High-cost vs. low-cost drugs -- how are the decisions made in countries with nationalized medicine?

Factual Questions
1

I am discussing nationalized medicine with someone on another board who is a rheumatoid arthritis (RA) sufferer. We are both U.S. residents, for context.

He currently takes the RA drug Enbrel, which costs his insurance company $1,250 per course. He had previously taken Methotrexate, which cost about $25 per course. He quit taking Methotrexate because he suffered from several of that drug’s severe side effects. Enbrel gives him relief with none of Methotrexate’s side effects.

He is concerned that because Enbrel, in the current market, costs roughly 50 times what Methotrexate costs, any nationalized healthcare plan in the U.S. would make Enbrel unavailable to him solely due to price.

The general question is this: in nations such as the U.K., Canada, France, Sweden, the Netherlands, Australia, etc. … how would such a scenario play out? Patient X has RA, takes Methotrexate for a while. Methotrexate helps the RA, but also has severe side effects. Patient X’s doctor prescribes Enbrel. Does the typical nationalized health service summarily reject the use of the more-expensive medicine? Or would the patient likely have access to the Enbrel with few regulatory issues?

2

As far as Canada is concerned, our provincial health insurance plans generally do not pay for prescriptions. There may be some exceptions (for example, at one point in Ontario, senior citizens’ prescriptions were paid for by the provincial health insurance plan, though I don’t know if this is still the case), but for the majority of Canadians, the cost of a prescription is either paid for out of pocket or paid for by a private insurer’s supplementary plan usually offered through an employer. I don’t think we can help you with your question.

3

My sister takes Enbrel, after having passed through Vioxx and Indomethacin+Methotrexate. We are in Canada.

Access to medicine/health care is a provincial matter, so coverage actually varies depending on where you live. My understanding is that if a drug is not currently on the list of covered medications, the patient’s doctors can request an exemption and aquire the drug for their patient, but the government may decline to cover the cost of it and the patient would be on the hook for the full cost. Provinces take forever to add drugs onto their list; they don’t want to spend money on expensive ones, and they want to be sure it’s worthwhile based on their own criteria. I think it often comes down to patients needing that drug, and needing it now, to get things moving, but I’m not sure. That said, there are a lot of drugs covered, so we aren’t being denied cutting-edge medicine in most cases. It just has to go through some bureaucratic BS first.

In Québec, Enbrel is on the List of Medications covered by the government, and I believe if my sister lived here, she would only have to pay a minimal amount for her prescription (or not at all). My understanding is that Prince Edward Island does not have Enbrel approved for ankylosing spondylitis (but have approved it for rheumatoid arthritis), and so my sister is covered through my father’s insurance plan while she’s a student (thanks to involvement by Wyeth/Amgen to get her covered). Once she graduates, we don’t know what will happen - I suppose with a history of coverage and successful treatment of her disease, the province could be convinced to take up the cost. I think part of the problem there is simply that no one has asked - there is currently exactly one other patient with AS on the Island, and that person is not using Enbrel.
ETA: As Spoons points out, drug payment is actually not generally covered by the provinces, but in Québec at least it is compulsory to have a drug payment plan either through private insurance or through the public one if unemployed/retired/whatever. I’ve based my post on my understanding of whether Québec would pay if my sister were on the public plan… I actually think she’s been on my father’s insurance the whole time.

4

Nationalized health care systems tend to have monopsony power over buying drugs and other health care items, which gives it a lot of negotiating power over what the things it buys cost. This is especially true with drugs, since while they have high fixed cost in creating and testing the drug, the production cost of most drugs is pretty trivial - that’s why Walmart can offer many generic drugs for $4 a month. That give said countries a lot of leeway in fixing the price of drugs, especially since they can threaten to revoke patents and let other companies make the drug if they need too.

5

Arrghh… the more I think of this, the more confused I am and the more confusing I’m making it.

When I mean that a province would take up the cost, I mean that they would negotiate a price with the manufacturer the way they do for all the drugs here (that’s why they are cheaper - the governments set the price).

