Pharmaceutical expenditure has increased rapidly across many Organisation for Economic Cooperation and Development (OECD) countries over the past three decades. This growth is an increasing concern for governments and other third-party payers seeking to provide equitable and comprehensive healthcare within sustainable budgets. In order to create headroom for increasing utilisation, and to fund new high-cost therapies, there is an active push to ‘disinvest’ from low-value drugs. The aim of this article is to review how reimbursement policy decision makers have sought to partially or completely disinvest from drugs in a range of OECD countries (UK, France, Canada, Australia and New Zealand) where they are publicly funded or subsidised. We employed a systematic literature search strategy and the incorporation of grey literature known to the authorship team. We canvass key policy instruments from each country to outline key approaches to the identification of candidate drugs for disinvestment assessment (passive approaches vs. more active approaches); methods of disinvestment and value-based purchasing (de-listing, restricting treatment, price or reimbursement rate reductions, encouraging generic prescribing); lessons learnt from the various approaches; the potential role of coverage with evidence development; and the need for careful stakeholder management. Dedicated sections are provided with detailed coverage of policy approaches (with drug examples) from each country. Historically, countries have relied on ‘passive disinvestment’; however, due to (1) the availability of new cost-effectiveness evidence, or (2) ‘leakage’ in drug utilisation, or (3) market failure in terms of price competition, there is an increasing focus towards ‘active disinvestment’. Isolating low-value drugs that would create headroom for innovative new products to enter the market is also motivating disinvestment efforts by multiple parties, including industry. Historically, disinvestment has mainly taken the form of price reductions, especially when market failures are perceived to exist, and restricting treatment to subpopulations, particularly when a drug is no longer considered value for money. There is considerable experimentation internationally in mechanisms for disinvestment and the opportunity for countries to learn from each other. Ongoing evaluation of disinvestment strategies is essential, and ought to be reported in the peer-reviewed literature.
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Now the National Institute for Health and Care Excellence (NICE).
For example, funding of diabetes nurses to teach diabetes patients how to self-administer insulin or use an insulin pump.
If the SMR is ‘major or considerable’, ‘moderate’ or ‘low but nevertheless justifying reimbursement’ it can be included in the list of reimbursable drugs, while drugs rated as ‘insufficient’ or ‘of low medical benefit’ are not covered.
The ASMR is rated in comparison with the other drugs already available in the same therapeutic area on a scale from I to V, with ASMR-I being given to a drug providing a major improvement and ASMR-V to drugs providing no or inadequate improvement.
Before 1999, INN prescribing was not allowed.
When the first generic enters the market, the price of the originator drops by 20 % and the price of the generic is fixed 60 % lower than the initial price of the originator. 18 months after, the price of the originator decreases again by 12.5 % and the price of the generics drops by 7 %. TFR is introduced if the substitution rate by pharmacists is lower than 80 %.
The life-saving drugs programme is a programme separate to the PBS which subsidises expensive life-saving drugs for very rare life-threatening conditions.
The current restriction for dabigatran is that the patient must have one or more of the following risk factors for developing stroke or systemic embolism: (i) prior stroke (ischaemic or unknown type), transient ischaemic attack or non-central nervous system systemic embolism; (ii) age 75 years or older; (iii) hypertension; (iv) diabetes mellitus; or (v) heart failure and/or left ventricular ejection fraction 35 % or less.
The arrangements for secondary care are left to individual institutions, with usage and purchasing negotiated by the healthcare professionals employed by that organisation.
Now the National Institute for Health and Care Excellence.
In 1984, the Canada Health Act outlined the basic tenancy of the healthcare system, establishing the underlying foundational principles of comprehensiveness, universality, portability, accessibility and public administration. Comprehensiveness establishes that all basic medical needs must be covered, while universality and portability ensure that all citizens are covered in all provinces regardless of their home province. Accessibility ensures that all citizens have reasonable access to the system and the tenet of public administration reconfirms Canada’s commitment to a public healthcare system.
