A New Reimbursement System for Innovative Pharmaceuticals Combining Value-Based and Free Market Pricing

Abstract

Sweden has experienced a national value-based pricing (VBP) system for innovative outpatient drugs operated by the Pharmaceutical Benefits Board - LFN (now called the Dental and Pharmaceutical Benefits agency - TLV) since 2002. VBP has the character of a monopoly system, leading to reimbursement decisions where usage of new medicines is limited to subgroups and not the population for which the drug is approved. VBP relies on a broad societal perspective, encouraging innovations by signaling to firms that value-adding treatments are demanded. However, the VBP system is operated without a drug budget responsibility. The budget responsibility lies at the regional level, not operating VBP, thus an intrinsic conflict is built into the system. The aim of this article is to suggest a modification to the current reimbursement system in Sweden where payment for pharmaceuticals is split between the regional and national levels. The system is expected to make new innovative pharmaceuticals accessible to a larger number of patients and provide more consumer surplus without reducing the producer surplus. In short, the county councils pay the marginal cost of production while the state pays for the innovation.

The End of the International Reference Pricing System?

“…Persson et al [20] suggest a modification to the current reimbursement system in Sweden, whereby payment for pharmaceuticals is split between regional and national levels. The idea is that the contribution from the national government is a fixed amount based on expected sales, and a lower price is used at the regional level where the county and councils buy the drug from the pharmaceutical companies.…”

General Overview ofValue-Based Pricing

“…To be a viable option in the UK, VBP must deliver efficiency (defined as the value for money) to the NHS and also provide adequate incentives for the pharmaceutical industry to invest in innovation. To do so, the new VBP system must be practical and uphold patient access to therapies, by providing quick access to effective therapies and maintaining supply, as well as being legally defensible [11]. Furthermore, a fine balance between financial stability and flexibility must be found among manufacturers and the government, and, finally, the transparency of the process is fundamental, because it upholds all the other factors presented here.…”

Getting value today and incentivising for the future: Pharmaceutical development and healthcare policies

“…Patents further lead to inequitable R&D investments since they incentivise greater investment in development of treatments for diseases predominantly affecting citizens of developed countries (Civan and Maloney, 2006;Hubbard and Love, 2004;Kaul et al, 1999). Different remedial approaches to overcome these issues have been proposed including the compensation of producer for operating on a lower point on the demand curve and Ramsey pricing (Carlton and Perloff, 2005;Danzon and Towse, 2005;Persson et al, 2012). Promoting pharmaceutical R&D through other means than intellectual property rights, e.g.…”

“…The analysis focuses on policies subjected to recent debate in the Nordic countries; e.g. the reimbursement process, international reference pricing (IRP) and adoption into clinical practise (NRK, 2011;Persson et al, 2012;PIF, 2012;RIGSREVISIONEN, 2013;SKL, 2012;SOU 2012SOU :75, 2012Statsrevisorerne, 2011).…”

“…Under VBP, which is claimed to be operated in Sweden 6 (Persson, 2012;Persson et al, 2012), a pharmaceutical technology would be priced based on the value it provides. A value based price (and quantity combination) can thus be defined as a price (and quantity combination) that lies on or below the demand curve.…”