The following is taken from the Second Plenary Session, Monday October 25th, 2004, at the ISPOR 7TH Annual European Congress, Hamburg, Germany

Good morning. First of all, thank you very much for coming and thank you very much, ISPOR, for the invitation. I was one of the lucky ones to be at the first ISPOR European Congress in Cologne, Germany, and being here back after seven years it’s obvious that you have come a long way over those seven years. So congratulations. I’m working with the World Health Organization (WHO) and as a disclaimer, what I will be saying will not necessarily represent the official opinion of WHO. A couple of words of introduction on our organization, you will probably know WHO is the specialized agency on public health of the United Nations. Our headquarters is based in Geneva. For the European region as in every other continent we have a regional office based in Copenhagen. And I am particularly responsible for the area of medicines, the larger part of our work deals with the countries of the former Soviet Union and other Eastern European countries but we have been working quite closely with many of the EU and Western European countries on issues around appropriate use of medicines and pricing and reimbursement policies. Last year we were asked to do a review, of NICE in the UK. We have also currently just finalized a report which is called Priority Medicines for Europe and the world which is due to be published published shortly and it’s a report commissioned by The Netherlands government under the EU. Presidency and it is at a public health agenda for pharmaceutical R&D. I will be talking about some of the general policy issues, about what’s happening in reimbursement and cost effectiveness evaluations.

When we look across Europe, obviously at a governmental level there are a number of important policy objectives that we need to take into account when we talk about pharmaceuticals. First of all, we want to have equitable access for patients to effective and safe medicines. We need to make sure that we have appropriate prescribing and use of medicines. We need to make sure that we get value for money because this is largely a publicly financed system in all the European countries. And at the same time, we need to balance this with an industrial policy and with EU, European Union single market objectives. Obviously both from a pharmaceutical R & D industry point of view as well from a generics point of view, Europe is an important player in the world in that respect and obviously from a political point of view those issues need to be balanced. And at the same time it is important to again remind us about the underpinning values of our health care systems very much focused again on equitable access and solidarity. One of the major concerns, again well known to everybody is the rising cost of medicines often rising faster than inflation, rising faster than health care costs.

Most of the time, this relates to higher volumes and higher price components. It is important to think about what’s happening in, especially in the new European Union member states where again pharmaceutical spending is still much less than in the EU15, and in spite of dramatic increases in medicines spending over the last years already, 10, 20, 30 percent per year at times, it is probably likely to increase even further in order to increase coverage and to close a treatment gap. And of course the dilemma is clear: public finance cannot often keep up with the increase in drug expenditures. What can we do as health insurance; ministries of health? Well, one thing of course would be very easy, to say, we just need more budget, but where is it going to come from? Your Ministry of Finance will not be too happy to come up, to pay the bill all the time. Of course you can start looking at limiting the range of drugs to be reimbursed but then at the same time, are we covering medical needs and do we still provide quality treatment? We obviously have to look at increasing efficiency in terms of prices, prescribing, and use. But there again we need to have the investments and the programs to make that work. Or we can simply shift part of the burden to patients but then if we do that, which are we actually presenting the bill to and what does that do to our equity and solidarity? One of the concerns, again to everybody rising cost often rising

So it is obviously a complex dilemma and in practice you will see that countries are doing a bit of everything. It’s also important to again remind us on the policy environment in Europe where because of single market treaties of the European Union, we now after many years, we do have one single European regulatory framework and legislation. The whole issue of marketing authorization is one European policy. However, at the same time, everything that has to do with pricing and reimbursement under the “subsidiary” principle continues to be a national responsibility. Over the last couple of years, there have been a number of initiatives that are making inroads into this area particularly in terms of sharing and exchanging information. I assume that this trend will continue to grow over the coming years. We will still have national decision, but there will be some increase in terms of trying to share knowledge and experience in this field of pharmaceutical policies. Governments are using a whole plethora of policy measures, how to deal with improving access, containing costs, and improving prescribing. The best reviews, is the recent book that was done by the Observatory. The Observatory is a collaborative agreement between WHO, London School of Economics, the World Bank, and a number of European countries and organizations. It is compulsory reading for everybody who wants to have a good update on the issues in Europe in this area. inflation, than health

