. The patients may experience the changing pharmaceuticals difficult and there is a risk of confusion particularly in case of multiple medication and patients who have weaker capabilities due to their illness. According to the statistics, until now 10% of patients have refused generic substitution whereas doctors have refused only 0.2% of generic substitution. The proposed reference price system is expected to reverse this and doctors are consequently expected to refuse generic substitution more often than previously.
The lively public discussion is likely to continue during the parliamentary readings of the Government Bill. As the legislative proposal is a part of the national budgetary legislation, the proposed amendments to the Medicines Act and the Health Insurance Act should be adopted, either in the proposed form or as amended during the parliamentary readings, during 2008.
Footnotes
1.Based on a survey conducted by the EGA in May 2006, see Perry: The European generic pharmaceutical market in review: 2006 and beyond, Journal of Generic Medicines, Vol. 4, Oct 2006, 4-14.
2.Government Bill 100/2008, p. 9-12.
3.Government Bill 100/2008, p. 12.
4.Government Bill 100/2008, p. 15.
5.It is noteworthy that this exclusion does not constitute an obstacle to bringing a generic product to the market, nor does it hinder substitution between an originator product and a parallel import product originating in another EEA state.
6.Analogy process patents are patents where the patent claims define processes for manufacturing a new and therapeutically valuable substance. They are characterised by the fact that the end-product is new and inventive, not the process in itself.
7.Government Bill 108/2005, p. 7.
8.Government Bill 100/2008, p. 13-15.
9.Government Bill 100/2008, p. 15.
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