2. Origin of Health Care Funding Models
Otto von Bismarck
Germany 1883
Social Health Insurance
Tommy Douglas
Canada 1962 - 68
Canadian “ Medicare”
William Beveridge
United Kingdom 1948
National Health Service
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3. The world doesn’t have a perfect health care system –
but if it did, it might look like this:
• Values and universal healthcare of the UK
• Primary care of Israel
• Community services of Brazil
• Mental health and wellbeing of Australia
• Health promotion of the Nordic countries
• Patient and community empowerment of parts of Africa
• Research and development of the USA
• Innovation, flair and speed of India
• Information, communications and technology of Singapore
• Choice of France
• Funding of Switzerland
• Aged care of Japan Source: Britnell, Mark. In Search of the Perfect Health
System., 2015
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4. The United Kingdom
If health reorganisation was an Olympic sport,
the NHS would take the gold medal.
(Mark Britnell)
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5. Health Care System - England
• Government role:
– National health service (NHS).
• System financing:
– General tax revenue (includes employment-related insurance contributions)
• Private insurance role:
– ~11% buy supplementary coverage for better access (including to elective
treatment in private hospitals)
• Caps on cost sharing:
– No general cap for out of pocket (OOP).
– Prepayment certificate with GBP29 per three months or GBP104 per year
ceiling for those needing a large number of prescription drugs
– Exemptions: Drug cost-sharing exemption for low-income, older people,
children, pregnant women and new mothers, and some disabled/chronically
ill; financial assistance with transport costs available to people with low
incomes
Source: 2014 International Profiles of Health Care Systems, Commonwealth Fund, January 2015
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6. Common (mis)perceptions about the UK Health Care
Perception Reality
Single payer health care system 4 Countries (England, Scotland, Wales,
Northern Ireland) each with its own NHS
NICE is an evidence-based decision
maker in the UK
NICE provides evidenced based “guidance” in
England and Wales – SMC provides guidance in
Scotland
NICE reviews all new drugs NICE aims to consider all new significant drugs
and indications
NICE negotiates prices NICE assesses whether submitted prices are
cost effective – the Departments of Health may
negotiate a “patient access scheme” if the
submitted price is not cost-effective
The UK applies “Value Based
Pricing” for Rx Drugs
No – discussed / debated but never
implemented – free & flexible pricing
The same HTA standard for all
drugs
Cancer Drug Fund (exempt until July 2016)
Special HTA criteria for highly specialized
technologies
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7. England: UK Funding of Prescription Drugs
• England: 209 Clinical
Commissioning Groups
(CCGs)
– CCG’s “commission” health
services on behalf of their
patients
– Each CCG has its own
formulary and policies for
implementing NICE guidance
– Each CCG has a prescribing
budget
• (set by NHS England)
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http://www.pulsetoday.co.uk/news/commissioning/the-big-bang-
ccgs-seize-control-of-gp-funding/20009626.fullarticle
8. CCG prescribing budget methodology
• Every year, NHS England will set the prescribing budget for
each CCG, using a formula that contains a number of factors,
including:
– population profile and list size of the practice
• using a weighted capitation unit known as the STAR-PU prescribing unit
– an average spend per patient for the CCG
• calculated for cardiovascular, respiratory and diabetes prescribing using
QOF prevalence data. This figure is then applied to each CCG as
appropriate
– consideration of historic spend of the practices in the CCG
– high-cost drug spend by the practices in the CCG
– adjustments made for deprivation and care home patients
– recent NICE guidance and other national clinical treatment guidance
– new medicines.
Source: British Medical Association – GP Prescribing Budget www.bma.org.uk/
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10. Patient Access Schemes
• These schemes involve innovative pricing agreements designed to improve
cost effectiveness and facilitate patient access to specific drugs or other
technologies.
• Patient access schemes may involve rebates or outcome based guarantees
whereby cost drug cost is refunded by manufacturer
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Velcade was accepted by NICE for the treatment of multiple myeloma with an “efficacy
guarantee”. The scheme allows patients at first relapse who show a full or partial
response to Velcade to carry on with the treatment, fully funded by the NHS and
patients who show no or minimal response to be taken off the drug and the drug costs
refunded by the drug’s manufacturer.
11. International variations in drug usage – Cancer Drugs
• UK performed poorly across a
range of therapeutic areas –
including Cancer
• This report and others combined
with patient advocacy led to the
development of the Cancer Drugs
Fund
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12. England – Cancer Drug Fund
• Began in 2011 – to end in March 2016 – transitioning to new programme July 1
2016
• The Cancer Drugs Fund is money the Government has set aside to pay for cancer
drugs that:
• haven’t been approved by the National Institute for Health and Care Excellence (NICE)
and
• aren’t available within the NHS in England.
