Regulation of hospital drugs

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Abstract

A set of measures have been adopted to contain hospital drugs expenditures while guaranteeing accessibility to costly innovative drugs despite the implementation of the new method of financing hospitals on a per case basis.A price regulation scheme has been introduced to achieve the first objective and an exclusion of costly drugs from the per case rates aims to meet the second one.

Purpose of health policy or idea

Several measures have been adopted to regulate hospital drugs. They have two main objectives:

1. to guarantee that hospitals have access to innovative treatments within the new method of financing hospitals on a per case basis ;
2. to contain the sharp increase of health insurance funds expenditure on drugs delivered by hospital pharmacies for ambulatory patients.

In order to achieve these goals, the following measures have been (or are to be) passed:

1. costly innovative drugs used by hospitals will be paid by health insurance funds on top of the payment per case system which is to be implemented in 2005;
2. in order to be fully reimbursed for the cost of these drugs, hospitals will have to agree with the Regional Hospital Agency on a good use of drugs contract, otherwise they will only be compensated up to 70% of their expenditure;
3. an agreement between pharmaceutical companies and the Economic Committee of Health Products will set up a ceiling price for these drugs to be sold to hospitals. This last will also be the price on which is based the health insurance reimbursement level. It can be decreased if the national target for health expenditure is exceeded;
4. for the case where hospitals succeed in negotiating a lower price, the gain between this price and the ceiling price is shared with the Health Insurance funds;
5. the price of drugs sold to ambulatory patients by hospital pharmacies will also be regulated by the Economic Committee.

Main points

Main objectives

Regulation of hospital drugs expenditures through price regulation and improvement of good use of drugs;

Measures to insure accessibility to costly innovative treatments through specific budgeting.

Type of incentives

Financial

Groups affected

Pharmaceutical industry, Hospitals,, Health Insurance Funds, Regional hospital agencies

Degree of Innovation	traditional		innovative
Transferability	strongly system-dependent		system-neutral

Political and economic background

Both the sharp increase of hospital drugs expenditures in the last couple of years and the implementation of hospital financing on a per case basis constitute the political background of  this policy.

In 2003, two reports have emphasized numerous issues related to hospital drugs management: a specific report ordered by the Ministry of Health (Woronoff-Lemsi et al.) and the annual report for the Parliament on Social security by the Court of Account. One of these issues was the sharper increase in hospital drugs expenditure than in expenditure related to drugs sold by community pharmacies. In fact, this increase relates on two types of expenditures:

• expenditures for drugs delivered for inpatient care;
• expenditures for drugs sold by hospital pharmacies to ambulatory patient.

In the first case, the increase is mainly due to innovative treatments for which manufacturers enjoy a monopoly position that does not allow hospitals to negotiate good prices (according to the Court of Account, products under monopoly represent 80% of hospital drugs expenditures). Moreover, the two reports pointed out inequalities between hospitals in their ability to negotiate with manufacturers. These inequalities result in wide variations of prices between hospitals.

In order to ensure access to these expensive drugs, the Ministry regularly adds specific funds on top of the global budgets granted to hospitals.  This is the reason why the financing of these drugs was specifically taken into account when defining the new method of financing hospital on a per case basis.

The second case relates to hospital drugs sold to ambulatory patients. Some drugs can only be used in hospitals but nevertheless be accessed by ambulatory patient through hospital pharmacies.

In this case, they are paid by health insurance funds to hospitals. This process called "retrocession" raises numerous problems. The two reports mentionned above  identified the following as being the most important one: theoretically, due to safety reasons, retrocession should be reserved for drugs that can not be purchased in community pharmacies and the status of these drugs "reserved for hospital use" is defined by the marketing authorization. Manufacturers are suspected to ask for this status to bypass the price regulation applicable to all reimbursable drugs sold in community pharmacies.

The Court of Accounts advocates for the definition of a shorter list of products "reserved for hospital use". From 2000 to 2003, expenditures of the main health insurance funds for retrocession products has doubled (+98,4%, according to Cnamts, 2004).

