COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

relating to the transparency of measures regulating the prices of medicinal products for human use and their inclusion in the scope of the national health insurance systems

ANNEX 1

SUMMARY OF RESPONSES TO THE PUBLIC CONSULTATION

The European Commission (DG Enterprise and Industry) conducted a public consultation on the possible revision of Directive 89/105/EEC. An electronic questionnaire was published on the Europa website and interested parties were invited to submit their contributions from 28 March 2011 to 30 May 2011. The consultation was open to all interested parties, with distinctive modules for competent authorities, originator companies, generic companies, medical devices companies and other stakeholders.

The consultation received 102 contributions. Respondents included:

· Competent national authorities

· Public health insurers, including sickness funds and payers

· Pharmaceutical companies and representative organisations (originator and generic sectors)

· Medical devices/in-vitro diagnostics companies and representative organisations

· Consultancies and law firms

· Professional organisations representing healthcare professionals, in particular pharmacists

· Supply chain companies, including full-line wholesalers and importers

· Patient groups

· Individual respondents

Contributions to the public consultation by type of respondent

Main categories of respondents || Number of contributions

National, regional or local administration || 19

Public health insurer (e.g. sickness fund, third party payer) || 6

Pharmaceutical company/industry association – originator products: Including - individual companies - representative organisations (EU and national) || 30 15 15

Pharmaceutical company/industry association – generic products Including - individual companies - representative organisations (EU and national) || 17 13 4

Medical devices/in-vitro diagnostics company/industry association Pharmaceutical company/industry association – generic products Including - individual companies - representative organisations (EU and national) || 10 5 5

Others || 20

Total || 102

The public consultation questionnaire addressed five main issue areas. The comments received on these issues are summarised below.

1. Impact of the existing directive

The public consultation clearly shows that Directive 89/105/EEC is perceived by all stakeholders as a useful instrument to ensure the respect of the principles of the common market in the field of pharmaceuticals. The impact of the directive is largely considered positive, even if not all of its aims are fully achieved and there is still room for improvement in several respects.

With regard to the most important goals of the directive as a common market instrument, namely the transparency of procedures and equal treatment between domestic and imported products, the picture to be drawn from the public consultation is unanimously positive. None of the respondents across all stakeholder groups sees a negative impact on equal treatment and very few consider that the directive does not achieve its transparency objectives at all. Moreover, the industry – both from the originator and generic sectors – almost unanimously considers the impact in this respect as positive or even very positive. This perception is shared by a strong majority of respondents from both the public sector and from civil society.

Impact on equal treatment between domestic and imported products Impact on the transparency of pricing and reimbursement procedures

Concerning the transparency and speed of pricing and reimbursement decisions, as well as the availability of legal remedies, the number of contributors that see a negative impact is negligible (3 replies in this sense altogether).

Impact on the speed of pricing and reimbursement decisions Impact on the availability of legal remedies

With respect to all these issues, the overwhelming majority of respondents among all groups of stakeholders see a positive or even very positive impact. The only exception concerns the availability of legal remedies: almost half of the national authorities do not see any impact of the directive as the principle of judicial appeal is anyway enshrined in their legislation.

The consultation enquired about other policy aspects not directly addressed by the directive but where a certain influence is however possible, such as access to medicines for patients and competitiveness of the pharmaceutical industry. In these areas, the positive perception of the impact of the directive still prevails but is, unsurprisingly, less pronounced. Concerning patient access to medicines, roughly half of the respondents report a positive impact and the other half either sees no impact at all or has no opinion on the matter. The positive answers here overwhelmingly came from the originator industry, while the generic industry mainly sees no impact and public authorities are split between positive impact and no impact. A similar picture can be drawn with regard to the effect on the competitiveness of the pharmaceutical industry. Interestingly, pharmaceutical companies (originators and generics alike) consider that the directive has had positive or very positive effects on the competitiveness of the industry.

Many respondents mentioned that there is room for improvement with respect to the enforcement of the rules laid down by the directive. A significant number of contributions referred to cases of incorrect application of the directive. They also stressed the difficulty of applying the rules of the directive to the ever more complex and rapidly changing scientific and economic realities of the pharmaceutical sector and to the specific legal frameworks of the Member States. More guidance, though not necessarily in the form of legislative changes, is therefore advocated by many stakeholders.

2. General viewpoints on a revision

The above-mentioned problem of a rapidly evolving regulatory framework in the Member States – which is in fact partly due to the dynamic changes in the pharmaceutical sector as well as to pressure on public health budgets – has until this day been taken into account only through the interpretation of the text of the directive (especially through the case-law of the Court of Justice). The text of the directive itself has never been adapted to these new developments. The question of a possible integration of these new realities, and notably the existing case-law of the Court, was therefore raised in the public consultation. Positions on these questions in the public consultation are differentiated.

Revision of the directive to include ECJ case-law

In general terms, the originator industry does not advocate any regulatory amendments to incorporate the case-law into the directive or to adapt outdated provisions. Originator companies instead favour a soft law approach based on the adoption of an interpretative Communication on the implementation of the directive and Commission guidelines. On the other hand, more than 75% of responding originator companies declare themselves at least favourable to an explicit inclusion of demand-side measures into the scope of the directive.

Revision of the directive to include ECJ case-law: originator industry

The generic industry is almost unanimously in favour of the incorporation of the ECJ case-law, as well as an inclusion of demand side measures and the repeal of outdated provisions.

Opinions on these questions differ within the public sector. A small majority of national authorities advocates the inclusion of case-law, while 25% is not favourable to this option and the rest has no opinion. Public health insurers are equally divided. Half of the national authorities are in favour of the repeal of outdated provisions, one fourth is against and one fourth has no opinion. Here the public health insurers join the favourable answers. As for the explicit inclusion of demand side-measures, half of the national authorities and nearly all public health insurers are not favourable to such a change and expect a considerable additional administrative burden and cost from it. However, 25% of respondents from national authorities do not expect such a burden.

3. Time-limits for pricing and reimbursement decisions

Part of the public consultation focused on the appreciation by stakeholders of the time-limits set out in the directive for pricing and reimbursement decisions. It gave the opportunity to share experiences concerning their application in the different Member States. It also asked for the views of public authorities and the generic industry regarding the possibility of introducing shorter time-limit for generic medicines.

3.1. Time-limits for originator medicines

More than 75% of respondents consider the current time-limits (90/180 days) to be appropriate for originator products. A large majority of national authorities and nearly all contributors from the originator industry share this view.

Are time-limits for originator products, as defined in the directive, appropriate ?

However, many replies from industry confirm that the time-limits are not always respected. Many respondents declare having experienced or knowing about cases in which the time-limits were not respected without any legitimate reason (e.g. publication delays). There seems to be at least equal concern among industry and their representatives about delays caused by stop-the-clock periods used by Member States to request additional information.

The question of whether and how any failure to comply with the time-limits should in the future be addressed by the directive received a differentiated reaction with the public consultation. While some replies from the industry sector indicate that sanctions in the event of non-compliance with the time-limits should be defined in the directive, it is noteworthy that a large majority of more than two thirds of the responses from industry favour a case-by-case decision by the competent national/regional courts. Unsurprisingly, most national authorities take the view that sanctions should be defined by national authorities and the remaining third opts for case-by-case decisions by national courts. None of them envisages a definition of sanctions in the directive.

3.2. Time-limits for generics medicines

On the question of a possible reduction the 90/180 time-limit for generics, the public consultation shows a clear demand from the relevant industry sector for considerably shortened delays. Roughly 80% of the answers from the generic industry call for immediate pricing and reimbursement (0 day) while the others consider a 30-days time-limit to be adequate. National authorities and public health insurers provide in their answers a much more mitigated picture. While about half of the national authorities wish to keep the current time-limits for generics, others would support a reduction but on different scales: 4 answers favour a 30-days time-limit, 2 express a preference for 45 days, one for 60 days and one would not object to a 0-day time-limit. The main reasons given by the national authorities for their reluctance to accept shorter time limits are the necessity for price negotiations and the additional administrative burden that they anticipate with an accelerated procedure. However, national authorities did not seem able to give an estimate of the increase in administrative costs that they fear.

Time-limits considered appropriate for the swift pricing and reimbursement of generics

|| Generic industry (16 contributions) || Public authorities & public health insurers (17 contributions) || Patient organisations (3 contributions)

0 days || 81,3% || - || -

30 days || 18,7% || 23,5% || -

45 days || - || 5,8% || -

60 days || - || 11,8% || -

No change to current time-limits || - || 58,9% || 1

Reduction of time-limits (no timeframe specified) || - || - || 2

4. Market and policy developments 4.1. Managed entry agreements

A total of 9 replies from national authorities declare that managed entry agreements are used in their counties. In most cases, the declared market share covered by managed entry agreements is small (less than 5%), although two countries report market shares above 20%. Most of the responses from national authorities do not see any role for the Transparency Directive with respect to managed entry agreements: only three respondents were in favour of explicitly extending the scope of the directive to such agreements (their main argument being that the role of managed entry agreements as a derogatory procedure needs to be clarified).

Nearly all contributions from the originator industry see a possible role for the directive in the field of managed entry agreements. However, an equally large majority of them considers that these agreements do not pose any problems in terms of interface with regular pricing and reimbursement procedures. Among these contributions, a widespread point of view is that the directive does in effect already apply to managed entry agreements.

4.2. Tendering

National authorities from only 6 Member States declare using tendering or public procurement procedures for pricing and reimbursement purposes (i.e. besides hospital tendering. These schemes are often used exclusively for generics and only cover a small share of the market (at most 8 %). In two cases, these procedures are used for vaccines only. Opinions are divided as to whether the directive should play a role in ensuring a higher level of transparency than provided by the general rules on public procurement in this field. Interestingly, this also true for those respondents who declare using tendering procedures themselves. Half of them advocate a role for the directive, while the other half considers that existing rules are sufficient.

