As of 1 March 2017 the amended provisions regarding drug pricing and its re-evaluation are in force. The new provisions concern the re-evaluations of the drug pricing three years after including a drug in the List of Specialties (Spezialitätenliste, SL) and after the patent expiration. In both instances the re-evaluation is no longer limited to the external reference pricing, but includes also the internal reference pricing. With the present PharmaCircular we inform you about the first experiences with the new practice of the Federal Office of Public Health (FOPH).
Assessment of Economic Efficiency
Before including a drug in the List of Specialties (Spezialitätenliste, SL) and every three years thereafter, the FOPH examines whether a drug meets the legal requirements for such listing, in particular whether the drug is effective, appropriate and economically efficient. Relevant for the assessment of the economic efficiency is the internal and external reference pricing (IRP and ERP respectively). For the evaluation of the ERP, the price of a drug is compared to the price of the same drug in countries with similar economic structures in the pharmaceutical area (Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Netherlands, and Sweden). The IRP is based on a price comparison with other drugs included in the SL for the treatment of the same medical condition.
In its previous practice, the FOPH cut the drug price based on an ERP only, excluding the IRP. The Swiss Federal Supreme Court held that this practice was not in compliance with the Federal Health Insurance Act (HIA), because the economic efficiency can only be assessed by comparing different cost benefit ratios. To exclude the IRP from the triennial review contradicts the intention of the legislator to eliminate uneconomical products and services from the SL. Such system change would require an amendment of the HIA (Decision 9C_417/2015 of 14 December 2015).
With the revised Ordinance on Health Insurance (OHI) and the Ordinance on Healthcare Services (OHS) the requirements for examining whether a drug meets all conditions for listing in the SL are the same for all re-evaluations. These uniform rules will replace the special rules for the review every three years and after patent expiration. The new provisions apply to all applications pending with the FOPH as of 1 March 2017 and all subsequent reviews.
Most relevant are the following changes:
- For the review of economic efficiency, an ERP and an IRP will need to be stablished, and each will be weighted equally, i.e. 50% (previous practice: 2/3 against 1/3).
- The IRP is determined in comparison to drugs that are used to treat the same medical condition. In the previous practice, the comparison included drugs with the same indication or a similar mode of action. The mode of action will no longer be considered.
- A capping for taking into account the IRP with regard to the ERP has been dropped (previous practice: cap of ERP+5%).
- With respect to originator drugs still under patent protection the IRP is limited to patent protected originator products. The FOPH may consider originator products that have lost patent protection, but only with respect to the prices before the patent expired. After the expiration of the patent protection, the FOPH establishes the IRP in comparison to originator products that have lost patent protection as well.
- For the triennial review of the IRP, the FOPH takes into account the prices as of 1 January of the review year with price changes to be considered until 1 July of the review year. In its previous practice the FOPH referred to the future prices that became valid as of 1 September of the review year. The previous practice led to considerable difficulties.
- The effective date for price cuts is 1 December of the review year (previous practice: 1 September).
Review after Patent Expiration
For the review after patent expiration the same rules apply as for the triennial review. Hence, the re-evaluation may not be limited to the ERP.
The review takes place when all relevant patents relating to the originator product have expired and a market entry of generics is possible. Therefore, patent protection for the manufacturing process, the dosage, or the combination of active pharmaceutical ingredients must also be considered.
If an originator product has obtained marketing approval for one or more patent protected indications, the review takes place when the patent for the first indications has expired. To avoid a review of the still patented second or further medical indications, the pharmaceutical company can request a separate marketing approval and inclusion in the SL for the indications that are still patented. For the patented indications the pharmaceutical company can claim a price equal to the previous price.
After patent expiration the FOPH does no longer consider the costs for research and development nor does it accept an innovator bonus. For this reason the IRP is made only with off-patent originator products. In its assessment, the FOPH does not consider the costs for generic drugs because of their different pricing regime that depends on the sales volume for the active pharmaceutical ingredients.
Differentiated Co-Payment by Patients
The FOPH increases the patient's contribution to 20% to the costs of the drugs if there is a price difference of 10%. Before, such increase required that the drug was at least 20% more expensive than the average of the least expensive third of all drugs with the same active ingredients. The dynamic differentiated co-payment is reassessed annually.
Due to the complex and substantially more comprehensive review, pharmaceutical companies and the FOPH are faced with a significant amount of additional work.
The new rules are incomplete and afford the FOPH with wide discretion, in particular with respect to the application of the IRP and the ERP. The FOPH is required to make use of its discretion adequately. The abuse of its discretion can be challenged in an appellate proceeding with the Swiss Federal Administrative Court.