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The reference pricing system: a socio-economic analysis of the use of low cost medicines in Belgium Posted 09/09/2011

Medicines contribute to improving the health status of populations. A recent literature review concluded that medicines are among the most valuable forms of health care and are instrumental in treating various diseases more effectively [1]. Medicines are a major driver of the significant increase in life expectancy observed over the previous decades [2]. The Belgian system therefore tries to help people in socially disadvantaged groups access good quality medicines at affordable prices. This article asks how the system might be improved to better fulfil this objective.

To control public expenditure on prescription drugs in ambulatory care, almost all European countries have opted for a reference pricing system (RPS). A RPS limits the reimbursement of drugs by establishing a maximum level of reimbursement for a group of pharmaceutical products. Any difference between the reference price and the price of a more costly drug has to be paid by the patient and is called the reference supplement. The reference supplement differs from co-payments on drugs because it applies to all patients uniformly, i.e. no matter their entitlement to increased reimbursement, and because it can be avoided by changing prescribing behaviour.

In practice, the use of low cost drugs (those drugs which do not incur a reference supplement for the patient) depends on interactions between the prescriber, the patient and the pharmacist. The RPS can be regarded as an example of a selective cost-sharing design that is intended to provide patients with financial incentives to alter their consumption behaviour.

In theory, reference pricing assumes that all patients are fully aware of the existence and the consequences of such a system and that all patients will make rational choices about which drugs to use. From a social point of view, problems of financial accessibility might arise from the RPS if the weakest socio-economic groups in society are less informed about the system, and hence are more subject to non-adherence.

A recent report provides new evidence on this topic for Belgium as part of a larger examination of the RPS [3]. The report asked if there is evidence of socio-economic differences associated with the use of low-cost drugs. If so, what are these differences associated with, e.g. lack of information, attitude, expectations, and what is the impact on patient costs?

Results from a literature review

In a literature review of the association between a RPS and drug use, drug prices, drug expenditures, health services use and health, four papers analysed the impact of reference pricing according to socio-economic patient characteristics [4-7]. All were based on data for adults aged 65 and older living in British Columbia, Canada, which has a Level 2 RPS.

Despite heterogeneity in the approach used by the four reviews, some general trends could be identified:

• An increase in the use of drugs priced at the reference price and decreased use of the highest cost drugs within the cluster.

• Some studies provided evidence that the introduction of a RPS was followed by a price reduction of the originator products; others found no effect.

• Reference pricing contributed to a reduction in drug expenditures for third-party payers.

• No adverse effects on mortality or healthcare use were found after the introduction of a RPS.

• After the introduction of the RPS, low income patients were more likely than high income patients to use the reference drugs.

Discussion

The Belgian Health Care Knowledge Centre (KCE) report was the first to analyse in detail how the Euros 60 million paid on reference supplements in 2008 was distributed among the general population in Belgium.

Assessment of possible unintended distributional consequences of the Belgian RPS did not identify under-use of low cost drugs by less privileged socio-economic groups, there was even a slight inverse tendency. The results are encouraging in terms of overall equity of the RPS, as defined in terms of financial accessibility. In any case, introducing a selective cost-sharing measure, such as the RPS, should be accompanied by measures guaranteeing equal access to information on prices and therapies.

By far the greatest number of reference supplements in 2008 concerned the prescription of cardiovascular drugs. A possible explanation could be that physicians are reluctant to prescribe (or switch to) a generic or other low cost alternative for this type of illness because they question the comparability of therapeutic effects. A recent literature meta-analysis comparing generic and brand-name drugs in cardiovascular medicine revealed no important clinical differences between them. Despite these reassuring results, half of the editorials examined expressed a negative view on interchangeability of generic drugs.