So instead of essentially buying at full cost if it’s not on the list ($25 000 a year for Enbrel), having it on the list would lower the cost to whatever the province says they’ll pay - say $11 000 a year (I’ve totaly made that number up). So the patient would either have to pay that cost, or have some form of insurance (private or public) to cover a percentage of it.

I am so not the right person to be explaining this. Sorry. But in your friend’s case, he could get Enbrel for most approved forms of arthritis in most provinces (except possibly PEI!). I assume things would shake out similarly in the US on a state-by-state basis.

6

A big part of this pricing model, though, is the fact that the drugmaker has typically already recouped its development costs via higher pricing in the US, so it’s profitable to offer the drugs at marginal costs in other markets. If the US pricing model changes to something significantly lower, it’s entirely possible that pricing in other countries would have to rise, or else the company may leave the market. So it’s hard to judge from single-payer drug pricing in other countries what would happen to US drug prices if the US went single-payer, since it would likely affect the system in those other countries too.

7

Since your friend clearly suffers from side effects of the first drug, there would be no reason to expect that your friend would be denied access to a drug that works for them.

I’m not sure how you come to the conclusion that “any nationalized healthcare plan in the U.S. would make Enbrel unavailable to him solely due to price”.

8

In the UK the National Institute for Health and Clinical Excellence (NICE) evaluates medications and other interventions and makes recommendations based on “cost effectiveness”. This takes into account factors like effectiveness (whether symptom control, “cure rate” or extension of life), patient quality of life, side effects and of course cost.

Assuming a treatment is funded, individual doctors are expected to treat the patient appropriately, acting in the patient’s best interest, but without unnecessarily squandering resources. In the case of rheumatoid arthritis the NICE guidelines can be found here:

From a quick skim it seems to suggest the same treatment that you and your friend have received - try methotrexate first, but if it isn’t effective or the side effects are intolerable, move on to more expensive medications such as Embrel.
In theory this means that everyone in the country is entitled to the same treatment. Unfortunately it isn’t perfect. The actual funding for medications comes from Primary Care Trusts who do not have to abide by NICE guidelines. Some PCTs fund treatments not recommended by NICE under certain circumstances, others don’t fund all NICE recommended treatments. Guidance also takes time to research and prepare, so there is a gap between a medication coming onto the market and it being approved.

This has lead to much-publicised stories of dying cancer patients battling PCTs for drugs to extend their life. No system is perfect and it must be extremely difficult for those patients and their families to know there is something that could help them but has been deemed “too expensive”. However, no system is perfect and without unlimited funds decisions have to be made as to which treatments can be funded. I imagine there are patients in the US who spend their dying months fighting their insurer for treatments. And I know there are patients who are bankrupted by their medical bills and patients who go without treatment.

Private healthcare and insurance is available in the UK and I assume patients having private care can pay (or try to get their insurance to pay for) any treatment their doctor is willing to prescribe. Until recently there were rules preventing patients from mixing the two systems by “topping up” their care - only paying privately for treatments not available on the NHS. These rules have officially been relaxed, though I believe the process is still quite bureaucratic and difficult.

9

Here in the U.K. drugs are looked at on a local basis, but if there are issues, the National Institute for Clinical Excellence can get involved.

From their FAQ:

10

Beaten to the punch!

11

Just thought I’d mention, for those who might not know, if you get your doctor to write the prescription for 90 days instead of 30 days, Walmart charges $10.00, so you’d save #2.00. (Covers almost all, but not all the same prescriptions as the $4/month)

And now back to your thread

12

Here’s a story that took place in the good old USA with a private insurance company. The insurance company has a color and a religious symbol in its name.

The story is about a guy, let’s call him Bill. He noticed a visual field defect in his left eye, and tried to see an ophthalmologist. The insurance company said he needed to see his primary care physician first. The primary care guy couldn’t work him in until next Thursday. He almost made it, on Wednesday he completely lost the vision in his left eye.

The primary care physician diagnosed it as a vitreous hemorrhage and elected to monitor the eye on a weekly basis. Not really his fault, with the eye full of blood it was impossible to visualize the detached retina. By the time the doctor realized what it was, the retina was essentially dead.

