Drug Pricing Methods in Sweden and Its Enlightenment

GUO Lang, SUN Li-hua

(School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China)

Drug Pricing Methods in Sweden and Its Enlightenment

GUO Lang, SUN Li-hua

(School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China)

Objective To provide references for drug pricing in China. Methods Regulations and policies on drug pricing and the price control measures in Sweden were expounded. Results and Conclusion The drug price based on the evaluation results of pharmacoeconomics can not only reflect its value comprehensively, but also provide pricing standards for the drugs that come into the market afterwards.

drug pricing; value-based pricing; Sweden; enlightenment

Sweden is one of the world’s best welfare states. It promulgated the “Medical Care and Health Services Act”in 1982 which stipulated that every citizen has the right to obtain the same medical care and health services. The cost of the universal health care brought enormous financial pressure to Swedish government. Pharmacoeconomic was applied to the medicine policy-making in order to maximize drug resource allocation and improve the level of public health[1].

China has a large population with limited medical resources, but people’s requirements for health and life quality are the same as the developed countries. The specific conditions mean that Chinese government must make full use of the limited medical resources to meet the public demand. To solve this problem, our government should improve the management efficiency from both the economic benefits and social benefits[2]. We can study the advanced experience of Sweden to improve drug pricing method in China.

1 Drug pricing method in Sweden

1.1 Negotiated price on the basis of cost plus

Before 2002, drug compensation price was determined by negotiation between National Social Insurance Board (NSIB）and pharmaceutical companies and some factors were taken into consideration while negotiating the drug price, such as the clinical results, R&D and production

cost, expected sales, social and economic contribution, cost of alternative medicine and oversea price etc. If a patent medicine has many alternative medicines, the R&D and production cost will serve as a major factor on pricing; if it has few alternative medicines, the R&D and production cost as well as the expected sales will serve as a major factor on pricing. While negotiating drug price, NSIB allows enterprises to add some profits based on the cost as an encouragement and support for their innovations. But there is not fixed profit ratio and each drug has its own profit, which is based on drug’s innovativeness and the alternative drugs price. The negotiated price is the wholesale price, and the final retail price is determined by ApoteketAB, which is a nationwide price. Research showed that the price of patent medicine was closely related to the degree of innovation and difference. One major factor for drug expenses increase was that the innovative drug price was much higher than the common drugs.

1.2 Pharmacoeconomic evaluation method

In 1993, the National Insurance Commission conducted the pharmacoeconomic evaluation as one reference element for drug price negotiation, and it suggested pharmaceutical enterprises provide related information about pharmacoeconomic evaluation when they applied for patent medicine price compensation, but it was not a mandatory requirement. From 1993 to 2001, enterprises started to demonstrate their drug value with economic indicators, but during this period, the methods of pharmacoeconomic evaluation were neither mature nor standardized. For example, from 1998 to1999, NSIB received 59 applications for patent medicine price compensation and only 17 of them used the costeffectiveness analysis with different cost inclusion.

Pharmaceutical Benefits Board, (TLV), an independent government agency, was established in January, 2002 which was responsible for the determination of reimbursement list and compensation price[3]. Compensation price was determined by TLV instead of negotiation. From then on, patent medicine pricing was based on pharmacoeconomic evaluation results, while the price of generic pharmaceutical was from the similar drugs price (reference pricing), which can encourage the price competition of patent medicine for further researching innovative products. TLV members consist of 10 health experts and a senior legal counsel who serves as the chairman. They are generally appointed by the government for a term of two year. If any problem occurs, an additional 1 or 2 person(s) can be brought into TLV for providing advice and suggestions without power of decision. In addition, to encourage innovation, Sweden allows drugs with better costs-effect to price high. TLV will verify the application for reality, scientificity and integrity to confirm the evidence, effect indicator and cost scope. In order to standardize the methods and procedures of pharmacoeconomic evaluation, in 2002, Sweden introduced the “General Guidelines for Economic Evaluations”[4], which covered the selection of cost and effect index in detail. The guidelines recommended the cost-effectiveness analysis as a major evaluation method. The best treatment should be used as the comparison and the cost is social cost while the effectiveness is the quality-adjusted life years. Willing-to-pay method will be used to estimate the benefits if quality-adjusted life years can’t reflect some short term results and the cost-effectiveness analysis will be applicable. If there are many evidences to prove a drug that has the same effect as the existing best ones, the treatment cost between this drug and the reference drugs is the main factor for pricing[5-7].

