Abstract
This report presents drug price control measures that have been implemented by government
agencies in a number of developed countries and in Thailand. Findings from the Research Projects on Drug
Prices (B.E. 2553-2555) funded by Health Systems Research Institute are included so as to recommend
further policies on drug price control.
In the developed countries, various drug price control policies have been implemented, especially in
the step of reimbursement. The reimbursement price has been set according to therapeutic classes of drugs.
Generally, healthcare purchasers seek to maximize several objectives, not limited to cost containment.
Innovative products under patent protection would be reimbursable if their increasing effectiveness and
decreasing significant adverse events were remarkable. In case of the narrow market drugs, such as orphan
drugs and drugs used in special populations including infant and newborn, healthcare purchasers may be
under pressure to provide the coverage and have limited power to bargain with drug manufacturers. The first
launched generic product is allowed to set a price higher than other following products so as to increase an
incentive for the manufacturers. VAT differential and mark up systems in supply chains are the important
factors affecting drug price variation. Some countries require no VAT or relatively low VAT for the
reimbursable drugs.
External price benchmarking is a common measure for price control in the European Union. Price
cap at 10% above an average of the three lowest-price countries has been used in Slovak Republic. The
average price across France, Germany, the United Kingdom and the United States has been used in Japan. It
is likely that manufacturers launch their products in the first countries where drug prices can be set freely or
are controlled only for the reimbursable lists such as the United Kingdom and Germany. Such a measure may
have positive impacts on market entry price convergence. There is evident that the market entry price among
five big markets in Europe is similar.
Profit control is an indirect form of price control regulation. This measure has been used in United
Kingdom before 2008. Manufacturers sign an agreement capping the industry profits in exchange for a
flexible framework for price setting. If the profit rate exceeds an authorized level, the manufacturers have to
pay back excessive returns to government or they may not have the permission to increase the prices.
In Thailand, drug price control has been implemented in government sector aiming for controlling the
national health expenditure. Ministry of Public Health (MOPH) and National Health Security Office (NHSO)
play a major role in drug price control. The MOPH’s Drug and Medical Supply Information Center (DMSIC)
provides descriptive data on the purchasing prices of non-essential (NE) and essential drugs (ED) based on
voluntary reports from the MOPH hospitals. In 2011, the MOPH announced the medium prices as a guide for
procurement of 546 items of ED. Major limitations include lag-time, unregular data and under-representation
of hospitals outside the MOPH.As mandated by the Cabinet Resolution on March 13, 2007, The MOPH’s Bureau of Health
Administration has negotiated purchasing prices for single source products, covering 12 items and 45 items
in fiscal years 2011 and 2012, respectively. However, price volume agreement was not used in the process.
Therefore the price negotiation committee has limited bargaining power.
At the MOPH regional level, group purchasing for high cost drugs is encouraged. However, this
method is not well accepted because of variation in drug specification and rigidity of the price setting
outcome. The group purchasing could reduce the purchasing price on average. However, large hospitals
could obtain a price lower than the bidding one if they acted independently. In general, the group purchasing
is acceptable for multisource products, of which the quality is not much an issue as for the high cost single
source products.
All three public insurance schemes cover drug products based on 783 items included in the current
National Lists of Essential Medicines (NLEM). Therefore, the NLEM is considered as an important indirect
price control. However, the three schemes vary in the degree of restrictiveness. Close ended provider
payment used by the Universal Health Coverage (UC) scheme and Social Security (SS) scheme is the key
incentive for hospitals in using ED.
Another drug price control is price negotiation for high-cost ED. This is a mechanism to increase
drug access implemented by the NHSO for the UC beneficiaries. Price volume agreement has been used for
negotiating antiretrovirals, antipsychotics, and special class of the ED.
Health Systems Research Institute (HSRI) has supported Drug Price Policy Research Program which
focuses on specific target groups as the way to control drug expenditure for Civil Servant Medical Benefit
(CSMB) scheme. The Program covers four major areas: (1) price setting strategies; (2) decision support
system for improving drug acquisition price using the pharmaceutical acquisition capability (PAC) approach;
(3) reference pricing system; and (4) the CSMBS beneficiaries’ preference and willingness-to-pay for
expensive medications.
For the first area (price setting strategies), the project suggests risk sharing by price volume
agreement to be used for the innovative drugs because it could reduce expenditure better than the external
price benchmarking. For a new drug with generics, brand premium for the first launched local generic should
be used as the pricing strategy. After the patent expiration, price cutting should be applied for multisource
drugs.
For the second area, purchasing price data obtained from DMSIC was used to show substantial
price variation across hospitals even after volume adjustment. With an implementation of the PAC approach,
efficiency could be increased and the expenditure for purchasing drugs would decrease by 25%.
For the third area, setting the reimbursed prices at the median values of drugs within the same
therapeutic class could reduce drug expenditure by 50% of the CSMBS’ direct billing system in large hospitals. Setting the reimbursed prices using the price of same generics would decrease the expenditure by
20%.
For the last area, the CSMB beneficiaries having hyperlipidemia have shown their willingness to pay
of not more than nine Baht per day for switching simvastatin (ED) to rosuvastatin (NE). In addition, they were
not willing to pay for any other NED antihyperlipidemics.
In addition to the four major areas above, the Research Program supports the development of drug
coding databases that link the MOPH’s 24-digit standard codes to the WHO’s Anatomical, Therapeutic and
Chemical (ATC) code system and defined daily dose (DDD). Classification based on the NLEM classes and
market status of the drug products were included. The database helps facilitate further data analyses and the
monitoring and evaluation (M and E) system for controlling drug expenditure and utilization.
Recommendation for drug price control
Country should keep improving existing drug price control mechanisms as implemented by past and
current governments. Use of the NLEM is a powerful indirect control measure. In the long run, manufacturers
should be enforced for cost structure declaration as the criteria for selecting drugs on the NLEM.
As market characteristics of drug products are matter, group purchasing and price negotiation
should be the strategy of choice for the single source products. Capacity building for price negotiation
techniques should be encouraged under the cooperation between MOPH and health insurance schemes
because the comparative advantage of the MOPH on provider profiles and the schemes on demand
information. Innovative methods such as risk sharing with price volume agreement, value-based pricing and
cost effectiveness analysis should be used. In addition, the M and E system for the hospitals’ purchasing
prices should be improved for timeliness and representation of the price information.
For setting the reimburse price, use of branded and single-source NE products should be restricted
for only the true candidates. The NLEM should be used as the reimbursed lists for all three insurance
schemes. For the CSMBS, financial incentive should be made when setting the reimbursed price based on
the generic ED.
Standardization of the drug price data and coding is necessary for evidence-informed policy
formulation. Therefore, an organization for maintaining drug price and use database and coding system
should be established. System to feedback the demand information would help supporting decision during
price negotiation and reimbursed price setting process.
In the long run, structure for drug price monitoring should be developed. Drug price should be
monitored for every step, from the NLEM process, hospital drug procurement, dispensing and reimbursement
for insurance. The monitoring of drug prices across hospitals and time-trend comparison should be
conducted. In addition, health care provider drug price index for both acquisition and reimbursement should
be developed.
