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Finnish Government Unveils Introduction of Controversial Reference Price Scheme
14 May 08
The Finnish government is to go ahead with the introduction in the country of a reference price scheme, which will include patented medicines.
Global Insight Perspective | | Significance | Finland is next on the list to implement a reference price scheme to control the price of medicines. Patented medicines will also be introduced into the scheme. | Implications | Prices of innovative medicines included in the reference price scheme are likely to decrease. In the case of patented medicines, this poses the question of Finland's commitment to promoting innovation. | Outlook | Pharmaceutical price stability is more than ever under threat in the country, as the government has made plans to update the reference price scheme four times a year. The pharma industry is in a position to question the viability of its R&D and marketing investments in the country. |
The Finnish Ministry of Social Affairs and Health has announced the introduction of a generic reference price scheme in the country, which should come into force by spring 2009 at the latest. Out of the 5,000 licensed presentations currently reimbursed by the Social Insurance Institution (KELA), 2,900 would be included in the price reference system, including a number of patented medicines for which there is a generic equivalent on the market. According to the proposals, the reference price in a group of medicines will be set at 1.50 euro (US$2.30) above the price of the cheapest drug available when the cheapest medicine is priced below 40 euro (US$62). On the other hand, when the price of the cheapest medicine reaches the 40-euro threshold, the reference price will be 2 euro above that price. Prices of medicines falling under the reference price system will be reviewed every three months. The government expects the reference price system to generate savings of 85 million euro, of which 33 million will result from lower pharmaceutical costs. The other 52 million euro will result from savings in reimbursement costs, of which 26 million will benefit KELA and 26 million will benefit patients. Commenting on the government's plans, Pharma Industry Finland (PIF) has warned that it could result in the country being blacklisted internationally as has happened with Norway. Indeed, the Norwegian drug-reimbursement system brings down the price of patented medicines early in the innovative medicine's market life. As a result, Norway was criticised last year in a report by the United States Trade Representative (USTR), a body that monitors respect to IP rights, for non-compliance with those of the innovative industry. As the Norwegian government failed to take any action on IP right protection, Norway was placed onto the U.S. Special 301 report watch list, which according to PIF, has hurt the perception of the country's commitment to innovation and its exports. Following the recent controversial decision from the Finnish Pharmaceuticals Pricing Board (PPB) to cut reimbursement of two patented medicines (see Finland: 8 May 2008: Finnish Pharma Association Points Finger at P&R Body Over IP Rights), Finland was mentioned in this year's USTR report. PIF has warned that it could damage the country's transatlantic relations and cast a shadow on Finland's credibility when it comes to its commitment to promoting innovation. Outlook and implications The implementation of a reference price scheme does not come as a complete surprise, as the government had been toying with such an idea for a few months (see Finland: 26 February 2008: Finland Considers Generic Reference Price Scheme). Nevertheless, the proposal is more aggressive than initially thought. Not only did the innovative industry fail to successfully lobby for innovative medicines to be left out of the scheme altogether; it was also dealt a blow when the government decided not to spare patented drugs. In Finland, the vast majority of patented medicines hold an analogous-process patent, which can be legally circumvented if a generic firm uses a production method that is different from the original method. This results in generic medicines being legally present on the Finnish market alongside medicines that are still patented. In effect, patients will be likely to pick a drug either cheaper or in line with the reference price as they will be responsible for any cost above that. This will prompt manufacturers of innovative medicines to bring their price down if they want to retain some market share. Another aggressive measure in the reference pricing plan is the provision for it to be reviewed every third month. This will capture any change in the market and manufacturers will be exposed to continuous price changes, which will bring even more uncertainty over price stability in the country. It is likely that the government will welcome market entry of copycat versions of innovative drugs in order to include the latter into the scheme, making any change in Finland's IP protection legislation improbable. PIF had already warned that the country was walking a fine line when it came to reward for innovation. The move is likely to hurt innovative manufacturers' confidence in the country and threats similar to those seen in the United Kingdom could emerge (see United Kingdom: 6 May 2008: Threats of Investment Exodus Loom as Adverse U.K. Governmental Policies Pile Up). The government argues that high pharmaceutical expenditure in the country made the move necessary. This is questionable, as 2007 sales of reimbursable medicines grew by 3.7% year-on-year (y/y) to 1,080 million euro, well below the market average of 6.2% y/y and the governmental targets of 5%. In addition, Finland's healthcare bill is middle-ranking alongside other (Western and Eastern) European countries and below the OECD average with total health expenditure as a share of GDP checking in at 5.9% in 2005.
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