Contributions from the originator industry almost unanimously consider that the existing transparency guarantees through public procurement regulations are sufficient and that the Transparency Directive should not apply in this field. However, many of them call for guidelines clarifying the demarcation between the scope of the directive and the body of law regulating public procurement. The very few contributions calling for a role of the directive (3 in total) are concerned about tendering procedures not in the field of generics, where they are most frequently used, but in the field of innovative medicines: they fear that tendering as a cost-containment strategy will discourage innovation and even create trade barriers.

In contrast to the originator industry, most replies from the generic sector favour a role of the directive with respect to tendering. At the same time, nearly all contributors from the generic industry are satisfied with the existing transparency guarantees in the public procurement framework. This discrepancy can be explained by the fact that most of these responses take a very critical point of view on the use of tendering procedures as a cost containment measure in general and not so much with regard to any specific transparency issues. They mention in particular the risk that companies might drop out of the market completely if they do not win enough tenders or if the procedure leads to unsustainable price levels, thereby diminishing competition and access to medicines for patients.

4.3. Personalised medicines

The linkage between a medicinal compound and a specific diagnostic element in personalised medicine raised the question of a possible role for the transparency directive in order to provide some form of coordination between these two elements. The public consultation shows, however, that the majority of stakeholders seem reluctant to engage in this direction. A large majority of national authorities speak against any explicit regulation of the matter in the directive, while the originator industry is divided. Interestingly, two thirds of the respondents from the medical devices industry declare having no opinion on the matter. Several contributions from industry express their conviction that personalised medicines are covered by the directive anyway in the light of the jurisprudence of the Court of Justice. Some of them suggest a clarification of the issue by way of Commission guidelines.

Role for the directive to increase transparency in the area of personalised medicines

|| No || Yes || No opinion

National, regional or local administration || 9 || 3 || 2

Public health insurers || 4 || 1 || 0

Pharmaceutical originator industry || 11 || 12 || 4

Medical devices industry || 1 || 2 || 6

TOTAL || 25 || 18 || 12

5. Possible extension of the directive to medical devices

An important aim of the public consultation was to find out if stakeholders felt any need at all for Directive 89/105/EEC to address not only medicines but also medical devices and, if so, what kind of role the directive could possibly play in this field. In order to get as much informed input as possible, the public consultation asked for the stakeholders' opinion on the three different ways a public authority can cover the cost of and put a specific price to a medical device: a listing and reimbursement process, financing as part of a global health intervention and via public procurement procedures. Only the first of theses categories undergoes a similar process as the medicines currently addressed by the directive.

The number of contributions from both the medical device industry and national authorities/public health insurers that see a role for the directive with respect to medical devices financed within a global health intervention or purchased through a public procurement process is negligible (1 or 2 answers in each case). The majority of respondents see no role for it at all, the others having no opinion on the matter and very few envisaging a limited role. Even though some contributions from the medical device industry mention problems in some countries in these areas, there seems to be a large agreement that these issues can not usefully be addressed by the transparency directive, but are either to be solved at member state level or fall into the scope of the public procurement directive.

Concerning medical devices which undergo a listing and pricing process, only one third of industry respondents and 20% of the national authorities would like to confer an important role to the directive in this matter. These contributions often give as a reason that to extend the scope of the directive that they wish for more detailed rules on European level than provided today by the medical devices directives concerning the quality of the products and not so much rules on the listing process itself. The majority of contributions which do not see any role for the directive in the medical devices sector, even for medical devices which undergo a listing process, consider the market for medical devices to be too fragmented and the market share of listed products too small for the Transparency Directive to make a meaningful contribution (market share estimated at 15% and decreasing). Several national authorities also mention the significant additional administrative burden that an extension of the directive to medical devices would entail.

Possible role of the directive to increase the transparency of procedures for medical devices subject to price regulation and reimbursement listing

6. Consultation of small and medium size enterprises (SMEs)

A specific public consultation was conducted for SMEs in the framework of the Enterprise Europe Network in order to find out about the specific experiences and expectations of SMEs.

While the general public consultation yielded an overwhelmingly positive reaction on the impact of the current directive, the responses from SMEs are less unanimous. Roughly a third of all respondents see a positive impact on equal treatment of domestic and imported products, the speed and transparency of pricing and reimbursement decisions and the availability of legal remedies. A fourth to a third of the answers even identify a negative impact in these fields. The others consider the effect to be neutral or do not have any opinion on this matter. This is in striking contrast to the general consultation, where the number of answers with a negative perception was negligible in all groups of stakeholders. On the other hand, when asked about the burden of pricing and reimbursement procedures for SMEs, one half of the respondents take the view that this burden would be higher or even substantially higher in the absence of minimum harmonisation as provided by the directive and the other half consider it to be similar.

The SME consultation does not yield any conclusive result as regards the possible adaptation of the directive to the rapidly evolving framework of pricing and reimbursement procedures in the Member States. Nearly half of the respondents do not have any opinion on that matter and the rest is almost evenly divided between a positive and a negative answer. While half of the respondents have no opinion on whether the directive should address pricing and reimbursement procedures for personalised medicine, the other half is clearly in favour of such an explicit extension of the scope of the directive.

As far as the possible inclusion of medical devices is concerned, the consultation shows an evident dissatisfaction (roughly two thirds of the replies) with the transparency of existing procedures concerning listing processes as well as public procurement and financing as part of global health interventions. Consequently, there is a corresponding call for a role of the directive in the medical devices sector, even though the contributions show that in most cases the respondents do not make any distinction between the three kinds of price stetting procedures and are unable to outline concretely the role that the directive should play in their opinion.

ANNEX 2

Evolution of the pharmaceutical market and OF public expenditure on medicinES[1]

1. Evolution of the EU Pharmaceutical market 1.1. Size of the market

The total European pharmaceutical market was worth an estimated €177,330 million at ex-factory prices in 2009. This is approximately 30.6% of the total world pharmaceutical market (€579,510). The growth of the European market was estimated at 5.5%. In contrast the Asian region demonstrated an estimated growth of 16%[2].

Figure 1 - Breakdown of the world pharmaceutical market – sales 2009

Source: IMS Health Market Prognosis, March 2010 (data relate to the total 2009 unaudited and audited market at ex-factory prices), as cited in EFPIA (2010) The Pharmaceutical Industry in Figures.

In terms of Member States, Germany and France have by far the largest pharmaceutical markets at €26.6 million and €26.2 million respectively. Italy, Spain and the United Kingdom also have relatively large markets, whilst the remainder of Member States all have a market size of less than €6 million. The breakdown of the total pharmaceutical market value by Member State (at ex-factory prices) is shown in Figure 2.

Figure 2 - Total pharmaceutical market value (ex-factory prices, €m, 2008)

Source: EFPIA member associations (official figures) – Bulgaria, Estonia, Lithuania, Malta, Romania: IMS Health as cited in EFPIA (2010) The Pharmaceutical Industry in Figures.

1.2. Pharmaceutical sales 1.2.1. Major trends

There is a clear upwards trend in both pharmaceutical sales and production in the EU. In the period between 1990 and 2008 total pharmaceutical sales in the 27 EU Member States (plus Croatia, Iceland, Norway & Switzerland) rose from just over EUR 40bn (at retail prices) to almost EUR 215bn in 2009. The figure below shows the evolution of pharmaceutical sales across the EU.

Figure 3 - Pharmaceutical sales 1990-2009 (EUR million)

Notes: Data relate to EU-27, Croatia, Iceland, Norway and Switzerland since 2005 (EU-15, Norway and Switzerland before 2005); (*) Since 1998 data relate to ambulatory care only; Source: EFPIA, The Pharmaceutical Industry in Figures, 2010.

This upward trend in pharmaceutical sales across the EU is mirrored at Member State level (Figure 4). Comparing 1997 with 2007, all 14 Member States for which figures were available recorded a significant increase in pharmaceutical sales. The increase was most marked in Greece (more than 250%) and least significant in Denmark (less than 50% increase in sales).

A combination of drivers explains differences in growth of pharmaceutical sales across Member States. Rather than price increases, in most countries the increase in sales value is driven by volume increases.[3] For example in Greece, parallel exports accounted for 22% of the total prescription pharmaceutical market[4], thus adding to sales growth. In Denmark, cost containment measures imposed by government may have contributed to comparatively lower growth than in other European countries.

Figure 4 - Percentage change in pharmaceutical sales 1997-2007

Source: OECD Health Dataset; original figures in USD million (PPP), Exchange rate 1.2836

Table 1 below shows 2008 pharmaceutical sales for a selection of EU Member States and forecasts the growth of the market until 2013. There are marked differences in the sales forecasts per country. Within the EU, the Baltic countries (Latvia, Lithuania and Estonia) show the lowest growth, up to 1%. Romania, Greece, Poland and Spain expect the highest growth in pharmaceutical sales (7.1 to 14.2%). Of the four largest Member States, France, Italy and the UK expect only a modest growth (1.1%, 1.8% and 1.5% respectively), while Germany keeps up with average growth on the world market (4.4%).

