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Health Econ > Pharma econ > Flashcards

Pharma econ Flashcards

1
Q

TLV?

A

The Dental and Pharmaceutical Benefits Agency, TLV, is a central government agency whose remit is to determine whether a pharmaceutical product, medical device or dental care procedure shall be subsidized by the state. We also determine retail margins for all pharmacies in Sweden, regulate the substitution of medicines at the pharmacies and supervise certain areas of the pharmaceutical market.

‘TLV is a government agency under
the Ministry of Social Affairs, that Decides
on price and reimbursement för
prescription drugs’

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2
Q

In HTA, QALYs are used as:

A

measure of the health gain from a new medical product

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3
Q

Treshold/willigness to pay in Sweden (per QALY)

A

severe conditions: 1,000,000/QALY
less severe conditions/typically: 500,000/QALY

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4
Q

The law regulating TLV’s reimbursement decisions - what characteristics must the cost have?

A

The cost should
be ”reasonable”
from a medical,
humanitarian and
societal economic
perspective

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5
Q

Maximum out of pocket cost of prescriptions per year?

A

2600 SEK

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6
Q

Average % of prescription drug costs that are covered by OOP?

A

18% (so 82% is paid by tax money)

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7
Q

The reimbursement ‘stair’
- outline the OOP cost for patients for reimbursed prescription drugs

A

0-1300 SEK = 0% subsidy
6382 SEK or more = free

(and categories in between for 50%, 75% and 90% subsidy)

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8
Q

3 types of decisions TLV can make regarding drugs?

A

General reimbursement: for all of the drugs approved indications
Restricted reimbursement: only for the indications/patient groups where the drug is cost-effective (e.g. only after the patient has tried a lower priced alternative)
No reimbursement: no reimbursement, price not regulated

(decision making process usually takes 110-120 days; there is an EU legislation stating the decision needs to be made within 180 days)

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9
Q

Expenditure on pharmaceutical comprises approx what % of THE in Sweden?

A

11%

(corresponds to 60 billion SEK)

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10
Q

Breakdown of expenditure on pharmaceuticals in Sweden

A
  • Prescription drugs with coverage (38 billion SEK, TLV conducts HTA (calculates the cost-effectiveness, makes the decision on coverage and regulates the price)
  • In-hospital drugs (12 billion SEK, TLV conducts the HTA but does NOT make the decision on coverage - in this case, regions choose whether they want to reimburse the drug depending on the evidence presented by TLV)
  • Over the counter (7 billion SEK, usually not reimbursed)
  • Prescription drugs without coverage (4 billion SEK; either drugs that were never applied for TLV assessment or got declined; companies may not apply if the drug is relatively affordable and intended for not too severe conditions, so they estimate they can rely on OOP)
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11
Q

Apart from making decisions on reimbursement, TLV also regulate:

A
  • generic substitution (designate the product of the month)
  • pharmacies’ retail margin for covered prescription drugs
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12
Q

Generic substitution

A

Generic substitution is the term applied to the substitution of a prescribed branded drug by a different form of the same active substance. The generic is usually unbranded; it is often a parallel imported product, which is regarded as ‘essentially similar’ by the EU Commission.

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13
Q

Trends in expenditure on pharmaceuticals in Sweden

A
  • increasing significantly
  • from 2013 to 2022, 57% increase
  • overall, numbers correspond to 5.4% annual increase
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14
Q

Swedish prices on generics compared to other EU countries are:

A

among the lowest!

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15
Q

Trends in pharma

A
  • many new oncology drugs
  • smaller targeted patient groups
  • less data and less good evidence at launch (the initial evidence presented for HTA is typically single arm trials, rarely RCTs)
  • high treatment costs per patient
  • increase in Advanced Therapy Medicinal Products (ATMPs) (medicines for human use that are based on genes, tissues or cells)
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16
Q

R&D investment in different therapeutic areas; biggest and smallest investments?

A

mainly: oncology
minor: cardiovascular, OBGYN, psychiatry

17
Q

Gene therapies: What is the challenge to the payer?

A
  • treatments are priced based on very long duration in effect, but long term effect/benefit is uncertain while the entire payment is made at the time of treatment
  • the risk to the payer might be reduced by a smart payment model, e.g. staggering the payment (installment-like principle)
18
Q

Pharmaceuticals - characteristics of supply

A
  • high fixed costs for R&D (10-20 billion SEK to develop a new drugs)
  • low marginal costs (low price for producing an additional unit of the product; after the research has been done, the price per pill/tablet produced is usually very low)
    (conflict between static and dynamic efficiency)
  • patents are of high importance, but they do not necessarily contribute to monopolies
  • most often oligopolies; there are usually a few producers that have drugs which have very similar use/effects (target the same patient group/indication) but sufficiently different mechanisms of action to have distinct patents) –> leads to some competition
  • heavily regulated industry (market approval, production, marketing, prices..)
  • characteristics in price setting (NOT based on marginal costs; has to account for R&D, non-disclosed discounts, price varies among countries and based on indiciation, often a momopsony situation (only one buyer) - both buyers (governments) and sellers (big pharma) are very powerful actors - negotiations typically have to take place regarding the price
19
Q

Static vs dynamic efficiency

A

Static efficiency - maximising utility of money right now
Dynamic efficiency - maximising utility of money over time

20
Q

High prices of drugs - origin of the issue and example of proposed solution?