In practice, every European country, one way or another is putting in place a whole series of strategies to select medicines for public provision. It may be directly a positive list. It can be systems around reference pricing. It can be differential reimbursement percentages. Again there is a whole range of policy measures that countries are using in order to target those drugs that are needed and that are cost effective in order to get maximum outcomes for their patients in their national systems. There again I think it is important to sort of look at the three levels of where we get medical decision making. On one hand, for market entry, our regulatory authorities are using basically only quality, efficacy, and safety for deciding whether a drug can come to the market, then we got one way or another the fourth hurdle in terms of a reimbursement decision based on medical needs, added therapeutic value, cost effectiveness, budget impacts, etc., etc., again a range of criteria that are being used. But then afterwards again there’s medical practice where even other evaluations may take place. They may be done by National Health Technology Assessment Agencies. They may be done by drug bulletins. They may be done by professional associations. There may be therapeutic guidelines. One of the challenges often that you see in countries to try to make sure that your reimbursement decision and your therapeutic guideline or what happens further down the line is in fact congruent; so you do not have any discrepancies in those decisions in order not to get perverse incentives in the system. And this is again an area where we need to look much more closely in how that is actually being developed.

When we look at reimbursement decision making processes and we look at a more organized approach to that, obviously there are a number of things that are needed. On one hand, you need to have a clear decision maker, which normally is the government or the health insurance; we need to have an information source which may be either the industry or health technology assessment agencies. We need to have clarity on what information do we actually need for making that decision. So we need to have clear guidance on the information needed. We need to have a clear process, so one knows what the steps that are required are. And then finally we need a decision and guidance, so you know, if the decision is being taken, then what precisely that decision is. major concerns, well known is the rising medicines faster than rising faster care costs.

Often you will see that a process will mean that an industry makes a submission. There is a government or a health system that evaluates. There’s a committee that looks at the evaluation and considers value for money. There may be an area of price negotiation. And finally because of the budget impact issue, normally the minister will decide on whether a drug gets onto the system or not. This is a time-point decision; we need to think what happens afterwards, because obviously the situation will change. You will want to look at a review after the initial decision has been made. There may be issues around price, so you want to start looking at what is happening with the price of your product and in which way that may affect the cost effectiveness evaluation on which your initial decision was based. You may also want to look at certain restrictions or widening of indication because it may very well be that your initial decision was based on one indication but obviously after one or two years there may be new clinical information. You will look at the usage, particularly those countries that are using price volume arrangements. You want to look whether those are being complied with or how this is playing out and you want to look at the cost to the reimbursement system. There needs to be a coordination on all of it which obviously has a lot of cost implications. Most countries use something of a fourth hurdle. There may be countries that are using it basically for all medicine. The company needs to apply for getting a drug on the reimbursement scheme on the basis of a series of criteria. There are countries like England with NICE that is doing this in a more selective way. They do not look at every single drug but they choose and pick which are the drugs or technologies that they’ll be looking at on the basis of criteria like public health implications and cost implications in most countries, the two main approaches are cost minimization and acceptability cost effective is if there is a drug that is considered to be better than what we have, then we look how much more would we be willing to pay for that?

 It’s also important to look at the two levers that you basically have in your system: a drug is not cost effective but a drug is cost effective for a certain use, for a certain indication. So what are the means that you

have to restrict the use to those patients who are more likely to benefit? And the second one is obviously price that a drug may not be cost effective at a price of C= 10 per pack but it may be cost effective, considered to be cost effective at C= 8. If you want to do cost effectiveness evaluations, there are a series of implications I think of which the most important one really is the value judgment. The issues that Martin Buxton raised earlier and particularly in the range of thresholds and so on, we should really look at a value judgment and an informed value judgment. It must be pretty difficult and not desirable to really put a very clear threshold above which nothing will get reimbursed. Since a couple of years ago, WHO is bringing countries together to discuss with the pricing and the reimbursement authorities and to try to initiate this sort of sharing of information and experience. Those countries that already were in the process of implementing cost effectiveness evaluation, have found difficulties in the studies that were being presented, very much similar to what the Australians and what the Canadians found in the early 90s as well. This will need time in order to get the studies that provide the data and the information that are needed for decision makers to make appropriate decisions. If you want to have a system with a fourth hurdle in cost effectiveness, there are a number of things that you need in order to make it work. Obviously you need a separate licensing and reimbursement decision which we have in all the countries in Europe although in some countries it may be done through a similar agency but with different decision making processes. You would need to have a positive list. You would need to be able to say no to something if you do not consider that it is to be reimbursed. You need to have something of a price negotiation in order to be able to negotiate around the cost effectiveness. You need to have a system that would allow you again to restrict or to target your drug to the population that is most likely to benefit on that. And you will need to have adequate guidelines for submissions. You will need to be clear on what it is that you will be asking the sponsor to provide you in order to take the decision. And you need to have competent evaluation committee and you need to have a very consistent and an informed decision maker.

