Reform on pharmaceuticals - Follow up

• Abstract
• Characteristics of this policy
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: Health Policy Developments 10

Abstract

The government made a proposal for several reforms on legislation concerning pharmaceuticals in autumn 2005. Parliament accepted the reforms with only minor changes and they came to force in the start of 2006. Among other things the reforms have decreased the prices of pharmaceuticals, increased the availability and decreased the prices of nicotine products, and restricted the scope of generic substitution.

Recent developments

The government made a proposal for several reforms on legislation concerning pharmaceuticals in autumn 2005. The most important changes in the reform were the exclusion of some drugs from the reimbursement system, lowering of maximum wholesale prices by 5 %, exclusion of part of the new drugs from generic substitution and allowing the sales of nicotine replacement products in shops, kiosks and gasoline stations. There were also other, less significant reforms introduced by this legislation change (see HPM 6/2005).

Firstly, according to the new legislation reimbursement of a drug can be rejected altogether if drug is used only temporarily or for the treatment of only mild diseases, if a drug has insignificant benefits or if a drug is not used to treat a disease. This was named the "no-reimbursement category". Before the reform only excessive price was a proper reason to reject reimbursement.

Secondly, due to legislation, maximum wholesale prices decreased by 5 % from the start of 2006. In practice this lowered the prices of drugs which are sold by the maximum price set by the Pharmaceutical Pricing Board. For example generic products are usually already sold by much lower prices than this and the reform did not influence their prices.

Thirdly, in the legislation change the drugs which do not have a product patent, but have a process patent in Finland and also have product patents in five other European countries were excluded from the generic substitution (introduced in 2003). They are excluded even when there would be generic alternatives sold legally in Finland. The government felt that without this restriction the pharmaceutical industry does not have the possibility to get adequate financial compensation from the Finnish markets.

Fourthly, by the legislation change the sale of nicotine replacement products was allowed for shops, kiosks and gasoline stations (only those in which tobacco products are sold also). Permission is needed from the municipality for this.

Degree of Innovation	traditional		innovative
Degree of Controversy	consensual		highly controversial
Structural or Systemic Impact	marginal		fundamental
Public Visibility	very low		very high
Transferability	strongly system-dependent		system-neutral
current    previous

The reform of the sale of nicotine replacement products was a rather fundamental change as this was the first time that a pharmaceutical product is allowed to be sold outside of pharmacies in Finland. This opens up the debate if the selling of other prescription free drugs should also be allowed. Furthermore, the introduction of the "no-reimbursement category" was - in theory if not in implementation- a rather fundamental change. Several of the reforms were rather controversial.

Purpose and process analysis

Current Process Stages

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

Initiators of idea/main actors

• Government

• Parliament

• Patients, Consumers

• Private Sector or Industry

Stakeholder positions

The stakeholders' positions have not changed since the last report. The pharmaceutical industry is strongly supporting the restriction on generic substitution. The expansion of the selling of nicotine replacement products is still strongly opposed by the Association of Finnish Pharmacies, as the reform has decreased their profit, while the Ministry for Social Affairs and Health is strongly supporting it. Overall there has not been much public discussion on these reforms after the legislation change (except somewhat on the reform concerning nicotine replacement products).

Actors and positions

Government
The Ministry for Social Affairs and Health	very supportive		strongly opposed
Parliament
Parliament	very supportive		strongly opposed
Patients, Consumers
Patients	very supportive		strongly opposed
Private Sector or Industry
Pharmaceutical industry (price cut)	very supportive		strongly opposed
Pharmaceutical industry (GS change)	very supportive		strongly opposed
Pharmacists (nicotine products)	very supportive		strongly opposed
current    previous

Influences in policy making and legislation

Parliament accepted the reform with only minor changes and it came into force in the start of 2006. The only change made by parliament that was of some significance was that after the annual out-of-pocket ceiling (about 600 euros) has been reached, a patient has to pay only 1,5 euros per prescription instead of 3 euros which the government had proposed. During the legislative process parliament was rather heavily lobbied by pharmaceutical companies, pharmacists, representatives of shop owners and patient organisations. Patient organisations we particularly concerned about changes in the out-of-pocket payments. However, the changes had a rather small overall effect on out-of-pocket payments.