(1) The health needs of all eligible people within New Zealand; (2) the particular health needs of Maori and Pacific peoples; (3) the availability and suitability of existing drugs, therapeutic medical devices and related products and related things; (4) the clinical benefits and risks of pharmaceuticals; (5) the cost effectiveness of meeting health needs by funding pharmaceuticals rather than using other publicly funded health and disability support services; (5) the budgetary impact of any changes to the Pharmaceutical Schedule; (6) the direct cost to health service users; (7) the Government’s priorities for health funding, as set out in any objectives notified by the Crown to PHARMAC, or in PHARMAC’s Funding Agreement, or elsewhere; and (8) such other criteria as PHARMAC thinks fit.
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Bonny Parkinson and Adam Elshaug contributed to the conception and developed the structure of the paper. The initial systematic review was conducted by Moni Choudhury. All co-authors contributed to the acquisition of information about the policy situation in their respective countries. Bonny Parkinson was responsible for compiling each country’s contribution to the paper. All co-authors contributed towards drafting and revising the intellectual content of the manuscript, and approved the final version for publication. Associate Professor Adam Elshaug is the guarantor for the overall content.
We are indebted to the anonymous reviewers whose comments greatly improved this paper. An astute summary observation made by reviewer two has been adapted and included in the conclusion section. We acknowledge this input and thank him/her for allowing its inclusion.
Compliance and ethical standards
Funding Statement: This research was funded in part by an Australian National Health and Medical Research Council (NHMRC) Capacity Building Grant (ID 571926) and an NHMRC Centre of Research Excellence in Medicines and Ageing Grant (ID 1060407). Associate Professor Elshaug is supported by the HCF Research Foundation as the HCF Research Foundation Principal Research Fellow, and holds an Australian NHMRC Sidney Sax Fellowship (ID 627061). Associate Professor Sallie-Anne Pearson is a Cancer Institute New South Wales Career Development Fellow (ID 12/CDF/2-25) and an Australian Health Policy Research Fellow. Dr Fiona Clement is supported by a Harkness/Canadian Foundation for Healthcare Improvement in Health Care Policy and Practice fellowship.
Conflicts of interest: Bonny Parkinson, Catherine Sermet, Fiona Clement, Brian Godman and Ruth Lopert have no conflicts of interest to declare. Steffan Crausaz is the Chief Executive of PHARMAC, the New Zealand Government agency responsible for the funding of medicines in New Zealand, as well as the budget for such funding. He has an interest in purchasing and disinvestment since these are related to the performance of PHARMAC. Sarah Garner is directly employed by the National Institute for Health and Care Excellence (NICE). Moni Choudhury is directly employed by NICE. Sallie-Anne Pearson is a member or the Drug Utilisation Sub-Committee of the Australian Pharmaceutical Benefits Advisory Committee (PBAC). Rosalie Viney is a member of PBAC and its Economics Sub-Committee. Adam G. Elshaug receives consulting/sitting fees from Cancer Australia, the Capital Markets Cooperative Research Centre—Health Quality Program, NPS MedicineWise, and the Australian Commission on Safety and Quality in Health Care. Catherine Sermet is a member of the Economic Evaluation and Public Health Committee of the HAS (French National Authority for Health). The views presented are those of the authors and do not reflect those of any of the entities with which they are affiliated.
Box 1: France
Broader Health and Pharmaceutical Policy
The French healthcare system is of a mixed type, structurally based on a Bismarckian approach with Beveridge goals reflected in the single public payer model, the current increasing importance of tax-based revenue for financing healthcare and strong state intervention. The Statutory Health Insurance (SHI) (Sécurité Sociale) was established in 1948 and covers currently almost 100 % of the resident population. Financial responsibility for healthcare in France is mainly borne by SHI. However, SHI only funds around three-quarters of health spending, leaving considerable scope for complementary sources of funding such as private supplementary health insurances .
Of the total pharmaceutical expenditure (including prescription and over-the-counter drugs), 67.5 % is funded by the SHI, 1.3 % by the state, 14.3 % by private supplementary health insurances and 16.9 % by patients themselves. Only medicines on the ‘list of reimbursable drugs’ are reimbursed by the SHI. The Transparency Commission assesses a drug’s medical value [service médical rendu (SMR)]Footnote 3 and improvement in the medical value [amélioration du service médical rendu (ASMR)]Footnote 4 in order to decide whether a drug should be included on the list of reimbursable drugs and to set prices. Four criteria are used to assess the SMR rating: (1) seriousness of the pathology/disease in question; (2) effectiveness of the drug and its potential adverse effect profile; (3) place of the drug in the therapeutic process in relation to alternatives currently available in France; and (4) impact of the drug on public health . Subsequent reimbursement rates varies between 0 % for ‘no or inadequate therapeutic value’, 15 % for low therapeutic value, 35 % for ‘moderate therapeutic value’ and 65 % for ‘major or considerable’ therapeutic value. In 2012, prescription drugs were reimbursed at an average rate of 70 % by SHI. All or substantially all of the remaining 30 % are covered by private supplementary health insurances for the 95 % of the French population having one.
