Drugs Pricing in Russia

Dr. Mondher Toumi

Professor Market Access University Lyon I
Prague, 5 June 2009

Introduction
Funding for pharmaceuticals in Russia remains a contentious issue, given that the population is theoretically entitled to free-at-the-pointof-service healthcare. The government is responsible for funding the provision of drugs in the hospital sector, but financing remains inadequate, frequently leaving patients to pay for at least some of their treatment out of pocket. Coupled with the shortfall in funds for the Federal Mandatory Health Insurance System (FFOMS) which are only set to rise from 2009 after several years of cutbacks, funding for drugs in the out-patient market is very low. As a result, patients' out-of-pocket payments account for around 90% of out-patient drug expenditure and 70% of total health expenditure.

Pricing In Russia
4 different pricing processes

Hospital DLO
Rare and expensive to treat diseases (7 diseases program) ONLS program

Out of pocket market

World Pharmaceutical Market (billion USD)

250,0
204,8

200,0 150,0 100,0

56,8

50,0 0,0

30,2

28,0

17,2

15,40

14,7

13,1

12,9

9,6

9,0

8,5

8,3

Russia

UK

Brasil

Germany

France

China

Spain

Canada

Mexico

Japan

India

USA

Italy

Russian Pharmaceutical Market Dynamics (growth in %)

40 35 30 25 20 15 10 5 0

37,5

24
Growth %%

2005

2006
5

2007

Provision of Essential Drugs Program (DLO-ONLS) Is The Most Sizeable Project Of National Scale
Population Number of citizens having right to receive a Package of Social Services (PSS) Number of hospitals and clinics Number of pharmacies Number of doctors 142.2 million 5.62 million (out of 6.43 million having a right to receive State Social Assistance (SSA) 23 524 5 964 231 520
6

Russian pharmaceutical market*

18 16 14 12

USD, blns

10 8 6 4 2 0
2003 2004 2005 2006 2007 2008 2009f 2010f 2011f 2012f

GDP, USD, blns.

441.4

568.2

720.8

988.9

1 290
6

1 479

1 544 f

1 700 f

1 950 f

2 261 f

26,2 Out of the pocket (%) Reimbursment (%) 73,8 94 Imported drugs (%) Domestic drugs (%)

Rate of reimbursed drugs in 2008

Rate of imported and domestic drugs reimbursed in 2008

During last years Russian market showed good uptrend which will decline this year and will continue to grow after years 2009from2010. - DSM group 7 * All data

Pricing and Reimbursement in Russia (Historical overview)

In 1994 Governmental bill 890 encompassed benefits for special groups of population. According to this bill the cost of drugs were reimbursed totally or for 50% to these groups of Russian citizens (11-18% of Russian population). In 1998 after the default Russian government started the price registration of drugs listed in Essential list of drugs. Domestic and foreign manufacturers had to apply maximal prices to the government. On the basis of this prices maximal mark-up rates for distributors and retailers was stated Reimbursement of drugs was delegated to the regional and municipal authorities. In 2005 Drug Reimbursement Program (DLO) started in the framework of monetization of benefits for special groups of population. Reimbursement was centralized and payment was effected by the system of Ministry of Health and Social Development of the Russian Federation. In 2008 DLO under the optimization process was divided into two components: Centralized procurement (7 nosologies program) - securitization of essential drugs to patients with diseases requiring expensive treatment 7 nosologies, such as: hemophilia, cystic fibrosis, hypophysial nanism, Gauchers disease, myeloleukemia, multiple sclerosis, as well as the state after transplantation; Regional procurement (ONLS program) all other pathologies according to the list of essential drugs. Funds for the regional budgets should be transferred from the federal budget. In 2008-2009 the prices are regulated and declared by the decrees of the Government of the Russian Federation.

