June 10, 2013 | By Márcio Barra If you have been keeping an eye out in the news in Portugal, a new drug cost cut just happened a few weeks ago. This is good news and bad news. Good as the general population may pay less and the government gets to spend less in drug reimbursements, but it’s also bad as it’s paving the way for the series of drug shortages cases that are currently happening in Portugal. The country has some issues regarding the sustainability and efficiency of its health system. The CSFSNS 2007 recommendations were mostly oriented to increasing the efficiency of the health system. Medicine pricing was an obvious place for the state to cut expenses by decreasing prices, since lower prices means that a lower value is reimbursed. This article will give you a look on how medicines are priced in Portugal.
First, it´s important to explain how medicines are evaluated in Portugal. Medicines can fall into six categories:
- Medicines that contain new therapeutic entities, with innovate mechanisms of action and higher efficacy and tolerability than existing treatments;
- New medicines with a similar qualitative composition to others already marketed and reimbursed, with the same dosage form, and at a 5% lower price than the lowest priced, reimbursed, non-generic drug;
- New dosage form, new doses, or new packaging of already reimbursed drugs with the same qualitative composition, provided that there is an therapeutic and economic advantage;
- New medicines which do not possess a significant therapeutic innovation nor qualitative composition to similar, already reimbursed medicines, but have an economic advantage compared to them;
- Combination products containing already reimbursed active substances, and the price does not exceed the sum of the prices of the same medicines when given alone in identical dosages;
- Combinations of active substances that don’t exist in the market alone and have shown advantage in clinical trials over drugs in the same therapeutic group.
The Portuguese medicines reimbursement scheme is divided into 4 tiers:
- Tier A, where 90% of the public price of the drug is reimbursed. This tier is for essential drugs to treat severe diseases;
- Tier B, where 69% of the public price is reimbursed. This one is for essential drugs for chronic diseases;
- Tier C, where 37% of the public price is reimbursed. This is for drugs which have a confirmed therapeutic interest, but don’t really fit in other tiers;
- Tier D, where 15% of the public price is reimbursed. This tier is for new medicines, medicines with limited reimbursement due to price reductions, fixing of a maximum value of sales for reimbursement purposes, and medicines which are temporarily inserted into this reimbursement tier, due to further data requirements by INFARMED, and medicines subject to a reimbursement agreement with INFARMED, as explained in Article 6 of Decree-Law nº 48-A/2010.
It’s worth mentioning that there is a special reimbursement scheme in place, used in certain conditions or for special groups of users: Reimbursement adjusted to beneficiaries State reimbursements in medicines included in tier A are increased by 5%, and in tiers B, C and D it’s increased by 15% for pensioners whose total annual income does not exceed 14 times the minimum wage in force in the preceding calendar year, or 14 times the social support value in force. For products whose retail prices are equal or below the fifth lowest price in the homogeneous group, to which they belong, state reimbursement is 95% for all tiers. Beneficiaries of this scheme must provide proof of their status at their health center.
Reimbursement on the basis of pathologies or particular groups of users
This scheme entails state reimbursement for medicines used to treat certain diseases or special groups of users. This reimbursement may be restricted to certain therapeutic indications of the drug, depending on the reimbursement terms. Two categories can be identified: Medicines that are dispensed in “workshop pharmacies” and medicines restricted to hospital use.
The reference pricing system
One of the characteristics of the reimbursement scheme in Portugal is the existence of the reference pricing system. This system applies to reimbursed medicines that are included in homogeneous groups. A homogenous group is a group of medicines who share the same qualitative and quantitative composition in active substances, dosage form, dosage and route of administration, and includes at least one generic available in the market. Each homogeneous group has a reference price, which is the average of the five lowest retail prices in the market. The five lowest retail prices are reviewed quarterly during the review of the system. More than 5 medicines can be included, as long as the sixth, either generic or branded, has the same price as one in the group of five. The reference price will be the value reimbursed by the state for the medicines included in each homogeneous group, according to the reimbursement tier applicable, if the retail price is higher than the reference price. If the retail price is lower than the maximum reimbursement, the product will be free for the user as the state reimburses the entire retail price. For example: Drug X belongs to reimbursement tier A. If the reference price for his homogeneous group is 100€, the reimbursement is 95€ in the special scheme and 90€ in the standard scheme, for all medicines of the group. If this medicine has a retail price of 200 euros, the patient will pay 105€ if he’s a beneficiary of the special regimen or 110€ in the standard scheme. After obtaining the price, the holder of the MA of a medicinal product can ask for reimbursement. The application must be accompanied by proof of the authorized price, therapeutic indications, and other elements deemed useful to the assessment process. The applicant may request a pharmacoeconomic study. INFARMED, I. P. verifies within 20 days the request and may ask the applicant for clarification, with a 10 day limit. The final decision is issued within 90 days of the request, 75 days if it’s for a generic drug.