Methods Used to Identify Potential Candidates, Criteria for Assessing Candidates and Methods Used to Implement Disinvestment
Disinvestment in drugs has mainly involved de-listing and price reductions. From 2000 to 2004, the Transparency Commission comprehensively re-evaluated 4490 drugs on the market at the time . Drugs with an SMR rating of ‘insufficient’ (n = 835) were subsequently removed from the list of reimbursable drugs, including mucolytics, expectorants and histamine H2 receptor antagonists . The concept of drugs with ‘insufficient medical value’ encompassed drugs that had been superseded by newer, more effective drugs; drugs considered dangerous; and drugs no longer considered effective. Economic considerations were not a major concern in the process. At the same time, 840 other drugs received an SMR rating of ‘moderate or low medical value’. As a consequence the reimbursement rate of 617 products was reduced from 65 to 35 %, which impacted drugs such as analgesics, antihistamines, antiseptics and antifungals . The changes in ratings were heavily contested by the industry. As a result, 763 of the drugs that were rated as ‘insufficient’ were re-evaluated in three waves between 2003 and 2006, although 525 were confirmed as insufficient and subsequently de-listed . In 2010, the reimbursement rate for drugs with ‘low medical value’ was lowered to 15 %, resulting in the re-assessment of those drugs in order to confirm the SMR rating.
Following the review in 2000–2004, three different processes were put into place . First, the Transparency Commission conducts a systematic re-assessment 5 years after the drug is first listed on the list of reimbursable medicines. This includes a re-assessment of the SMR taking into account any new evidence available. Second, the Transparency Commission may conduct a re-assessment of a therapeutic class. The reasons for a class re-assessment are a lack of data on efficacy at the time of the first assessment, or the introduction of the new reimbursement rate of 15 %. Finally, a single drug may be assessed for the same reasons as before. The latter two processes may be initiated by the Ministry of Health or by the Transparency Commission.
As for other countries, safety issues have been another reason for disinvestment in France. The most well-known example in recent years was the case of benfluorex, a drug indicated for the management of overweight in patients with type 2 diabetes mellitus or as adjunct to diet in hypertriglyceridaemia and widely used off-label for treating obesity. On the market in France since 1987, benfluorex was re-evaluated in 1999 and rated as being of ‘insufficient medical value’. This decision was challenged by the manufacturer, leading to a second evaluation in 2006 which was inconclusive and allowed benfluorex to keep its reimbursement rate of 65 % . Finally, benfluorex was withdrawn from the market in November 2009 after the discovering of severe cardiac complications . Occasionally, disinvestment due to safety issues has gone beyond the recommendations of the European Medicines Agency (EMA). This was the case for pioglitazone, which was withdrawn from the market in France while the EMA authorised the drug with a warning on safety .
France has also introduced a range of measures in order to enhance the utilisation of generics versus originators: allowing pharmacists to substitute between originator and generic drugs was introduced in 1999; voluntary international non-proprietary name (INN) prescribing was introduced in 2002;Footnote 5 and a pay-for-performance scheme [rémunération sur objectifs de santé publique (ROSP)] was extended to include prescribing targets for generic prescriptions for statins (HMG-CoA reductase inhibitors), antibiotics, treatments for hypertension, etc. in 2012. More recently, mandatory INN prescribing was introduced in 2015 after certification of all medical software.
Other measures have also been introduced in order to decrease the cost of generic drugs, including a reference pricing scheme introduced in 2013, where reference prices for each generic group are based on the average prices of the generics in the French market [Tarif forfaitaire de responsabilité (TFR)]; and mandatory price reductions following the introduction of a generic drug.Footnote 6 The aim of these policies was to convince physicians to switch as many prescriptions as possible from the originators to their generic counterparts .
