Medicine Pricing Pressure Likely
BMI View: The Colombian innovative drug market is relatively liberalised compared with other countries, as the local authority does not directly interfere with drug pricing. Instead, an international reference system is employed to determine the maximum prices for drugs with no chemically identical competitors. Colombia's relatively advanced reimbursement system has offered better coverage for local citizens compared with other Latin American countries. However, the government will put further pressure on drug prices, especially on essential medicines, as local authorities try to increase domestic medicine access and control public healthcare spending. Volume sales will be boosted due to further drug price cuts and potentially provide higher commercial returns for drugmakers.
The issues of pricing and reimbursement play an important role in determining the likely commercial success of a pharmaceutical product in Colombia. Following marketing authorisation, the pharmaceutical industry must successfully navigate the national regulatory system to determine the price at which a product can be sold and whether or not it will be eligible for reimbursement by public or private health insurers. Colombia has direct control for certain drugs and a positive list of drugs for reimbursement defined in Manual of Essential Drugs & Therapeutics (Manual de Medicamentos Esenciales y Terapeutica).
Pricing Regulation Regime
The National Price Commission of Pharmaceuticals and Medical Devices (Comisión Nacional de Precios de Medicamentos y Dispositivos Médicos, CNPMDM) is the authority responsible for drug pricing. The CNPMDM forms part of the Ministry of Commerce, Industry & Tourism (MCIT). Pre-2006, Law 81 of 1998 classified all medicines in four pricing categories: direct control, regulated freedom, monitored freedom and freedom.
Based on study from the fourth quarter of 2004, Resolution No. 04/2006 has established a new technical group: drug prices were classified as red for those to be regulated, yellow for those to be monitored and green for those not to be monitored. Due to competition issues, prices for drugs classified as red would be the highest, while prices for drugs classified as green would be the lowest.
|Direct Control||Regulated Freedom||Monitored Freedom||Freedom||Total|
The National Commission on Pricing of Medications (NCPM), a special technical committee of the Commerce Ministry, sets the maximum public sale price of the Direct Control Regime medicines, which have no chemically identical competitor. The price takes into account the average price for the same medication in the three lowest priced reference countries: Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Peru and Venezuela. The new system of price controls, which covers the private and public sector markets, is based on independently collated local price data. Quarterly adjustments made according to the prevailing US dollar exchange rate with the Colombian peso.
Resolution No. 04/2006 eliminated the need for producers to report Average Wholesale Prices (PPD - Precios Promedio a Distribuidor) and Suggested Retail Prices (PSP - Precios Sugeridos al Publico). Instead, it replaced them with Minimum Unitary Prices (pum - Precios Unitarios Minimos) and Maximum Unitary Prices (PUM - Precios Unitarios Máximos). Implemented in 2002, PPD was the average price considering the four major distribution channels and PSP was used for medicines under the monitored or regulated free systems. Additionally, maximum retail prices (PMVP) were used for medicines under the direct control system. Based on prices reported by producers to CNPMDM in QIV 2004, wholesalers obtained a 37% discount at manufacturers' prices and applied a 25% profit margin in 2004. Also, retail prices were 38.8% cheaper than PMVP prices. The retail margin stood at 33% in 2004. In the institutional sector, price discounts at wholesale prices were even higher in 2004.
Colombia operates a two-part pricing system for public sector pharmaceuticals, one of which covers all government medicines and the other just those covered by the Institute of Social Security (ISS). However, PhRMA, which represents the interests of multinational pharmaceutical companies, has criticised the fact that the maximum reimbursement prices determined for the public health insurance system are often used across the board, which leads to low prices for a number of medicines.
Under Resolution No. 01/2012, published in September 2012, the CNPMDM added 70 medicines - including treatments for hypertension, heart failure, epilepsy, depression, acid reflux, Alzheimer's disease and arthritis - to the direct control system in the institutional sector, and fixed their maximum prices. Overall, the CNPMDM added 151 medicines to the direct control system between January and September 2012.
Around the same time, the CNPMDM decided that prices of drugs that require control and have an impact on SGSSS sustainability will be included in the direct control system. The CNPMDM will also fix the maximum retail price (Precio Máximo de Venta al Público, PMVP) to the institutional sector. The CNPMDM will continue to monitor prices in the institutional sector, and will be able to extend measures to the private retail sector, when it determines that it is necessary to guarantee the system's sustainability.