Recommendations

Although overall financial accessibility was good, the Euros 60 million paid on reference supplements in 2008 is not a negligible amount. This represents the excess paid due to prescribing of drugs that are not the cheapest alternative available. Several measures could be envisaged to further reduce this amount:

• For prescribers: increase the low cost quotas (percentage of prescriptions that have to be for ‘low cost’ medicines). These quotas were set in 2005 and have not been revised since. Further encourage prescribing by INN, which ensures that patients receive the lowest-cost version of the drug available on the market.

• For pharmacists: allow pharmacists the right of substitution, unless explicitly prohibited by the prescriber. Provision for this was made in the legislation in 1993, and it is already standard practice in all countries included in the international comparison.

• For patients: increase awareness of the reference supplement, by clearly telling patients how much it is as they pay for the medicine.

• For the structure of the system: only Belgium uses a fixed percentage of the originator product to calculate reference prices. It could set the reference price with respect to all drugs within a cluster including generic products.

Conclusion

The KCE study analysed more than 1.5 million prescriptions and linked the patient and prescriber in two ways. However, the availability of socio-economic information was rather limited, especially the lack of information on education at the individual level.

It concluded that RPS schemes do not affect patient health negatively. However, it confirmed that Belgians pay the average EU prices for off-patent drugs, which are much higher than prices in neighbouring country, The Netherlands.

A total of 155 original molecules were included in the RPS in December 2008 (out of a total of 732 on the Belgian market). For 65 of these drugs (42% of the drugs in the RPS) pharmaceutical companies decreased the public price to the level of the reimbursement basis, so no reference supplement was to be paid by patients. For the remaining 90 drugs, a reference supplement was due: on average, the reference supplement was Euros 3.8 per package in 2008. This means that if the prescriber had chosen a low cost alternative instead of the brand prescribed, 10% of the patients’ out-of-pocket payments could have been avoided.

Although patients are aware of generic drugs, and even though they overestimate the price differential, they are very cautious in asking their prescriber to change the prescription.

The results are encouraging in terms of overall equity of the RPS since the use of low cost alternatives is higher among more disadvantaged groups. However, to avoid inequities among patients, cost-setting measures should be accompanied by measures guaranteeing equal access to information on prices and therapies. The Euros 60 million paid on reference supplements in 2008 is not a negligible amount. Especially for the chronically ill, the reference supplements could add up to a considerable sum.

For further information on reference pricing in Belgium please see the country focus section of GaBI Online [8].

Related article

How successful is the reference pricing system in Belgium

References

1. Grootendorst P, Piérard E, Shim M. Life-expectancy gains from pharmaceutical drugs: a critical appraisal of the literature. Expert Rev Pharmacoecon Outcomes Res. 2009;9(4):353-64.

2. Simoens S. Generic medicine pricing in Europe: current issues and future perspectives. J Med Econ. 2008;11(1):171-5.

3. Vrijens F, Van de Voorde C, Farfan-Portet MI, le Polain M, Lohest O. The reference price system and socioeconomic differences in the use of low cost drugs. 2010. KCE reports 126C.

4. Lopez-Casasnovas G, Puig-Junoy J. Review of the literature on reference pricing. Health Policy. 2000;54(2):87-123.

5. Goldman DP, Joyce GF, Zheng Y. Prescription drug cost sharing: associations with medication and medical utilization and spending and health. JAMA 2007;298(1):61-9.

6. Aaserud M, Dahlgren AT, Kösters JP, Oxman AD, Ramsay C, Sturm H. Pharmaceutical policies: effects of reference pricing, other pricing, and purchasing policies. Cochrane Database of Syst Rev. 2006;19(2):CD005979.

7. Morgan SG, Hanley G, Greyson D. Comparison of tiered formularies and reference pricing policies: a systematic review. Open Medicine. 2009;3(3):131-9.

8. GaBI Online - Generics and Biosimilars Initiative. Belgium. Policies and Legislation [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2011 September 09]. Available from: www.gabionline.net/Country-Focus/Belgium/Policies-and-Legislation

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