Box 2: Australia
Broader Health and Pharmaceutical Policy
The Commonwealth Government of Australia has subsidised access to drugs since 1948 via the Pharmaceutical Benefits Scheme (PBS) . Through the PBS, the Commonwealth Government aims to provide affordable, timely and equitable access to necessary drugs to Australian patients at an affordable cost to the Government. The PBS is one of three pillars of the Australian health system, the other two being free treatment in public hospitals and subsidised out-of-hospital medical services through Medicare.
The PBS provides reimbursement for medicines prescribed in the community and dispensed by community pharmacies, as well as some drugs dispensed in private hospitals, and some drugs dispensed at public hospitals or specialist treatment centres (i.e. Section 100 drugs). In 2005, 59 % of items listed on the PBS schedule were restricted in some form and 27 % of PBS items were subject to authority-required restrictions .
The Pharmaceutical Benefits Advisory Committee (PBAC) makes recommendations regarding which drugs should be listed on the PBS schedule and which vaccines should be listed on the National Immunisation Programme schedule . The PBAC is required to consider [92, 93] “the [clinical] effectiveness and cost of therapy involving the use of the drug, preparation or class, including by comparing the effectiveness and cost of that therapy with that of alternative therapies, whether or not involving the use of other drugs or preparations”. In 1993, Australia became one of the first countries to require that an economic evaluation form part of the evidence submitted when considering the funding of a new drug .
Methods Used to Identify Potential Candidates, Criteria for Assessing Candidates and Methods Used to Implement Disinvestment
Traditionally, de-listing drugs from the PBS has been largely confined to withdrawal by a manufacturer for reasons other than safety concerns ; de-listing due to withdrawal of market approval by the Therapeutics Goods Administration, usually on safety grounds (e.g. rofecoxib in 2004); and de-listing after the drug is rescheduled and becomes available for purchase over the counter (e.g. antifungal creams in 1997–1998) [95, 96]. This is primarily because the PBAC has traditionally been passive, considering applications submitted to it, usually by manufacturers seeking PBS listing of new drugs (or new indications), rather than proactively reviewing drugs already on the formulary. Thus, instead of active disinvestment and de-listing, it is ultimately prescribers who elect to cease prescribing treatments they consider to be less effective or more toxic than more recently PBS-listed drugs.
This has changed recently, with the PBAC conducting a series of post-market reviews of PBS-listed drugs. These reviews have been initiated due to “concerns related to the quality use of a medicine, cost effectiveness, clinical effectiveness, higher than predicted utilisation and/or international differences” in utilisation . These reviews may be initiated by PBAC or by referral from the Minister for Health. Reviews have been conducted for the following classes of drugs: biological disease-modifying antirheumatic drugs (bDMARDs) , treatments for Alzheimer’s disease  and anticoagulation therapies , and are currently in the process for products used in the management of diabetes , treatments for asthma in children  and the life-saving drugs programme .Footnote 7
These post-market reviews have resulted in a number of recommendations to ensure the cost effectiveness of a PBS-listed drug in clinical practice. In some cases, this disinvestment took the form of requiring a price reduction. For example, as a result of the review of treatments for Alzheimer’s disease, the PBAC recommended that none of the PBS-listed drugs under review should be de-listed but a 40 % price reduction should be applied . Similarly, as a result of the review of bDMARDs the PBAC also recommended a price reduction; however, the manufacturer of anakinra did not agree to the new price and the product was withdrawn by the manufacturer [41, 42]. In other cases, this disinvestment took the form of restricting treatment to certain patients. For example, the review of anticoagulation therapies to treat atrial fibrillation recommended restricting new oral anticoagulants to “patients unable to tolerate warfarin therapy and/or who are unable to obtain satisfactory international normalised ratio (INR) control despite specific measures” . This restriction is yet to be implemented .Footnote 8
Over the past 20 years Australia has also introduced a range of measures to enhance the utilisation of generics versus originators, such as permitting brand substitution by pharmacists even if the prescription specifies a particular brand, unless the prescriber indicates that “brand substitution is not permitted” and subject to the patient’s agreement , paying pharmacists an incentive to dispense a benchmark-priced off-patent medicine , increasing consumer awareness of generics , and addressing the concerns of clinicians regarding generics through “academic detailing” . Australia has also implemented measures to reduce the prices paid for generic drugs, such as reference pricing [104–106] and mandatory price discounts [101, 107]. More recently, “price disclosure rules” have been introduced under which manufacturers must provide information about the actual transaction prices to pharmacies, including any non-price incentives such as bonus stock or in-kind discounts [107–109]. If the weighted average disclosed price is more than 10 % lower than the PBS price then the PBS price is reduced to the weighted average disclosed price. These latter reforms appear to have been particularly effective in reducing the PBS prices of drugs for which generic versions are available .
