Healthcare Systems Around the World

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Healthcare Systems Around the World

• Their Strengths and Weaknesses

David Mackenzie Konrad Wallerstein
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Introductions

• David Mackenzie Adelphi International Research
  which has responsibility for Global Marketing
  Research
• Konrad Wallerstein from Adelphi Focus which has
  responsibility for developing market access
  solutions for our clients
• A core presentation of about 45 minutes to an
  hour
• Follow up QA on implications for marketing
  research practice
• Opportunity to ask questions..as interactive as
  possible please

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Opportunity to strengthen our understanding of
the context within which Marketing Research is
being conducted

• Growth in market access and a creeping
  interdependence between the traditional process
  of product positioning and market access
• Shift in the attitudes, behaviours and priorities
  associated with the acquisition of healthcare
• Require a strengthened understanding of the
  context for any marketing research or business
  analysis that is conducted
• Those who operate in a vacuum without strong
  awareness and the capabilities associated with
  broader market access issues are likely to find
  themselves at a disadvantage.at best being naïve
  is their approach but at the worst failing to get
  effective products to marketa loss to the
  company but also a loss to the patients
• Historic separation between market access
  activities from product marketing,
• We may need to recognise just how hardwired some
  of these changes may become in the future for
  payers and prescribers
• Increasingly economically savvy and strident
  customer groups, thinking and acting like mini
  regulators

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Create an appreciation for where the major
differences occur

• Cannot hope to cover all the detail of world
  healthcare systems in 90 minutes
• Illustrate some of the different types of models
  and approaches that exist
• Support critical questioning to strengthen the
  development of methodologies

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Develop ideas and hypotheses on ways to better
integrate and leverage marketing research
activities to the benefit of brand development

• Currently more separate than is ideal
• Market will favour those that understand the
  issues around market access since they are better
  able to contextualise the problem and any
  subsequent activities not least marketing
  research and business analysis
• Today's methodologies may not hold the same
  relevance in the future

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Agenda

• Healthcare Systems Page 3
• Gaining Market Access for Pharmaceutical
  Innovations
• the Great Game Page 15
• If Payors were to Play to Win Page 30
• Whither the Great Game? Page 35

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Healthcare Systems
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What do we mean by Healthcare Systems?

• We define Healthcare systems as
• The method and processes by which supportfor
  health and well being is provided

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Purpose of Healthcare Systems

• Objective of healthcare system
• Improve healthcare outcomes, e.g. life
  expectancy, child mortality, improved quality of
  life
• To prevent, control communicable diseases (public
  good)
• To do so efficiently, reduce waste, incorporate
  more efficient innovations
• Equitable access really political choice
  reflected in organisation of healthcare system
  dominant payor systems tend to espouse this, not
  multiple payor ones

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Amount spent in a country does not correlate with
national healthcare outcomes

• Amount spent in a country does not correlate
  with national healthcare outcomes

• These statistics based on averages wide
  discrepancies can exist based on region (e.g.
  Kerala in India), ethnic groups (e.g. blacks in
  USA), economic level (e.g. USA, China, India,
  Thailand, etc), age, etc.
• Perspective, i.e. in US if only look at insured
  outcomes better but then costs higher too
• Wider discrepancies tend to occur in countries
  where there is no coherent healthcare system
• Coherence enhances prospect of equity in outcomes

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Multiple Payors and Coherence

• Most countries have multiple healthcare payors
• If the healthcare system is coherent
• One payor dominates and others operate in its
  slipstream, e.g. France (multiple caisses
  complementary insurance), UK (complementary
  insurances)
• OR
• Multiple social payors are aligned through an
  overarching regulatory framework, e.g. Germany
• Providers concentrate on treating do not need
  processes to exclude patients
• Co-payment based on seriousness of condition (the
  more serious the condition, the lower the
  co-payment), with exemptions for the disadvantaged

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Coherence
VERSION A
Funding premiums, often by employer May not be
risk based
COMPLEMENTARYINSURANCE
NATIONAL/PUBLIC PAYOR
HEALTHCARECOSTS
Funding tax or premiums (citizens employers)
Balance of what is not paid/ reimbursed by others
PATIENTS
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Coherence
VERSION B
REGULATORY FRAMEWORK
Socialhealthinsurers
Social Health Insurers
HEALTHCARECOSTS
Balance of what is not paid/ reimbursed by others
PATIENTS
Funding premiums (citizens employers)
PrivateInsurance
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Non-coherent healthcare systems

• Non-coherent healthcare systems have no
  overarching regulatory framework
• Payors compete for good patients, so
• Seek to select and set premiums based on risk
  (not interested in covering expensive patients)
• Favour treatments that are financially beneficial
  to it
• Less interest in prevention or treatments for
  long-term outcomes
• Providers
• Charge different rates according to patients
  purse
• Devote resources to prevent access by
  non-qualified patients (US 300bn in 2007)
• Result
• Some patients not treated, treated late and
  treated in facilities to which have access,
• Usually this leads to
• Worse outcomes
• Higher costs
• Reduced cost effectiveness
• Coherence increases prospect of
• Greater equity in access to healthcare

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Is Payor Competition the cause of Non-Coherence?

