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Price control policy for patented medicines

Price control policy for patented medicines. Adun Mohara. Agenda Setting Model (Kingdon, 1984). PROBLEM STREAM. Window of opportunity. POLITICAL STREAM. POLICY STREAM. PROBLEM STREAM. Existence evident of problem Pharmaceutical high price in Thailand (Chaonsin, 2009)

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Price control policy for patented medicines

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  1. Price control policy for patented medicines Adun Mohara

  2. Agenda Setting Model (Kingdon, 1984) PROBLEM STREAM Window of opportunity POLITICAL STREAM POLICY STREAM

  3. PROBLEM STREAM Existence evident of problem Pharmaceutical 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

  4. POLITICAL STREAM • National Mood: the public debates and conflicts over CL policy

  5. Window of opportunity Agenda Setting Model (Kingdon, 1984) PROBLEM STREAM • POLICY STREAM • Feasibility of policy • Impact of policy POLITICAL STREAM

  6. Objectives General 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 study 1. 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.

  7. 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 POLICY STREAM 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 ?

  8. 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) • Affordable pricing • Reasonable price • Cost effective • Transparency DRUG ACT (draft) • Control price structure (3) Strategy for access to drug • Regional bulk purchase (4) • Taxes elimination (5) Appropriate implementation of TRIPS agreement • Parallel import(6) • Compulsory licensing (7) PATENT ACT 8

  9. Strategies of policy affecting on price“7 candidates” Feasibility analysis for a readiness policy

  10. Failed Intervention frame for pricing control of patented drug • Direct price structure control • Profit control • Cost plus/ mark-up control Price structure Registration process (at reasonable price) Reasonable price International reference pricing (Equity price) Pharmaceutical tax elimination Therapeutic reference pricing/ Pharmacoeconomic Rational selection for including essential drug in NEDL Patented drug in NEDL Breakthrough product Reimbursement Pharmaco-economic evaluation Price Negotiation <100,000 ฿ /QALY (Including in National Essential Drug List) 100,000-300,000 ฿ /QALY (In-depth study for increasing accessibility) Reimbursement process (at affordable price) Volume Agreement (regional bulk purchasing) Adopting TRIPS agreement for increase accessibility Parallel import Voluntary / Compulsory licensing

  11. POLICY STREAM Result from part 1 : The readiness policy package for implementing appropriately as drug price control measure in registration process is • International reference pricing and • Therapeutic reference pricing/ Pharmacoeconomic. 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?) Input • 1. International reference pricing • International drug price indicator guide (supplier) + shipping cost + Tariff + VAT • BNF(12.5% margin)* PPP + shipping cost + Tariff + VAT • 2. Pharmacoeconomic (Therapeutic reference pricing ) • Incremental cost effectiveness ratio/ICER, • ICER /QALY gained < 3 times of GDP/capita (WHO recommented) How does implement the measure in to practical practices ?

  12. Price estimation Price at market equilibrium (Pe : Cutoff price) Demand side (assumed as linear demand fn) QM : Demand at the time prior issuing CL PM : Price at the time prior issuing CL QA : 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 CL Po : Supply price (MC=MR) at optimum level QA : Supply at maximize accessibility (CL) Ps : Supply price at negotiated price Note: Marginal Cost= Market price* cost/price ratio (Ref: AIDS, 2006 and PPRS, 2006) 1. International reference pricing • 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 • 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 S = MC 3. Price at market equilibrium The welfare economic was applied for estimating of price at equilibrium market M PM PS Pe PN PO D = AR MR P = βO + β1Q O QA QM

  13. AR, AC, P A M PM B D Pe E C D = AR MR O QM The Welfare Economics of Monopoly for estimating market equilibrium Estimated price based on lowest possible price and maintain industry incentive S= MC Qe

  14. No. of patients Patients live with HIV/AIDS Total 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 CHD Total 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 cancer Total 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 price No measure Price in public sector Original price (DMSIC,06,07) Price in private sector Original patient price (private Hospital 06,07) + Mark up 20-30% (Chaoncin,06) Negotiation price International comparison (IPIG,09/BNF,09 adjusted PPP) Pharmacoeconomic (3 times GDP/QALYs gain) market equilibrium (cut point) (Price negotiation, 06,07) CL policy Generic price (MOPH,06,07) ------------------------------------------ Price of ARV, CHD; 2006 Price of clopidogrel; 2006 Price of cancer drug; 2007 Parameters for scenario analysis

  15. Scenario Analysis Total 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

  16. Budget impactanalysis of 4 comparative scenarios (million baths) Scenario Analysis

  17. Negative impact from price regulation 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. 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 innovationeffects could hurt consumers. (Sood, 2008)

  18. POLICY STREAM Result of part 1: The readiness strategies for control price of medicine in Thailand is • International reference pricing and • Therapeutic reference pricing/ Pharmaco-economic. 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?) Result of part 2: Price control policy in registration process can cause Pros: 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 How does implement the measure in to practical practices ? Part 3: Policy analysis for making policy of price control measure in registration process practical in Thai’s context.

  19. Flow of drug control at launch Pharmacoeconomic Registration Reimbursement Price regulation NLEM selection committee Working group for price study (MOPH) Drug regulation committee International reference Act: Classify drug into 3 groups and identify its comparable product 15 sub Committee International drug price Data based High price High effectiveness • Group 1 • Breakthrough • Therapeutic • improvement Group 1 and 2 Economic committee Therapeutic reference Pharmacoeconomic Group 3 • Group 2 • Technical improvement • Slightly therapeutic • improvement <100,000B/QALYs : Accept >300,000B/QALYs : Reject Group 1 and 2 • Group 3 • Me-too drug • No improvement 100,000 - 300,000B/QALYs The price should not higher than 3 times/GDP Budget Impact Analysis (Price volume agreement) Price regulation committee (DIT) • - Therapeutic classification • Identify new product for • patent registration Demand for drug data based Price regulation at launch Price for reimbursement

  20. International 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 Important factors for international price comparison Parameters for adjusting price index - Volume weights (in case information available) • Purchasing Power Parity/PPP* Source:The Pharmaceutical Price Regulation Scheme, 2005

  21. Therapeutic reference pricing and Pharmacoeconomic pricing Important factors for recommending the level of therapeutic improvement compare to its alternatives • 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 payment Factors 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 • Me-too product • Salt, ester • Therapeutic reference pricing 23 ICER = (C1-C2)/(E1-E2)

  22. Flow of drug regulation at launch Pharmacoeconomic Registration Reimbursement Price regulation NLEM selection committee Working group for price study (MOPH) Drug regulation committee International reference Act: Classify drug into 3 groups and identify its comparable product 15 sub Committee International drug price Data based High price High effectiveness • Group 1 • Breakthrough • Therapeutic • improvement Group 1 and 2 Economic committee Therapeutic reference Pharmacoeconomic Group 3 • Group 2 • Technical improvement • Slightly therapeutic • improvement <100,000B/QALYs : Accept >300,000B/QALYs : Reject Group 1 and 2 • Group 3 • Me-too drug • No improvement 100,000 - 300,000B/QALYs The price should not higher than 3 times/GDP Budget Impact Analysis (Price volume agreement) Price regulation committee (DIT) • - Therapeutic classification • Identify new product for • patent registration Demand for drug data based Price for reimbursement Price regulation at launch

  23. Pharmaceutical products has special characteristics over other products. Consumers have insufficient knowledge for making decision to choose the products by themselves. The asymmetric informationmay 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 systemtransparent for consumer in the whole society. Conclusion

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