In a leading case of 30 April 2015, the Swiss Federal Administrative Court considered the current practice of the Swiss Federal Office of Public Health (FOPH) regarding the re-examination of drugs which are reimbursed by the mandatory health insurance as unlawful. For the last five years, the FOPH assessed drug prices in the context of periodical re-examinations almost exclusively based on external reference pricing, without considering drug pricing references in Switzerland. In light of this (not yet legally binding) decision, it seems doubtful whether the newest amendments regarding the drug pricing regime enacted by the Federal Council and the Federal Department of Home Affairs will be valid. These amendments are scheduled to come into force on 1 June 2015.

Previous Practice of the Federal Office of Public Health

According to art. 65d para. 1 of the Ordinance on Health Insurance (OHI), the Federal Office of Public Health (FOPH) reviews all drugs included in the list of reimbursable pharmaceutical specialties (Specialties List/SL) every three years in order to determine whether they still comply with the conditions for being listed, that is, whether they are effective, appropriate and efficient. In principle, the fundamental benchmarks to evaluate a drug's efficiency are the Internal Reference Price (IRP) as well as the External Reference Price (ERP), each weighted at 50% (art. 65b para. 2 OHI). However, during the periodic re-examination to be conducted every three years, the ERP is taken into account almost exclusively according to art. 65d para. 1bis lit. a OHI. The IRP is only taken into consideration in exceptional cases, that is, when a comparison with drug prices of reference countries is not feasible. Depending on whether the IRP is included in the examination, the approved drug prices vary.

Limited Examination is not in Accordance with the Law

The Federal Administrative Court's leading case (C-5912/2013) was a about an order of the FOPH that imposed to reduce the price of a specific drug by almost 26% only based on the ERP, without consideration of the IRP.

The Court held that until 2009 it was constant legal practice of the Federal Supreme Court to examine the efficiency of a drug based on both the IRP and the ERP. The cost-benefit-assessment to be conducted in the context of the IRP is to be understood as an essential evaluation criteria regarding a drug's efficiency. Only in cases where no reference drug for the IRP was available and hence the IRP could not be conducted, the ERP could be applied exclusively.

The amendments of the OHI and the Ordinance on Services in the Compulsory Health Insurance (OSCHI) by the Federal Council and the Federal Department of Home Affairs (FDHA) – which were enacted successively since 2009 – aim to reduce the costs of drugs. This was also the goal when art. 65d para. 1bis OHI was adopted with the amendment of the OHI of March 2012. Pursuant to art. 65d para. 1bis OHI, the efficiency shall be assessed exclusively based on the ERP in the context of the triennial review, and the IRP shall only be applicable if the ERP cannot be carried out. As a consequence, the FOPH normally considered the IRP only with respect to the first admission of a drug to the SL.

The Federal Administrative Court held that the adoption of art. 65d para. 1bis lit. a OHI and the elimination of the IRP constituted a fundamental change of the drug pricing regime that clearly contradicts the constant case law of the Federal Supreme Court regarding the concept of efficiency according to art. 32 para. 1 of the Federal Health Insurance Act (HIA). According to the legislator's intent, the same criteria where to apply in the context of the triennial review, as it is the case with respect to the admission of a drug to the SL (efficacy, adequacy, efficiency). The executive branch is not competent to deviate from this statutory concept. Therefore, the court finally held that the rule imposed by art. 65d para. 1bis lit. a OHI violates the constitutional principle of legality. Furthermore, the court stated that the license holder (claimant) may also invoke the constitutional guarantee of economic freedom with regard to the governmental price fixing. Because of its lack of a legal basis, the FOPH order also violates this fundamental right.

The decision of the Federal Administrative Court may be appealed to the Federal Supreme Court and is not yet legally binding.

Amendment of the OHI and the OSCHI to enter into force on 1 Juni 2015

The Federal Council and the FDHA have enacted amendments of the OHI and the OSCHI with regard to drug pricing. These amendments shall enter into force on 1 Juni 2015 and particularly entail the following new rules:

  • When assessing the efficiency with respect to the admission of a drug to the SL, the ERP shall be weighted twice and the IRP only once. As a rule, the newly fixed price may exceed the ERP by no more than 5%.
  • Belgium, Finland, and Sweden will be added to the group of reference countries for the ERP. Moreover, binding discounts in reference countries must be taken into consideration when fixing drug prices in Switzerland.
  • In the context of the triennial review, the ERP must be taken into account for two thirds and the present price for one third. However, the margin of tolerance of 5% currently applicable shall be rescinded. The IRP shall continue to be applied only exceptionally, in particular, if the ERP cannot be carried out at all or only in less than three reference countries.

Conclusion

In its leading case, the Federal Administrative Court interpreted the requirements of the HIA strictly. When conducting the triennial review, the efficiency of a drug is to be assessed based on the same criteria that apply when a drug shall be first admitted to the SL. Both the IRP and the ERP must be applied. 

However, the amendment of the OHI and the OSCHI to enter into force on 1 Juni 2015 still stipulate two different types of efficiency tests, one to be followed when assessing the admission of a drug to the SL and the other when conducting the triennial review. Due to its reduced weighting compared to the ERP, the IRP will generally become even less important. As to the triennial review, the IRP will continue to be taken into account only exceptionally.

Given the above, it appears questionable whether said amendment of the OHI and the OSCHI will be valid if the leading case of the Federal Administrative Court becomes legally binding.