These reports also emphasized numerous problems in drugs providing to patients in inpatient care that  lead to iatrogenic incidents. In this field, the idea to introduce financial incentive to promote the good utilization of drugs is definitely new.

Purpose and process analysis

Current Process Stages

	Idea	Pilot	Policy Paper	Legislation	Implementation	Evaluation	Change
Implemented in this survey?

Origins of health policy idea

Problems related to retrocession have been identified for several years, long before the recent dramatic increase. There have been several attempts to reform retrocession. In 1992, an Act had forbidden retrocession while allowing some exceptions that were to be stated in decrees of the Council of State. These last  never came out. Prior  to the Social Security Funding Act for 2002 that have regularized the retrocession (without solving the problem of the list of drugs concerned), several administrative texts have tend to regulate the system.

However, if the idea to shorten the list of the retrocession drugs is not new, the idea to regulate prices of these drugs is relatively new in policy papers. It challenges the principle of "freedom of prices" defined for hospital drugs in 1987.

The price regulation of costly innovative products is also new.  It is motivated by the sharp increase of expenditures that was challenging the sustainability of  access to innovative treatments as well as access to alternative hospital care. The implementation of the new funding method gives an opportunity to institute new modalities of payment for these drugs (expenditures for other drugs are included in rates defined by DRG).

Recently,  iatrogenic accidents as well as nosocomial infections and other medical incidents have been more and more publicized. However, despite a growing concern from policy makers to these phenomenon, efforts to improve prescription and delivering of drugs have mainly been local. The idea of introducing a financial incentive to promote good utilisation of drugs in hospital is new in the national public debate.

Approach of idea

The approach of the idea is described as:
new:

Stakeholder positions

The Bill for the Social Security Funding for 2004 can be considered as the only official policy paper on this policy.

Technical papers are also produced by the working group in charge of the implementation of the new method of financing hospitals.

Influences in policy making and legislation

The more important piece of legislation is the Social Security Funding Act for 2004. It states that :

• costly innovative drugs delivered in inpatient care will be financed on top of  payment per case rates;
• there will be a price regulation for retrocession drugs as well as for costly innovative drugs sold in hospitals;
• for the case where hospitals succeed in negotiating a lower price, the gain between this price and the ceiling price will be shared with the Health Insurance funds;
• the level of coverage of the cost of costly innovative drugs will be related on whether hospitals agree with the Regional Hospital Agency on a good use of drugs contract and on how they respect it.

The framework agreement signed between the pharmaceutical manufacturers' union (LEEM) and the Economic Committee of Health Products in March 2004 defines more precisely:

• the manufacturers' declaration procedure of  prices and the content of this declaration;
• the criteria justifying an Economic Committee's veto to the price proposed by the manufacturer (price "abnormally" high compared to the price in major EU countries, existence of a competitor offering a better price, or risk of misuse of the product leading to "abnormal" health insurance expenditures );
• the conditions for revising prices.

The agreement also plans the constitution of a group in charge of the follow-up and monitoring of its implementation.

In March 2004, a first list of costly drugs has been published by the working group in charge of the implementation of the payment on a per case basis.

Adoption and implementation

Since a framework agreement has been signed by the pharmaceutical industry (after three months of negotiation), the price regulation of hospital drugs is likely to be implemented.

As far as costly drugs are concerned, manufacturers will have to develop new strategies:  for a product being included in the list of costly drugs means that its price will be regulated but also that this product will be independently financed by the health insurance funds. Otherwise, the drug price will be negotiated directly with hospital (which is theoretically a less powerful purchaser than the Economic Committee) without any ceiling  but the payment for the drug will be included in the per case rate, which means that its utilisation will be compared by hospital doctors and managers with alternative treatments or products.