Finally, in order to minimise the cost of intravenous chemotherapies, the Department of Health proposed introducing the Intravenous Chemotherapy Supply Program (ICSP), whereby pharmacists are reimbursed for the amount of drug used rather than the number of vials dispensed . This was met with criticism regarding the potential for under-prescribing or under-dosing of some high-cost drugs and higher costs for the patient or the hospital [111, 112]. Consequently, ICSP was not implemented and the Efficient Funding of Chemotherapy Drugs (EFCD) initiative (Revised Arrangements) was introduced from 2011, whereby pharmacists are reimbursed for the combination of vials that most cost effectively comprises the required patient dose .
Box 3: UK
Broader Health and Pharmaceutical Policy
When the National Health Service (NHS) was established in 1948 in the UK, the founding principles were that it should be free at the point of delivery and based on clinical need, not ability to pay. Funded by the tax payers, the NHS meant that access to drugs was no longer limited by income. Community pharmacists dispensing drugs are reimbursed by the NHS Prescription Services, with the payment schedule based on average wholesale prices and calculated by the NHS Business Services Authority and published as the monthly Drug Tariff.Footnote 9 Generally, general practitioners are able to prescribe whatever they deem appropriate; however, the Drug Tariff contains a ‘blacklist’ , which lists the drugs and/or specific brands of drugs that cannot be prescribed on NHS primary care prescriptions. The NHS Prescription Services will not refund the cost of drugs on the ‘blacklist’ to the dispensing pharmacy. Whilst the legislation exists, in practice its use is generally limited to non-controversial prescribing of branded products that can be purchased over the counter. There are concerns relating to the validity of this national legislation in the face of EU anti-competition rules. There are also concerns that the ‘blacklist’ would threaten the autonomy of prescribers. Consequently, policy makers have used other mechanisms to influence prescribing.
From 1991, in order to control rising NHS deficits, the UK Government introduced policies to make regional health authorities and providers more responsible for budgets, eventually resulting in the creation of purchasing units (primary care trusts) [73, 74]. This strategy inevitably introduced the need for regional drug and therapeutics committees and arrangements to provide advice regarding which drugs were funded. While successful at reducing the growth in pharmaceutical expenditure , one unintended consequence of this devolution of authority and fixed budgets was the ‘post code lottery’, whereby patients’ access to treatments, especially high-cost treatments, was determined by where they lived.
In response to this situation, in 1999 a new special health authority, the National Institute for Clinical Excellence (NICE)Footnote 10 was created . NICE’s remit was to introduce ‘evidence-based medicine’ into routine practice and achieve improvements in the quality and delivery of care through outcome measurement. NICE’s remit is primarily England and Wales, but some products are also used by Scotland and Ireland. NICE’s clinical guidelines programme includes making recommendations about the on- and off-label usage of drugs. The most high-profile programme of the NICE portfolio is the technology appraisal process, which looks at the clinical and cost effectiveness of drugs, focusing on how they perform in practice and how much it costs for one additional quality-adjusted life-year. Similar organisations exist in both Scotland [Scottish Medicines Consortium (SMC)]  and Wales [All Wales Medicines Strategy Group (AWMSG)] .
While negative recommendations from NICE are voluntary and it does not mean that a drug cannot be prescribed by a clinician or funded by the NHS, a positive recommendation means that local NHS bodies must fund these technologies within 3 months . However, concerns have been raised that these positive recommendations are diverting resources away from other, perhaps more cost effective, drugs or health programmes due to a lack of headroom .