Historically Russia pursue two types of pricing and reimbursement federal and regional. Both of them are actual today after several years of centralized practice.
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Operational Principles of Pricing and Reimbursement

Drug purchase of 7 nosologies is performed in auction on the federal level by The Ministry of Health and Social Development of the Russian Federation. Usually national distributors or foreign manufacturers participate in this tenders. Other drugs each region or municipality holds by its own independent tender regarding remainder of the drug list. Usually in this tenders local as well as national distributors participate. Vaccines are priced and reimbursed centrally. Purchase of these products performed on the federal auctions by Rospotrebnadzor federal body for consumer rights defense and wellbeing. Purchasing (centralized as well as regional ones) are being made through auctions in accordance with Federal Law No 94-FZ. Population Number of citizens having right to receive a Package of Social Services (PSS) Number of hospitals and clinics Number of pharmacies Number of doctors Number of distributors 142.2 million 5.62 million (out of 6.43 million having a right to receive State Social Assistance (SSA) 23 524 5 964 231 520 > 500

Pricing and Reimbursement in Russia is a complex system which is held by central and regional 9 authorities.

Start-up Problems Of New Reimbursement Program Implementation in 2008

Problems of new 2008 program inherited from former 2005-2007 program The main problem incorrect forecast of the needs in drugs, due to lack of appropriate epidemiological data. Inaccurate requests for drugs supply is a current problem. Delays in documentation flow (drugs delivery and acceptance) Problems with auctions management and their efficiency. Software problems. Start-up problems with ONLS implementation. Delays in including of newly registered drugs in Essential list of drugs. New (2008) management of pricing and reimbursement program expected to:
Secure the limits of rights and responsibilities of federal center and regional authorities concerning the management and control over ONLS implementation; Enhance the transparency and predictability of management decisions made; Increase the resource of control over state social assistance provided to the citizens.

After 2008 crisis Russian Federation government begun to implement new rules of pricing regulation and essential drug list formulation. The full implementation will be ended in 2010
10

Number Of Postponed Prescriptions (2006-2007 monthly comparison, 000)

1800 1600 1400 1200 1000 800 600 400 200 264 0
Jan Feb March Apr May June July Aug Sept Oct Nov Dec

1708 1577 1346 1224 991 915

2006 2007
579 470 417 382 256

541

310

297

224

393

417

485

492

482

556

713

802

11

Essential Drugs Program (DLO-ONLS) Results For The Period 2005-2007

160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 0 Supplied in the amount (mln. Rbl.) Prescriptions written out ('000) Prescriptions accepted Drugs sold (mln. Rbl.)

2005 2006 2007

12

Dynamics Of The Share Of The Postponed Prescriptions in 2007 (%)

2007 (%%)
16 14 12 10 8 5,9 6 3,7 4 2 0 Jan Feb March Apr May June July Aug Sept Oct Nov Dec 2,6 2,1 1,2 0,8 0,6 0,5 0,32 10,7 8,7

14,4

13

The Share Of Postponed Supply In Regions By The End Of 2006 & 2007
2,5 2,19 2

1,5 Dec.31, 2007 1,05 1 Dec.31, 2006

0,59 0,5 0,25 0,22 0 Center N-West South 0,39

0,55 0,29

0,61 0,5 0,41 0,23 0,46 0,35

0,62 0,32

Volga

Urals

Siberia

Far East

RF

14

Problems Of DLO-ONLS Implementation In The Beginning Of 2007

The main problem is financial deficit (debts to the suppliers for 2006); Poor management of drugs distribution that lead to;
Deficit of some drugs, Significant share of the postponed supply, Lowering of the stocks in the regions.

Inaccurate requests for drugs supply from regions and lack of the system of inventory management; Lack of the system of financial management and control on prescription writing out.

