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Special Communication
Health Care Policy and Law
September 28, 2020

Drug Reimbursement Regulation in 6 Peer Countries

Author Affiliations
  • 1Department of Medical Ethics and Health Policy, Perelman School of Medicine, University of Pennsylvania, Philadelphia
  • 2Yale School of Medicine Center for Outcomes Research and Evaluation, New Haven, Connecticut
  • 3Beth Israel Deaconess Medical Center, Harvard Medical School, Boston, Massachusetts
JAMA Intern Med. 2020;180(11):1510-1517. doi:10.1001/jamainternmed.2020.4793

The US has nearly 4.5% of the world’s population but accounts for more than 40% of global drug spending. With the upcoming 2020 election, a top priority of many voters is to better control drug prices and reform the pharmaceutical market. In this Special Communication, the drug price mechanisms and government regulations used in 6 representative peer countries are evaluated: Australia, France, Germany, Norway, Switzerland, and the United Kingdom. Drug price regulation is compared with that currently used in the US. Eight key lessons from the regulations used in these countries and which elements are incorporated into the bills currently making their way through the US Congress are evaluated (2 from the US House of Representatives and 1 from the US Senate). None of these bills is as systemic or comprehensive in its drug pricing mechanisms and regulations as the schemes in the other countries.

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2 Comments for this article
Buying outcomes, not drugs
Ruth Lopert, MD MMedSc LLM FAFPHM | George Washington University
The authors have stated that "(I)n Australia, as part of marketing approval, pharmaceutical companies submit clinical and economic evaluations and cost-effectiveness analyses (CEAs) to the Pharmaceutical Benefits Advisory Committee (PBAC)...". This is incorrect. The application for reimbursement is entirely separate from the marketing approval process, the latter being the responsibility of the the Australian drug and therapeutics regulatory agency, the Therapeutic Goods Administration. Submission to PBAC is required where a manufacturer seeks inclusion of its drug on the national formulary, which is by no means mandatory, though will significantly expand its market share. Price regulation, as described, only applies to medicines that are included in the reimbursement formulary; any drug that gains marketing approval may be prescribed and dispensed via a private prescription and the price is not regulated. Interestingly though, the prices of medicines prescribed privately are still very much lower than those in the US. Also, unlike NICE, the PBAC threshold is notional, inferred from past decisions rather than declared. A number of quantitative and qualitative factors inform the PBAC’s decision-making, and thus a fixed threshold would not be appropriate. It is perhaps worth mentioning that in evaluating medicines for reimbursement, the PBAC’s conceptual approach is that the role of the program is to procure outcomes, rather than drugs. Many of the pricing mechanisms flow from this fundamental, conceptual basis.

The authors also state that “(W)hen a second branded drug with similar efficacy enters the market, both drugs are automatically moved to formulary 2, triggering a 16% price decrease.” This is incorrect. The price reduction is triggered by the PBS listing of the first new brand of the same drug, ie a generic or biosimilar, and the price reduction is 25%, not 16% (https://www.pbs.gov.au/info/industry/pricing/pbs-items/first-new-brand-price-reductions) . Further, medicines on formulary 2 are subject to price disclosure arrangements (https://www.pbs.gov.au/industry/pricing/price-disclosure-spd/price-disclosure-operational-guidelines-06-2016.pdf), which progressively reduce the price by effectively clawing back discounts in the supply chain.

More broadly it is perhaps worth noting that for many years various scholars and policy analysts have attempted to generate interest in other countries’ approaches to price regulation, including the Australian approach, only to be repeatedly told that American problems require uniquely American solutions and that the US has little to learn from other countries’ approaches. Moreover, not only do such approaches continue to be decried as ‘free-riding’ and ‘undermining innovation’, but the US in its bilateral and plurilateral trade agenda attempts wherever possible, to undermine rational approaches to drug price regulation among its trading partners. it was (fortunately) unsuccessful in the Australia US FTA and the TPP, and only partially successful in KORUS, but fears have been expressed that the UK will come under pressure in the UK-US FTA negotiations. Such policy incoherence scarcely bodes well for the adoption of sensible, evidence-informed mechanisms for price regulation that the US sorely needs.
CONFLICT OF INTEREST: Dr. Lopert is the former director of the Australian program the authors describe.
Response to Dr. Lopert
Aaron Glickman, MPA | University of Pennsylvania
Thank you for this comment. We have asked the journal  to correct two statements in the article. For clarity, the reference to PBAC approval as part of marketing approval has been changed. While market approval and PBS listing are two separate processes, they typically proceed in parallel. This was not sufficiently clear in the original article.

We have also corrected the description of the formulary 2 listing process to note a 25% drop triggered by a bioequivalent/biosimilar being approved, rather than a 16% drop. The change in markdown occurred in October 2018, during the editing process of a
chapter of Dr. Emanuel’s book, "Which Country has the Worlds’ Best Health Care," from which part of this paper is drawn. That should have been double checked prior to submission.

Finally, we did not include a discussion of price disclosure agreements, given the word limit for the article. In the book, we note that the required disclosures of ex-factory prices to the Department of Health helps keep PBS from overpaying, as the ministry can decrease reimbursement to match the ex-factory price.