• Non-coherent healthcare systems all have, within
  the same market (geographic, e.g. country, state
  population, e.g. urban, poor, etc.)
• Competing payors
• Competing providers
• But also have no overarching regulatory framework
  for payors and providers
• A healthcare system with competing profit making
  payors can be coherent if operates within
  regulated framework (e.g. Voss plan in
  Netherlands)

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Example Competing Profit Making Payors in a
Coherent System
Regulation Standard healthcare packageMaximum
premium for standard package
Reinsurance Organisation
Paymentflat amountper member (life)
Receipts based on risk profile of members(lives
covered)
Insurance fund
Insurance fund
Insurance fund
Funds compete Funds collectpremiums frommembers
Insurance fund
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Improving Outcomes and Efficiency

• Healthcare systems need to incorporate innovation
• Effective innovation
• Improves outcomes
• Reduces waste
• Reduce costs
• Innovation can impact at all phases of healthcare
• Data storage and transmission
• Size and organization of facilities
• Techniques for medical acts
• Pharmatherapies
• Etc.
• We will consider how pharmaceutical innovation is
  assimilated into the healthcare system in a few
  jurisdictions
• Pharmaceutical innovation directly benefits
  healthcare once it can be applied to patients
  i.e. once the drug incorporating the innovation
  has gained market access

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Gaining Market Access for Pharmaceutical
Innovations the Great Game
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Market Access the Great Game

• Payors
• Seek to provide improved healthcare services for
  their members subject to cost constraint
• Play in their jurisdiction against all
  manufacturers, in all/most therapy areas
• Drug Manufacturers
• Seek to increase net revenues
• Play globally against all payors, in selected
  therapy areas
• Game with good players, good sportsmen, poor
  losers, etc.

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Playing the Game

• In each market, payors set the rules
• Playing a sequence of one to one matches, against
  one payor for one market would be simple
• Company K vs Payor A Prize Access to Market A
• Company K vs Payor B Prize Access to Market B
• Company K vs Payor C Prize Access to Market C
• Great Game all matches are not equal
• Most major retail markets - single dominant payor
  (France, Italy, etc.)
• In some retail markets no clear payors
  outside hospitals (Thailand, China,
  Indonesia, etc.)
• - multiple payors (Canada, USA)
• - tiered payors (Canada, Spain)
• In hospital markets multiple payors common
• - tiered payors common

and also
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Further Complicating Factors

• Some payors
• Cheat they abdicate their responsibility for
  assessing viable price by relying on their
  colleagues in other jurisdictions
• Communicate with other payors
• Traders
• Engage in international price arbitrage, across
  some jurisdictions
• So, manufacturers need a market access strategy
  and implementation plan that addresses the rules
  of all significant payors (for the product),
  potential interactions between payors and the
  prospect of cross-border trade

International Reference Pricing
Cross Border Trade or Re-importation
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International Reference Pricing

• Details vary greatly
• Purpose (sets maximum or narrow price difference)
• Countries referenced (minimum criteria)
• Price levels used
• Products included
• Formula used
• Examples

• Netherlands
• Sets maximum pharmacy purchase price (wholesale
  selling price)
• May be re-calculated every 6 months
• Average of price to pharmacists in Belgium,
  France, Germany, UK (from all channels including
  cross border trade)

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International Reference Pricing Examples

• Ireland
• Sets maximum price to wholesaler
• Just at launch
• Minimum of wholesale buying price in UK NHS price
  and average of prices in Denmark, France,
  Germany, Netherlands, UK
• Canada
• PMBR monitors prices in each of the Provinces
  territories to ensure they are not excessive (set
  their own maximum reimbursed price)
• Price to wholesalers, pharmacies and hospitals
  (not interested in retail prices)
• One of the criteria
• Average of price in France, Germany, Italy,
  Sweden, Switzerland, UK, USA
• Data supplied by manufacturers and analyzed every
  6 months
• Greece
• Minimum price across Europe
• France, Japan

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International Price Referencing, Western Europe
Only formal price references are included
Portugal
Netherlands
UK.
Denmark
Austria
Greece
Ireland
Italy
Luxembourg
Germany
Sweden
Belgium
Switzerland
Spain
France
Finland
The boundary colours show whether the country
uses price referencing itself (formal - orange,
informal green, not blue)
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Europe Influences Rest of World
Italy
Switzerland
Australia
Germany
UK.
Belgium
Sweden
France
Brazil
Only formal price references are included
The boundary colours show whether the country
uses price referencing itself (formal - orange,
informal green, not blue)
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Price Reimbursement in France
Marketing Authorisation (AMM)
Commission dEvaluation des Medicaments (CEM)
Reimbursed en ville
Agrée aux Collectivités
Comité Economique des Produits de Santé (CEPS)
Drug included in GHS (DRG) ? T2A
NO Hors T2A
YEST2A
CEPS must approve price Centre/ARH sets use
conditions Centre funds
Free pricing - MAH negotiates price, conditions
with hospitals
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CEM (Commission de la Transparence)