• This may be because:
• the drugs haven’t been reviewed by NICE yet, or
• NICE says there insufficient evidence to demonstrate clinical effectiveness
• NICE concludes they are not cost effective.
• MDs must apply on behalf of patient in cases where other cancer products are not
appropriate
• Approval in generally in 2 – 10 days
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13. Always in the news - Limited Access to Cancer Drugs in the UK
Cancer charities condemn NHS England for axing medicines
(September 2015)
“Cancer charities have said the decision by NHS England to strike at least a
dozen medicines off the list that the Cancer Drugs Fund (CDF) will pay for is a
“hammer blow” for patients that will shorten lives.
The Rarer Cancers Foundation, which campaigned to get the fund set up in
2011, said 5,500 NHS cancer patients who might have benefited from the
expensive medicines will no longer have the chance.
Among the drugs that will no longer be available on the NHS are medicines
for breast cancer, multiple myeloma, bowel cancer, pancreatic cancer, cervical
cancer and leukaemia.”
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14. England - New Cancer Drug Fund
• Goes live on 1 July 2016, include:
• The CDF will become a ‘managed access’ fund. This will include clear entry
and exit criteria for drugs entering the fund
• All new licensed cancer drugs will first be referred to NICE for appraisal.
• NICE will make one of three recommendations:
– that drug should be routinely funded through NHS – where there is clear
evidence of the drugs clinical and cost effectiveness
– that the drug should not be routinely funded through NHS - where there is
clear evidence that the drug is not clinically and cost effective
– that the drug should be considered for funding within the new CDF for a time
limited period- where the clinical and cost effectiveness of the drug is
uncertain
• A CDF Investment Group will be established to manage and oversee the
CDF budget.
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16. Health Care System Germany
• Government role:
– Statutory health insurance system, with 131 competing SHI insurers (“sickness
funds” in a national exchange)
– High income can opt out for private coverage.
• System financing:
– Employer/employee earmarked payroll tax
– General tax revenue
• Private insurance role:
– ~11% opt out from statutory insurance and buy substitutive coverage.
– Some complementary (minor benefit exclusions from statutory scheme,
copayments) and supplementary coverage (improved amenities)
• Caps on cost sharing:
– 2% of household income; 1% of income for chronically ill
– Exemptions: children and adolescents < 18 years of Age
Source: 2014 International Profiles of Health Care Systems, Commonwealth Fund, January 2015
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17. Price reforms: unintended consequences:
Germany: 15 market withdrawals post AMNOG
• Pre-AMNOG: Germany has historically been an
attractive market to launch new medicines
– Manufacturers were largely free to set their own
prices
– Comprehensive pharmaceutical coverage
– High level of public funding
• Most pharmaceuticals are eligible for
reimbursement through the Statutory
Health Insurance covers ~90% of
population
• Post- AMNOG:
• Under the new legislation:
– Manufacturers still able to freely set a price
for a new drug, but it will only apply during
the first 12 months of marketing
– During year 1 manufacturers must prove
their drug provides some form of added
clinical benefit compared to existing drugs
• If NO added benefit reference-
pricing scheme
• As a result of the new AMNOG process 15 drugs have completely left the German
market:
– Aliskiren/amlodipine, bromfenac, canagliflozin,
canagliflozin/metformin, colestilan,
collagenaseclostridiumhistolyticum, linaclotide, linagliptin,
lixisenatide, lomitapide, lurasidone, retigabine, perampanel,
vildagliptin, vildagliptin/metformin
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18. Germany AMNOG Process
• Multi-stage , multi-agency process that can take up to 15 months
Source: Markus Jahn, Novartis Pharma GmbH, Pharma Pricing & Market Access Outlook, March 2012
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19. Germany – Speciality Drug Policy
• GBA decides level of additional benefit (by definition “orphan” has some
level of additional benefit although it may be “unquantifiable”)
• For new products with orphan drug status, a simplified submission process
applies unless annual sales exceed €50 million a year
• Prices (rebates) negotiated with the Sickness Funds (social insurers)
• No cost-effectiveness analysis (cost/benefit analysis possible if price
cannot be negotiated with Sickness funds)
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21. Health Care System France
• Government role:
– Statutory health insurance system
– all SHI insurers incorporated into a single national exchange.
