EKIP– Expert Club for Economics and Politics A Different Opinion
This year's budget for medicines in Bulgaria amounts to 1.2 billion leva, forming a quarter of the total budget for healthcare of the National Health Insurance Fund. However, our market still lacks certain medicines that are easily accessible in the European one. The lack of these medicines, as well as the abuses in this market, are mainly due to state regulation in the field of healthcare in the form of price control and price referencing. In their attempts to solve the problems with volatile and high prices in the open European market, politicians and bureaucrats approach the problem with the introduction of a command pricing policy, which currently leads only to consequences such as the withdrawal of medicines from the Bulgarian market.
That is why, over the past 10 years, there has been constant talk about medicines missing from the Bulgarian market. This usually creates a problem for patients, whose relatives in most cases have to look for these medicines outside the country and accordingly purchase them at a marginal price, instead of them being available, reimbursed and paid for by Bulgarian institutions. In most cases, it is not a question of experimental or innovative therapies due to the fact that access to them in Bulgaria is relatively easy. We are talking about medicines that belong to conventional therapies for the treatment of oncological, cardiovascular, respiratory, etc. diseases. By conventional it is understood that according to the pharmaco-therapeutic guidelines they are the first and second line of treatment for the respective disease. Being established medicines on the market, in most cases they have an expired patent and there are generic analogues for them that are of the same quality and have interchangeable therapeutic effects. Despite the presence of several medicines in one group, price regulation gradually leads to their withdrawal from the Bulgarian market.
What is the regulation?
One of the first authorities to start drug regulation is the Bulgarian Medicines Agency (BMA), which is responsible for issuing marketing authorizations, manufacturing authorizations, conducting clinical trials, and drug safety. Once medications are approved by the BMA, they can be offered to patients in Bulgaria. The next step concerns medications that are prescribed by doctors with a prescription and that are partially or fully paid for by the National Health Insurance Fund (NHIF). To do this, medications go through a second regulatory body called the National Council for Prices and Reimbursement (NCPR). Its activities include registering the maximum retail selling prices of over-the-counter medications, setting maximum prices for all other medications, and making decisions on the inclusion and pricing of medications in the Positive Medicines List (PLS).
The main mechanism for regulating the prices of both prescription-only medicinal products and those included in the Positive Medicines List (PML) and paid for with public funds is carried out on the basis of international (external) price referencing. The manufacturer's price for medicines is determined on the basis of the lowest "official" reference prices in certain EU member states. The PML includes medicinal products paid for by the NHIF and prescribed by a doctor, and new (innovative) medicines are included only if a medicinal product with the same name is paid for in a certain number of EU countries. The last step in the institutional chain is the NHIF, which pays for medicines according to the values set by the regulator in the PML. The fund pays a percentage of the lowest reference price of this medicine - 25, 50, 75 or 100%, respectively.
Impact on importers and manufacturers
The market is affected by price regulation in various ways, one of them is the withdrawal of medicines. According to the National Center for Drug Safety (NCDS), in 2018, a total of 158 medicines were withdrawn from the Bulgarian market. According to the Bulgarian Drug Agency (BDA), for the period 2014-2017, the number of deregistered products in the country was 1,512, and in 2017 alone, 327 medicines were withdrawn. There are several main reasons for this. For importers, the price referencing of medicines leads to a suppression of the price below the market price and the solution is to stop their sale on the territory of Bulgaria. What is not taken into account when applying this mechanism is the volume of the markets of different countries, as well as the induced demand.
For drug manufacturers in Bulgaria, price referencing is based on the "lowest price" principle at the manufacturer level. In order to sell a drug in our country, the manufacturer cannot register a price that is higher than the lowest price in the 15 reference countries. In some cases, however, the lowest price is a matter of exception - a temporary discount provided in a given country for a certain period of time.
Imagine that the government decides that the price of a certain drug is too high and forces the manufacturing/importing company to sell it at a lower price. If the manufacturing company can afford to sell the drug at the price the government has set and still cover its production costs, it will have to make do with the lower profits. In this case, consumers will be happy, but the company’s shareholders will suffer losses.
Now imagine that the manufacturing company cannot produce the drug at this price, cover its costs and make a profit. Let's imagine that the price that the state has set will have to be subsidized by the sale of other products of the manufacturing company in order for the given drug to still exist on the market. It will turn out that the company will prefer not to enter such a market at all, where it has to sell at a loss. In short – it will stop producing/importing the given drug.
Impact on NHIF and patients
State regulation in the field of pricing leads to the artificial reduction of the price of medicines, which is of short-term benefit to the NHIF, because the institution manages to optimize the budget according to its needs. In the long term - if these medicines leave the Bulgarian market, competition in the group decreases, the price increases and the economic benefit for the institution is reduced to zero. The problem with these savings is that they are one-sided or solely budget-oriented, and actually "sink" into the depths of the institution's budget and are used to fill one or another deficit. The effect on patients is expressed in less access to certain medicines due to their withdrawal, followed by a lack of them on the market. In this way, the treatment of one or another group of patients suffering from various diseases is limited. The lack of access to medicines leads to higher costs for hospital care. On the one hand, this is because the missing medications can be imported and purchased through the hospital, but this is already done at a price set by the importer, which is not subject to competition rules - i.e. they become several times more expensive. On the other hand, because when a disease is not treated with medications, the patient's general condition worsens and he has to be hospitalized, which is a much more serious expense for the NHIF than paying for the medication.
This article was originally published by The Economist magazine.