2 The virtue of pharmacoeconomic evaluation

Drug price should be consistent with its value which mainly depends on its effect as well as the cost. The traditional drug pricing method can’t reflect its value accurately and comprehensively because it is based on the cost. The application of pharmacoeconomic in drug pricing comes from two aspects, one is drug life cycle and the other is efficacy and this method is scientific for drug pricing.

Setting drug price is related to various interests, such as government agencies, medical insurance institutions and patients etc. It includes many factors as R&D, production, circulation and drug life cycle, at the same time, the burden of national medical expense, people’s economic capacity and the reasonable allocation of medicine resources should be taken into consideration. Pharmacoeconomic can assess and analyze the drug effect comprehensively, and its objective is consistent with drug pricing, namely, it is not to maximize resource conservation, but to ensure the best allocation of medical resources[8].

3 Inspirations for China

Sweden applied pharmacoeconomic evaluation method to drug pricing which balances the benefits among the pharmaceutical enterprises, social security agencies and the patients. We can learn some Swedish experiences for China’s drug pricing. Due to the serious low-level and redundant pharmaceutical projects, it is difficult to reflect the value to price drugs based on cost or market price, and it restricts the drug innovation incentives. We suggest that pharmacoeconomic evaluation should be applied mandatorily to drugs pricing, and pharmaceutical companies are required to submit pharmacoeconomic evaluation results while declaring drugs. At the same time, they are allowed to price drugs with new active substantial, especially the drugs for serious diseases. By applying the principle widely, the predictable and transparent pricing system will enable enterprises to make long-term investment decisions with more certainty.

4 Conclusions

This article takes Swedish practice for reference and puts forward pharmacoeconomic evaluation pricing method for our government agencies so that the drug prices can reflect the drug value comprehensively. This method can not only price the new drug reasonably, but also provide a standard for the following listed drugs.

[1] SUN Li-hua. Pharmacoeconomics (the Second Edition) [M]. Beijing: China Medical Science and Technology Press, 2010: 2.

[2] SUN Li-hua, HUANG Tai-kang, WU Chun-fu. Thought about the Management Mission for Drugs [J]. China Pharmacy, 2007, (13) : 971.

[3] Eric Faulkner, Karl Matuszewski MS, Christie Niziol. Sweden Pharmaceutical [EB/OL]. http://www.ispor.org/htaroadmaps/ sweden.asp#4.

[4]General Guidelines for Economic Evaluations from the Pharmaceutical BenefitsBoard [EB/OL]. http://www.tlv.se/inenglish-old/medicines-new/pricing-and-reimbursement-ofmedicines/.

[5] Pricing and Reimbursement of Medicines [EB/OL]. http://www.tlv. se/in-English-old/medicines-new/pricing-and-reimbursement-ofmedicines/.

[6] OECD Health Data 2011: How does Sweden Compare [EB/OL]. http://www.oecd.org/LongAbstract/0,3425,en_33873108_33873822 _38980335_1_1_1_1,00.html.

[7] WU Rui-xue. Enlightenment on Management Policy of Sweden Patent Medicine Price [J]. China Pharmacy, 2009, 20(1): 10-11.

[8] LI Hai-tao, XIA Hui, LI Shi-bao. Discussion about Drug Pricing by Pharmacoeconomics Evaluation [J]. China Pharmacy, 2007, (23): 1765.

Author’s information: SUN Li-hua, Professor. Major research area: Medical benefit of investment and management, Pharmacoeconomics. Tel: 024-23986553, E-mail: guolang1016@163.com