Three surgeries to attempt to reattach were mostly unsuccessful. He still had what they call ambulatory vision. With the good eye closed he could not read any letters on the eye chart, or even see the eye chart, but he could make out the shape of furniture and avoid bumping into walls.

The one thing the surgery was successful at was in leaving him with a hell of a case of glaucoma. He hadn’t given up on the eye yet, and had an idea in the back of his head that some stem cell research might someday have them growing retinal tissue by the square meter, so he wanted to treat the glaucoma. He ended up on three separate prescriptions to put into his eye. They really stung too, but he was endeavoring to persevere.

Then the insurance company stopped paying for the prescriptions. It seems like the vision in the left eye wasn’t good enough to be worth saving. If he wanted to pay the $5000 a year the treatment cost, go for it, but from their point of view the eye was not worth saving. He argued that future developments might make it salvageable, but the insurance company refused.

Ah, but what about the pain? Early onset glaucoma is mostly painless, but when the pressure gets up into the forties and fifties it gets kind of sore. Oh, they said, they could perform a trabeculectomy. Without the drugs it wouldn’t save his optic nerve, but it would eliminate the discomfort.

So I don’t know how these decisions are made in a country with nationalized medicine, but I know how they’re made here.

13

The way it would work in Spain, for any medication bought using a Seguridad Social-issued prescription:
if the patient was an active person or a dependent of an active person, the active person would pay 60% of the government-accepted price for the medication. An active person is defined as someone who’s got an SS# (which you get with your first job, normally, I’m not going into fifth-corner situations here) and who is neither disabled nor retired.
If the patient is disabled or retired, then Seguridad Social covers the full cost of the medication.

If you have gotten the prescription from a “professional insurance group” (mutua laboral) then how much you pay will depend on the terms of the insurance (normally the same as for SS). If you get it from a private doctor or without a prescription, you pay 100%.

Doctors are instructed to prescribe in generic form if possible (“500mg ibuprofen”) rather than use brands; the protocols are also drawn with economy in mind (if there’s 5 possible tests for a condition, they’ll run the cheapest one first, then maybe another one for confirmation - which one is cheapest may depend on your location, for example whether a machine is available within your province or not). But once you get the scrip, the % you pay is the same.

I once worked for a big pharma company which was being sued by a well-known NPO for marketing practices which involved things like making a drug available only in India (for free, but it’s a place where most people who might have the condition the drug was for won’t ever get to a specialist, and it got the Indian generics industry off their back while allowing them to strut saying “look how saintly I am!”) and in the US (where the price they were charging was one that would give the Health Minister of any socialized-medicine country a case of the giggles strong enough to require a hospital stay).

14

Let me start by saying that Canada does not have nationalized health care. Let me repeat: Canada does not have nationalized health care. Whether we would better off if it were nationalized is a different question that I will not address here.

What we have is single payer health insurance. My family physician is my choice. But there is, to be sure, no deductible and no copay. At least in Quebec, the only plan I have any knowledge of. Each province runs its own system, although the federal government kicks in a subsidy. The same with hospitalization, no deductibel and no copay. In Quebec, there is a law that everyone must also have drug insurance. In this, private companies compete with the government plan. I preferred my employer’s insurance (which also complemented the provincial health plan by paying for alternate care (e.g. eyeglasses and physical therapy) and drugs. But after I turned 65, the drug insurance was an expensive extra premium and they clearly preferred that I join the provincial plan, which I did. It has both deductible and copay. Generally, they approve only the cheaper drugs, but if you can make a case that that is unsatisfactory, they will allow it. Maybe. One thing is that, unlike the US plan that must have been drafted by lobbyists for the drug companies, the province has negotiated substantially lower fees. My wife had to get a prescription for celebrex while we were in the states last fall and 30 pills cost $96. Here the province has negotiated a price of around $25. We pay less than $10.

15

Since I work with these issues for the Swedish government I think I can answer this one. I even happened to look at the cost of the various biological drugs for RA recently.

