Wednesday, 24 June 2009

USA - US$80 billion Deal Reached Between the US Government and Drug Companies

Drug companies have pledged to save the US healthcare system US$80 billion over the next decade, primarily in the form of discounts on branded pharmaceuticals, in a deal agreed on 20th June 2009.

The agreement has been welcomed by President Obama, who called it a “significant breakthrough on the road to healthcare reform”.

The pharmaceutical companies have agreed to a provide a discount of at least 50 per cent to elderly and disabled patients, who face a gap in Medicare insurance coverage when their drug costs reach a certain level, known as the ‘doughnut hole’; no reimbursement is provided for payments between US$2,700 and US$6,154.

The manufacturers’ aim is to fill the ‘doughnut hole’ while subsequently boosting incremental sales. According to a study by the Kaiser Foundation in 2008, about 500,000 Medicare beneficiaries, or 15 per cent, stop using their prescription drugs when in the ‘doughnut hole’. Therefore, the discounts will encourage patients to continue to take their medicines and could, in effect, generate additional sales volume.

The figure of US$80 billion reflects the total projected savings to the healthcare system, from the drug discounts in the Medicare coverage gap, in addition to other concessions which are yet to be specified. There is speculation that there could be additional savings for those on low incomes, but discussions are still taking place between industry officials before the precise details are finalised. The US$80 billion figure translates into around 2 to 3 per cent of US drug spending, according to Deutsche Bank, and the savings will go towards funding President Obama’s proposed overhaul of the healthcare system.

The agreement was made between the Pharmaceutical Research and Manufacturers of the America Industry Association and the Senate Finance Committee Chairman, Max Baucus. Assuming that the drug overhaul legislation becomes law, the agreement is likely to take effect in July 2010.

Further reading - An in-depth review of the US pharmaceutical market, including some background information on the healthcare system, is available from Espicom: The Pharmaceutical Market: USA (published March 2009)

Sweden - Pharmacy Market Reform Bill Will Come into Force in July 2009

From July 1st 2009, there will be both state-owned and private outpatient pharmacies in Sweden. The pharmacy market reform is expected to result in more pharmacies with longer opening hours, increasing access for patients. Sweden is one of few countries in the world to have a state monopoly in the pharmacy market, with the Apoteket chain, which has been in place for 35 years.

One important issue is that pharmacies will be allowed to negotiate with branded and generic drugmakers on purchase prices for medicinal products. The new model will maintain price pressure while providing the conditions for a greater number of pharmacies to establish themselves on the market. The model approved by the government means that:
  • Freedom of pricing will be maintained for over-the-counter (OTC) medicines
  • Price competition via a national marketplace will be maintained for generic medicines
  • Pharmacies will be given the chance to negotiate on the price of original pharmaceutical products

Apoteket will remain a key competitor in the market, with 330 of the 946 pharmacies currently owned by Apoteket remaining under state ownership. The remainder will be sold to other competitors, and a proportion of those remaining will be transferred to a newly formed company that will have individual entrepreneurs as partners. This will allow small-scale enterprise within the framework of a functioning support structure, with the intention that the partners will eventually be able to buy out their pharmacies. The only restriction is that neither physicians nor drugmakers will be allowed to own a pharmacy.

There are several potential bidders for the pharmacies, including Celesio, Tamro, Oriola and Alliance Boots. The pharmacies will be sold in two nationwide clusters, of 200 pharmacies and 170 pharmacies, alongside a number of regional clusters with 20 pharmacies in each.

The government has also proposed selling OTC medicines in shops, in addition to pharmacies. The Medical Products Agency will be instructed to decide which products are allowed to be sold in this way, and there will be an age limit of 18 for purchasing OTC products in shops. This will come into force in November 2009.

Further reading - An in-depth review of the Swedish pharmaceutical market, including information on the deregulation of the pharmacy state monopoly, is available from Espicom: The Pharmaceutical Market: Sweden (published April 2009)

UK - NHS Dentists to Be Paid According to Number of Patients

There will be a shift in NHS dentistry to focus on preventative care, following an independent review into NHS dental services in England, published in June 2009. The review, led by Professor Jimmy Steele, made recommendations that dentists be paid according to the number of patients on their books and the quality of care they provide, rather than the amount of treatment carried out.