Table 1 - Prognosis for pharmaceutical sales in EU countries, 2008-2013

Country || Market Sales 2008, Euro '000 || Compound Annual Growth rate 2003-2008 || Compound Annual Growth Rate 2008-2013 || Estimated size of the market in 2013

EU-27 || 249,060,461 || - || 4.00% || 303,375,683

EU-15 || 224,777,147 || - || 3.70% || 268,950,920

Austria || 4,950,811 || 6% || 4.40% || 6,140,042

Belgium || 7,360,218 || 5% || 5.60% || 9,642,982

Bulgaria || 1,078,387 || 9% || 6.00% || 1,442,484

Cyprus || 471,412 || - || 4.00% || 573,459

Czech Republic || 3,267,290 || 7% || 6.30% || 4,431,850

Denmark || 3,122,408 || 8% || 5.70% || 4,111,774

Estonia || 262,803 || 11% || 1.00% || 276,414

Finland || 3,180,119 || 5% || 2.40% || 3,583,746

France || 48,658,527 || 5% || 1.10% || 51,427,140

Germany || 47,609,313 || 4% || 4.40% || 59,186,823

Greece || 8,669,458 || 15% || 9.10% || 13,430,321

Hungary || 3,378,479 || 7% || 6.20% || 4,569,085

Ireland || 2,953,315 || 16% || 6.80% || 4,103,194

Italy || 30,658,935 || 4% || 1.80% || 33,440,663

Latvia || 450,348 || 24% || 0.40% || 459,282

Lithuania || 739,588 || 13% || 0.70% || 766,023

Luxembourg || 282,147 || 5% || 3.70% || 337,654

Malta || 206,690 || - || 4.00% || 251,315

Netherlands || 7,913,185 || 2% || 6.00% || 10,612,991

Poland || 8,262,559 || 6% || 7.50% || 11,885,865

Portugal || 6,159,709 || 5% || 3.20% || 7,206,903

Romania || 3,295,561 || 35% || 14.20% || 6,399,802

Slovak Republic || 2,012,004 || 11% || 3.20% || 2,352,912

Slovenia || 858,189 || 6% || 3.40% || 1,016,272

Spain || 24,179,199 || 8% || 7.10% || 34,080,118

Sweden || 4,695,229 || 5% || 2.80% || 5,402,063

United Kingdom || 24,384,579 || 4% || 1.50% || 26,244,506

Source: ECORYS Competitiveness of EU Market and Industry for Pharmaceuticals - Volume 2, pg.56; Note: converted from US$ using exchange rate of 1.2836

1.2.2. Breakdown by main distribution channels

Pharmaceutical sales are largely distributed through pharmacy and hospitals. Pharmacy accounts for the largest distribution channel, with over three quarters (76%) of pharmaceutical sales. The remaining 23% are distributed through hospitals, with approximately 1% through other channels such as dispensing doctors, supermarkets and other retail outlets.

Figure 5 - Pharmaceutical sales by distribution channel (2008)

Source: EFPIA (2010) The Pharmaceutical Industry in Figures.

There is considerable variation across Member States in terms of the size of the two main distribution channels. Pharmacy is the largest distribution channel in all countries except for Cyprus. However the proportion of sales through pharmacies ranges from 91% (Slovakia) to 48% (Cyprus) across Member States. Conversely, the proportion of sales coming through hospitals ranges from 9% (Slovakia) to 52% (Cyprus).

Table 2 - Breakdown of the total pharmaceutical market value (at ex-factory prices) by main distribution channels, 2008

Member State || Pharmacy || Hospital || Other channels

Slovakia || 91% || 9% || 0%

Romania || 89% || 11% || 0%

Belgium || 88% || 12% || 0%

Poland || 87% || 13% || 0%

Lithuania || 86% || 14% || 0%

Bulgaria || 86% || 14% || 0%

Germany || 85% || 14% || 1%

Ireland || 82% || 16% || 1%

Latvia || 82% || 18% || 0%

Sweden || 82% || 17% || 0%

Hungary || 82% || 18% || 0%

Slovenia || 81% || 19% || 1%

France || 80% || 20% || 0%

Croatia || 79% || 21% || 0%

Netherlands || 76% || 20% || 4%

Czech Republic || 75% || 25% || 0%

Spain || 75% || 25% || 0%

Finland || 74% || 25% || 1%

Greece || 74% || 26% || 0%

Portugal || 70% || 29% || 0%

Austria || 69% || 31% || 0%

Italy || 66% || 34% || 0%

United Kingdom || 63% || 32% || 4%

Denmark || 59% || 40% || 1%

Cyprus || 48% || 52% || 0%

Total || 76% || 23% || 1%

Note: Denmark, Finland, Iceland, Latvia, Norway, Slovenia, Sweden: pharmaceutical market value at pharmacy purchasing prices; Belgium (2008 provisional), France, Germany, Ireland, Italy, Norway, Spain: estimate; Greece: including parallel exports; Source: EFPIA (2010) The Pharmaceutical Industry in Figures.

1.3. Pharmaceutical consumption

Data on pharmaceutical consumption is difficult to compare across Member States. Member States use varying units of measuring consumption – i.e. packs, defined daily dose (DDD), units of administration and others use weight in mg.

The PHIS report (2010) provides data on annual in-patient pharmaceutical consumption in Austria, Slovakia, and Portugal each of which measure consumption in different units. In Austria consumption is measured in packs, Slovakia uses DDD, and Portugal uses units of administration. In Austria there was a total increase in annual consumption from 20 million packs to 24 million packs between 2000 and 2005. In Slovakia, there was an increase in annual consumption from 200 million DDD to 300 million DDD between 2001 and 2008. In Portugal, there was no increase in annual consumption between 2007 and 2008; consumption remained flat at 78 million units of administration.

While pharmaceutical consumption provides part of the picture of the overall market there is no straightforward relationship between consumption and expenditure and the leading drug across the EU in terms of volume is not the leading drug in terms of expenditure. Based on survey data from 25 Member States (all but Greece and Luxemburg) the leading substance for consumption is paracetamol whereas trastuzumab leads in terms of expenditure. A list of the top 10 substances can be found in Table 5.

Table 3 - Top 10 active ingredients by consumption and expenditure

Position || Top 10 active ingredients used in hospitals, ranked with regard to consumption || Top 10 active ingredients used in hospitals, ranked with regard to expenditure

1 || Paracetamol || Trastuzumab

2 || Electrolyte || Rituximab

3 || Furosemide || Docetaxel

4 || Acetylsalicylic Acid || Interferon beta-1a

5 || Epoetin beta || Etanercept

6 || Albumin || Epoetin alpha

7 || Omeprazol || Imatinib

8 || Ranitidine || Oxaliplatin

9 || Prednisolone || Adalimumab

10 || Coagulation factors IX, VII, and X || Bevacizumab

Source: PHIS, pp. 65-67

2. Public expenditure on pharmaceuticals

This section focuses on the share of the market which is reimbursed and is covered by public expenditure. This part of the market is of greatest relevance for the Transparency Directive’s provisions on pricing and reimbursement.

2.1. Overall public expenditure on pharmaceuticals

Public expenditure on health has followed a similar rising trend to pharmaceutical sales. The pharmaceutical sector accounts for an average 17% share of total health expenditure in most OECD countries.[5] Since 1980 pharmaceutical expenditure in the EU countries has been increasing more than total health expenditure (net of pharmaceutical expenditure). In the period 1980-2005 the mean annual growth of pharmaceutical expenditure was 5.0% in comparison to 4.1% of health expenditure.[6]

Figure 6 shows the total public expenditure on pharmaceuticals for the period 1990-2009 in all 27 Member States plus Croatia, Iceland, Norway and Switzerland. Over that period, total public expenditure on pharmaceuticals in these countries increased from EUR 40bn to over EUR 120bn.

Figure 6 - Public pharmaceutical expenditure in the EU 1992-2009 (EUR million)

Notes: Data relate to EU-27, Croatia, Iceland, Norway and Switzerland since 2005 (EU-15, Norway and Switzerland before 2005); Since 1998 data relate to ambulatory care only; Source: EFPIA, The Pharmaceutical Industry in Figures, 2010.

Table 5 below presents expenditure per capita on pharmaceuticals in 17 Member States over 6 years (2000-2006). In Europe, on average, expenditure has been increasing every year due to aging population and other factors. At Member State level, there is a significant positive relationship between per capita income and per capita pharmaceutical expenditure (including prescribed and non-prescribed drugs). Whereas Belgium and France lead the table, Poland and Denmark spend the least. In Poland it is important to note that this is mostly attributable to an average low pharmaceutical price level since per capita consumption by volume is second in Europe, with an average unit consumption of 33 packs (France 49 packs, Italy 27 packs).[7]

Table 4 - Total expenditure per capita on pharmaceuticals, other medical non durables, (Euro PPP)

|| Year

Country || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006

Average || 392 || 422 || 444 || 479 || 505 || 541 || 564

Austria || 435 || 431 || 479 || 520 || 530 || 540 || 576

Belgium || - || - || - || - || - || 741 || 750

Czech Republic || 294 || 334 || 366 || 416 || 443 || 467 || 448

Denmark || 268 || 298 || 339 || 330 || 341 || 349 || 367

Finland || 350 || 379 || 417 || 443 || 490 || 512 || 499

France || 538 || 592 || 630 || 641 || 673 || 710 || 724

Germany || 466 || 512 || 543 || 574 || 565 || 632 || 642

Greece || 326 || 349 || 386 || 442 || 504 || 543 || 562

Hungary || - || 356 || 395 || 453 || 483 || 565 || 598

Italy || 580 || 641 || 641 || 635 || 655 || 650 || 673

Luxembourg || 359 || 404 || 408 || 444 || 467 || 448 || -

Netherlands || 350 || 383 || 417 || - || - || - || -

Poland || - || - || 267 || 291 || 307 || 303 || 318

Portugal || 433 || 463 || 495 || 501 || 537 || 564 || 579

Slovak Republic || 263 || 290 || 349 || 391 || 426 || 462 || 499

Spain || 420 || 444 || 489 || 602 || 621 || 648 || 684

Sweden || 406 || 449 || 486 || 499 || 526 || 529 || 547

Note: converted from US$ using exchange rate of 1.2836; Source: ECORYS Competitiveness of the EU Market and Industry for Pharmaceuticals V 2. P.51.