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Level Of Public Satisfaction With Drugs Supply

Federal District Satisfied Rather satisfied Rather not satisfied Not satisfied at all

Central Siberia Volga Far East North West South Urals

13% 5% 5% 0% 5% 0% 4%

22% 20% 11% 16% 9% 7% 2%

27% 35% 23% 20% 21% 28% 23%

37% 35% 60% 63% 63% 65% 72%

16

The Main Problems With DLO-ONLS Program In 2006 & 2007

Problem Always Rather often Rather rare Never No comment

2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 Long waiting time to get prescription written out Long waiting time to get free medicine in the pharmacy Absence of the free drug in the pharmacy when needed Needed drug is not in the List of subsidized medications 45 40 26 35 13 16 14 8 2 1

11

19

21

24

29

30

37

25

15

41

42

37

28

15

12

10

24

28

38

25

18

28

12

17

Evaluation Of DLO-ONLS Structural Units Activity In 2006-2007

Structural units Very bad Bad Neither good nor bad 200 6 33 29 200 7 31 30 Good Excellent

200 6 Participating pharmacies Doctors responsible for writing out prescriptions for free drugs Local authorities 4 5

200 7 15 9

200 6 9 9

200 7 17 15

200 6 34 36

200 7 23 30

200 6 18 22

200 7 14 15

17

42

21

20

36

28

17

18

Drop-Out From DLO-ONLS Program

2006 2006
Drop out 46% Participate 54% Drop out 67%

2008

Participate 33%

6,5 million participants

Reasons for drop-out:

2007
Drop out 50% Participate 50%

Absence of needed drugs in the List Inconvenient procedure of getting prescriptions Lack of drugs in pharmacies Receipt of monetary compensation is better than 19 additional drugs supply

Modernization Of DLO-ONLS Program

Since 2008 RF regions are given power to arrange auctions on state purchase of drugs for certain categories of citizens in the form of social services. Formation of special groups of patients needed high cost therapy Introduction of medical services standards allowing the better forecast of medical costs and optimize drugs provision. These measures should guarantee an access of RF citizens to quality medical help Improvement of monitoring and oversight activities

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Drugs Provision For Certain Groups Of Citizens In 2008

Provision of drugs is divided into two parts:
- Centralized purchasing - 7 nosologies (33 billion Ruble. annually) - Regional purchasing

Provision of drugs scheme is being changed:

- Powers to ensure drug provision are transferred to RF regions along with of the budget for the purpose (Federal Law dated October 18, 2007)

Purchasing (centralized as well as regional ones) are being made through auctions in accordance with Federal Law No 94-FZ. 21

Comparison Of DLO-ONLS Program In The Period Of 2005-06 & 2008

2005-2007 1. Personification of registry (targeted medical aid) 2008 1. Personification of registry (targeted medical aid), though for 7 expensive nosologies registration is made at the level of the Ministry of Health 2. INN single list approved by MOH order No 93 3. Price is determined on the basis of auctions (Federal Law dated July 21, 2005) 4. Purchasing are made at auctions: - at federal level for 7 expensive nosologies - at regional level for the rest of medications - drugs are selected by INN 5. Funds are transferred to RF regional budgets through Federal Fund of Obligatory Medical Insurance (OMS)
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2. INN single list approved by MOH order No 93 3. Single price level (price registration in accordance with Government decree No 619) 4. Purchasing of drugs at actions at federal level.

5. Financing through Federal Fund of Obligatory Medical Insurance (OMS)

Introduction Of Standards
600 standards are approved, including
300 of high technology medical aid 135 of specialized care 115 of outpatient care, including 7 expensive nosologies 26 of health resort assistance 45 of emergency medical care

Council for Standardization is functioning in MOH Standards for the following 7 expensive nosologies
Patients with transplanted organs and tissues Cystic fibrosis Patients with hereditary factor VIII and IX deficiency. Von Willebrand Disease Multiple sclerosis Gipopituitarizm
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Means Of Control Over DLOONLS Program Implementation