• Assesses therapeutic importance of the drug,
  based on severity of disease and drugs safety,
  efficacy and importance in the treatment strategy
  for the condition (SMR)
• ? important ? moderate ? weak
• Evaluates product against therapeutic
  alternatives, ie improvement in medical benefit
  (ASMR)
• Based on
• Efficacy
• Side-effects
• Place within the therapeutic strategy
• Severity of the condition
• Whether it is preventative, curative or
  symptomatic treatment
• Expected or actual value for public health
• Defines target population
• If authorisation for retail sales requested
  recommends reimbursement level (based on SMR), of
  0, 35, 65 or 100
• Decides whether to recommend inclusion on
  hospital list, if requested

• allocates a score (ASMR)
• major
• important
• moderate
• minor
• none
• unfavourable

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CEPS (Economics Committee)

• CEPS (Economics committee) makes decision on
  prices
• negotiates price primarily based on comparator
  prices ASMR
• If ASMR
• 6 no price (not reimbursed)
• 5 discount of 30 to comparator (similar to
  generic)
• 4 discount
• 3 small discount to smaller premium
• 2, 1 or 3 (depot de prix procedure) - company
  may submit price coherent with prices in other EU
  G5 markets and CEPS will agree, unless previous
  breaches
• Other conditions apply
• agrees average dose with company
• sets volume constraints based on target
  population and company forecasts
• negotiates penalties for breach of contract
  including exceeding agreed volume
• company signs contract also agreeing to pay-back
  clauses
• PR approval process can take 10-12 months

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Drug Pricing Process in Japan
PFE price proposal
Health Policy Bureau (HPB) provide advice on
proposed approach
Submit PFEs Proposal
Health Insurance Bureau (HIB) submit own and PFE
price proposals
1st meeting Drug Pricing Organization
(DPO)Considers existence and suitability of
comparators necessity of applying
premiumProposes price
PFE does not accept price
PFE accepts price
2nd meetingconsiders appeal PFE allowed to
address DPO
PFE does not accept price
PFE accepts price
Draft pricing report sent to Central Social
Insurance Medical Council (Chuikyo)
Price added to NHI price list (60 to 90 days
after approval)
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Pricing of Innovative Drugs (with comparator)

• Complex multi-tiered system
• For innovative drugs with comparators (most
  common)
• Innovator price
• cost of comparator drug
• ? inter-specification adjustment
• premium(s)
• ? foreign price adjustment (AFP)

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Premiums

• Innovation premiums criteria
• have a clinically useful and new mechanism of
  action.
• objectively shown to have efficacy or safety
  superior to similar drugs
• objectively shown to improve the therapeutic
  methods for the target disease or injury
• objectively shown to improve medical usefulness
  through pharmaceutical modification
• Innovation a), b) and c)
• Usefulness I any two of a), b) or c)
• Usefulness II either b) or c) or d)
• Also premiums awarded for pediatric indications
  and limited market size

P alpha x (factor) log(daily
cost/C1)/log(C2/C1)
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Average Foreign Price Adjustment

• Countries contributing to AFP are
• France
• Germany
• UK
• USA

Decrease in price
150 of Average Foreign Price
Increasein price
Average Foreign Price
75 of Average Foreign Price
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If Payors were to Play to Win
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What would happen if payors started playing to
win?

• When paying for innovation
• Enforce claims made during negotiations
• Risk sharing
• Re-assess older drugs, adjust their price and
  reimbursement, alongside each new one
• Assess re-assess value of product across all
  indications,
• eg Japan
• Potential conflict with price consistency
• Consider all discounts and non-legitimate
  expenses as amounts to be clawed back
• Consider pharmaceuticals as a group rather than a
  series of silos
• eg NZ

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New Zealand
NEW PRODUCT(eg IN ONCOLOGY)
Agreed Price
A
Offered Price
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New Zealand
NEW PRODUCT(eg IN ONCOLOGY)
A
OLD PRODUCTS(EG IN GASTRO-INTESTINAL)
Old Price
CompetitorsProducts
OwnProduct
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New Zealand
NEW PRODUCT(EG IN ONCOLOGY)
A B
A
OLD PRODUCTS(EG IN GASTRO-INTESTINAL)
B
CompetitorsProducts
OwnProduct
NEW Price
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Whither the Great Game?
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Will the Great Game become Simpler or more
Complex?

• Greater national coherence
• Greater international coherence
• Premium prices will require major innovation
• Borderline/no innovation, will need convincing
  reason to be reimbursed at all
• Minor innovations, no price premium increased
  revenue from capturing larger market share
• Major innovations, national authorities will set
  price based on
• the incremental medical value (eg Fr, J)
• the cost effectiveness (eg De, NL, UK)
• Claims made in pricing application (efficacy,
  safety, cost effectiveness, target population,
  etc) will be part of contract
• Payors will limit growth in spending
• Funds to pay for new innovation will come from
  reduced funding for other therapies

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Healthcare Systems around the World

• Their Strengths and Weaknesses

David MacKenzie Konrad Wallerstein