Public expenditure on pharmaceuticals as a proportion of total pharmaceutical expenditure has also been increasing from just over 60% in 1997 to close to 68% in 2007. These figures suggest that the value of the reimbursed market as a proportion of the total market has increased considerably between 1997 and 2007 in the countries covered by the data. The figure below charts the evolution of public expenditure on pharmaceuticals as a proportion of total pharmaceutical expenditure over time.

Figure 7 - Public expenditure on pharmaceuticals as a proportion of total pharmaceutical expenditure 1997-2007

Includes medical non-durables; Member States included: Austria, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Spain, and Sweden; Source: OECD Health Dataset; original figures in USD million (PPP), Exchange rate 1.2836.

ANNEX 3

OVERVIEW OF THE PROVISIONS OF DIRECTIVE 89/105/EEC[8]

Article 1 || Subject matter || Any national measure to control the price of medicinal products or to restrict the range of products covered by the national health insurance system must comply with the requirements of the Directive.

Article 2 || Initial price decision || Provisions which apply when marketing is only permitted after the price of the product has been approved by national authorities:

Article 2.1 || Time-limit for decision || - The price decision must be adopted and communicated to the applicant within 90 days. - If the decision is not made within this period, the applicant is entitled to market its product at the price proposed.

Article 2.2 || Motivated decision communicated to the applicant || If the price proposed is not accepted by the national authorities: - the decision must be motivated (statement of reasons) based on objective and verifiable criteria. - the applicant must be informed of the remedies available and of the time limits for applying for such remedies.

Article 2.3 || Publication and communication of prices || At least once a year, list of prices fixed must be: - published in an appropriate publication. - communicated to the Commission.

Article 3 || Price increase || Provisions which apply when price increase is only permitted after approval by national authorities:

Article 3.1 || Time-limit for decision || - The decision must be adopted and communicated to the applicant within 90 days (+ 60 days if exceptional number of applications) - If the decision is not made within this period, applicant is entitled to apply the price increase requested.

Article 3.2 || Motivated decision communicated to the applicant || If the proposed price increase is not accepted by national authorities: - the decision must be motivated (statement of reasons) based on objective and verifiable criteria - the applicant must be informed of the remedies available and of the time limits for applying for such remedies.

Article 3.3 || Publication and communication of price increases || At least once a year, a list of price increases must be: - published in an appropriate publication - communicated to the Commission

Article 4 || Price freeze ||

Article 4.1 || Annual assessment of macro-economic conditions || - At least once a year, Member States must carry out a review to determine if the macro-economic conditions justify maintaining the price freeze. - Possible price increase/decrease must be announced within 90 days after the start of the review.

Article 4.2 || Possibility to request derogation from price freeze || - In exceptional cases, the marketing authorisation holder may apply for a derogation from price freeze. The Application must be motivated. - A reasoned decision on the application must be adopted and communicated to the applicant within 90 days (+ 60 days if exceptional number of applications).

Article 5 || Profit control || If a Member State adopts a system of direct or indirect controls on profitability, the following information must be published and communicated to the Commission:

|| Provisions applicable to profit control systems (only example to date is in the United Kingdom) || - method used to define profitability - range of target profit permitted - criteria according to which target rates of profit are defined and criteria according to which profit can be retained above the companies’ targets - maximum percentage of profit which can be retained by companies above their target. Information must be updated once a year or when significant changes are made.

Article 6 || Decision on reimbursement (positive list) || Provisions which apply if a medicinal product can be reimbursed only after the competent authorities have decided to include it in a positive list of products covered by the national health insurance system:

Article 6.1 || Time-limit for decision || - The decision to include a product on the positive list must be adopted and communicated to the applicant within 90 days (+ 90 days if pricing decision is made during the same procedure or after decision on reimbursement). - If national rules impose that the reimbursement decision must be made after pricing decision, both procedures must be completed within 180 days.

Article 6.2 || Motivated decision communicated to the applicant || A decision not to include a product on the positive list: - must be motivated (statement of reasons including, if appropriate, expert opinions or recommendations) based on objective and verifiable criteria. - the applicant must be informed of the remedies available and of the time limits for applying for such remedies.

Article 6.3 || Publication and communication of criteria || The criteria used to decide upon inclusion of products on positive list must be published and communicated to the Commission before 31/12/1989.

Article 6.4 || List of reimbursed products || A complete list of reimbursed products and their prices must be published and communicated to the Commission before 31/12/1989. The list must be updated at least once a year.

Article 6.5 || Decision to exclude a product from the positive list || A decision to exclude a product from the positive list: - must be motivated (statement of reasons including, if appropriate, expert opinions or recommendations based on objective and verifiable criteria. - the applicant must be informed of the remedies available and of the time limits for applying for such remedies.

Article 6.6 || Decision to exclude a category of products from the positive list || A decision to exclude a category of products from the positive list: - must be motivated (statement of reasons) based on objective and verifiable criteria. - must be published in an appropriate publication.

Article 7 || Decision on exclusion from reimbursement system (negative list) || Provisions which apply if national authorities can adopt decisions to exclude individual products or categories of products from national health insurance system:

Article 7.1 || Decision to exclude a category of products || A decision to exclude a category of products from reimbursement system (inclusion in negative list): - must be motivated (statement of reasons) based on objective and verifiable criteria. - must be published in an appropriate publication.

Article 7.2 || Publication and communication of criteria || The criteria used to decide upon exclusion of products must be published and communicated to the Commission before 31/12/1989.

Article 7.3 || Decision to exclude an individual product || Decision to exclude a specific product from reimbursement system: - must be motivated (statement of reasons including, if appropriate, expert opinions or recommendations on which the decision is based) - must be based on objective and verifiable criteria. - applicant must be informed of the remedies available and time limits for applying for such remedies.

Article 7.4 || List of products excluded: publication and communication to the Commission || - Complete list of excluded products must be published and communicated to the Commission before 31 Dec 1990. The list must be updated at least every six months.

Article 8 || Criteria for therapeutic classification and transparency of transfer prices ||

Article 8.1 || Criteria for therapeutic classification || The criteria concerning the therapeutic classification of medicinal products must be communicated to the Commission before 31/12/1989.

Article 8.2 || Transparency of transfer prices || The criteria to verify the fairness and transparency of prices charged for the transfer of active substances or intermediate products within a group of companies must be communicated to the Commission before 31/12/1989.

Article 9 || Review of directive ||

Article 9.1 || Commission proposal within 2 years || The Commission must submit a proposal within two years with appropriate measures for the abolition of any remaining barriers to the free movement of medicines.

Article 9.2 || Adoption by Council within one year || The Council must decide on the Commission’s proposal within one year after its submission.

Article 10 || Transparency Committee ||

Article 10.1 || Creation of a ‘Consultative Committee’ || Consultative Committee for the implementation of Directive 89/105/EEC attached to the Commission.

Article 10.2 || Tasks || Examine questions relating to the application of the Directive

Article 10.3 || Membership || One representative and one deputy for each Member State.

Article 10.4 || Chairmanship || Committee chaired by a representative of the Commission.

Article 10.5 || Rules of procedure || The Committee shall adopt its own rules of procedure.

Article 11 || Final provisions ||

Article 11.1 || Deadline for transposition || 31/12/1989.

Article 11.2 || Communication of existing legislation and practices || - Before 31/12/1989, Member States must communicate to the Commission their laws, regulations or administrative provisions relating to the pricing of medicinal products, the profitability of manufacturers and the coverage of products by the national health insurance system. - Amendments and modifications to these laws, regulations or administrative provisions must be communicated to the Commission.

ANNEX 4

PROBLEM TREE

ANNEX 5

DELAYS OBSERVED IN PRICING AND REIMBURSEMENT PROCEDURES[9]

The Transparency Directive specifies a maximum amount of time permitted for competent authorities in Member States to take decisions on pricing and reimbursement. Article 2 of the Directive stipulates that decisions on prices must be communicated to the applicant and adopted within 90 days of receipt of the application. Similarly, a decision on whether to include the product in the list of those covered by the national health insurance for reimbursement purpose must also be made within 90 days. For both of these processes, the timescales can be extended by a further 90 days if the competent national authority deems there to have been insufficient supporting information provided with the application, and request additional information. Any further delays for reasons other than this are considered to be a breach of the Directive.

This annex provides details of the actual pricing and reimbursement delays for innovator and generic medicines based on the available data.

1. Pricing and reimbursement delays for innovator medicines 1.1. Delays observed – originators

Data collected as part of the Commission’s inquiry into competition in the pharmaceutical market[10] suggest that originator companies object to the extent of delays and uncertainties created by national pricing and reimbursement procedures. They argue that these delays have reduced the period of exclusivity that they hold over patented medical products and thus reduces their expected revenue. Although the Transparency Directive clearly stipulates that decisions on pricing and reimbursement should be taken within 180 days, the report suggests that in several Member States it takes considerably longer for such decisions to be taken. Indeed, it is suggested that originator companies face delays ranging from a few months to several years with respect to the pricing and reimbursement decision.[11] This may be in part due to request for further information, which enables a further 90 day delay to be taken.