So again it’s challenges on all sides of the equation. I think it is also important to think in terms of the inclusiveness in the decision making process and that everybody can have input to this process, not only industry but particularly increasingly patient groups that may be in a position to provide important information particularly when it comes to value judgments. There are also issues around the reimbursement committee and how do you manage potential conflicts of interest. Most of the governments obviously work with external experts in this field. It is important to have clear guidelines on how do you manage these potential conflict of interest. And finally in many countries we have health technology assessment agencies that most of the time is not directly linked with the reimbursement decisions but often do a lot of contractual work for them. At a national level there are needs and possibilities for bringing things together. When using cost effectiveness analysis, there are growing requirements and there’s definitely an increasing need for resources. All the national governments that get involved in this, you get rapidly expanding expert committees and institutions. One has to relate cost-effectiveness evaluations to the values and the goals and also to the priorities of your health care system. Cost effectiveness, is not in a vacuum but you need to relate it in the health care environment in which you are. And again you also need to be able to effectively implement it. If you are not able to target patient groups on certain indications, then your initial analysis may be not very useful. The whole issue around “silo budgeting” obviously puts challenges to the implementation of this as well. Also increasingly because we do not get the data often that we would like to have in order to take the reimbursement decision, we are increasingly trying to look at sort of shared decision making or, instead of just saying, “okay, we are going to reimburse this drug”, that we get more conditional reimbursements and that we look at therapeutic outcomes down the line and that we make agreements with industry either in terms of price volume arrangements or in terms of therapeutic outcomes. The example of interferon in the UK may be an interesting thing to look at. We have to realize that again often at the moment of the reimbursement decision, we’re in an imperfect world. We do not get all the information we need. And we want to see in which way we can under a conditional arrangement, try to get better decisions but also better data down the line.

That brings us again to the issue of point decisions vis-a-vis continuous evaluation and how do you bring new information into your initial assessment. There are also still quite a lot of challenges around DALYs, QALYs, and value considerations. These issues when reimbursement authorities are taking decisions will need to be further debated and informed. For example, it may have to do with survival and quality of life in severe diseases. Although QALYs try to take that into consideration, but as reimbursement authority, you will be inclined to look more at survival in severe diseases, to rule of rescue (those people who happen to suffer from diseases that only affect very few people, obviously they would have the same right and the same equitable right to have access to drugs). There are discussions about “fair innings”. Yesterday somebody talked about one of the countries where it appeared that intravenous drug users were not getting the medicines they needed: so implicit decisions in health care systems are made where certain people might not get the drugs that they needed because of certain fault and culpability considerations. An important issue again is the potential for misuse and leakage: if your system is not able to target patients, then you might end up with a decision that gives you a lot of extra costs without getting more benefits around that. A final word on international collaboration: a Euro NICE? It’s very important to recognize that each system is different and that there are also different levers and different solutions in each system. However, the problems that all countries are facing tend to be the same. There are similar cost drivers and particularly the evidence, ultimately the clinical evidence that we’re looking at, at the point of the reimbursement decision is basically the same for every country and that may be an area where we could try to work further in sharing experience and information. Some final conclusions in terms of broad public health: health care systems in Europe will continue to be based on values in terms of quality treatment, equitable access, and solidarity. We will see definitely a continued selection of medicines based on need and efficiency for reimbursement.

It’s clear that all countries are very emphatically trying to stimulate the use of generics as one effective way of controlling costs in health care. Improving prescribing and use, although we know the problems around already for 30 or 40 years continue as one of the key issues where improvements are needed and where improvements can also provide great benefits to patients and to the system as a whole. Negotiation and purchasing capacity of buyers will further develop over the next years and most countries are already shifting to reference price systems in order to rationalize payments within their health care system and allowing maximum benefit in a constrained environment. Thank you very much for your attention.

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