IHS Global Insight Perspective | |
Significance | Public healthcare budget targets for 2011 include a 2.9% maximum spending growth year-on-year (y/y), which should bring savings of 2.4 billion euro and reduce the healthcare deficit to 11.5 billion euro. |
Implications | Austerity measures adopted to attain this objective include pricing and reimbursement cuts, pro-generics measures, as well as an increased contribution on the turnover of pharmaceutical companies under the "clause de sauvegarde" system. |
Outlook | The PLFSS 2011 once again underlines the greater importance given to drugs of high ASMR (therapeutic improvement; Amélioration du Service Médical Rendu) and SMR (therapeutic value; Service Médical Rendu) value in the French model. While medicines of ASMR I, II and III are generally protected in terms of price cuts and mandatory rebate on volume, co-payments are set to remain inexistent (0%) or low (25%) for patients suffering from chronic and severe disease in the long term. |
In 2009 a total of 158.1 billion euro was spent on healthcare in France. Spending exceeded by 450 million euro the national target for expenditure in public healthcare (ONDAM) set by the parliament for 2009. Although healthcare expenditures in the outpatient sector were in keeping with the national target voted, spending in the hospital sector recorded an overrun of 550 million euro. Overall, public expenditure on healthcare and medicines increased by 3.1% year-on-year (y/y) in 2009, leading national health insurer CNAM to end 2009 with a record healthcare deficit of 10.6 billion euro.
The global deficit of the social security has been revised and is now expected to reach 22.8 billion euro in 2010, against the record 30.5 billion previously forecast. CNAM's anticipated healthcare deficit should be nearer to 12.1 billion euro, instead of the 13.1-billion-euro deficit formerly announced. The slight improvement is partly due to the job market recovery observed at the end of 2009 and in 2010.
Social Security Deficits, 2009-11 (Bil. Euro) | |||
2009 | 2010* | 2011** | |
Healthcare | -10.6 | -12.1 | -11.5 |
Work Accidents | -0.7 | -0.6 | -0.1 |
Families | -1.8 | -2.9 | -3.0 |
Pensions | -7.2 | -9.1 | -6.9 |
Total Social Security | -20.3 | -24.8 | -21.3 |
* Expected | |||
For the first time since 1997, the growth in public healthcare expenditure is likely to be in line with the national target set at 3% y/y, with total spending of 162.4 billion euro in 2010. By comparison, national targets have been overrun by on average 1.5 billion euro each year since 1997. Public healthcare budget targets for 2011 include an ONDAM target of 2.9% maximum spending growth y/y, which should bring savings of 2.4 billion euro compared to the underlying growth and reduce CNAM's anticipated deficit to 11.5 billion euro.
National Target for Expenditure in Public Healthcare (ONDAM) | ||
2010 | 2011 | |
Outpatient Sector | 75.2 | 77.3 |
Inpatient sector | 52.6 | 53.9 |
Other Spending in Healthcare Structures | 18.4 | 19.0 |
Elderly Care | 7.2 | 7.6 |
Disabled Care | 7.9 | 8.2 |
Other | 1.0 | 1.1 |
Total Healthcare Spending | 162.4 | 167.1 |
Source: PLFSS 2011 | ||
The ONDAM has been set at 167.1 billion euro for 2011; up 2.9% y/y. Several cost-containment measures were approved by parliament yesterday to retain growth under a 2.8% threshold in the outpatient sector. These efforts will concentrate on an increased take-up of generics and on pricing and reimbursement cuts.
Austerity Measures for 2011
The taux (rate) k, above which pharmaceutical companies will pay a contribution to the CNAM, will be decreased to 0.5% growth in sales of reimbursable drugs in 2011, down from 1% in 2010. Those exempt from the exceptional contribution include companies that have signed a convention with the French pricing committee (CEPS). Signing an agreement with the CEPS implies the obligation to apply price cuts and to pay rebate on sales volume. Paediatric drugs and medicines with favourable pharmacotherapeutic profiles (ASMR of I, II or III) are generally exempt from paying those forced rebates. The rate K was already decreased to 1% in 2010, down from 1.4% in 2009, to yield savings of 50 million euro. Similar savings are expected for 2011. Orphan drugs are excluded from the measure.
However, the major change of the LFSS 2011 will concern drugs of intermediate therapeutic value whose reimbursement rate will be decreased by five percentage points to 30%. This is expected to save 300 million euro to the CNAM. A similar reduction of five percentage points will be applied on the reimbursement of medical devices, except on those used for chronic diseases. In addition to reimbursement cuts, downward pressure on prices will be the rule again in 2011 as companies will have to accept further price cuts estimated at 500 million euro under conventional agreements with the CEPS. On the generic front, the maîtrise médicalisée scheme will be intensified, meaning that a higher take-up of generic prescribing will be encouraged. This is expected to bring savings of around 550 million euro.
Orphan drugs are currently exempt from certain taxes, including the contribution on turnover, the promotional tax and the tax on wholesalers’ revenue. This will change for those generating revenues above 20 million euro per year. The measure was adopted following a recommendation of the CEPS that estimated that the fiscal benefit was only justified for low-selling orphan drugs.
Outlook and Implications
The LFSS 2011 will require more contribution from the pharmaceutical industry at a time when the reduction of deficits appears to be the number one priority for the government within the Eurozone. Anticipated savings of 2.4 billion euro should contribute to a reduction in the healthcare deficit of up to 11.5 billion euro in 2011. Cost-containment measures will continue to target patented drugs, generics and medical devices during 2011, with total savings of 860 million euro anticipated from P&R cuts, pro-generics measures and increases in contribution.
Price cuts negotiated under conventional agreements with the CEPS will be lower than the 560-million-euro cut applied in 2010. The contribution required from companies that are not under conventional contract with the CEPS will, however, increase compared to 2010 as the lowering of the taux k under the clause de sauvegarde will mean that a higher number of pharma companies will contribute while a higher contribution will be paid by those already concerned. The system underlines the greater importance given to drugs of high ASMR value as companies with such drugs opting to sign agreements with the CEPS are both exempt from the so-called “clause de sauvegarde” and from rebates on volume. Meanwhile, the French model also privileges drugs of high therapeutic value (SMR), such as drugs indicated in the treatment of chronic diseases as reimbursement cuts tend to target only drugs of lower therapeutic value.