Methods Used to Identify Potential Candidates, Criteria for Assessing Candidates and Methods Used to Implement Disinvestment
Since 2006, NICE has had an active disinvestment programme [23, 63]. Initially, a pilot active disinvestment programme was introduced that aimed to identify low-value drug and non-drug interventions, which, if stopped, would save over £1 million each [23, 63]. However, NICE concluded that there were few identifiable candidates for total disinvestment (i.e. ‘blacklisting’), that the emphasis should be placed on better targeting of treatments, and that NICE was already identifying candidates for disinvestment through its existing processes (e.g. through clinical guidelines) . Consequently, NICE continued to identify candidates for disinvestment through its existing processes and publishes ‘recommendation reminders’, reiterating existing guidance. In particular, following the launch of the Department of Health’s Quality, Productivity and Prevention (QIPP) programme, NICE reviewed its disinvestment programme and launched a database of ‘do not do’s’ (replacing the ‘recommendation reminders’) [23, 61, 63]. The database contains all the ‘do not do’ recommendations contained in NICE cancer service guidance, clinical guidelines, interventional procedures and technology appraisals guidance since 2007 [61, 62]. Working with the UK Cochrane Centre, NICE has also developed summaries of newly published Cochrane reviews that conclude that interventions should not be used or could not be recommended [23, 63, 64].
The UK Government has also introduced a range of measures in order to encourage the utilisation of generics versus originators, as well as generic drugs that are considered therapeutically equivalent to a patented drug. This has been achieved nationally through the QIPP programme and the Better Care, Better Value (BCBV) initiatives, in addition to local initiatives [40, 48, 80, 81]. For example, there have been multiple initiatives across Scotland to increase the prescribing of generic ACE inhibitors, proton pump inhibitors and statins (HMG-CoA reductase inhibitors), including regional formularies, general monitoring of prescribing patterns, benchmarking, academic detailing and practice-based financial incentive schemes [40, 48]. Primary care groups in England have also successfully introduced similar multiple measures to enhance prescribing efficiency for these three classes [48, 82, 83]. Finally, clinicians are encouraged to prescribe by international non-proprietary name (INN) in UK medical schools [40, 83–85].
Box 4: Canada
Broader Health and Pharmaceutical Policy
Canada has a single-payer, publicly funded, universal healthcare system. Its existence was established in 1946 beginning in one province (Saskatchewan), with establishment across all provinces in 1966 with the introduction of the Medical Care Act.Footnote 11 The healthcare system is largely focused on acute care delivery; essentially, all services delivered within a hospital setting are publicly funded. In the outpatient and community setting, no point-of-contact payment is allowed. However, publicly funded drug and outpatient services coverage varies by province. Funding is shared by both the national and provincial governments with the exact funding mix varying over time.
Canada has no national publicly funded drug insurance plan. A national process exists to critically assess the clinical, economic and patient evidence for new drugs [the Common Drug Review at the Canadian Agency for Drugs and Technologies in Health (CADTH)] . The Common Drug Review is advisory to the provinces who make the final reimbursement decision. However, no national process exists to assess or reassess the evidence for drugs already publicly available. The current disinvestment (de-listing) landscape is haphazard and responsive; provinces must develop their own individual processes to support disinvestment activities for drugs.
The most developed disinvestment process is that of the Atlantic provinces (Prince Edward Island, Newfoundland and Labrador, Nova Scotia and New Brunswick) . An explicit review mechanism exists through the Atlantic Common Drug Review. While this review process may result in disinvestment, the overarching goal of the process is to ensure that the drugs covered are current and based on the best available evidence. A review may be launched in response to changes in the scientific evidence, regulatory status, cost effectiveness or budget impact related to changes in the drug cost or the cost of its comparators. Importantly, this process results in recommendations to the provincially funded drug plans in Atlantic Canada, with each province making their own decisions. Ontario has adopted a different strategic approach. In 2011, Ontario’s Citizen’s Council was asked to deliberate on an approach to managing the drug formulary . Specifically, the council was asked “Under what conditions should the executive officer of the Ontario public drug programs consider delisting of drug products on the Ontario formulary?”. The Council outlined the need for a formal, clear and transparent disinvestment process based on evidence with both timelines and milestones. Suggested criteria for review included aspects such as cost, availability of bioequivalents and efficacy. The implementation of a process in response to the Council’s deliberation is unclear. Disinvestment processes within the other provinces may occur in one-off fashion with periodic refreshes to the formularies.
