The price level of medicinal products was a hot topic for the pharmaceutical sector in Europe in 2012, as the financial crisis made governments cut spending and slash prices on medicinal products. The Norwegian economy has largely been left unscathed by the crisis, but prices on pharmaceutical products are amongst the lowest in Europe.

Despite being a high-cost country, the prices on prescription medicinal products in Norway are considerably low, both for patent-protected and off-patent medicines. This article intends to provide an overview of the legal framework of the pricing mechanism in Norway.

Legal framework

The legal framework for pricing of medicinal products in Norway is the Act on Medicinal Products article 6 and chapter 12 of the appurtenant Regulation on Medicinal Products (the Regulation). In addition to these rules, the Norwegian Medicines Agency (the Agency) also uses the Guideline on Pricing of Medicinal Products when determining the price.

Statutory pricing apply for prescription only drugs. According to the regulation, it is a prerequisite that a prescription drug has obtained a maximum Pharmacy Purchase Price and a maximum Pharmacy Retail Price before it can be sold or put on the market. The Agency can also determine that the rules of the Regulation shall also apply for OTC-products when these are included in the national reimbursement scheme for the out-patient sector.

The maximum Retail Price is automatically calculated by adding a maximum profit margin (pharmacy mark-up), cf. section 12-3 of the Regulation. The pharmacy mark-up is determined by the Agency. The current pharmacy mark-up is 7 % for drugs with a Purchase Price up to NOK 200, and 4% for the Purchase Price above NOK 200. There is an add-on of NOK 22 per pack, and for certain substances (including narcotic substances), an additional NOK 10 per pack is added. The value added tax (VAT) comes in addition, and is currently 25%. Free pricing apply for veterinary medicinal products. Free pricing also apply for OTC-drugs, with the exception of those included in the national reimbursement scheme.

Determining the Purchase Price – the general rules

When determining the maximum Purchase Price, the Regulation states three factors that can be taken into account:

  • The price of the drug in other EU and EEA-member states. This factor should always be taken into account.
  • The price of medicinal products in Norway with the same or similar active substance. This factor may be taken into account.
  • Information about the production cost for the medicinal product. This factor may be taken into account in particular circumstances.

It is explicitly stated that the first factor should be strongly emphasized.

As a general rule, the Agency sets the maximum Purchase Price at an average of the three lowest market prizes in a selection of European countries. The selection normally includes Sweden, Finland, Denmark, Germany, Great Britain, the Netherlands, Austria, Belgium and Ireland.

Various differences

It is not uncommon that there are differences in pack sizes between comparable products in Norway and other countries – for instance a product in Norway may be marketed as a 2-pack, and in Ireland as a 4-pack. Thus comparison is done for the price per unit in all cases, with the differentiation of price per unit for small packs, and price per unit for large packs.

As a general rule, a pack containing 30 units or less is considered a small pack, while a pack with more than 30 units is considered a large pack.

The importance of this differentiation can be illustrated by an example from 2011, where the Agency in determining the price for the 2 pack of a medicinal product (a local anaesthetic) based their unit price on 25 packs in the reference countries – despite the fact that 2 packs were available in these countries. The Ministry of Health and Care overturned this decision, finding that due to higher production and logistics costs, there could be a risk that the 2 pack would not be marketed in Norway due to the Agency's decision.

In accordance with the Guideline, other dosage forms may also be taken into comparison when determining the price per unit, if they can be considered as different variants of the same medicinal product. For example, the price for capsules and tablets may be used as basis in determining the price for a sublingual tablet.

Re-evaluation of the price

Pursuant to section 12-5 of the Regulation, both the MA-holder and the Agency may request a re-evaluation of the price based upon new circumstances or new information.

According to the Agency's own Guideline, such revisions shall, generally speaking, not happen more than once a year. An exception is made for new medicinal products released on the market. For a period of two years after the release, the Agency may request new price information from the manufacturer every 6 months to determine the price in Norway.

The Agency actively re-evaluates the prices for the most selling drugs in Norway. Each year the Agency selects a number of active substances that will be subject to reevaluation by the Agency the following year. These are generally selected based on the sales, although some may be chose due to large growth in sale, or particular high prices. For 2013, the Agency has notified that 250 active substances will be re-evaluated.

MA-holders may also request a revision of the price. A circumstance the Guideline specifically mentions is a product withdrawal from one of the reference countries.

Differences in the out-patient and the in-patient sectors

The Agency sets the same maximum PPP whether or not the product is intended for the outpatient or the in-patient sector. This does not mean that the price level is the same for the two sectors.

Most hospitals in Norway are public. Procurement for all medicinal products financed by public hospitals is done by the Norwegian Drug Procurement Cooperation (LIS). Procurement of medicinal products for the in-patient sector is done by tendering, and generally speaking, the discounts to the hospitals are significant.

Reduction of prices pursuant to generic competition

Norway uses a "stepped price model" for reduction of the prices of medicinal products that face generic competition, usually at the end of the patent protection term.

The Agency decides which medicinal products that shall be subject to the "stepped price" model. The Regulation states two criteria for a product to be subject to the stepped price model:

  • The Agency must have listed the original product and the generic product(s) as substitutable (placed on a substitution list)
  • Stable generic competition must have occurred for the original product.

The last criteria, "stable generic competition" is specified in the Regulation to be when the products are placed on the substitution list, and no severe delivery problems for the generic competitor can be documented.

The effect on the price for a medicinal product subject to the stepped price model is drastic. The reduction is 30 % at the moment stable generic competition occurred, and 55 % 6 months after stable generic competition occurred. For medicinal products with sales 100 million NOK or more within a 12-month period during the last 2 years before generic competition was established, the cut rate after 6 months is 75 %. The Regulation also gives the Agency the right to decide further price cuts 12 months after the last ordinary cut.

Complaints

A determination of price, a change in the price or a decision to place a medicinal product in the stepped price model are all decisions subject to the Public Administration Act, and thus can be appealed to the Ministry of Health and Care. Decisions from the Ministry may be appealed to the district court.

When appealing a decision regarding pricing to the Ministry, there are certain considerations that should be kept in mind:

  • Pursuant to section 12-2 of the Regulation, information about the production cost for the medicinal product may be taken into account in particular circumstances. In the Guideline, it is stated that the Agency follows the general rules of pricing, and only considers exceptions from these if there is a great risk that the medicinal product will no longer be available in the market at the calculated price, and that non-availability could have negative consequences for the access to useful and cost effective medicines.
  • In these particular instances, the Guideline states that the Agency will consider two factors, the documented production costs and special factors regarding the basis for the calculation.
  • Relevant factors, e.g. production costs, must be precisely documented.
  • In previous decisions, the Ministry has stated that the consideration of an effective administration of this area must be compared to the consideration of a price "as correct as possible." In general, in its decisions the Ministry tend to place considerable weight on the first consideration.

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About the authors:

Inga Kaasen is an attorney-at-law and partner at the Norwegian law firm Grette. She also holds a PhD. in biotechnology. She is the leader of Grette's Life Sciences team, and has extensive experience with patent disputes, pharmaceutical law, IP transactions and R&D agreements.

Håkon Austdal is an associate at the Norwegian law firm Grette. He also holds a Bachelor of Pharmacy. He is a member of Grette's Life Sciences team, working with patent disputes and pharmaceutical law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.