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Hospital Healthcare Europe

Health economists warn of cost containment threat


5 October, 2007  

Pharmaceutical cost-containment policies in Europe may not achieve long-term healthcare cost savings or improve health, and may instead discourage innovation and inhibit access to innovative treatments for patients who need it.

This was the main message of a pre-conference workshop at the European Health Forum Gastein on 5 October. The conference is being held at Bad Hofgastein, Austria, on 3–6 October.

Most governments employ some method of pricing and reimbursement controls on innovative pharmaceuticals in order to limit the growth of healthcare costs.

Reference pricing rewards generics with higher prices than they would have under competitive market conditions.

But a study by LSE Health – a research centre of the London School of Economics – shows that promoting generics results in budget savings for governments only if there is real competition in the market.

The study found that low levels of competition in that sector in Europe produce higher-than-average prices for government and health insurers.

This deprives governments of the resources to invest in innovative medicines and other parts of the healthcare system.

Furthermore, parallel trade of pharmaceuticals from low-price countries rewards stakeholders that do not contribute to the innovation process.

Another LSE study showed that parallel trade within the EU benefits mostly parallel traders, who do not contribute to the innovation process, and deprives governments and patients of resources that could improve health.

Health technology assessment is also increasingly being used by governments as a means of ensuring value for money.

However, under standard methods of assessment which rely purely on cost-benefit analysis, many socially desirable drugs, such as orphan drugs, may not be deemed cost-effective and access may be limited.

Michael Drummond, a professor of health economics at the UK’s University of York, commented: “Standard HTA evaluations are not adequate for assisting decisions on whether patients have access to orphan drugs.”

Furthermore, he said pricing and reimbursement policies should not rely exclusively on economic principles such as cost-effectiveness evaluation, but should also encourage the development of and access to new drugs for people with unmet medical needs. Societal values must play a role in the decision-making process.

Presenters stressed the need to introduce competitive generics markets and discourage the use of reference pricing.

They agreed that in order to maximise efficient use of healthcare resources and ensure continued access to new medicines, there must be a greater commitment to rewarding the products of research and development.

EHFG