Sweden has value-based pricing of pharmaceuticals. This means that drugs are priced and reimbursed based on among other things cost-effectiveness. The other criteria are need and solidarity (basically disease severity) and the pricniple of human value (you cannot discriminate based on social status, race, religion etc).

Drug reimbursement is decided by a government agency on a national level (The Dental and Pharmaceutical Benefits Agency).

The cost-effectiveness criteria means that if a drug is more expensive than other treatment options it has to provide an improvement in health compared to the other option. In the case of Enbrel (or Remicade or Humira etc) it provides a large additional benefit, albeit at a very large cost (the yearly cost of using Enbrel is about 150 000 kronor or about €15 000 ) and methotrexate is quite cheap.

Enbrel and the other biological drugs are reimbursed for RA (and psoriasis as well). If the treating physician finds that the best option for the patient is Enbrel (for example if methotrexate is ineffective or give intolerable side effects) he or she can prescribe it to the patient. The patient will then get it reimbursed at the pharmacy. The Swedish reimbursement system is quite generous and the total copayment for all drugs for a patient will never exceed kronor 1800 (€180) per year.

16

Thanks for all the replies, everyone. I am learning a ton in this thread.

17

Germany doesn’t have nationalized health care (whatever that exactly is - it seems to be applied to many different systems), but a general health care system.

I don’t have personal experience with the drugs or illnesses you mentioned, but the general scenario of

Patient is prescribed drug X by doctor for his condition, drug X has side effects for this patient, doctor switches to drug Y

the price would not be the immediate question. The first question is “Is drug Y approved by the office for health (similar to what the FDA does, I assume - drugs have to be approved and tested)”. If yes, then go. The patient may have to pay the proscription fee of about 10 Euros or so, but that can be waived for very poor people (they apply to their Public health insurance company to get free status). Drug X might have been on the list (see below) and thus free of the prescription fee, but drug Y is not, but it’s the same fee regardless of the cost of the medication itself.

If Drug Y is experimental and thus not yet approved, things are different, of course.

In an effort to cut costs, and one of the many Health Systems reform, some years ago a list of some 1 000 common medications was drawn up, and the cheapest /generic types of these were put on a list for all doctors to prescribe first. If your medication is on that list, the prescription fee was dropped. This doesn’t mean that doctors can’t prescribe the other medications, they just need a good reason. Side effects - witnessed or suspected - are a good reason. But the doctors shouldn’t prescribe expensive medications over generic ones simply because the pharmacy salesman gave them a nice bribe/toy.
The effect of this on the pharma industry was to put all the prices for the same medication different brands at nominally the same, and start competing with the apothecaries by gross discount - if they buy 20 packages of Brand X, they get another 10 packs, but if they buy 25 packages of Brand Y, they get a 15% discount… making sure that once again it’s almost impossible to really compare prices.

18

An overview of the German health care (pdf, page 5) system (so you can see how close it is to that nationalized system you are asking about).

Oh, and can we please stop that myth that medications are cheaper elsewhere because the research is done in the US, and if the US stopped paying the high prices of the free market, prices would rise in other countries? There are several pharma companies with research (aside from the research done at Universities) in non-US countries like Europe, you know.

19

Here in Australia, we have this thing called the Pharmaceutical Benefits Scheme. It’s a program where the government subsidises the cost of (most) prescription drugs. As of 2009, the most you will pay for one course of a prescription drug is $AUD 32.90 (roughly $US 25). Just for interest’s sake:

(from the linked wikipedia article)

20

I agree that the location of the research is somewhat immaterial, but I disagree that the high prices paid in the US are immaterial. I also disagree that those high prices are “of the free market.” The high prices are due to the time-limited monopoly granted through the patent system, intentionally taking something other than a free market approach. The patent system and its accompanying monopolies are how the US incents companies to innovate. A free market would bring prices down and reduce the incentive to conduct research. It might be better to have the lower prices and provide more direct government incentives for research (or to accept a lower level of research), but that is a difficult policy question.

This is relevant to the OP because high drug prices reflect not only the cost of producing a specific drug but also a policy decision about how research is funded. These systems interact and changes in one area will affect the other.