Monitoring
- Overall situation (as reported by territorial departments of Roszdravnadzor) - Drugs supply, prescriptions, distribution, stocks (as reported by regional medical authorities) - Publications in mass media - Telephone hot lines - Letters from the public

Audit of ONLS program implementation in regions Partnership with non-governmental organizations Surveys of consumer perception of ONLS program Control over drug supply for expensive oncology Control over targeted use of funds allocated to the regions
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Start-up Problems With DLO-ONLS Implementation In 2008

1. The main problem drugs deficit due to incorrect forecast of the needs, disruption of supply, violations in auction procedures. Inaccurate requests for drugs supply is still a current problem. Delays in documentation flow (drugs delivery and acceptance) Problems with auctions management and their efficiency. Software problems. Start-up problems with ONLS implementation.
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2. 3. 4. 5. 6.

New Format Of DLO-ONLS

The program will allow: Secure the limits of rights and responsibilities of federal center and regional authorities concerning the management and control over ONLS implementation Enhance the transparency and predictability of management decisions made Increase the resource of control over state social assistance provided to the citizens
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Number Of Postponed Prescriptions (000) In Federal Districts In 2007

as of February 11, 2008
1200 1026

1000

800

600 369

2007 2008

400

129

129

25

26 South

25 Volga

0 Center N-West

10 Urals

24

55

109

111

200

154

182 33 8 RF

Siberia Far East

27

DLO-ONLS program implementation

as of February 11, 2008 vs. 2007
14000

12912

12000
9948

10000
7687 7277

8000

6000

5225

5003

4982 3945

4000

3320 1946

2000
21

1374

0 Supply (million RBL) 2007 2008 Prescriptions ('000) 7 nosologies Provided (million RBL)

Fed Registry

28

Share of the postponed prescriptions (%) in federal districts

as of February 11, 2008 vs. 2007
18 16,55 16 14 12 10 8 6,53 6 4 2 0 Center N-West South Volga 2007 Urals 2008 Siberia Far East RF 3,06 3,57 2,99 7,97 7 4,92 6,68 6,6 4,16 10,91 11,29 11,95 17,78 16,82

29

How to enter into the pricing and reimbursement program?

6 steps procedure
1. 2. 3. 4. 5. 6. Registration of drug in Roszdravnadzor (Federal service on surveillance in healthcare and social development) Application of drug to the List of Essential Drugs The Government of Russian Federation Registration of price in the Federal Agency of tariffs Application of drug to The Standards of Treatment of The Ministry of Health and Social Development of the Russian Federation Participation in the auctions and tenders of federal, regional and municipal health authorities Marketing and promotion of drug benefits to health professionals

There is no standardized operational procedure for each step. Individual program to each drug should be created by the applicant drug manufacturer.
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General Mechanism and Principles of Essential Drugs List Formation in Russian Federation
GOVERNMENT OF RUSSIAN FEDERATION
Final approval of The List

The Ministry of Health and Social Development of the Russian Federation

Decision to include in The List

Federal Service on surveillance in healthcare and social development (Roszdravnadzor)

31

Expert organization. Recommends to include in The List.

General Mechanism & Principles of Price Registration

Federal Service on tariffs
Price negotiation and registration Authority.

Federal Service on surveillance in healthcare and social development (Roszdravnadzor)

Expert organization.

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Roszdravnadzors Plan To Improve Practice Of Pricing & Reimbursement*

First step A. Decision on the model B. Elaborating rules and law C. Information to professionals and consumers Third step A. Dissemination of the tested model all over Russian Federation B. Inclusion of socially vulnerable population Second step A. Pilot project in 7 representative regions of Russia B. Analysis and correction of pilot project outcomes Fourth step Inclusion of all population of Russia into the tested model

Model is not elaborated yet. Most of experts predict that mixture of governmental and privet insurance of drug supply and reimbursement will be tested.
* From http://www.remedium.ru/section/detail.php?ID=23959&phrase_id=1167288

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Thank You