The Estonian Health Insurance Fund, Haigekassa, increased its spending on drug reimbursement in 2013 by 4.7% y/y, while draft legal amendments have been presented calling for a separation between the pharmaceutical retail and wholesale segments.
IHS Life Sciences perspective | |
Significance | Estonia's Haigekassa spent 4.7% more on drug reimbursement in 2013 than in the previous year, according to its annual report. Meanwhile, draft reforms have been presented that would mean a separation of pharmaceutical wholesale and retail activities. |
Implications | Reimbursement spending has been rising steadily in Estonia and has almost doubled in the last eight years. The issue of strong links between major drug distribution groups and pharmacies has been on the agenda in Estonia for some time. |
Outlook | Drug reimbursement in Estonia can be expected to continue to grow steadily, with new innovative products being added to the reimbursement list at a steady rate, although the strong focus on INN prescription and storage of the cheapest products in particular drug groups in pharmacies continues to work in the opposite direction. Potential legal amendments separating wholesale and retail activities could prove restrictive for some operators by possibly opening up competition more generally, although, with the focus on bringing prices down, this could have negative consequences for the pharmaceutical industry as well. |
The Estonian Health Insurance Fund (Haigekassa) has recently approved its annual report for 2013. The report shows that in 2013, the fund's total spending was up 6.5% year on year (y/y), reaching a total of EUR830 million (USD1.141 billion). There was an increase of EUR31.1 million in the amount spent on specialist medical care, with the total reaching EUR482 million, while the amount spent on primary care is reported to have increased by just over EUR700,000, to EUR76 million.
Total drug reimbursement expenditure increased 4.7% y/y
The fund reports that in 2013, the proportion of the total budget spent on pharmaceuticals was 19%. Taking the various segments in which drug reimbursement spending is carried out, the total for the year is reported to have increased by 4.7% y/y, to EUR159.821 million. The growth is focused mainly in the pharmacy channel, with the value of reimbursement paid for medicines available via pharmacies up 4.5% y/y to EUR103.391 million, while there was also a dynamic increase of 8.9% y/y in the reimbursement of pharmaceuticals as part of separately listed health services. In the hospital sector, however, there was a reduction in the value of reimbursement paid out for medicines, of 1% y/y, which the Haigekassa explains is the result of the lower number of people in hospitals.
Volume of prescriptions up 2.5% y/y
There was a 2.5% y/y increase in the number of prescriptions issued to the account of the Haigekassa, while the average cost of one prescription is reported to have increased by 2.0% y/y.
Haigekassa drug reimbursement, 2013 | ||
2013 (EUR '000s) | % change y/y | |
Via pharmacies | 103,391 | 4.5 |
- Number of prescriptions | 7,625,135 | 2.5 |
- Average cost of prescriptions (euro) | 13.56 | 2.0 |
Hospital drugs | 16,483 | -1.3 |
Pharmaceuticals as part of separately listed health services | 39,760 | 8.9 |
Additional drug benefit | 187 | -55.6 |
TOTAL | 159,821 | 4.7 |
Source: Haigekassa | ||
INN prescriptions increase, co-payments fall
The Haigekassa notes that the number of prescriptions that now feature the international non-proprietary name (INN) reached 80% in the second half of 2013. Furthermore, it notes that in the last year, the proportion of the cost of reimbursed medicines paid by patients in the form of co-payments has fallen in the past four years by 20%.
Parliamentary committee backs proposal to separate retail from wholesale
Separately, the Social Affairs Committee of the Estonian Parliament has approved important draft legal changes that would separate the pharmaceutical retail and wholesale realms. Under the proposed changes, companies engaged in pharmaceutical wholesale activities would not be permitted to obtain a general pharmacy licence, in a bid to reduce the potential for excessive market concentration.
Under the amendment, the Estonian State Agency of Medicines (Ravimiamet) would have the power to request the national competition board to identify companies whose activities are connected through dominant influence and allow them to give such companies notice of a three-year period of transition in which they would be required to bring their activities in line with the regulations. The proposals also include plans to support the establishment of pharmacies in rural areas as well as simplify the process of opening pharmacies on Estonia's smaller islands. In addition, it would only be possible to open chain pharmacies in smaller towns and rural areas, if the amendments gain parliamentary approval. However, the committee stopped short of including restrictive rules on pharmacy ownership, stating that only dispensing chemists could be given a licence for operating general pharmacies, after strong protests from the competition board, among other organisations.
Outlook and implications
Looking at the figures for the Estonian pharmaceutical market in 2013 provided by Ravimiamet earlier in the year, the 4.7% y/y increase in drug reimbursement spending by the Haigekassa is close to the overall market growth of 4.2% y/y estimated by Ravimiamet (see Estonia: 19 March 2014: Estonian pharma market value grows 4.2% y/y to USD321 mil. in 2013). Considering the fact that the Haigekassa's reimbursement spending in 2005, in the year after joining the European Union, was just EUR55.716 million, and has therefore almost doubled in eight years, the trend in Estonia remains positive, although the rate of new additions to the drug reimbursement list is gradual and the entry of many products into the list can be quite delayed.
Prescription by INN by Estonian doctors is certain to have had some effect on keeping the growth in the cost of prescriptions low and reducing the proportion covered by patients. Considering that in the second half of 2013 it was reported that 80% of prescriptions are written with INNs, while in the first nine months of 2013 it was 75%, up from 66% in the equivalent period of 2012, there is a strong trend in the direction of INNs, which is working in the opposite direction regarding reimbursement costs.
The new proposals for amending the law on pharmaceutical retail and wholesale would, if they were to come into force, represent some restriction in the market, which could have an impact on pharmaceutical companies operating the country. However, it could also represent an opportunity, in terms of the potential for larger entities to be broken up, making the retail and wholesale segments of the market more competitive. This is an issue that has been under the spotlight in Estonia for some time (see Estonia: 21 September 2012: Estonian National Audit Office Report Highlights Inefficiencies of Drug P&R Regulation).The Estonian authorities are particularly focused on the fact that the market concentration purportedly maintains prices at an artificially high level.