Swedish Government and pharmaceutical industry agree on new pricing model for products that have been on the market for more than 15 years

06 February 2014

Johanna Elvander, Mathilda Nordmark

As a result of an agreement between the Swedish Government and the Swedish trade association for the researched-based pharmaceutical industry[1], LIF (Sw. Läkemedelsindustriföreningen), the price of pharmaceutical products that have firstly, not been subject to competition from generic products; and secondly, which are older than 15 years will be reduced by 7.5 percent as of 1 January 2014.

Background

Sweden has a system of free pricing when it comes to pharmaceutical products. The price offered, however, must be cost- effective compared to other treatments if the provider of the pharmaceutical product wants their product to be part of the Swedish pharmaceutical benefit system and included in the high-cost threshold system (Sw. högkostnadskyddet).

It is up to the TLV[2], a government agency (Sw. Tandvårds- och Läkemedelsförmånsverket) to decide whether a pharmaceutical product shall be part of the benefit system and, if so, whether the price offered for that pharmaceutical product is acceptable. If the pharmaceutical product is included in the high-cost threshold system, TLV will decide its purchase and selling price.

TLV is also in charge of the generic substitution system. The current price model allows for TLV to reduce the price of an original pharmaceutical product by 65 percent if the level at which prices are currently set has been reduced by at least 70 percent as a result of the presence of competition (the "65-percent" rule). This creates a maximum price for pharmaceutical products included in the high-cost threshold system. 

A consequence of this price model used today is that the price of original pharmaceutical products, which are part of the high-cost threshold system and are not, for any reason, subject to competition from generic products, remains at a high level.

In June 2011 a commission of inquiry was appointed with the mandate to carry out an overview of certain issues regarding, inter alia, pricing of original pharmaceuticals that are not subject to competition from generic products. The task was to find a sustainable pricing model taking into account the interests of both patients and industry. The committee published their results in 2012, the outcome of which was the suggestion that an international reference pricing model be introduced to complement the current value based model currently employed.

In response to this suggestion, an alternative model for reaching the same result was presented which was agreed between the Swedish Government and LIF on 5 September 2013. This model will cover all pharmaceuticals that have been accepted for high-cost thresholds but lack competition from generic drugs. The price of such pharmaceuticals will be reduced by 7.5 percent (a straight percentage reduction in price) 15 years after receipt of market authorisation, provided they have not been given a maximum price based on the "65-percent" rule described above. The aim of this model is to achieve the same proposed goals as would have been reached by introducing the new pricing model suggested by the commission of inquiry.

TLV has been assigned to monitor and evaluate the effects of the new pricing model, and has also been made responsible for ensuring that the industry reduces their prices as agreed. If the goals are not met, the Swedish Government will reconsider the matter.

The agreement will be implemented in two stages. As of 1 January 2014, the price reduction will be implemented by an undertaking from the innovative pharmaceutical industry. As of 1 January 2015, price adjustments will be implemented continuously and annually, based on changes in TLV's regulations.



[1] This is a trade association with about 80 members and associate companies who represent approximately 80 percent of the total sales of pharmaceuticals in Sweden.

[2] The Dental and Pharmaceutical Benefits Agency

This article is part of the International Life Sciences Update for February 2014

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