The review recommends that a “significant chunk” of dentists’ income should be linked to the number of patients registered with them, and this could amount to as much as 50%. The report also recommends that dentists have greater accountability, and should be penalised for faulty work and required to carry out necessary procedures to correct it at no extra cost to the NHS. Dentists should also focus on ensuring patients understand the importance of oral health and diet, as dentistry has become too preoccupied with treatment rather than prevention, according to the review.

The proposed changes see a return to patient registration, which was scrapped in the widely-criticised dental reforms of 2006. It is estimated that a million fewer patients have access to an NHS dentist in England than before the reform came into force three years ago.

The review also proposes a new system of patient charges, replacing the current three-band system with one of between five and 12 bands. This will relate payments more closely to the amount of work being done, as currently it costs the same amount to have one filling, as it does to have ten.

Health Secretary Andy Burnham has accepted all of the recommendations “in principle” and pilot trials of the new system will begin in the autumn.

Further reading - An in-depth review of the UK pharmaceutical market, including some background information on dentistry, is available from Espicom: The Pharmaceutical Market: United Kingdom (published March 2009)

Wednesday, 17 June 2009

USA - Public Health Insurance Bill Unveiled, June 2009

President Obama has indicated that he views major reform of the US healthcare system as a priority, arguing in February 2009 that it ‘…cannot wait, it must not wait, and it will not wait another year’. Details are slow in emerging, although a number of basic principles have been laid down:
  • Reduce long-term growth of health care costs for businesses and government
  • Protect families from bankruptcy or debt because of health care costs
  • Guarantee choice of doctors and health plans
  • Invest in prevention and wellness
  • Improve patient safety and quality of care
  • Assure affordable, quality health coverage for all Americans
  • Maintain coverage when you change or lose your job
  • End barriers to coverage for people with pre-existing medical conditions

Reducing the number of uninsured Americans is a key, and contentious, component of this. One element became a little clearer in June 2009, with the introduction into the House of Bill H.R. 2668, the Choice in Health Options Insures Care for Everyone (CHOICE) Act. This is being sponsored by Chris Murphy (D-Conn.), and co-sponsored by Peter Welch (D-Vermont) and Bruce Braley (D-Iowa).

The bill would create a Federal public health insurance plan for the first time in the USA. It would not be compulsory, but would compete with private health plans for members. It was introduced in the House on June 2nd 2009 and referred to the House Committee on Energy and Commerce, which has jurisdiction over healthcare legislation, and also the House Ways and Means Committee. It will probably form part of a wider health reform plan currently being prepared in Congress by the Democrats.

The proposed public plan (the American Trust Health Plan) would be operated by the DHHS and would be self-financing. Anyone eligible to purchase private health insurance would be able to enroll. All healthcare providers providing services under Medicare would be required to participate. Premiums would be set by the DHHS. Regional variations in premiums will be allowed, as will other variations in accordance with existing norms.

The bill’s sponsors hope that the public plan will give private providers an incentive to reduce costs and make health insurance more affordable. Critics see it as a first step on the road to a compulsory public system, similar to that proposed by President Clinton in 1993. That effort failed as a result of a concerted lobbying effort by the healthcare industry. The current bill may face a more benign Congress, but pressure from the private insurance industry and its allies is sure to be strong, and will test the resolve of Democrats to present a united front.

Further reading - An in-depth review of the US pharmaceutical market, including some background information on the healthcare system, is available from Espicom: The Pharmaceutical Market: USA (published March 2009)

UK - The NHS Faces £15 billion Budget Shortfall

The UK’s National Health Service (NHS) is facing a cut in funding of up to £15 billion from 2011, as a result of the economic recession and rising healthcare costs. According to the report from the NHS Confederation, released in June 2009, funding could fall by 2.5 to 3.0 per cent per annum from 2011/12, which is equivalent to a cut of between £8 to 10 billion over three years and up to £15 billion over five years.

