The Brazilian health ministry has announced a set of measures for the adjustment and regulation of the pharmaceutical market, including a new methodology for price adjustment.
IHS Life Sciences perspective | |
Significance | Health minister Arthur Chioro and the National Health Surveillance Agency have announced a set of measures for the adjustment and regulation of the pharmaceutical market in Brazil, as well as actions to speed up the registration of "clone" medicines. |
Implications | The new methodology makes more accurate annual adjustment according to the market reality, giving transparency to the process and predictability to the sector. |
Outlook | The new methodology is expected to reduce the price adjustment percentage decreasing healthcare expenditure by approximately BRL100 million (USD35.3 million) annually. |
Brazilian health minister Arthur Chioro and the National Health Surveillance Agency (Anvisa) announced on 27 February a set of measures for the adjustment and regulation of the pharmaceutical market in the country, as well as actions to speed up the registration of "clone" medicines. According to Chioro, the new criteria are better tailored to the reality of the Brazilian pharmaceutical market and are designed to enhance competition.
New price-adjustment methodology
The new methodology is intended to make more accurate annual adjustments according to the market reality, giving transparency to the process and predictability to the sector. The changes in the methodology aim to keep the average percentage of adjustment below inflation, with a lower index than that calculated under the previous rule. Additionally, each of the factors will have a fixed date to be disclosed, giving greater transparency to the process. The new methodology is expected to reduce the price adjustment percentage, decreasing healthcare expenditure by approximately BRL100 million (USD35.3 million) per year.
According to Chioro, the three price adjustment categories – non-concentrated, moderately concentrated, and highly concentrated – are defined based on the competition in the private pharma market. Additionally, the new price-adjustment methodology will adopt the Herfindahl-Hirschman Index (HHI), an international model for measuring the individual market power of companies or economic groups. The adoption of the HHI will facilitate the expansion of the group authorised to make the lowest price adjustment. Furthermore, the new regulation will also consider the market as a whole, not only at the retailer level as in the previous methodology. Therefore, for the first time, medicines sales in hospitals and procurement will be included in this new price-adjustment methodology.
One of the main ideas behind the changes in the price-adjustment methodology is to reduce the list of medicinal products subject to greater price adjustment, aiming to lower the final price paid by patients out-of-pocket. Therefore, under the new methodology, only 21.57% of regulated drugs in the private market will have the biggest adjustment, which are the medicines with the highest competition in the market and tend to have lower prices. Meanwhile, 51.73% of the controlled drugs will have the lowest adjustment index applied, which will affect the group classified as highly concentrated market. The moderately concentrated markets account for 26.70% of the total, and will have a moderate adjustment.
Aiming to give greater transparency to the process, each of the factors that make up the formula, such as productivity (x), price adjustments related between sectors (y), and intra-sector (z), will have a date for publication by the inter-ministerial Pharmaceutical Price Regulation Board (CMED). The CMED is an inter-ministerial body that is in charge of annually setting the medicines price adjustment index based on technical criteria defined in the Federal Law 10,742 2003. Therefore, a detailed resolution will published by the CMED before the end of March applying the new formula to calculate the medicine price adjustment, the 2015 adjustment calculation, the inflation period (March 2014 to February 2015), industry productivity, cost variation of inputs, and competition within the sector itself.
Drug Market Tracking System
Together with the changes in the CMED price adjustment criteria, Chioro also announced the Drug Market Tracking System (Sammed), which will become effective for the pharmaceutical industry from September 2015. With Sammed in place, pharmaceutical companies should send their information every six months instead of once a year, aiming at better monitoring of the pharmaceutical market.
According to the new methodology, the x factor should be released in September, the y 30 days before the adjustment, and the z up to 60 days after the companies deliver their marketing reports with information on revenues and number of products sold.
This measure will also allow better estimates of the prices adopted in the private and public market, giving more precision in public policy development for the pharmaceutical industry. It will be possible, for example, to measure the impact and monitor trends faster and observe the pharmaceutical market behaviour and effects of the new price-adjustment methodology
"Clone" medicines
Clone medicines are products of the same production line that share the same matrix (active ingredients, concentration, route of administration, dosage, and therapeutic indication) of a drug already registered and marketed, of which price has already been set by the inter-ministerial Pharmaceutical Price Regulation Board. Therefore, there will be a simplification of price analysis for drugs with the same matrix production to encourage companies to adopt simplified registration.
Currently, the pharmaceutical industry must have a price support guarantee already practiced in the market if it wants to register a clone. The registration process for this type of product by the National Health Surveillance Agency (Anvisa) is to be more streamlined and its expansion will facilitate the reduction of about 25% in the post-registration queue.
Outlook and implications
The announcement of a new methodology adopted by the MoH for the annual price-adjustment is a measure that the industry was waiting for as the previous methodology has been criticised for not recognising the changes in the market such as the therapeutic value of the medicine, exchange rate variation, and different treatment costs. Although the newly-published price methodology details are not exhaustive, drug companies will be relieved to finally have a measure of guidance that will allow them to formulate their strategies for the year ahead.
Once the CMED provides specific details on the 2015 adjustment calculation, inflation period, industry productivity, cost variation of inputs and competition, within the sector itself, the manufacturer's price and the maximum retail prices in price increase methodologies is part of CMED's regulatory activity.
The MoH's aim of reducing the price adjustment percentage mainly in the highly concentrated market is unlikely to be welcome by the pharma companies, which have launched innovative products in Brazil as the pharmaceutical sector is still growing strongly despite the inflation rates, and the country's pharma industry was expected to see a more considerable increase in the price adjustments for their pharmaceutical products offered in the private market.
Finally, the new drug Market Tracking System and the speeding up of registration of "clone" medicines are likely to have a positive impact on domestic and international producers of innovative medicines in the Brazilian market.
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