Pharmaceutical Industry Funding Challenges

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Pharmaceutical Industry Funding Challenges

• Val Beaumont
• July 07

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True Cost Reflection Of Medicines As A
ComponentOf Healthcare Expenditure
Total Meds Incl. Disp Fee
R bn.
Total Meds Excl Disp. Fee
CMS Annual Report 2000-6 Disp Fee 2000-2003
50-30 Disp Fee 2004-2005 Max 26
Medicine Expenditure Trend Declining Back To
1990s Levels
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SA Healthcare Component Cost Evolution- 1997-2005
Source CMS Annual Report 2005/6
Medicine Expenditure Trend Declining Back To
1990s Levels
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Regulatory And Managed Care Impact On Medicine
Expenditure 1997 To 2005
R 16 bn.
Managed Care Interventions
Drug Utilization Review/Clinical Entry Criteria
Regulatory Interventions
Medical Schemes Act
PMB CDL
PMBs
Single Exit Price
Solvency Requirements
IBP
Medicines Expenditure
Unregulated
Regulated
1997
2005
1998
1999
2000
2001
2002
2003
2004
SA Spend On Medicines In Line With International
Benchmarks OECD Benchmarks
Medicines No Long A Cost Driver In Private Sector
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Benchmarking Medicines As A Percentage Of
Healthcare Spend.(2004 OECD Data)

Including Dispensing Fees
Sources OECD Health Report 2006 (Data 2004),
South Africa 2005-6 CMS Annual Report Figure 12,
Pg 50 (Includes Dispensing Fees), South Africa
2005-6 CMS Annual Report Pg 88,89,90 Annexure I,
Pg 99 Annexure K (Includes Dispensing Fees)
SA Spend On Medicines In Line With OECD Benchmarks
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Medicine Expenditure Benchmarked Against Other
Healthcare Expenditure Components
If We Include Non Healthcare Expenses In The
Healthcare Pie For 2005
( 2005-6 CMS 15.70)
CMS Annual Report 2005-6
Non Healthcare Costs Consume More Than Medcines
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Complexity Of Member Access To Medicines-
Influencers Of Patient Medicine Choices
381 Plan Options
139 Medical Schemes
Each With Different Benefits Rules
Formularys
Co-Pays
Clinical Entry Criteria
DSPs
Chronic Application Forms
Clinical Motivation Forms
Do These Member Access Barriers Lead To Healthier
Members?
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Key Challenge For Entire Healthcare Sector-
Focus On Cost Versus Clinical Value
Cost
Clinical Value

• SEP
• Provider Tariffs
• Per Diems
• More Co-pays for members

• Patient Outcomes
• Healthcare Outcomes
• Healthcare Quality
• Pharmaco
• - economics

Who provides The Balance For Members?
Footnote Source Source
Does Competing On Cost Alone Lead To Healthier
Members?
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Cost Of Pharmaceutical Innovation In South
Africa- Focus On New Medicines
New chemical entities that entered the South
African Healthcare market after 2003, resulted in
annual increases in medicine item cost of 0.7
and 1 for the respective periods.
Source Mediscor Medicines Review 2006
Incremental Cost Of New Medicines Has A Marginal
Impact On Medicines Expenditure
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Understanding Reported Medicines Expenditure- In
Hospital Out Of Hospital Medicines2000-2005
R bn.
CMS Annual Report 2000-6
15.70 Reported Only Out Of Hospital Including
Dispensing Fees
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Interests Should be Aligned For The Benefit Of
Healthy Members

• Provider

• Managed Care

• Scheme

Patient
Can We All Do A Better Job In Ensuring Members
Are Experiencing Value from Our Products And
Services?
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Conclusions A More Member Focused Approach

• Medicines No Longer A Cost
• Driver In SA Market
• Due To Regulatory And
• Managed Care Interventions

• Medicines Costs In Line
• With International Benchmarks

• Members Access To Life
• Saving Medicines A Complex
• Process Which Might Not
• Be Incorporating The
• True Value Of The Medicine

• New Innovative Medicines Have
• Been Proven Not To Drive
• Total Medicines Costs For
• Schemes

?Balancing Cost With Clinical Value For Members
Best Interest Should Be The Focus Area For All
Stakeholders