A reference pricing system for Ireland

Keywords::

• generic substitution
• Ireland
• pharmaceutical expenditure
• reference pricing
• reimbursement

The various cost containment measures that have been introduced over the past few years in Ireland to contain pharmaceutical expenditure are well documented [1]. Community drug schemes have been the main target of these measures as they comprise approximately 85% of total public pharmaceutical expenditure [101]. Recent trends have shown a decrease in annual pharmaceutical expenditure for the first time in a decade; however, pressure still remains on the healthcare payer to decrease the deficit [2]. The Health Bill 2012 [102], scheduled to pass into law in the autumn of 2012, will introduce new legislation on the pricing and supply of medicines and will allow the introduction of the much awaited reference pricing (RP) and generic substitution system for the reimbursement of pharmaceuticals on the community drug schemes. So what does this mean? What should the different stakeholders (prescribers, patients and payers) expect from such a system?

RP is a reimbursement policy currently operating in 25 European countries. The policy sets a maximum allowable cost that will be covered (i.e., reimbursed) for a group of interchangeable drugs. The healthcare payer subsequently reimburses only the reference price for all drugs covered in the reference group or cluster. Any difference between this reimbursement price and the actual price, if greater, must be paid by the patient, the so-called copayment. Patients can avoid any potential copayments by opting for a less expensive interchangeable medicine. Prescribed drugs priced at or below the reference price do not bear this extra cost for the patient. If, however, there is a clinical reason as to why the patient should receive a product with a higher price, the healthcare payer must bear the difference.

RP can be applied to different levels of drug groups and can be referred to as phase 1, phase 2 or phase 3. Phase 1 RP groups drugs have identical bioactive ingredients and are therefore considered therapeutically interchangeable, that is, generic groups. This has been used in many countries including Canada (Ontario), Denmark, Italy, Norway, Sweden and the USA (Medicaid). Phase 2 RP groups are drugs by pharmacological class (i.e., Anatomical Therapeutic Chemical classification 4 level). These drugs have a similar (but not identical) molecular structure and show similar pharmacological benefit, for example, angiotensin-converting enzyme inhibitors, AT₂ antagonists. Phase 3 RP is the broadest definition of clustering groups of drugs and groups drugs by therapeutic class (Anatomical Therapeutic Chemical classification 3 level); for example, all antihypertensive agents. Phase 1 is often referred to as generic RP and phase 2 and 3 RP as therapeutic RP [3].

Rationale for introducing RP with generic substitution

The clinical and economic rationale for RP is based on the assumption that drugs within the cluster are equivalent and clinically interchangeable, and so a common level of reimbursement can thus be established. It follows that the expensive medication can be substituted by a less expensive alternative without any loss of effectiveness. In an ideal world, the beneficiaries can receive the best available treatment according to the evidence base at an appropriate cost.

Clustering the groups according to therapeutic equivalence is essential to establish a RP for a group of medicines. Under the legislation covered in the Health Bill 2012, the Irish Medicines Board will be renamed the Health Products Regulatory Authority and will publish and keep updated a list of interchangeable medicines. The authority will have a period of up to 180 days to determine if a new product is suitable for inclusion on the list. The Health Service Executive will be responsible for establishing and maintaining a reimbursement list, which will include setting and reviewing the RP assigned to a group of interchangeable medicines. The RP will be reviewed at least once a year, but not more than every 3 months and may, following such a review, lead to a new RP being set for a relevant group of interchangeable products. It is expected that RP will be introduced at phase 1 level. The Bill also clearly outlines the duties of pharmacists in relation to dispensing prescriptions presented to them for branded or generic products and states that the product of lowest cost to the Health Service Executive (as specified in the reimbursement list) or the patient from the list of interchangeable items will be dispensed. The Bill also outlines what manufacturers should expect in terms of conditions that may be attached to the supply of listed items, such as the requirement for cost–effectiveness data to be presented to support their application. Additionally, the Bill outlines for the first time that a product or listed item can now be removed from the reimbursement list.

Practical implications of introducing RP with generic substitution in Ireland

Implementing such a system in Ireland will not be without challenges, including the existing low rate of generic prescribing at just 19% by volume [2], prescribers concerns in the past with efficacy and supply of generic drugs [4], and the current pricing mechanism for generic products. Indeed, setting an appropriate RP that is fair, once the list of interchangeable medicines is published, will itself prove challenging. Successful implementation of a RP and generic substitution system cannot therefore be achieved without substantial educational and information campaigns to stakeholders. The underlying aim of RP is not just another attempt to cut budget deficits, but a logical plan that combines sustainable cost containment in pharmaceutical expenditure with full access to therapeutically equivalent drugs. Although evidence from Ireland is lacking on the patient perspective of RP systems, evidence from elsewhere suggests that most patients who understand the concept of a RP system favor its introduction when compared with alternatives such as increased copayments [5].

A recent literature review of RP systems in Europe highlighted some key issues, which would seem pertinent to healthcare decision-makers in a country contemplating the introduction of such a system [6]. The review considered the impact of RP on the usage, expenditure and pricing of drugs and associated health outcomes. The main findings included: the implementation of a RP system led to an increase in the use of drugs priced at or below the RP level within a reference group; there was an overall decrease in drug prices following the implementation of the RP system; some drugs that were priced below the RP level increased their price toward that level; short-term savings on healthcare budgets were achieved but there was no impact on long-term growth of drug expenditure; and health outcomes were not negatively affected by the system.

Evidence may therefore suggest that RP alone may not afford the healthcare payer a sole potential route for cost containment with pharmaceuticals and that it may be more appropriate to acknowledge the RP system as playing a supporting role alongside other policies such as generic substitution and price competition. The decision, therefore, by the Department of Health to support RP with generic substitution is welcomed. Indeed, Drummond et al. refer to the dual role that RP plays in The Netherlands alongside health technology assessment, where innovative drugs are subjected to health technology assessment, in order to assess whether they should be placed in a new cluster and to establish a RP for any new cluster [7].

Conclusion

RP with generic substitution will play a positive role in controlling future pharmaceutical expenditure in Ireland, and initial evidence from our group suggests that there is potential to generate savings from two drug groups with the greatest expenditure on the community drug schemes, that is, statins and proton pump inhibitors. Overall, the advantages of the new system should outweigh any disadvantages. There is also an opportunity cost here, most notably the financing of innovative and more expensive medicines for other high-priority disease areas, for example, oncology. RP with generic substitution may indeed be the vehicle needed by the healthcare payer to improve efficiency in what is currently considered a stretched system.

Financial & competing interests disclosure

The authors have 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.