Dynamic reform in International Reference Pricing
The same week that we recently aired our webinar on the impact and risks of international reference pricing (IRP), Slovakia approved legislation to curtail alleged manufacturer attempts to circumvent IRP-related price reductions by marketing unique presentations. As a result, Slovakia will no longer only compare identical pack sizes under IRP; changes are likely to mainly affect producers of off-patent and generic drugs, as anticipated in the latest 2019 version of our IRP Guidebook.
Not long ago, low-priced Slovakia used to be part of Portugal's reference country basket, the composition of which is due to be reviewed later this year as part of an annual exercise. Portugal must opt for geographies from within the EU with lower drug prices than its own or with similar GDP. This revision is a legacy of the so-called troika (made up of the European Commission, the European Central Bank and International Monetary Fund) in the context of the country's previous financial bailout.
Although not the focus of my recent webinar presentation on IRP in Latin America, reference basket composition is part of the current reform debate in this region, particularly in Latin America's largest pharmaceutical market. Following years of talks over modernization, Brazil is in the midst of a program to reform its launch price setting regulations, which have featured IRP since 2004. Reformed legislation is expected in 2020, following a structured program including the conclusion of a regulatory impact analysis (RIA) and a now delayed public consultation phase.
The RIA identified the reference basket as being among the cause of problems associated with the 2004 regulation; the current debate centers on potential expansion of this basket. Amongst its nine current reference countries are Portugal and Greece, the latter of which has itself been a hothouse of IRP reform in 2019, involving a basket reduction and a harsher IRP formula.
Portugal is also part of the Colombian IRP basket, which since 2013 has been used to set the maximum sales price for specific already commercialized drugs under a direct price control regimen. The new administration is finetuning this IRP methodology, although potential changes have not been made public. The changes are likely to include referencing beyond the current 17 countries due to lack of publicly available price information. The eventual publication of changes is overshadowed by industry criticism that authorities have not currently been implementing the methodology, which only regulates 13% of commercial presentations in Colombia, to the letter of the law.
It remains to be seen if the new Colombian administration will add markets such as Italy, South Africa or Turkey to the basket of the 2013 mechanism. These were listed by the previous government in draft legislation pertaining to a distinct IRP methodology to be associated with value-based pricing (VBP) of new innovative drugs at launch. The VBP reform to strengthen the so-called "front door" (puerta de entrada in Spanish) centers around the already unveiled system for therapeutic value classification, which will determine the yet-to-be published final pricing methodology adopted.
Meanwhile, Chile's Ministry of Health (MoH) has reportedly unveiled the intent to propose a draft law to set the maximum list price for patented drugs, informed by the creation of an international price observatory to collect data on the average price of a drug in Latin America. This is likely to be modelled on CENABAST's observatory, which was unveiled in May 2019 and is used to apply informal IRP to obtain a fairer price, when conditions are similar, as part of direct procurement negotiations with manufacturers of single-source medicines. CENABAST is a decentralized institution under the MoH that manages procurement processes mandated by the public health network. According to primary research included in the 2019 edition of our IRP Guidebook, CENABAST prefers to reference Latin American prices, although the observatory contains data from disparate geographies.
Elsewhere in the Americas, the United States is contemplating adopting some form of IRP for the first time. The government of the largest pharmaceutical market in the world has proposed use of IRP to reduce Medicare Part B spending under the so-called IPI model. Our latest Guidebook contains case study simulations of the IPI model to evaluate the impact of IPI-driven cuts in Medicare reimbursement on international price levels and revenue. If the United States were to adopt IRP, the United Kingdom and Sweden would be increasingly isolated, among the only sizeable, mature markets not using some form of the tool.
To find out more about our nuanced insights on IRP policy evolution, please check out the latest edition of our Guidebook, and visit us at booth # C3-065 during ISPOR Europe 2019 in Copenhagen, Denmark.
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