Swiss Agreement Sees Drug Prices Fall But Access Accelerated
This article was originally published in The Pink Sheet Daily
Executive Summary
The Swiss government and the pharmaceutical industry have reached an agreement that will see prices slashed by 20% over the next three years, but reimbursement decisions to be accelerated by over 300%.
Pricing pressure facing European pharmaceutical companies is a bitter pill to swallow, but the Swiss medicines industry has at last found something of a sweetener.
Trade-Off
A deal has been struck by the Swiss federal ministry of the interior and the pharmaceutical industry associations Interpharma and Vips under which drug companies will be obliged to accept price reductions of about 20% and drop court cases brought against the government aimed at rescinding the cuts. But the trade-off will be faster access to medicines by patients in the country. This is encouraging news for an industry that has made a concerted effort to combat pricing pressures there since 2011 (Also see "Switzerland’s Poor Performance In 2010 Heralds Uncertain Future For The Industry" - Pink Sheet, 7 Feb, 2011.).
The Swiss market may not be amongst the biggest in Europe, but the country is a pharmaceutical powerhouse and the home of drug giants Roche and Novartis AG. Furthermore, because its prices are amongst the highest in Europe, any reduction will have a knock-on effect on prices in other countries that use Switzerland as a reference state.
The cuts are expected to affect some 2,500 products in Europe’s fourth largest pharmaceutical market in terms of R&D expenditure, and should save the government CHF 720 million ($813 million) by 2015.
They are part of a cost-control program that initially was supposed to have been implemented on Nov. 1, 2012 but was held up due to a court decision against the government's actions. The price reductions now will be introduced on June 1, 2013, once the necessary laws have been amended to incorporate the agreement’s details.
The upside of the pact for the pharmaceutical industry will see the federal health ministry obliged to make a reimbursement decision within 60 days of receiving notification of a drug authorization by the national medicines agency Swissmedic. “By comparison, in the last three years, Interpharma estimates this [process] took around 200 days,” a spokesperson for the industry association said.
She pointed out that this not only was disappointing for patients, but also for clinical researchers in Swiss hospitals. “This is because the efficiency of the process should not be underestimated as criteria when it comes to deciding where clinical trials should be carried out,” the spokesperson added.
The agreement also ensures that when a medicine is authorized for a new indication, it will be reimbursed immediately by health insurers. Hitherto, insurers have been wary of paying for new indications without specific direction from the ministry of health.
Previously, when a new indication was granted, health insurers had based the drug’s price on an analysis of prices in other European countries. Pharmaceutical manufacturers argued that this was inefficient due to currency fluctuations. The new agreement will see price reductions based on projected additional turnover, rather than external prices. Up to a maximum of 35% of additional turnover will be incorporated into price cuts.
Government Position
Federal health minister Alain Berset called for the original price cuts as he made changes to the pricing system last year. Traditionally, the health ministry calculated the price of a medicine based on a comparison with similar products in the Swiss market and an analysis of prices in a number of European countries, including the U.K., Germany, Denmark, the Netherlands, France and Austria.
However, under the new plans, prices would have been based solely on European prices. A comparison with similar domestic products would have been undertaken only if the drug were not available in other countries. But the comparison will be reinstated from 2015.
The health ministry had announced in 2012 that some 800 medicines would experience price cuts of around 20%. The industry was determined to fight this and brought court cases against the government in defense of some 30 products.
Roche and Novartis were amongst companies requiring that the new pricing model be struck down. But the constitutional court determined that while it was deciding the case, the model still could be introduced.
The pharmaceutical companies then in late 2012 turned to the Federal Supreme Court, which confirmed that while the case was being handled by the constitutional court, the pricing model had to be suspended.
The constitutional court's decision is not expected until 2014.
That delay could have cost the government some CHF240 million ($260.2 million) in annual savings and was likely to have forced it into negotiations with industry. The compromise solution now agreed upon by the two sides removes that threat.