Pharma econ Flashcards
(33 cards)
TLV?
The Dental and Pharmaceutical Benefits Agency, TLV, is a central government agency whose remit is to determine whether a pharmaceutical product, medical device or dental care procedure shall be subsidized by the state. We also determine retail margins for all pharmacies in Sweden, regulate the substitution of medicines at the pharmacies and supervise certain areas of the pharmaceutical market.
‘TLV is a government agency under
the Ministry of Social Affairs, that Decides
on price and reimbursement för
prescription drugs’
In HTA, QALYs are used as:
measure of the health gain from a new medical product
Treshold/willigness to pay in Sweden (per QALY)
severe conditions: 1,000,000/QALY
less severe conditions/typically: 500,000/QALY
The law regulating TLV’s reimbursement decisions - what characteristics must the cost have?
The cost should
be ”reasonable”
from a medical,
humanitarian and
societal economic
perspective
Maximum out of pocket cost of prescriptions per year?
2600 SEK
Average % of prescription drug costs that are covered by OOP?
18% (so 82% is paid by tax money)
The reimbursement ‘stair’
- outline the OOP cost for patients for reimbursed prescription drugs
0-1300 SEK = 0% subsidy
6382 SEK or more = free
(and categories in between for 50%, 75% and 90% subsidy)
3 types of decisions TLV can make regarding drugs?
General reimbursement: for all of the drugs approved indications
Restricted reimbursement: only for the indications/patient groups where the drug is cost-effective (e.g. only after the patient has tried a lower priced alternative)
No reimbursement: no reimbursement, price not regulated
(decision making process usually takes 110-120 days; there is an EU legislation stating the decision needs to be made within 180 days)
Expenditure on pharmaceutical comprises approx what % of THE in Sweden?
11%
(corresponds to 60 billion SEK)
Breakdown of expenditure on pharmaceuticals in Sweden
- Prescription drugs with coverage (38 billion SEK, TLV conducts HTA (calculates the cost-effectiveness, makes the decision on coverage and regulates the price)
- In-hospital drugs (12 billion SEK, TLV conducts the HTA but does NOT make the decision on coverage - in this case, regions choose whether they want to reimburse the drug depending on the evidence presented by TLV)
- Over the counter (7 billion SEK, usually not reimbursed)
- Prescription drugs without coverage (4 billion SEK; either drugs that were never applied for TLV assessment or got declined; companies may not apply if the drug is relatively affordable and intended for not too severe conditions, so they estimate they can rely on OOP)
Apart from making decisions on reimbursement, TLV also regulate:
- generic substitution (designate the product of the month)
- pharmacies’ retail margin for covered prescription drugs
Generic substitution
Generic substitution is the term applied to the substitution of a prescribed branded drug by a different form of the same active substance. The generic is usually unbranded; it is often a parallel imported product, which is regarded as ‘essentially similar’ by the EU Commission.
Trends in expenditure on pharmaceuticals in Sweden
- increasing significantly
- from 2013 to 2022, 57% increase
- overall, numbers correspond to 5.4% annual increase
Swedish prices on generics compared to other EU countries are:
among the lowest!
Trends in pharma
- many new oncology drugs
- smaller targeted patient groups
- less data and less good evidence at launch (the initial evidence presented for HTA is typically single arm trials, rarely RCTs)
- high treatment costs per patient
- increase in Advanced Therapy Medicinal Products (ATMPs) (medicines for human use that are based on genes, tissues or cells)
R&D investment in different therapeutic areas; biggest and smallest investments?
mainly: oncology
minor: cardiovascular, OBGYN, psychiatry
Gene therapies: What is the challenge to the payer?
- treatments are priced based on very long duration in effect, but long term effect/benefit is uncertain while the entire payment is made at the time of treatment
- the risk to the payer might be reduced by a smart payment model, e.g. staggering the payment (installment-like principle)
Pharmaceuticals - characteristics of supply
- high fixed costs for R&D (10-20 billion SEK to develop a new drugs)
- low marginal costs (low price for producing an additional unit of the product; after the research has been done, the price per pill/tablet produced is usually very low)
(conflict between static and dynamic efficiency) - patents are of high importance, but they do not necessarily contribute to monopolies
- most often oligopolies; there are usually a few producers that have drugs which have very similar use/effects (target the same patient group/indication) but sufficiently different mechanisms of action to have distinct patents) –> leads to some competition
- heavily regulated industry (market approval, production, marketing, prices..)
- characteristics in price setting (NOT based on marginal costs; has to account for R&D, non-disclosed discounts, price varies among countries and based on indiciation, often a momopsony situation (only one buyer) - both buyers (governments) and sellers (big pharma) are very powerful actors - negotiations typically have to take place regarding the price
Static vs dynamic efficiency
Static efficiency - maximising utility of money right now
Dynamic efficiency - maximising utility of money over time
High prices of drugs - origin of the issue and example of proposed solution?
- companies have to set high unit prices (although the cost per unit when it comes to production is very low) in order to get a positive return on investment for their R&D efforts
- however, high unit prices lead to inoptimally low use
Proposed solution:
- companies who have a drug approved for a specific market get a fixed lump sum to cover the R&D costs (sum depends based on value of their drug, considering size of target population, condition severity etc), which could then allow them to charge low cost per unit of drug, elading to larger usage
Is enough money invested globally in R&D for new drugs? or is there a market failure?
- the amount of money invested in overall R&D globally is increasing, however, market failure (suboptimal investment) might be happening in some areas, such as psychiatry and antibiotics)
Why is the investment in antibiotics R&D low?
- a truly new class of antibiotics has not been developed for decades
- any antibiotics produced now would have to be stored for later use (when all current antibiotics are ineffective due to AMR); this provides no incentive for pharma companies to research antibiotics now
- policy makers need to design incentives for researching antibiotics now without encouraging their overuse
Market failure
Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.
in cost effectiveness studies, effect is usually evaluated using
Quality Adjusted Life Years