As part of an OECD study, the holders of marketing authorisations for 78 pharmaceutical products granted marketing approval between 1997 and 2001 were surveyed to ascertain the average delays that occur from P&R application to the decision to approve. Figure 1 outlines the extent of and variation across several Member States in terms of delays. The total delay comprises of the following three types (where relevant) of delay:

(1) Pricing delay – the elapsed time from the date the pricing application was made to the date price approval was granted

(2) Reimbursement delay – the elapsed time from the date the reimbursement application was made to the date the company “was first informed about the reimbursement decision”;

(3) Publication delay – elapsed time from the date the company was notified of the reimbursement decision to the date the authorities published the decision (only in countries for which publication of a decision in an official journal is a prerequisite for reimbursement)[12]

Figure 1 - Average number of days from pricing and reimbursement application to decision, 1997-2001

Source: OECD (2008) Health Policy Studies Pharmaceutical Pricing Policies in a Global Market, pg. 133

As the figure highlights, the average delay in Belgium is particularly long, and almost twice as long as in the country with the second longest delays, Greece. A further six Member States have delays that exceed the 180 day period stipulated by the Transparency Directive for pricing and reimbursement decisions, although it is unclear whether this is as a result of ‘stop the clock’ procedures used to request additional data, or due to the publication delay. For instance, the Portuguese competent authority suggested that the stop the clock provision is almost always used for new medicines and sometimes more than once within the same application process. The average stop the clock lasts for about 10 days though this has stretched to 6 months in extreme cases. The objective of stopping the clock is to gather additional information for the “value added” analysis. Nevertheless, the Portuguese competent authority suggested that the deadline for pricing and reimbursement are usually met except for a small number of complex products where the deadline is significantly exceeded. Portuguese legislation stipulates a maximum delay of 75 days for reimbursement which is usually met though this can be extended to 120 days for complex products. The average delay for a pricing decision (by the Ministry of the Economy) is about 60 days. The Italian competent authority confirms that P&R delays are very product specific. A study from Hungary suggested that a number of new pharmaceutical products have taken two to three years from submission of an application to decisions being made. It is thought that this was in part due to changes in personnel at ministerial and administrative levels, as well as other factors. Interviews with stakeholders in the pharmaceutical sector as part of the study found the general consensus to be that decisions for innovative drugs are rarely made within the timescales permitted by the Directive[13].

At the other end of the scale, reimbursement and pricing delays do not exist in Germany and the United Kingdom as drugs are reimbursed as soon as they are approved, unless or until added to the negative list. While more recent data suggests that delays have increased in most countries[14], there have also been improvements; most notably in Belgium, Denmark, France, Austria and Finland. For example, a 2008 report from the Pharmaceutical Industry Association, Pharma.be in Belgium, analysed reimbursement decisions for 46 new and innovative drugs in 2008. It found that pricing and reimbursement decisions were made by the competent authority for all 46 new drugs within the 180 days permitted by the Directive, and the average delay was 73 days. However, despite these improvements the industry association has still expressed concern that the delays are too long[15]. In 2008 the French Pricing Committee (CEPS) published a report that stated the average time to process pricing applications (for first applications) was 102 days, with the average time for new drugs being 201 days[16]. In 2009, CEPS annual report published the following processing times.

Table 1 – France: Processing times for drug listing applications in by type (in number of days)

Type of product || Accepted || Abandoned, withdrawn or rejected || All

Generics || 65 || 124 || 66

Non-generics || 213 || 579 || 256

All || 89 || 468 || 106

Source: CEPS, Annual Report 2009.

In Denmark, the maximum time for reimbursement applications concerning medicinal products with an entirely new constituent or new medicinal product forms is 90 days, calculated from the time when the marketing authorisation is available. Usually, reimbursement decisions are made within 1-2 months. Applications for reimbursement for a new medicinal product form with the same method of administration (e.g. ointments/creams/liniments or tablets/capsules) are usually granted within 2 weeks and generic products are automatically reimbursed if the originator product is reimbursed. If the Danish Reimbursement Committee recommends a negative outcome, the applicant is granted a 14 day stop-clock to make a statement before the committee formally makes its decision.

The figure below shows average pricing and reimbursement delays at two different points in time. The graph shows that Austria, Finland, Denmark and Belgium have improved delays. At the same time, delays in other countries have increased.

Figure 2 - Average number of days for pricing and reimbursement decision - 1997-2001 compared to 2004

Source: 1997-2001 data from OECD (2008) Health Policy Studies Pharmaceutical Pricing Policies in a Global Market, pg. 133. 2004 data from Pharmaceutical Industry Competitiveness Task Force Competitiveness and Performance Indicators (2005), pg. 42.

Another way of estimating pricing and reimbursement delays is by disaggregating the EFPIA WAIT indicator. The W.A.I.T indicator (2009) shows that the average time delay between market authorisation and “accessibility” ranges from 101 to 403 days in the 14 Member States covered. Belgium has the longest delay, followed by Italy at 318 days, whilst the shortest delays are evident in Ireland, Austria and Denmark. In order to bring delays down further, the Italian Medicines agency (AIFA) and the State-Regions Conference (Conferenza Stato Regioni) have signed an agreement for automatic inclusion in regional hospital formularies of innovative drugs.[17] In addition to bringing down overall accessibility delays after a reimbursement decision has been taken at national level, this move should help reduce regional disparity in access to drugs.

Figure 3 - Average time delay between marketing authorisation and "accessibility”

Source: EFPIA

The W.A.I.T. indicator does not reveal the share of the delay in time to market that can be explained by pricing and reimbursement procedures. However, combining WAIT data with information from the pharmaceutical sector inquiry on which countries are approached first by originator companies for pricing and reimbursement can provide an initial insight into the share of time to market that can be explained by delays in pricing and reimbursement. The upper left cells in the table below (France & Italy) indicate countries that are among the first to be approached for pricing and reimbursement and which, at the same time, exhibit long times to market. This suggests that in these Member States pricing and reimbursement delays could explain a larger proportion of the WAIT indicator. Countries in the lower left cell (Denmark) combine a short WAIT indicator with a relatively late approach for pricing and reimbursement which suggests that P&R procedures in these countries are comparatively quick.

Table 2 - WAIT indicator and relative timing of pricing and reimbursement applications

|| Among first to be approached for P&R || Approached after the first wave

Long WAIT || Italy France || Belgium

Medium WAIT || Netherlands Spain || Greece Finland Portugal

Short WAIT || Sweden Ireland || Denmark

Note: only countries in both WAIT and studies. Source: EFPIA for WAIT indicator, sector inquiry for timing of pricing and reimbursement applications.

Finally, it should be noted that data on time delays do not in themselves inform about the quality of the pricing and reimbursement procedure. Interviews with sector representatives as part of a study on the “Competitiveness of the EU Market and Industry for Pharmaceuticals” for DG Enterprise also specified that such delays occur across the EU. In particular, it was stated that some countries’ administrations bring out an automatic negative advice after 180 days, forcing the pharmaceutical applicant company to resubmit its pricing and reimbursement application. This way, the countries comply with the Transparency Directive, but stall the procedure by giving a negative evaluation to the application.

1.2. Main reasons for delays – originators

A number of reasons have been put forward to explain why delays occur in the pricing and reimbursement decision making process for new products. Information collected from the pharmaceutical sector suggests that they see the following as being the main reasons for the delays:

· Fragmentation of national decision making processes, including more decision making at regional, local or even hospital levels. Such fragmented decision making requires negotiations with many different parties, delaying the process and increasing administrative costs[18];

· Price conversions within the EU, driven by cross-border price referencing, i.e. the practice of some Member States referring to other countries’ pricing and reimbursement decisions before taking their own decision. As a result of such practices, originator companies will often apply for pricing and reimbursement in Member States where they expect high prices, and then (if at all) apply in other countries[19];

· Practices to control expenditure such as therapeutic reference pricing (and the inclusion of patented products), which places medicines to treat the same medical condition into groups or ‘clusters' with a single common reimbursed price;

· The increasing use of health technology assessments; and

· Publication delays.

Delays may also occur as a result of pharmaceutical companies strategically holding off submitting applications in countries where strict price control referencing exists, or where the markets are smaller. In addition, because lower prices in some Member States may influence prices in others, through parallel trade and price referencing, manufacturers may prefer longer delays or non-launches to the acceptance of a relatively low price. This suggests that pricing regulations can exacerbate delays in time to market in some countries[20], and countries with low prices for pharmaceuticals generally have fewer launches and longer launch delays.

2. Pricing and reimbursement delays for generic medicines 2.1. Observed delays - generics

Patent protections for specific pharmaceuticals are valid for a fixed period of time during which they have exclusive rights to manufacture and market the product. When patent protection expires, originator companies lose these exclusivity rights and generic manufacturers can enter the market with equivalent medicines. These generics are usually sold at significantly reduced prices, which can reduce the strain on public health budgets, as well as creating incentives for continued innovation.

As with new pharmaceutical products, the Transparency Directive specifies a 90-day limit for adopting decisions on pricing and a further 90 days for reimbursement. However, studies have shown that in practice these time limits are often exceeded. Moreover, there is considerable variation across Member States.

Figure 4 - Time delay (in days) for P&R approval for a generic medicine after granting of market authorisation (2005)

Source: EGA

The figure above shows the results of a survey carried out by EGA (2005) of pricing and reimbursement delays for generics across 23 Member States. Whilst some Member States are well within the 90/180 days permitted, others exceed these timescales considerably. For example, a generic product approved through the same EU registration procedures is typically launched one year earlier in the Netherlands than in Belgium due to delays in pricing and reimbursement approvals. Latvia, Slovakia and Romania have the longest delays, whist Denmark, Sweden and Ireland have the quickest pricing and reimbursement procedures for generics.

Although it has been suggested that the delays for generics have improved as a result of the Transparency Directive, time delays are a challenge to the competitive generic medicines industry and can make it difficult for generic manufacturers to assess how long it will take for them to launch a product onto a particular market[21].

