Lithuania's National Health Insurance Fund (VLK) spent 6.1% more year on year on drug reimbursement in 2013, but plans a reduction in expenditure this year, as well as a range of cost-containment measures affecting both innovative and generic drug producers.
IHS Global Insight perspective | |
Significance | The National Health Insurance Fund's (VLK) drug reimbursement budget for this year foresees a slight reduction in expenditure, after a 6.1% year-on-year increase in 2013, while the VLK plans a range of cost-containment measures affecting producers of generics and innovative drugs. |
Implications | Drug reimbursement spending has returned and even exceeded pre-crisis levels in Lithuania, while generics uptake remains modest compared with neighbouring Poland, for example. |
Outlook | The Lithuanian authorities are clearly not keen to see drug reimbursement rise much further beyond the levels reached before the economic crisis and have prepared a range of measures set to affect both the innovative and generics sectors this year. |
Drug reimbursement projected to fall in 2014
Lithuania's National Health Insurance Fund (VLK) has published the details of its drug reimbursement expenditure for 2013 and projected expenditure for this year, alongside other related information. The full document can be accessed here at the website of the Lithuanian Ministry of Health.
According to the VLK's data, the drug budget of the Mandatory Health Insurance Fund (PSDF) reached LTL700.9 million (USD275.7 million) in 2013, while the initial plan had been for expenditure of LTL670 million. Therefore, in 2013, drug reimbursement expenditure rose by 6.1% year on year (y/y), which continues an upward trend from 2012. However, the budget plan for this year foresees a slight reduction in spending, compared with 2013, to LTL690 million.
Meanwhile, the total patient co-payments for reimbursed drugs in 2013 declined slightly to LTL158.3 million from LTL158.8 million in 2012. However, there was a slight rise in the average price of a prescription, which went up by 4.9% y/y to LTL57.9.
PSDF drug reimbursement budget information, 2009–14 | ||||||
2009 | 2010 | 2011 | 2012 | 2013 | 2014 (plan) | |
PSDF reimbursement budget (LTL mil.) | 696.2 | 653.3 | 621.1 | 660.6 | 700.9 | 690.0 |
Patient co-payments (total, LTL mil.) | 213.8 | 165.4 | 151.7 | 158.8 | 158.3 | - |
Average prescription price (LTL) | 61.2 | 56.1 | 53.3 | 55.2 | 57.9 | - |
Source: VLK | ||||||
Generics remain far behind
Details have also been disclosed on the proportion of the PSDF drug budget paid out for originator and generic products. The VLK reports that patent-protected originator products accounted for 55% of the PSDF's budget in 2013, amounting to LTL359.7 million, which is an increase from LTL307.5 million in 2012. Off-patent originators comprised 22 % of expenditure, amounting to LTL139.3 million, down from LTL153.7 million in 2012, while generics took up 23%, amounting to LTL149.8 million, up from LTL147.7 million in 2012.
Centralised procurement yields average price cuts of 11% on high-cost drugs
The VLK has revealed information regarding the centralised procurement system, which applies to – among others – high-cost hospital drugs, including oncology drugs such as Erbitux (cetuximab; Merck Serono, Germany) and Avastin (bevacizumab; Roche, Switzerland). According to the VLK, negotiations between the drug pricing committee and manufacturers of high-cost, patent-protected medicines concerning the introduction of the centralised procurement system have resulted in an average price reduction of 11%. The VLK reports that the total budget set aside for these drugs in 2013 was LTL48.15 million and that savings of LTL7 million were made thanks to the negotiations. The discussions reportedly took place with eight manufacturers on the prices of 13 medicines.
Regulatory changes planned for innovative and generics sectors
The VLK has disclosed further details on planned regulatory changes in the coming year, which include setting the reimbursement prices twice per year. Furthermore, it reports that a decree on improving access to treatments is ready to be implemented and involves risk-sharing agreements with producers. The decree includes new models of contracts and states that the agreements will involve centrally procured medicines and treatments prescribed for rare diseases.
Finally, a number of cost-saving initiatives for off-patent and generic medicines are planned. These include obligatory price reductions for originator drugs that have lost patent protection but do not yet have generics competition. It is envisaged that if a mandatory price cut of 25% is imposed on these drugs, annual savings of LTL40 million could be made. Savings amounting to LTL30 million per year are expected from a measure to reduce the price of the first-to-market generic to a maximum of 50% of the price of the reference product and impose a minimum 15% price reduction for the second- and third-to-market generics. The creation of a system of therapeutic clusters is also planned, which the VLK estimates will secure savings of up to LTL80 million per year. The VLK reports that a draft ordinance on the formation of a therapeutic cluster containing the sartan group of cardiovascular drugs was prepared in November 2013, which, when implemented, the fund expects will save LTL5 million per annum. However, the draft ordinance has been sent back for reconsideration.
Outlook and implications
Drug reimbursement expenditure in Lithuania has more than recovered from the levels it reached after the economic crisis hit the country in 2009 and last year's reimbursement budget exceeded the previous high point attained in 2009. Although the planned drug reimbursement budget for this year constitutes a reduction compared with the actual amount spent in 2013, the fiscal plan for last year was considerably lower than the real expenditure. Therefore, it remains likely that the current budget will be increased, as it was last year.
However, considering the wide-ranging, cost-containment measures being planned, there is a chance that the planned budget may be realised. In the VLK's document, it provides details of the amount of rebates expected from producers of originators on their contracts under centralised procurement – new conditions for risk-sharing agreements are likely to be more favourable to the Lithuanian payor than to producers. Meanwhile, looking at the range of cost-containment measures planned for off-patent and generic products, the prospects for generics producers are equally challenging.