SISMED aims to optimise drug price information. It supports the drug regulation process, which is led by the CNPMDM. SISMED controls any price increases in the private pharmacy sector. Additionally, the Solidarity and Guarantee Fund (Fondo de Solidaridad y Garantía, FOSYGA) can consult reference prices to reimburse medicaments. SISMED's implementation has been gradual. The CNPMDM, the MSPS, the MCIT and pharmaceutical producers were the first entities involved. Wholesalers, EPS, Healthcare Providers (IPS - Instituciones Prestadoras de Servicios de Salud) and departmental/district health directorates followed.
There is a positive list for reimbursement, defined in the Manual of Essential Drugs & Therapeutics (Manual de Medicamentos Esenciales y Terapeutica). Drugs are listed by generic name and pharmacological presentation. The list, known as the Regimen de Libertad Vigilada, or Regulated Freedom Regime, covers all active ingredients designated as 'essential' under Resolution 1746 of November 1993. An 'essential' drug must be the most cost-effective drug to treat an illness, meeting pharmacological safety and efficacy requirements; provide a favourable answer to problems of morbidity/mortality within the community; and be economically viable.
There are two broad systems for reimbursement in Colombia: the subsidised scheme for the poor, and the contributory scheme. Drugs are provided free under the subsidised scheme, although the introduction of moderating fees is under consideration in an effort to contain the current abuse of the system. Under the contributory scheme, drugs are provided free for inpatients, providing the hospital has sufficient funds in its budget. EPS are granted a budget from FOSYGA, FOSYGA, together with co-payments and moderating fees, provide funding for social security healthcare coverage.
Drugs for outpatients are free in principle, though moderating fees are in place for excessive use of the system at above defined limits or for what is considered to be elective treatment. EPS are free to establish the limits for reimbursement within MSPS guidelines, but the frequency and amount of moderating fees must be published at least once per year in a national newspaper.
Under national guidelines, patient contributions to prescription drugs under the contributory scheme vary according to financial circumstances. For people in income groups one, two and three, the contribution is 10% of the total cost of the prescription, up to a maximum of 20% of the minimum legal monthly salary currently applicable. For people in income groups four, five and six, the contribution is 20% of the total cost of the prescription, up to a maximum of 40% of the minimum legal monthly salary.
A positive list for reimbursement is defined in the Manual of Essential Drugs and Therapeutics. Drugs are listed by generic name and pharmacological presentation. In addition, the MSPS, health departments, local directorates, EPS and IPS are allowed to design their own therapeutic guides to cover drug prescriptions, frequency of use of the service, and other such criteria.
Under normal circumstances, only drugs that fall into the categories below are free of charge or reimbursable (in the outpatient sector). Other drugs may be prescribed at the request of a patient, but these can only be covered under a complementary health plan.
Drugs for special programmes, which form part of the Basic Attention Plan (Plan de Atención Básica), are provided free to persons not affiliated to an EPS. The whole population are entitled to free vaccinations under the Extended Programme of Immunisation (PAI);
Drugs for the treatment of chronic illnesses, which are high-cost and not covered for general use, may be reimbursed by EPS in certain circumstances, through a fund or insurance mechanism. Drugs must be prescribed by authorised personnel and the patient must be eligible under the Integral Attention Guidelines (Guías de Atención Integral); and
Alternative essential drugs are included for patients who are hypersensitive or resistant to drugs on the basic list. Alternative essential drugs for reasons of risk, sanitation or convenience may be added. These drugs are subject to the approval of the National Health Social Security Council (CNSSS).
According to the WHO, the active ingredients on Colombia's essential drugs list represent about 40% of prescriptions written annually. Medicines not included on the list must be paid for in full. Prices of essential list drugs are allowed to increase only in line with the official level of inflation. As this is often lower than the real level of inflation, companies see their profit margins gradually reduced over time.
The MSPS has acknowledged that there might not be enough financial resources for FOSYGA to reimburse non-POS pharmaceutical drug expenditure to EPS. This amount was estimated at over COP3,000bn (US$1.4bn) in 2010, compared to initial estimates of between COP2,400bn (US$1.1bn) and COP2,500bn (US$1.2bn). ACEMI had valued it at COP2,800bn (US$1.3bn). This expenditure amounted to COP1,900bn (US$0.8bn) in 2009, comprising 2mn requests, compared to COP626.0bn (US$301.3mn) in 2007, comprising 835,000 requests.