2.2. Main reasons for delays – generics

Findings from the sector inquiry for pharmaceuticals suggest that the main obstacles for generic companies are discrepancies in assessment criteria, patent linkage (i.e. some regulatory bodies consider whether the generic product may infringe the originator company's patents). Generic companies have also argued that these delays result not only from the decision making procedures, but often also from the additional requirements for obtaining pricing and reimbursement status for generic medicines, e.g. information on the patent status or concerning complete equivalence between the originator and generic product. These additional requirements seem to give opportunities for originator companies to intervene and hence prolong the de-facto exclusivity period of their product.

Alleged claims of patent infringements are another potential reason for delays in pricing and reimbursement decision making. Specifically, it has been suggested by some generic companies that alleged claims of potential patent infringements can delay the process because some Member States’ pricing and reimbursement authorities prefer to wait until the situation is clarified before coming to a decision[22]. For example, in Portugal, the pricing decision is often suspended due to interim injunctions that have been filed against the marketing authorisations. The pricing decision remains suspended until the court has ruled on the marketing authorisation.

Another potential obstacle for generic entry lies in the need for absolute equivalence between generic versions and the originator, requested by pricing and reimbursement authorities in some Member States in order to allow substitution. These requirements go much further than the bio-equivalence requested for marketing authorisations, and can include, for example, identical pack sizes, identical doses, identical patient information leaflets and/or identical summaries of product characteristics[23].

Finally, like for originators, publication delays can have a significant impact on overall pricing and reimbursement delays.

ANNEX 6

Case-law of the court of justice

RELATING TO COUNCIL directive 89/105/EEC[24]

1. Overview

The European Court of Justice has examined several cases in relation to Directive 89/105/EEC. Its judgements clarified issues related to the scope of the Directive, time-limits, appeal procedures and the direct effect of several articles of the Directive.

Relevant cases:

– Case C-424/99 of 27 November 2001, Commission v. Austria

– Case C-229/00 of 12 June 2003, Commission v. Finland

– Case C-245/03 of 20 January 2005, Merck, Sharp & Dohme

– Case C-296/03 of 20 January 2005, GlaxoSmithKline

– Case C-317/05 of 26 October 2006, Pohl-Boskamp

– Case C-311/07 of 17 July 2008, Commission v. Austria

– Case C-352/07 of 2 April 2009, Menarini and joined cases C‑353/07 to C‑356/07, C‑365/07 to C‑367/07 and C‑400/07

– Case C-417/07 of 14 January 2010, AGIM and joined case C-472/07

– Case C-62/09 of 22 April 2010, ABPI

At the time of adoption of the directive, in December 1988, the design of health insurance systems in the Member States was usually less complex than nowadays. Pricing and reimbursement procedures mainly involved the submission of an application followed by a decision-making process to determine the price of the medicine and/or its eligibility to reimbursement. However, since then, national pricing and reimbursement systems have evolved and more complicated mechanisms have been put in place.

In order to ensure that the objectives of the Directive are achieved, the Court adopted an extensive interpretation based on the purposes of the Directive and going beyond the mere wording of its provisions.

Key Principles established by the Court

· Directive 89/105 has as its underlying principle the idea of minimum interference in the organisation by Member States of their domestic social security policies.[25] The requirements arising from Directive 89/105 affect neither the Member States’ policies for determining the prices of medicinal products nor national policies on price setting or on the determination of social security schemes, except as far as it is necessary to attain transparency for the purposes of that directive.[26]

· The objective of Directive 89/105/EEC is to ensure, in accordance with its Article 1, that any national measure to control the prices of medicinal products or to restrict the range of medicinal products covered by the national health insurance systems complies with its provisions.[27]

· The fundamental principle established by the ECJ is that Directive 89/105/EEC must be interpreted in light of its objectives so as to ensure its effectiveness (‘effet utile’).[28] An extensive interpretation of the provisions of the Directive must prevail because it is linked to the free movement of goods, which is one of the fundamental freedoms of the Community.

2. The scope of the Directive 2.1. Introduction

The case-law of the Court mainly relates to national procedures on the coverage of medicines by health insurance systems (Article 6 of the Directive). The wording of Article 6 often appears too restrictive to encompass new forms of pricing and reimbursement which have been established by Member States. The article refers to “positive lists”:

The following provisions shall apply if a medicinal product is covered by the national health insurance system only after the competent authorities have decided to include the medicinal product concerned in a positive list of medicinal products covered by the national health insurance system […].

The main challenge with Article 6 lies in the fact that Member States rely "primarily on the actual wording of the introductory passage in Article 6."[29] According to advocate General Tizzano, this provision "is not particularly well worded."[30] In his opinion, the logic of this provision and the intention of the directive are to refer to all cases where inclusion of a medicinal product in a list entails automatic reimbursement of it. The fact that in one Member State reimbursement is also possible under certain conditions for medicines not included in the list does not detract from the relevant factor, which is that to include a product in a list normally means that it is automatically reimbursed.

This interpretation reconciles its wording with the declared intent of the Directive: “Member States shall ensure that any national measure, whether laid down by law, regulation or administrative action, to [...] restrict the range of medicinal products covered by their national health insurance systems complies with the requirements of this Directive.

Advocate General Tizzano considers that the decisive factor is the fact that this provision aims at ensuring free movement of goods. According to the settled case-law, this requires a broad interpretation of the relevant requirements and not an interpretation which is restrictive and would affect its efficacy. By interpreting this provision in a different way, it would mean that Member States would be encouraged "to evade, by means of formal and nominalistic arrangements, the obligations imposed in the directive".[31]

Several rulings of the Court also relate to Article 4, which lays down obligations on the Member States in case of price freeze. The Court ruled that Article 4(1) encompasses all national measures controlling the prices of medicinal products, in particular price reductions, even if these measures are not preceded by a price freeze.

2.2. Interpretation of Article 6: inclusion of medicinal products in the national health insurance system 2.2.1. Case C-424/99, Commission v. Austria (27 November 2001)

In Commission v Austria,[32] the Court had to clarify the concept of positive list in the meaning of the Directive. This judgement shed light on the scope of the Directive as well as on the interpretation of Article 6.

Facts

In Austria, medicines that appear on the register of medicinal products are reimbursed. However, there is also another possibility to have the cost of the medicinal products borne by the health insurance scheme: if the principal doctor or the supervising doctor of the competent social security institution agrees that it is necessary and appropriate for the patient, in view of his condition. In this case, prior authorization must be given by that doctor.

The Austrian government contended that Article 6 of the directive did not apply since that article referred to a positive list and that a list of medicinal products constituted a positive list only where authorization by the social security system of prescription of a medicinal product was dependant upon the inclusion in the list. The Austrian authorities argued that medicinal products which were not in the register could have been reimbursed, where patients have obtained authorization. Their position was therefore that the register is not an exhaustive catalogue of the medicinal products covered by the sickness insurance scheme but just a working tool for the use of doctors, enabling them to determine which medicines were going to be covered by the social security scheme without prior authorization. The Austrian government also claimed that the Commission was interfering in the organization of the national social security systems.

Findings and main implications of the judgement

· The Court of Justice ruled that the Community did not question the method of financing or the structure of the social security system, but only sought to ensure compliance with the provisions of the Transparency Directive.

· The Court established that the sole determining factor that qualifies a positive list is the fact that inclusion of a medicinal product in this list normally means that its costs will be automatically borne by the social security system. It is irrelevant that the cost of products which are not included on the list can be covered by the scheme if there is an authorization from the doctor. Therefore, Article 6 applies where the inclusion of a medicinal product on a list leads to automatic coverage by the health insurance system.

· The Court justified this interpretation based on the purpose of the Directive, which is to ensure that any national measure to control the prices of medicinal products for human use or to restrict the range of medicinal products covered by the national health insurance systems complies with the requirements of the directive (Article 1).

2.2.2. Case C-229/00, Commission v. Finland (12 June 2003)

In Commission v Finland,[33] the Court had to determine whether the decisions establishing categories of products subject to higher-rate reimbursement fall within the scope of Article 6 of the Directive. The decision establishing the list of active ingredients which received higher-rate coverage was not adopted pursuant to an individual application, did not contain any statement of reasons and was not open to judicial review.

Facts

In addition to the basic scheme of insurance cover, the Finnish system provided for higher-rate reimbursement schemes with respect to medicinal products which are essential for the treatment of serious or chronic illnesses. The Council of Ministers determined by decree the serious and chronic illnesses for which patients may receive higher-rate reimbursement and drew-up a general list of the active ingredients used in medicinal products to combat these illnesses. The Institute for Social Security subsequently established a list of the medicinal products already covered by the basic health insurance scheme, which contained one of the active ingredients listed in the decree. The products present on this list were entitled to higher-rate reimbursement.

The Finish government contended that Article 6 of the Directive did not apply to the decree of the Council of Ministers since the decree did not result in the inclusion of a medicinal product on the list of medicinal products qualifying for higher-rate cover, but just drew a list of active ingredients. It also considered that the decision establishing the list of active ingredients used in medicinal products which may receive higher-rate coverage was not adopted pursuant to an individual application and therefore was not subject to Article 6 of the Directive.

Findings and main implications of the judgement

· Article 6 applies to measures of a general nature where they amount to a bundle of individual decisions.

The Court ruled that it is necessary to interpret the Directive in the light of its objectives and not to limit the interpretation to the wording of the articles. A measure which does not directly provide for the inclusion of the medical products on the list of medicinal products qualifying for higher-cover rate, but decides only on the active ingredients which are going to be included in that scheme, falls within the scope of the Directive. In the Finnish case, the general measure (decree of the Council of Ministers) was considered as a bundle of individual decisions because the body establishing the actual positive list had no discretion as to the choice of products to be included in the list. Therefore, any measure which affects the coverage of medicinal products by the national sickness insurance systems falls within the scope of the Directive.

