November 2015

Interview with Stefan Meierhans, Price Supervisor

In particular, the prices for generic medication in Switzerland are much too high. This is the opinion of the Price Supervisor. He states that false incentives relating to regulation are to blame. In the interview, Stefan Meierhans says that a fixed-fee model is required if prices are to fall.

Helsana: Mr Meierhans, why do we Swiss pay up to three times as much for a medication as our neighbours in Germany or France?

Stefan Meierhans: The prices for some medication, especially those for generic medication, are indeed much higher here than abroad. Our healthcare market is highly regulated. Although the many regulations are also in the patients' best interests, at the same they contain false incentives and misregulation.

You need to explain that to us in greater detail.

The healthcare market is a supplier's market. In other words: the medical practitioners and the industry have a great advantage in terms of knowledge in practically all areas. An example: if your doctor tells you that you need a particular medication to make you feel better, then you should believe them. After all, you cannot assess its effectiveness yourself. And that is precisely the reason why there is no healthy competition. There is also a lack of transparency where quality and costs are concerned, and unfortunately we have been dealt a poor hand for setting prices.

To what extent?

Our regulation system is outdated and offers false incentives. That is why some medication in Switzerland costs many times the price charged in neighbouring countries.

What are the false incentives?

The innovation surcharge, for example, should be abolished. New and better medication automatically displaces the old ones, so there is no need to grant it a price surcharge on top of that. Furthermore, every medication should in principle only be added to the list of medicines provisionally for two to three years; during this period, it has to prove itself both in terms of efficacy and cost-effectiveness. The false incentives undoubtedly also include the margins which accumulate until a medication gets from the manufacturer to the patient – they are clearly too high.

What bothers you about it?

The excessive percentage margins give an incentive to pharmacies and doctors who dispense medication themselves to prescribe medication which is too expensive. It goes without saying that doctors and pharmacists should have an incentive to purchase products at the lowest possible price, and there can also be no objection to discounts. However, these price advantages should be passed on to policyholders in some form or other.

Does the government actually need to set medication prices?

Yes, because compulsory health insurance – which specifically also covers prescribed medicinal products – is a social insurance. We are all jointly and severally liable and cannot simply switch course. This insurance is compulsory. However, the government should ensure through stable medication prices that the system is not abused and overstrained and also remains affordable in the future. After all, it has to guarantee the best result at the best possible price.

What influence do you have on prices in your capacity as the Price Supervisor?

The Federal Office of Public Health has to inform me when it sets medication prices. I can then make a recommendation. Under the law, I have an extensive right of recommendation. If we have different opinions, which does happen, the Federal Office of Public Health has to justify its decision publically. However, it would be going too far if I were consulted and asked to make a recommendation on every single medication. The Price Supervisory Authority therefore limits itself to making recommendations on fundamental system-related issues, such as setting the price and analysing the benefits of medication, and in this way influences the rules. These are then applied equally to every medication.

You resolutely demand that the price of generic medication be lowered. What is going wrong?

Unfortunately, we are still not using enough generic medication in Switzerland, and the ones we do buy are much too expensive. We pay up to five times as much as the Dutch for the highest-grossing generic medication! In Germany, one in three medications is already a generic medication. The corresponding proportion in Switzerland is a mere 17 percent. Firstly, this is due to the anti-generic medication regulation of prices in the patent-free sector, in which manufacturers of generic medication always have to offer all package sizes of the original with the same active ingredient and an expired patent. Moreover, they are confronted with the anti-competitive "distance rule", which leads to the generic medication prices being 10 to 60 percent below the prices of the associated originals. Secondly, the health insurers even have to pay for an expensive original whose patent has expired (minus the excess) if a much lower-priced generic medication exists. Finally, there are false sales incentives: pharmacists are to this day still given a percentage of the sales price. An example: with a shop price of 100 francs, the pharmacist gets a 12 percent margin on the sold medication. If the generic medication just costs 50 francs, the pharmacist only gets a six franc margin. No person with a commercial mindset would voluntary give up half of their profit!

What is your recipe for combating this deficiency?

Patients should receive optimal care. To that end, we need a system which is predictable, foreseeable and fair. This can be achieved by first giving free rein to market forces. Companies should be allowed to decide for themselves what price they would like to offer their medication at. However, only the price of a cheap product should be completely covered by the health insurance company. If the patient expressly requests the more expensive original preparation, they have to pay the difference in price themselves – unless switching to the generic medication with the same active ingredient is unjustifiable on medical grounds.

This fixed-fee model has already proven effective abroad.

In the area of expired patents in particular, this has resulted in the manufacturers' prices settling at around about this covered amount. After all, they want to secure their sales and therefore lower the prices of generic medication. We have calculated that we could save about 400 million francs per annum in Switzerland with a fixed-fee model. That equates to approximately 1.5 percent of premium volume.

In doing so, wouldn't we run the risk of opening the way to cheap medicine as claimed by the pharmaceutical industry?

No, we can sensibly adapt the fixed-fee model to Switzerland thanks to the fact that all medication for sale must be authorised by Swissmedic, which guarantees high quality. Unlike other countries which have introduced the fixed-fee model, we do not want the prices to change every few weeks, meaning that the patients affected often have to switch to a different medication. We envisage that prices would only adjusted four to six times a year.

What impact would the fixed-fee model have on patients who are dependent on the original preparation for medical reasons?

None. However, a rethink is required. That includes the service providers. Chronically ill patients in particular could be treated with generic medication right from the start. Big savings can be made in this area.

You also criticise the high barriers to getting medication authorised.

In Switzerland, we are prepared to pay for the luxury of our own authorisation authority, because our pharmaceutical industry wants it to be this way and hopes to thus obtain quicker authorisation of domestic products! I can only understand this to a certain extent. I ask myself if we really need it as there are viable alternatives.

Such as?

In the USA, for example, there are shorter authorisation processes for medication developed abroad. And in the EU, there are authorities which even authorise medication on a country-by-country basis. We could cooperate better with them. This would be a lot cheaper for us. Our authorisation practice is so full of obstacles that it leads to market foreclosure and pushes prices upwards. That is why I call for Swiss legislation to be brought into line with European authorisation practice. After all, Europe has similarly high quality standards as Switzerland does.

Interview: Guido Klaus, Andrea Hohendahl