Disinvestment in the form of de-listing drugs is very uncommon. More common is the targeting of utilisation patterns of drugs. For example, in 2013 the provincial government in Alberta made changes to the pricing of generics to cover only 18 % of the brand name price . This change in prices was accompanied by a public campaign to encourage patients to ask for generics in order to increase the prescription of generic drugs. Its success has yet to be evaluated.
A range of measures in order to enhance the utilisation of generics have also been introduced, such as educational material targeted towards physicians accompanied by a major public campaign.
Box 5: New Zealand
Broader Health and Pharmaceutical Policy
Drugs in New Zealand have received public funding since 1941 . The New Zealand Pharmaceutical Management Agency (PHARMAC) is the government agency that determines which drugs will be listed on the Pharmaceutical Schedule, and thus receive publicly funding, and under what conditions. The New Zealand Public Health and Disability Act 2000 states :
[PHARMAC is] to secure for eligible people in need of pharmaceuticals, the best health outcomes that are reasonably achievable from pharmaceutical treatment and from within the amount of funding provided …
Thus, PHARMAC must meet the budget set for it by the Minister of Health, and in doing so it must seek to optimise health outcomes. PHARMAC’s budget for 2013/2014 was set at NZ$795 million to cover community drugs and devices, vaccines and hospital-administered cancer treatments .
PHARMAC makes changes to the Pharmaceutical Schedule to achieve this objective. These changes may take the form of listing new drugs; subsidy/price reductions; and responding to supply market activity (e.g. global product discontinuations). Furthermore, in the year to 30 June 2014, 4.3 % of prescriptions were subject to a prospectively obtained Special Authority authorisation .
The defined annual budget and its anticipated future pathway constrain PHARMAC’s ability to fund new drugs, and consequently it is incentivised to make careful choices, ensuring that each decision at the margin offers the best value in terms of health outcomes. Effectively, PHARMAC uses a programme-budgeting and marginal analysis (PBMA) approach to adoption of new drugs . PHARMAC considers nine criteriaFootnote 12 when considering listing a drug, including effectiveness, safety, costs and cost effectiveness . These criteria are considered relative to all of the funding options available at a given time.
PHARMAC focuses on price reductions to improve the value for money for existing technology and make headroom for listing new drugs. Price reductions generally arise as a result of competition, which is enabled where there are alternatives that can deliver the same or similar health outcomes. As a ‘buyer’ of health outcomes, PHARMAC has utilised a range of tools to create competitive environments for the supply drugs, but at improved value, including :
Rebates and discounts (e.g. price–volume agreements);
Package agreements (e.g. listing a new drug that is not cost effective at the posted international price if the manufacturer agrees to discount one or more of its other currently listed drugs);
Tendering sole supply for off-patent drugs;
Reference pricing therapeutically equivalent on-patent and off-patent drugs; and
Contracts (e.g. agreements to exchange a current price reduction for protection against the future use of other cost-saving tools).
PHARMAC’s savings activity each year creates new price concessions of around 6–7 % of the value of the entire portfolio. These savings along with modest rises of budget of about 3 % per annum on average over the 21-year period of PHARMAC’s existence [116, 118] have been sufficient to manage growth in both volume and the mix of treatments used including adoption of more expensive new technologies .
The effect of these policies in PHARMAC’s early years was a reduced range of varieties of drugs (substantially brands and pack options) (Fig. 2). That is, some disinvestment in the form of de-listing occurred . The 2012 example of blood glucose testing equipment is an example of how such disinvestment occurs, whilst maintaining access to the health outcomes. PHARMAC moved from a funded range of six blood glucose meters and test strips provided by four suppliers, to a range of three from a single supplier. This resulted in a saving around NZ$10 million each year from a baseline spend of about NZ$22 million. Around 120,000 patients needed to change products in order to retain their funding, or otherwise would have had to pay out-of-pocket [119, 120]. However, de-listing is typically not undertaken because, in the context of falling prices of existing drugs and the increasing asking prices of new ones, past funding decisions are typically better value for money than current decisions.
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Parkinson, B., Sermet, C., Clement, F. et al. Disinvestment and Value-Based Purchasing Strategies for Pharmaceuticals: An International Review. PharmacoEconomics 33, 905–924 (2015). https://doi.org/10.1007/s40273-015-0293-8
- Reference Price
- Pharmaceutical Benefit Advisory Committee
- Restricting Treatment
- Coverage With Evidence Development