· Existence of an application and protection of the parties concerned

The Court addressed the issue of a lack of application to include a medicine on the list of medicinal products qualifying for sickness insurance cover. It ruled that the Directive should be interpreted so as to give the persons concerned the possibility to verify that the official entry of medicinal products on the list corresponds to objective criteria and that there is no discrimination between national medicinal products and those from other Member States. This issue is very important since the organisation of national systems has evolved and measures taken to determine the conditions of reimbursement of medicines are not always adopted as a result of an individual application.

· Where different categories or modalities of reimbursement exist (for instance different levels of coverage by the health insurance system), Article 6 applies to all these categories, levels or modalities

The Court ruled that Member States cannot circumvent their obligations by creating one reimbursement category which respects the requirements of the Directive, while other reimbursement categories do not comply with these requirements.

· Principle of non-interference

The Court confirmed that the Directive does not interfere with the organisation of the national social security schemes. The method of financing, the structure of the social security system is not called into question. Pricing and reimbursement of medicinal products clearly fall within the scope of national competence, but the Directive establishes a series of procedural requirements to provide assurance that national measures do not amount to barriers to trade. According to its sixth recital, the “requirements [imposed by the Directive] do not affect national policies on price setting and on the determination of social security schemes, except as far as it is necessary to attain transparency within the meaning of this Directive”.

· It is the effect of the measure that determines whether it constitutes an individual decision

The Finnish decree in question was found to infringe Article 6(1) and (2) of the Directive. This is important since the Finnish authorities in their defence argued that these articles are not applicable because the decree in question is regulatory in nature and therefore falls within the scope of Article 7(3). Advocate General Tizzano[34] argued that the Council of Minister's decree was not a measure laying down general and abstract criteria to be taken into account by competent authorities in deciding whether or not to include medicinal products on the lists: the decree determined not only the active ingredients but also the individual medicinal products containing them that would be included in the higher-rate reimbursement scheme. He concluded that even if it is a piece of delegated legislation, the decree contains a series of individual decisions on the inclusion of specific medicinal products in the national health insurance scheme. Therefore, it is important to look at the effect of the measure in order to determine whether it is an individual decision.

2.2.3. Case C-317/05, Pohl Boskamp (26 October 2006)

Facts

The Court was asked to rule on a preliminary question regarding the compatibility with the Directive of a system which, after excluding non-prescription medicinal products (OTCs) from the scope of reimbursement, enables an authority to grant derogations from this exclusion to certain OTCs, without providing for the procedural requirements laid down in Article 6(1) and 6(2) of the Directive (e.g. time-limits, obligation to provide a statement of reasons, possibility to appeal). Under the system at issue, the responsible national authority – the ‘Gemeinsamer Bundesausschuss’ – established a list of active ingredients used in the treatment of serious illnesses which may, by way of exception, be prescribed and financed by the national health insurance system.

Findings and main implications of the judgement

· The Court confirmed the broad interpretation of the notion of positive list

A list of active ingredients or medicinal products qualifies as a positive list as soon as the inclusion of an ingredient or product in this list entails its coverage by the national health insurance system. This conclusion applies regardless of the formal qualification of the list and regardless of the national body or institution which makes the decision.

· The Court confirmed that measures of a general nature are covered by Article 6 of the Directive if they amount to a “bundle of individual decisions”

In the system described, the decisions made by the national authorities constitute a bundle of individual decisions affecting several interested parties. The fact that the marketing authorisation holders are affected entitles them to claim the rights accorded by Article 6 of the Directive. The Court reiterated that Member States cannot establish a dual procedure for the establishment of the list of products qualifying for reimbursement: one which complies with the Directive and one which is exempt from its obligations.

· The judgement confirmed that the Directive cannot be interpreted restrictively so as to guarantee its effectiveness:

The reasoning of the ECJ is again based on the objectives of the Directive: ensuring the effectiveness of the Directive requires that the persons concerned can verify that the inclusion of medicines into the list responds to objective criteria and that there is no discrimination between national products and products from other Member States.

· With regard to the claim of the German authorities that the Directive applies only to applications submitted by the holder of a marketing authorisation, the Court ruled that the marketing authorisation holders affected are entitled to claim rights.

Failure to communicate the list of medicinal products to Pohl-Boskamp, as well as the lack of a statement of reasons and information on the legal remedies available, infringe the requirements of Article 6(2) of the Directive.

· The Court also considered that the existence of a barrier to intra-Community trade is not a pre-requisite for the application of the Directive.

2.2.4. Case C-311/07, Commission v. Austria (26 October 2006)

The Court was asked to determine whether national rules on the inclusion of products on a reimbursement list comprising several categories of reimbursement were compatible with Article 6 of the Directive.

Facts

The litigation related to national rules on the inclusion of medicinal products in a positive reimbursement list. The list in question (the Austrian reimbursement code) comprised three categories of reimbursement, designated as red box, yellow box and green box. The conditions of reimbursement of a given medicinal product were dependent on its classification in one of these categories, with the green and yellow box offering more favourable reimbursement conditions than the red box.

Upon application for inclusion in the reimbursement code, medicinal products were immediately included in the red box for a maximum period of 24 months (or 36 months under specific circumstances). During this period, the national authorities would decide if the medicinal products should be included in the yellow or green box, or excluded from reimbursement.

The Commission argued that the Austrian system did not guarantee the inclusion of medicinal products in the yellow or green box within 90 or 180 days, in contradiction with Article 6(1) of Directive 89/105/EEC. The Austrian authorities refuted this view, considering that the reimbursement code, taken as a whole, constitutes a positive list within the meaning of Article 6(1). National legislation was deemed to be in line with the time-limits of the directive, insofar as medicinal products had access to reimbursement as soon as they were included in the red box (a decision which took less than 90 days).

Findings and main implications of the judgement

· The Court dismissed the Austrian argument of interference in the organisation of its national social security scheme: the Commission only sought to ensure the observance of the requirements of the Directive but did not put into question the method of financing or the structure of the social security system. It recalled that the objective of Directive 89/105/EEC is to ensure, in accordance with its Article 1, that any national measure to control the prices of medicinal products or to restrict the range of medicinal products covered by the national health insurance systems complies with its provisions. Decisions to include a medicinal product in the Austrian reimbursement code, and more specifically in the yellow or green box of the code, constitute such measures. They are, therefore, subject to the requirements of the directive.

· The Court concluded that the Austrian system does not comply with Article 6(1) of the directive because it does not guarantee that applications for inclusion in the yellow or green box of the reimbursement code will be addressed within 90 days (reimbursement decision only) or within 180 days (joint pricing and reimbursement decision). The fact that an application to include a medicinal product in the code leads to its temporary inclusion in the red box is irrelevant. Indeed, this temporary classification does not mean that the inclusion of the product in the yellow or green box will be decided within the time-limits prescribed by Article 6(1).

· The judgement confirmed that, if a national health insurance system comprises different categories of reimbursement, the obligations of Article 6(1) apply to the inclusion of medicinal products in any of these categories – i.e. not only to the least favourable reimbursement category, but also to the categories providing more favourable reimbursement conditions.

· This interpretation applies mutatis mutandis to the other provisions of Article 6. Member States cannot circumvent their obligations under the directive by creating one basic or least favourable reimbursement category which respects the requirements of the directive, while other, more favourable reimbursement categories would not comply with these requirements.

2.2.5. Case C-62/09, ABPI (22 April 2010)

Facts

Case C-62/09[35] addresses the issue of "demand-side" measures. The Court had to decide in a preliminary ruling over the financial incentives granted to doctors to prescribe specific named medicines.

Findings and main implications of the judgement

· The Court ruled that public authorities are allowed to offer financial incentives to doctors to prescribe specific named medicines belonging to the same therapeutic class: this does not constitute an advertising of medicines prohibited by Directive 2001/83/EC. However, the Court considered that these financial incentives given to doctors should comply with the provisions of Directive 89/105/EEC: measures which are addressed to doctors must be transparent, must be based on objective and non-discriminatory criteria. The reason behind this is that the incentives given to doctors affect the list of what is being reimbursed and it is important that these measures be transparent.

· This judgment is important as it tackles the “demand-side measures”. National systems increasingly use measures aimed at health professionals, such as financial incentives or prescription guidelines, to contain pharmaceutical costs. As these measures affect the medicines which are prescribed, delivered and eventually reimbursed, the Court recognized the need for the professionals in the pharmaceutical industry to verify whether these schemes are based on objective and verifiable criteria and whether there is no discrimination between national medicinal products and those from other Member States.

2.3. Interpretation of Article 4: price freezes and price reductions 2.3.1. Case C-352/07, Menarini and joined cases (2 April 2009)

The judgement relates to the interpretation of Article 4 of Directive 89/105/EEC. It highlights the procedural obligations which Member States have to follow when they introduce price freezes or price reductions (both are covered by the directive). It also clarifies the margin of discretion of the national authorities in relation to such measures.

Facts

During 2005 and 2006, the Italian authorities introduced several measures reducing the prices of medicines with a view to ensuring compliance with the ceiling of expenditure laid down by national law. These successive measures were adopted on the basis of a predicted over-expenditure, rather than on the basis of actual figures.

Several pharmaceutical companies challenged these price reduction measures before the “Regional Administrative Court of Lazio”. Several questions related to the interpretation of Article 4(1) and 4(2) of the Transparency Directive have been addressed to the ECJ.

