The power of r – pharmaceutical sales decomposition in Cyprus public healthcare sector and determinants of drug expenditure evolution: any lessons learned?

Abstract

The pharmaceutical sector has been established as the primary cost driver in health. The scope of this paper is to explore the drivers of pharmaceutical expenditure in Cyprus by decomposing sales and assessing impact of prices, volumes and substitution effect. We used a statistical approach to decompose the growth of public pharmaceutical expenditure during 2005–2011 into three elements: 1) substitution effect; 2) price effect; and 3) increase of consumption. We further decomposed consumption into: 1) prescription/visits; 2) visits/beneficiaries; and 3) beneficiaries. Pharmaceutical expenditure grew by 31.4 % and volume of medicines dispensed increased by 55%. Prices declined by 11% and product-mix residual was -5.5%, indicating that Cyprus experienced a switch to cheaper medicines (generics) without compromising access of patients to innovative medicines. This was enhanced by guidelines, monitoring of prescribing behavior, generic substitution and efficient tendering. The increasing number of products per prescriptions should be monitored with caution.

Keywords::

• cost-sharing
• generic substitution
• guidelines
• innovation
• pharmaceutical expenditure
• pharmaceutical policy
• pharmaceuticals
• price effect
• product-mix decomposition

Acknowledgements

Authors are grateful to C Purslow and also to three anonymous referees for their valuable comments in an earlier version of this paper, which enabled us to further improve it.

Financial & competing interests disclosure

The author has no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties.

No writing assistance was utilized in the production of this manuscript.

Key issues

• Pharmaceutical expenditures are consistently rising and are stretching health systems beyond their viability.

• Price control, as a supply side regulation, is considered the obvious option for cost containment.

• Product-mix decomposition allows disintegration of expenditure to its basic components, enabling identification of most important covariates.

• Generic substitution, implementation of guidelines and monitoring of prescribing behavior were classified as important factors. Price as a standalone measure is not potent enough.

• Cyprus market is characterized by increase of defined daily dose dispended.

• Cost-sharing measures are also important tools reducing demand, while regulation of pharmaceutical marketing reduces supply side-induced demand.

• All these should be applied in the context of an integrated health policy.

• Oncology products due to their high uptake rate of new technology should be treated with caution, enabling access to life-threatening conditions, without adversely affecting resources for other common diseases.