The preference policy for generics in the Netherlands- preferred by whom, Focus Reports
Release Date: 2010-12-10
Since 2007, health insurance companies in the Netherlands have operated under a preference policy system for generic pharmaceuticals. The preference policy – part of a series of reforms following the privatization of health insurance in 2006 – was devised with the intent to control costs by creating a system of managed competition amongst insurance providers. With competition firmly established and generics prices driven significantly down, concern amongst generics companies has now shifted to security of supply issues that the policy has created which threaten the long-term sustainability of the health system.The concept of the preference policy is quite simple: private health insurers negotiate directly with pharmaceutical companies on the price of generic drugs that have the same composition or active substance. In practice, only the cheapest medicine within the same category will be reimbursed – the so-called “preferred drug” – creating a pressure that pushes prices down to their lowest levels. Insurance companies are able to achieve significant price discounts and stimulate competition in the generics market.
For obvious financial reasons, patients are strongly incentivized to purchase preferred drugs as they are reimbursed on medical expenses. This policy has received great support from patients with chronic illnesses, since they are now having a long-term access to the affordable drugs.
However, the downsides for patients for whom the preferred drug does not work are either higher co-payments or having to resort to more expensive branded alternatives.
From the supplier’s perspective, generics producers have found themselves in strong competition for health insurance contracts in order to be the “preferred” supplier. With the list of preferred drugs being renewed every 4-6 months, missing a contract implies a considerable loss of business for the producers.
A cornerstone of this health reform is that insurers are no longer playing a passive role. Instead, they negotiate on behalf of the patients on the quality and costs of health care.
In an October interview with Focus Reports, Drs. P.F. Bongers, chairman of Bogin, the leading association for generics companies in the Netherlands, explained the negative side effects of preference policy reform. Of top concern is logistics management that hinders the supply of drugs and the quality of the generics available due to a greater willingness to slash inventories at fire-sale prices for non-preferred products.
With regards to inventory management, he added, “In one month you might lose sales either because you have excess stocks in your warehouse when you are out of the system (not in the list of the preferred drugs), or you do not have enough stock in your warehouse when you happened to be in the system. Logistically, it is not a good system if you have to stock up in one month to meet increased demand.” Concerning for Bongers is the detrimental effect that the uncertainty of supply will have on patients – if the medicine providers cannot supply market demand, patients will suffer.
With such a strong focus on low-costs in order to win preference, Marcel Gerritsen, director of Memidis, a local Dutch company specializing in women’s health products, went so far as to describe a “war in the generics industry.” Kalman Petro, Benelux managing director of generics giant Actavis, explained to Focus Reports that this “war” has created tremendous pressure on the entire medical system. The health insurers are misusing the initial goodwill of the preference policy as a tool to tackle the rising prices on medicine, in their own interest. Cost-containment mentalities of insurance companies are now dictating the rules on the market. While previously the power was in the hands of wholesalers and producers, today the health insurance companies have the dominant position at the negotiation table.
When asked what the future generics market will look like, Petro believes that changes in the preference policy are necessary in order to ensure the long-term sustainability of quality generics. “Generics companies can produce whatever we want, but if patient safety is compromised, then we have achieved nothing. We must make sure that patient safety remains the most important priority. We are happy to talk about competitive prices – that is fine, it is the nature of the industry, and we are used to it. But there comes a certain point where we can no longer drive prices further down.”
With the preference policy, health insurance companies, a previously minor stakeholder within the Dutch pharmaceutical landscape, have now assumed a much more preponderant voice. Whether the existing players like it or not, the insurers are here to stay, and open, transparent dialogue is the only solution to sustaining quality healthcare provision.
| Type: | NORMAL |
| Company: | Focus Reports |
| Country: | 瑞士 |