The report, Dealing with the downturn: the greatest ever leadership challenge for the NHS?, outlines that demand is expected to continue to increase “from long-term trends in ageing, increasing disease burden from improved survival and rising fertility”, in addition to “the negative health effects of recession in areas such as mental health and alcohol use”.

There was a period of huge growth in health spending under the Labour government, which saw the NHS budget almost triple. In 2009, the NHS budget is £98.2 billion, and will rise to £102.3 billion in 2010. However, despite the surplus of around £1.35 billion in the financial year 2008/09, NHS finances will deteriorate considerably after the comprehensive spending review in 2011.

The Health Secretary, Andy Burnham, asserted that concerns over closures and job cuts were “completely premature” and claimed that focusing on prevention through promoting healthier lifestyle choices would lessen the pressure on the NHS. He also claimed that core targets, such as waiting time guarantees, would remain in place as minimum standards.

Unions, such as Unison and the British Medical Association (BMA), are concerned the cuts could lead to increased use of private healthcare providers to meet the growing demands placed on healthcare services.

Further reading - An in-depth review of the UK pharmaceutical market, which includes some background information on the healthcare system and the NHS, is available from Espicom: The Pharmaceutical Market: United Kingdom (published March 2009)

Monday, 15 June 2009

Pfizer expands generics agreements with Indian companies

On 20th May 2009, Pfizer announced that it had entered into licensing agreements with two Indian pharmaceutical companies, Aurobindo Pharma and Claris Lifesciences, which would strengthen Pfizer’s position in emerging markets and expand its portfolio of medicines in its Established Products Business Unit. The agreement with Aurobindo expands a series of earlier agreements between the two, announced on 3rd March 2009, in which the two firms would work to commercialise medicines that are no longer protected by patents and have lost market exclusivity in the US and Europe. Pfizer’s Established Products Business Unit was launched in 2008 as part of the firm’s initiative to create smaller, more accountable business units aligned with customer needs.

Pfizer commented that its expanded agreements with Aurobindo would grow its product portfolio within emerging markets to reflect the market dynamics and commercial interests of over 70 countries. Under the terms of the agreement, Pfizer has acquired the rights to 55 solid oral dosage products and five sterile injectable products for patients in over 70 emerging market countries. The products include antibiotics and anti-infectives, and cover a broad range of therapeutic categories, such as cardiovascular and central nervous system disorders. Pfizer will commercialise the 60 products in phases, tailoring its approach for different regions. Financial terms of the deal were not disclosed. In the agreements announced in March 2009, Pfizer acquired the rights to 39 generic solid oral dose products in the US and 20 in Europe, along with an additional 11 in France. The products were to be commercialised in the US through Pfizer’s Greenstone subsidiary. Pfizer also acquired the rights to 12 sterile injectable products in the US and Europe. These agreements in turn were an expansion of an existing five-product US deal that Pfizer and Aurobindo entered into in July 2008.

With regard to Claris Lifesciences, Pfizer entered an agreement to commercialise sterile injectable medicines after the products have lost patent protection and have lost market exclusivity in North America, Europe, Australia and New Zealand. Under the terms of the agreement, Pfizer acquired the rights to 15 injectable products covering a wide range of therapeutic areas including anti-infectives and pain management. As with the Aurobindo agreements, financial terms of the deal were not disclosed.

Pfizer commented that to date, 128 non-Pfizer products, consisting of 98 solid oral dose and 30 sterile injectables, had been added to its portfolio of established brands. Pfizer added that its global annual sales of established products are worth around US$10 billion.

Background information on Aurobindo Pharma and Claris Lifesciences can be found in The Indian Pharmaceutical Industry 2009: Diversification, Expansion & Ambitions, published by Espicom in May 2009. In addition, Espicom has recently updated The Pharmaceutical Market: India, which provides a detailed review of the Indian pharmaceutical market.