Findings and main implications of the judgement

· The Court ruled that Article 4(1) encompasses all national measures controlling the prices of medicinal products, even if these measures are not preceded by a price freeze. It considered that Article 4 should be interpreted by reference to the purpose and general scheme of the Directive. A restrictive interpretation of the Directive is not desired as this would tantamount to excluding measures reducing the prices of all, or of certain categories of medicinal products, if such measures are not preceded by a freeze on those prices. Moreover, the Court ruled that an interpretation according to which the adoption of measures reducing the prices of all, or of certain categories of medicinal products must be preceded by a freeze would affect Member States' price fixing policies and this would go beyond the purpose of the Directive.

· The Court ruled that Member States were allowed to adopt price reduction measures for all medicinal products, or for certain categories of medicinal products, more than once a year and to do so for several consecutive years. The only condition would be to carry out a review of the macro-economic conditions which justify the freeze to be continued, at least once a year. This is also a minimum requirement, meaning that Member States may carry out such a review more than once a year.

· The Court ruled that Article 4(1) of the Directive must be interpreted as meaning that it does not preclude measures controlling the prices of all, or of certain categories of, medicinal products from being adopted on the basis of predicted expenditure, provided that the requirements laid down by that provision are met and that the predictions are based on objective and verifiable data. A contrary interpretation would constitute interference in the organisation of national social security policies of the Member States. It underlined the leeway margin left to the Member States, but in the same time it is also pointed out that this discretion is not unlimited and that the predictions used by the national authorities must be based on objective and verifiable data.

· The Court considered that it is up to the Member States to decide on the criteria on the basis of which the review of the macro-economic conditions is to be conducted. These macro-economic conditions can consist of pharmaceutical expenditure alone, in health expenditure overall or even in other type of expenditure.

· The Court ruled that Member States must, in all cases, provide for the possibility for the companies concerned by a price freeze or price reduction to apply for a derogation from the price imposed, without prejudice to the ascertainment by the national authorities that it is an exceptional case and that there are particular reasons for the company to do so. The genuine participation of the company concerned consists, first, in the submission of an adequate statement of reasons justifying the application for a derogation and, second, in the provision of detailed additional information if the information supporting the application is inadequate. The obligation for Member States to state the reasons for any refusal of such an application is also expressly imposed by Article 4(2).

2.3.2. Joined Cases C-471/07 and C-472/07, AGIM (14 January 2010)

The Court gave its interpretation with regard to Article 4(1) of the Directive 89/105/EEC. This case adds to the line of cases meant to define the scope and to clarify the provisions of Directive 89/105/EEC. In this case, the Court emphasises the margin of discretion left to the Member States in organising their national social security systems.

Facts

In Belgium, the authorities imposed a price freeze on medicinal products for the period 1 January 2003 to 31 December 2003 and from 1 July 2005 to 31 December 2005. Several pharmaceutical companies sought the annulment of the ministerial decree setting the price freeze. In both cases C-471/07 and C-472/07- the applicants claim the infringement of Article 4(1) of Directive 89/105/EEC.

Findings and main implications of the judgement

· The Court confirms the margin of discretion Member States have in determining criteria on the basis of which the review of macro-economic conditions must be carried out. It is up to the Member States to determine whether they take into account healthcare expenditure alone or other macro-economic conditions (such as those in the pharmaceutical industry sector) when reviewing the macro-economic conditions which justify a price freeze. It is also up to the Member States to determine whether the review of macro-economic conditions would be based on general trends, such as the financial balance of national health systems. However, those criteria must be in compliance with the objective of transparency pursued by Directive 89/105; thus, the criteria must be based on objective and verifiable factors.

· The judgement clarifies the situation where a price freeze is imposed after an interruption of 18 months from the previous price freeze, which lasted for 8 years. The Court rules that in such cases the new measures freezing prices can be taken without carrying out a review of the macro-economic conditions. The whole reason of having such an annual review is to make sure that the macro-economic conditions justify the price freeze to be continued.

3. Time limits 3.1. Case C-245/03 Merck, Sharp & Dohme (20 January 2005)

Questions related to the nature of time-limits and the consequences of exceeding the time-limit within which the competent authority is to respond have been addressed in Merck.[36]

Facts

In 2003, the Belgian Council of State requested interpretations from the Court of Justice with respect to the time-limit for reimbursement decisions laid down in Article 6(1) of the Directive (90/180 days). The key question was whether the absence of a decision by the national authorities within the prescribed time-limit entails the automatic inclusion of the product into the national health insurance system.

Findings and main implications of the judgements

The Court’s judgements clearly establish that:

a) The time-limit for the inclusion of products into the reimbursement list is a mandatory time-limit which the national authorities are not entitled to exceed.

b) The Directive does not impose the automatic inclusion of a medicinal product on the reimbursement list if this time-limit is exceeded.

3.2. Case C-296/03, Glaxosmithkline (20 January 2005)

In this case the Court ruled that the time-limit laid down in the first subparagraph of Article 6(1) of the Directive is mandatory.

The Court also ruled on the consequences of exceeding the time-limit where a previous decision adopted in good time has been annulled. It decided that it would be for the Member State to determine whether the fact that the time-limit laid down in the first subparagraph of Article 6(1) of the Directive is exceeded precludes the competent authorities from formally adopting a new decision when the previous decision has been annulled in court proceedings, although such possibility can be exercised only within a reasonable time which may not in any event exceed the time-limit laid down in that article.[37]

This underlines the discretion left to the Member States to decide bout the consequences of exceeding the time-limit after a previous decision adopted in good time has been annulled. However, it also underlines the fact that this discretion is not limited, but the procedural rules set in the Directive must be observed.

4. Appeal procedures

The Directive provides that the persons to whom the decisions are addressed should be informed of the remedies available and of the time limits allowed for applying such remedies.

What is meant by the possibility to appeal is clarified by the Court in Case C-424/99 Commission v. Austria (27 November 2001)

Facts

In Commission v Austria,[38] there was only the possibility of complaint against the first recommendation of the small technical advisory board and a complaint to the main technical advisory board when the opinion of the board was negative. The Commission contended that these were not appeal procedures since this remedy laid not before the courts but before the administrative authorities.

Findings and main implications of the judgements

The Court ruled that appeal to independent experts could not be equated with the remedies mentioned in the Directive. Moreover, the small advisory board and the main one can issue only recommendations and have no decision-making power. The applicants must have the possibility to challenge decisions before genuine judicial bodies.

5. Direct effect 5.1. Direct effect of Article 4 (1)

Joined Cases C-471/07 and C-472/07 Association générale de l’industrie du médicament (AGIM) and others v État belge [2010] nyr

The Court ruled that Article 4(1) of the Directive had no direct effect. It could not be considered as sufficiently precise for an individual to be able to rely on it before the national court against a Member State. Since the State was supposed to carry out a review at least once a year to ascertain whether the macro-economic conditions justify that price freeze and since the provision contained no indication as regards the matters on the basis of which measures to control the prices must be adopted, nor the criteria for such annual review, the conclusion was that there is no direct effect.

5.2. Direct effect of Article 6

Case C-317/05 G. Pohl-Boskamp GmbH & Co. KG v Gemeinsamer Bundesausschuss [2006] ECR I-10611

The Court ruled that Article 6(2) of the Directive had direct effect and should be interpreted as meaning that it confers on the manufacturers of medicinal products affected by a decision which allows the coverage by the health insurance system of certain medicinal products containing active ingredients referred to therein the right to a reasoned decision mentioning remedies, even though the rules of the Member State make no provision for any corresponding procedure or remedies.[39]

The full text of all judgements can be found on the website of the Court of Justice:

http://curia.europa.eu/

ANNEX 7

Managed EntrY OR RISK SHARING agreements:

OVERVIEW AND CASE STUDIES[40]

There is a burgeoning literature on the different types of conditional (risk sharing) agreements that have recently been introduced in different EU Member States.[41] These instruments are seen by some as potentially effective tools to contain the increase in public expenditure on pharmaceuticals, ensure that reimbursed medicines deliver on promised health outcomes and reward innovation.[42] At the same time, risk sharing is also often presented as a way of extending patient access to medicines that would otherwise not have been approved for reimbursement. For instance, risk-sharing can play a role when there is uncertainty around the effectiveness of the product.[43]

The popularity of risk sharing schemes is likely to increase over time as public health budgets come under increasing financial pressure and demand for pharmaceuticals continues to rise (as seen in the previous section). This is for instance clearly the case in the UK where the Department of Health has launched a consultation on plans to implement “value based pharmaceutical pricing”. Negotiations with industry will start in April 2011 with new arrangements coming into force when the current pharmaceutical price regulation scheme (PPRS) expires in 2013.[44] This system will be designed to support the “use of risk-sharing schemes to enable early uptake of new medicines which lack cost-effectiveness data”.[45]

The two main types of risk-sharing agreements that have been implemented in Europe are price volume agreements (PVA) and performance based guarantees. The box below has a list of key examples of PVAs as well as indications on the extent to which these are being used in some Member States.

Box 1 - Examples of price volume agreements and associated market share

· Estonia – PVA’s are mandatory for all pharmaceutics on the positive list. · Lithuania – Since 2008, PVAs are mandatory for all new pharmaceuticals which will increase the Statutory Health Insurance budget compared with currently available treatment. · France – If sales of a particular pharmaceutical exceed projections, companies are required to pay back a certain percentage which varies by class and year. In 2004 rebates were 670 million Euros which is equivalent to 3% of the total pharmaceutical expenditure. · Hungary – Similar to France, payback mechanism has been in place since 2003. In 2006 rebates amounted to 22.5 billion HUF which is equivalent to 5.96% of the budget

Source: Risk sharing arrangements for pharmaceuticals: potential considerations and recommendations for European payers, (2010) Adamski et al., volume 10(153)

Table 1 pr