Legislative outcome

Enactment

Actors and influence

Government
The Ministry for Social Affairs and Health	very strong		none
Parliament
Parliament	very strong		none
Patients, Consumers
Patients	very strong		none
Private Sector or Industry
Pharmaceutical industry (price cut)	very strong		none
Pharmaceutical industry (GS change)	very strong		none
Pharmacists (nicotine products)	very strong		none
current    previous

Positions and Influences at a glance

Adoption and implementation

The implementation of the "no-reimbursement category" has proven to be difficult and reimbursement has not been rejected or cancelled for any drug based on the new criteria. These decisions should be made by the Pharmaceutical Pricing Board (PPB) of the Finnish Ministry of Social Affairs and Health having civil servants from different state agencies as members. Mild disease, temporary use and insignificant benefit are found to be hard to explicitly define in practice. Additionally, many drugs which generally could fulfil these criteria can be important for some specific groups of patients.

By contrast, the lowering of maximum wholesale prices by 5 % was a rather successful reform. Pharmaceutical companies strongly opposed this and stated that they might have to take some drugs out of the reimbursement system because of this reform. However, no drugs were removed from the reimbursement system and partly as a result of this reform the total pharmaceutical whole sale expenditure decreased by 0,7 % in the years 2005-2006 (in the year before expenditure had increased by 6,7 %).

The government estimated that due to the restriction of generic substitution a maximum of 20 million euros of annual savings would be lost. However, it is now estimated that the negative financial consequences of this change are more significant for patients and society. There has been some debate on the rationality of the restriction.

The reform on the sale of nicotine replacement products increased their availability and decreased their prices. In January 2007, nicotine products were sold not only in approximately one thousand pharmacies, but also in 2375 shops, 355 gasoline stations and 714 kiosks. The wholesale trade in nicotine replacement products grew by 41 per cent, but a part of the increased sales could be accounted for by the filling of stores. The prices of nicotine replacement products decreased by 15 per cent on average as a result of price competition and the removal of the pharmacy fee. Currently nicotine replacement products are cheaper in shops than at pharmacies, kiosks and gasoline stations, but pharmacies have the largest assortment. There exist also considerable price differences between pharmacies.

Monitoring and evaluation

The Ministry for Social Affairs and Health set up a working group to monitor the reform on the sale of nicotine replacement products. In 2007 the working group considered that reform successful. It also proposed, among other things, that selling these products should also be allowed in restaurants and that the requirement that the products may be sold only in shops which sell tobacco should be removed.

Expected outcome

The implementation of the "no-reimbursement category" failed. By contrast, the lowering of maximum wholesale prices by 5 % was a rather successful reform. It temporarily decreased the growth of pharmaceutical spending in Finland. The reform on the sale of nicotine replacement products was successful and there are no signs that the reform has increased the inappropriate use of these products. The restriction of generic substitution is estimated to have a significantly more negative effect on patients and on the containment of pharmaceutical expenditure than expected without any advantages to society. It is probable that the rationality of this restriction is considered again , when a possible introduction of reference pricing system is discussed in the near future.

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
current    previous

Many reforms introduced by this legislation had an impact to the costs of drugs, both decreasing and increasing them.

References

Sources of Information

Working group memorandum (expanded sales of nicotine replacement preparations), the Ministry for Social Affairs and Health 2007:21 http://www.stm.fi/Resource.phx/publishing/documents/10602/summary_en.htx

Reform formerly reported in

Reform of legislation concerning pharmaceuticals Process Stages: Legislation

generic substitution of prescription drugs Process Stages: Implementation

Generic Substitution of Prescription Drugs Process Stages: Implementation, Legislation

Selecting drugs to a higher reimbursement category Process Stages: Implementation, Legislation

Restrictions for generic substitution Process Stages: Policy Paper, Idea

Author/s and/or contributors to this survey

Lauri Vuorenkoski

Suggested citation for this online article

Lauri Vuorenkoski. "Reform on pharmaceuticals - Follow up". Health Policy Monitor, October 2007. Available at http://www.hpm.org/survey/fi/a10/5