What about financial incentives for a better use of drugs? The commitments of each hospital are the following: to implement nominative delivering (Currently, the hospital pharmacy gives an amount of drugs to each service. However, it does not know to which patients drugs are delivered), computerization of delivering and data collection; elaboration of guidelines by the Commission for pharmaceuticals and medical devices existing in each hospital, participation to regional network to elaborate guidelines.

These commitments will be part of agreements signed by hospitals and Regional Hospitalisation Agencies. The content of these agreements (commitments and ways to monitor their respect) are not well defined and there is a debate to know if it should be defined nationally or by decentralized authorities (ARH). It is therefore difficult to appreciate the chances of success of this part of the policy.

Monitoring and evaluation

The framework agreement between LEEM and the Economic Committee states that its implementation, i.e. the implementation of price regulation has to be monitored and assessed.

The Economic Committee will be involved in the monitoring of hospital drug expenditures, on an annual basis.

The financing of costly innovative drugs will probably be also assessed by the working group in charge of the reform of hospital financing.

Results of evaluation

n/a

Expected outcome

It is difficult to know if the price regulation will allow cost-containment for very innovative drugs under monopoly, even if the Economic Committee is a bigger purchaser than isolated hospital or groups of hospitals.

The definition of a price ceiling should be likely to reduce inequalities in prices paid by hospitals.

The impact of the financial incentive to promote a better utilisation of hospital drugs is difficult to imagine. We can only notice that Regional Hospital Agencies  will have to be very strict to apply the principle of financial sanction in case of non compliance with the good practice agreements. And in the case of sanctions, the financial burden for the hospital will be high.

Impact of this policy

Quality of Health Care Services	marginal		fundamental
Level of Equity	system less equitable		system more equitable
Cost Efficiency	very low		very high

References

Sources of Information

Le médicament à l'hôpital, Rapport annuel au parlement sur la sécurité sociale, septembre 2002, Cour des comptes, pp 368-382. www.ccomptes.fr/Cour-des-comptes/publications/rapports/secu2002/activites-hospitalieres-relation-avec-soins%20ambulatoires.pdf

Le médicament à l'hôpital, Woronoff-Lemsi M.C., Grall J.Y., Monier B.,Bastiani J.P., 2003, Ministère de la santé, 81 p. www.sante.gouv.fr/htm/actu/med_hop/sommaire.htm

La rétrocession hospitalière : un passe-droit lucratif, La Revue Precrire, Novembre 2003, Tome 23, N°244, pp. 779-780. www.prescrire.org/editoriaux/EDI22914.pdf

La tarification à l'activité : modèle d'allocation des ressources et modalités de mise en œuvre, document de travail, Ministère de la santé : Mission Tarification à l'activité, August 2003. www.rees-france.com/pdf/DOC%20T2A.pdf

Projet de Loi de financement de la sécurité sociale pour 2004, n° 1106, déposé le 9 octobre 2003. www.assemblee-nat.fr/12/projets/pl1106.asp

LOI n° 2003-1199 du 18 décembre 2003  de financement de la sécurité sociale pour 2004 , Journal officiel, 19 décembre 2003. www.legifrance.gouv.fr/WAspad/UnTexteDeJorf?numjo=SANX0300139L

List of drugs excluded from  payment per case, March 2004: www.le-pmsi.org/dossiers/tarifs_reference/annexe6medic2.pdf

La rétrocession hospitalière, un doublement des dépenses en trois ans, Point de conjoncture, Cnamts, Mars 2004, N°23, pp. 14-16. www.ameli.fr/157/DOC/1340/article_pdf.html#

Accord cadre entre le Comité économique des produits de santé et les entreprises du médicament, 30 mars 2004. www.extranet.leem.org/UploadPublic/2004/Accord%20cadre%20hospitalier%20du%2030%20mars%202004.doc

Author/s and/or contributors to this survey

Valérie Paris (CREDES)

Suggested citation for this online article

Valérie Paris (CREDES). "Regulation of hospital drugs". Health Policy Monitor, April 2004. Available at http://www.hpm.org/survey/fr/a3/2