• System financing:
– Employer/employee earmarked income and payroll tax
– General tax revenue, earmarked taxes
• Private insurance role
– ~90% buy (or receive) government vouchers for complementary coverage
(mainly cost-sharing, some non-covered benefits);
– limited supplementary insurance
• Caps on cost sharing
– €50 cap on deductibles for consultations and services
– No cap on cost sharing for pharmaceuticals
– Exemptions for low-income, chronically ill and disabled, and children
Source: 2014 International Profiles of Health Care Systems, Commonwealth Fund, January 2015
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22. France – Service Medicale Rendu (SMR)
• Service medical rendu (SMR)
– considers the severity of the disease and the medical benefit of the drug
– determines if the drug can be reimbursed
– determines the reimbursement level of 35%, 65% or 100% (the remainder
being a copayment)
• SMR ratings range from “insufficient” to “important”
– No reimbursement if SMR considered as “insufficient”
– Product eligible for reimbursement in other cases
• The SMR is used in conjunction with the ASMR that assesses the level of
clinical improvement
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23. France – “Clinical Improvement”
ASMR Clinical Improvement Price Implications
I Major
innovative product of significant
therapeutic benefit
Premium possible
II Important
product of therapeutic benefit, in
terms of efficacy and/or
reduction in side effect profile
Premium possible
III Moderate
moderate improvement in terms
of efficacy and/or reduction in
side effect profile
Premium possible
IV Minor
minor improvement in terms of
efficacy and/or utility
Price no higher than
comparators
V None no improvement
Price must be lower than
comparators
VI Not Reimbursable
Amélioration du service médical rendu (ASMR): Clinical Improvement as a basis of
price negotiation
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24. Price Negotiations in France
• Transparency commission (of the HAS) determines the SMR & ASMR
• Economics committee (CEPS) negotiates the price
• The CEPS, which includes representatives from the ministries of health,
finance and industry, negotiates drug prices with manufacturers.
• Prices of drugs in categories ASMR I to ASMR III consider prices of other
European countries (DE, IT, ES, UK).
• This system is unique, as both the level of co-payment and the price
negotiations depend on the added value related to effectiveness.
• “The final price is multi-factoral—the level of AMSR, the price in similar
countries, volumes, planned volumes and target populations— but
because price was supposed to follow independent medical assessment,
there has been a kind of value-based pricing” (Prof Claude Le Pen).
Source: www.economistinsights.com/sites/default/files/ValuebasedhealthcareFrance.pdf
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25. Summary
• Most countries provide universal access
• Mix of public and private coverage to varying degrees
• Cost sharing (copayments) is common in most countries (for all health
services)
• All countries conduct some form of health technology assessment
• Some provide immediate access to new cancer drugs (Germany)
• Drug budgets (national, regional or local) limit access to newer drugs
– UK, New Zealand
• Most new cancer drugs are not cost effective using traditional health
economics
– Even with “end of life” adjustments (e.g. NICE)
• Risk sharing agreements are necessary to facilitate access
• Patient advocacy is essential for securing funding for cancer drugs
– Limited drug budget – government cannot fund all drugs
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26. France – Specialty Drugs
• Many outpatient specialty drugs are assessed and funded in the same
manner as other outpatient drugs
• Very expensive ambulatory drugs funded through hospital pharmacies
(generally at 100%)
• Drugs for rare / serious diseases can be funded prior to market
authorization through the ATU mechanism
• France is in the process of reforming its assessment mechanisms and will:
– Replace the SMR and ASMR ratings with a single system
– Use health economics (including ICERs) to inform the price negotiations
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27. Biography
W. Neil Palmer
President & Principal Consultant
PDCI Market Access Inc
Neil.Palmer@pdci.ca
www.pdci.ca
Neil Palmer President and Principal Consultant of PDCI Market Access Inc. (PDCI) a leading pricing and reimbursement
consultancy founded in 1996. He leads a senior team of market access professionals with pricing & reimbursement
engagements covering Canada, Europe, and the United States.
Prior to PDCI, Neil worked with the Canadian Patented Medicine Prices Review Board (PMPRB) where his
responsibilities included policy development, overseeing the price review of patented medicines and conducting
economic research. Prior to the PMPRB, he worked with the Health Division of Statistics Canada where he was
responsible for economic and statistical analysis of health care costs and utilization. Neil also worked with RTI Health
Solutions (Research Triangle Park, North Carolina) where he served as global vice president for pricing and
reimbursement. After completing his studies at the University of Western Ontario, Neil began his career in Montreal
with the research group of the Kellogg Centre for Advanced Studies in Primary Care. He has written extensively on
pharmaceutical pricing and reimbursement issues and is a frequent speaker at conferences in North America and
Europe.
In January 2015, Neil was appointed Adjunct Assistant Professor at the University of Southern California School of
Pharmacy graduate program in Health Care Decision Analysis where he lectures on health technology assessment,
pricing and market access from a global perspective.
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