In 2011, the “Memorandum of Understanding” recommended as one the main targets of containing healthcare costs the reduction of public expenditure on drugs, to 1.25% of GDP in 2012 and to 1% of GDP in 2013. Through the years, some of the measures applied to met this goal were an obligatory price reduction to generic drugs, from 35% to 40%, alongside incentives for generic prescription, change of the then reference countries France, Spain, Italy and Greece to the “3 EU countries with the lowest drug prices or with a similar GDP”, a revision of existing user fee exemption categories (more 150 M€ in 2012 e 50 M€ in 2013), alongside other cuts in the Portuguese health system in hospitals and public subsystems. What follows is a brief overview of the drug pricing changes in Portugal through the years. Changes in drug pricing in Portugal can be traced back to 2006, with a 6% price reduction enforced by Ordinance nº 618-A/2005. Then, in 2007, another 6% price reduction occurred, from Ordinance nº 30-B/2007. The system of price caps was also implemented, issued in Decree Law. 65/2007, alongside a 5%, 9% or 12% reduction applied to generic drugs with a market share of: 50% ≤Q < 60%, 60% ≤ Q <70% and Q ≥70% respectively, issued in Ordinance n. 300-A/2007 In 2008, there was a price review under the price cap system implemented by DL. 65/2007 and Ordinance nº 300-A/2007. Moreover, a 30% price cut for generic drugs maximum prices was implemented by Ordinance nº 1016-A/2008 In 2009, another review happened under the pricing methodology established by the DL. 65/2007 and Ordinance nº 300-A/2007 In 2010, there was a price reduction resulting from the transfer of margins for pharmacies and wholesalers, implemented by DL. 48/2010, a 7% average price reduction on drugs, in accordance with the pricing methodology review issued by Ordinance nº 312-A/2010, a 6% mandatory discount in retail price for all reimbursed medicines issued byOrdinance nº 1041-A/2010, and a 7,5% price cut for biological medicines, from Dispatch nº 18419/2010 In 2012, a new pricing methodology was established, with a new set of reference countries (Spain, Slovenia and Italy), new marketing margins for wholesalers and pharmacies, and new generic prices (50% below the recommended retail price of the reference product, or 25% if the wholesale price is less than 10 €). This change in reference countries resulted in further price cuts. This year, 2013, about 1.400 brand drugs had a 7% discount, but the 6% mandatory discount in retail price for all reimbursed medicines issued by Ordinance nº 1041-A/2010 was discontinued by the Ministry of health. The 7% discount was due to the annual price adjustment and change of reference countries – Spain, France and Slovakia. The price of generic drugs remained the same in 2013 thus far, since their average price is already lower prices of the new reference countries. The 1% GDP goal was something that was questioned from the onset by APIFARMA, alongside the April 1st price reduction due to the annual price revision and new reference countries, which, according to João Almeida Lopes, president of APIFARMA, the change in reference countries was unnecessary, and that further price drops could lead to a worsening of the drug shortage situation. This was confirmed by a study conducted by Deloitte, which concluded that 46% of the Portuguese medicine users have faced drug shortages in Pharmacies. PhRMA also stated to be displeased with the ongoing cost containment measures and drug expenditure cuts that are being applied, which “do not make up the value of innovation and deny the benefits that innovative drugs can bring to Portugal”. They deemed the ongoing “budget constraints “are unrealistic, namely the goal of reducing the public expenditure on medicines to 1% of the GDP, and that “increasing difficulties” are affecting the launch of many innovative drugs in Portugal.
Special thanks go to Anabela Farrica, BSc, for compiling some of the information in this article.