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25% variation in per capita drug spend across European Union

Caroline White

Tuesday, 31 May 2011

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Per capita spending on medicines varies by as much as 25% across Europe, with Greece topping the league table, and Poland at the bottom, shows a report from the London School of Economics, commissioned by the European Parliament.

A range of factors is responsible, says the report, citing the volume of medicines consumed; the mix of brands versus generics and their pricing systems; the share of the price that is reimbursed by the various national health systems; as well as wholesalers’ profit margins and the VAT rate.

The price of drugs has come to the fore as medicines represent the third most important cost component in member states’ healthcare budgets and expenditures are rising faster than GDP, says the report, mainly due to an ageing population and the increasing cost of new drug development.

Overall spending on medicines has risen significantly over the past decade, but a recent Department of Health review of the prices for 150 drugs found a 25% difference in the average price for this “basket” between the lowest and highest spenders among 11 member states, says the report.

The costs of the same drug also vary considerably, with fourfold differences in price evident among medicines covered by patents and related forms of intellectual property rights, including market exclusivity periods and supplementary protection certificates.

And despite costing typically 25% less than brand versions, the variation among generic drugs is even greater, the report found. There was a 16-fold difference between the highest and lowest prices for one generic medicine for high blood pressure, for example.

This is important, says the report as a large share of the medicines consumed across the 27 EU countries are generics. They make up over half of the total volume in the UK, Germany, Denmark and Sweden.

In general, prices of in-patent pharmaceuticals seem to be proportionally higher in member states with higher levels of per capita income. Higher income states also seem to spend more on medicines, says the report.

Twenty four out of the 27 EU Member States use external price referencing to set prices, but tendering for off patent medicines, price caps for generics and internal price referencing are also used. But pricing inevitably affects patient access to medicines, says the report.

Among the raft of recommendations to iron out pricing differentials and variations in availability, the report recommends greater sharing of information and policy experience among member states on the purchase of medicines, using initiatives such as the network of Competent Authorities on Pricing and Reimbursement.

Approaches to Health Technology Assessment could also be looked at, given the increasing popularity of this method to select which drugs to prescribe/reimburse, it says, while EU policies could encourage greater and earlier use of generic medicines to drive down prices.

Closer collaboration among member states in the field of biomedical innovation could avoid duplication in research, and setting research priorities in accordance with unmet medical needs at EU level would also be desirable, suggests the report.

It also recommends that the problem of small markets, which face lower competition from generic drugs and thus higher prices, as well as the problems related to the lack of availability of certain products in individual member states, should be tackled.

Differences in the cost of and access to pharmaceutical products in the EU

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