Influence of Pharmaceutical Competition on Compensable Price Differential (EMI): A Dynamic in Favor of Freely Negotiated Hospital Price?

OBJECTIVES: Expenses of additional payment for costly drugs listed on the national out-of-DRG list are soaring in French hospitals. Among the cost control measures, a gain-sharing mechanism called “compensable price differential” (EMI) encourage each hospital to negotiate prices of these drugs, which are totally reimbursed by the national health insurance, by keeping half of the difference between the hospital purchase price and the national ceiling reimbursement tariff.

The dynamics of the EMI, seen as an incentive or a windfall income if it lasts over time, remain insufficiently studied. This study analyses the EMI over the last decade to assess the effectiveness of hospitals' pricing freedom in relation to the competitive environment.

METHODS: Claims data for reimbursement of out-of-DRG drugs and EMI granted have been collecting between 2013 and 2023 for the 38 Public Hospitals of Paris (AP-HP) for univariate analysis. Explanatory variables to the EMI were therapeutic classes, competitive environment (biosimilars, generics, oligopoly, monopoly) and time since the first competitor’s commercialization.

RESULTS: From 2013 to 2023, 133 million euros of EMI were generated with annual sums ranging from 3 M€ to 20 M€ [1% - 6% of the annual expenditures which doubled during the period]. Three pharmaceutics classes (immunosuppressants, antineoplastics, immunoglobulins) and six drugs accounted for 89% and 83% of EMI. The main determinant of EMI is existing competition. EMI trends of six biosimilars (84 M€ of EMI) and eleven generics (14 M€) were analysed in detail. EMI increased rapidly from the first competitor’s commercialization year and reached a peak at year +2, before a downward revision of the reimbursement tariff, which seems to intervene quicker for generics.

CONCLUSIONS: Hospital procurement procedures provide more flexibility than price administration by rapidly influencing downward prices when competition exists. Few drugs generate EMI with similar trends observed either being generics or biosimilars, allowing to model expected revenues.