A
  • companies have to set high unit prices (although the cost per unit when it comes to production is very low) in order to get a positive return on investment for their R&D efforts
  • however, high unit prices lead to inoptimally low use

Proposed solution:
- companies who have a drug approved for a specific market get a fixed lump sum to cover the R&D costs (sum depends based on value of their drug, considering size of target population, condition severity etc), which could then allow them to charge low cost per unit of drug, elading to larger usage

21
Q

Is enough money invested globally in R&D for new drugs? or is there a market failure?

A
  • the amount of money invested in overall R&D globally is increasing, however, market failure (suboptimal investment) might be happening in some areas, such as psychiatry and antibiotics)
22
Q

Why is the investment in antibiotics R&D low?

A
  • a truly new class of antibiotics has not been developed for decades
  • any antibiotics produced now would have to be stored for later use (when all current antibiotics are ineffective due to AMR); this provides no incentive for pharma companies to research antibiotics now
  • policy makers need to design incentives for researching antibiotics now without encouraging their overuse
22
Q

Market failure

A

Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.

23
Q

in cost effectiveness studies, effect is usually evaluated using

A

Quality Adjusted Life Years

24
Q

TLV prioritization principles:

A
  • cost-effectiveness
  • severity of the condition

(from an ethical standpoint, overreliance on cost effectiveness is sometimes criticized)

25
Q

What kind of pricing does Sweden mainly rely on for pharmaceuticals?

A
  • does not rely rely on reference pricing
  • mainly ‘value based pricing’ (a drug is reimbursed if price and effect imply that it is cost effective)
26
Q

Fixed costs vs average total costs vs average variable costs

A

A fixed cost is an expense that does not change when sales or production volumes increase or decrease. Fixed costs are the expenses a business incurs that do not change with the amount of goods produced or services
provided.

Average Cost, also called average total cost (ATC), is the cost per output unit.

Average variable cost (AVC) is calculated by dividing variable cost by the quantity produced.

27
Q

In which ways can costs be considered in cost-effectiveness analyses?

A
  • various perspectives can be adopted
    e.g.
  • Health care costs
  • Municipality’s costs
  • Patients out-of-pocket costs
  • (Productivity gains?)

Shift towards: SOCIETAL PERSPECTIVE/COSTS (considers all costs/savings regardless who
pays)

28
Q

The rationale for using societal perspective rather than healthcare perspective when it comes to ‘costs’ in cost-effectiveness analyses?

A

Productivity gains used to be taken into account, but nowadays there’s much more hesitancy to include this, because it may lead to discrimination against some patient groups (such as the elderly or people with disabilities)

Critique: When the government decides which
drugs should to reimburse, it considers
how much a person contributes to
the economy. Retirees contributes less
and therefore medical drugs for
them are more expensive.
That’s the way to understand a decision by
TLV.”

29
Q

Define cost-effectiveness

A

Cost per gained QALY

(cost new)-(cost old)/(QALY new)-(QALY old)

30
Q

The value flower

A

Comprises:

Value elements included in the traditional payer or health plan perspective (core elements of value):
- QALYs gained
- net costs

&

Value elements also included in the societal perspective:
- Common but inconsistently used elements of value (Productivity and family spillovers)
- Potential novel elements of value (Value of knowing, Insurance value, Fear of disease, Value of hope, Severity of disease, Equity, Real option value, Scientific spillovers)

31
Q

TLV considerations when it comes to reimbursement decisions

A

*TLV’s interpretation:
”Reasonable cost” = cost effective
* But allowing for severity of disease
* Societal perspective
* QALYs (Quality adjusted life years)

32
Q

Summary of HTA in TLVs decision making - key points

A

TLV is known in Sweden for taking cost-effectiveness seriously

  • A new drug needs to provide reasonable value for money in order
    to be subsidized
    – The motivation: Maximizing health gains
  • But cost-effectiveness is only one of three decision making criteria.
    The other two are:
    – Human value
    – Needs and solidarity
  • The cost-effectiveness analysis:
    – Societal perspective: Include all costs and cost-savings
    – Measuring health gains by Quality Adjusted Life Years (QALYs

Health Econ (9 decks)

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