Pharmaceuticals price regulation in Bulgaria – principles and latest changes

The price regulation of pharmaceuticals by definition aims to achieve a balance between, on one side, the public interest in effective and accessible healthcare, and on the other the private commercial interests of pharmaceutical companies.  And if innovations and the improved access to treatment of previously incurable conditions are accepted well, the ever-increasing prices of medicines, the revenues of which are the source of finance for innovations,are viewed not so favourably by patients and public funds alike.
 
In view of the pursued balance between the above conflicting interests and the choice between the above benefits/ disadvantages (low prices vs. innovation), the pharmaceuticals price regulation creates new or improves on the existing regulatory mechanisms.  Herein below we shall review, firstly, what are the existing price regulation mechanisms, applied hitherto in Bulgaria, and, secondly, what are the new measures, introduced with the latest changes to the Health Insurance Act and Regulation No 10 on the terms and conditions for reimbursement of medicinal products, medical devices and diet foods (Regulation No 10).
 
Existing Mechanisms
 
The price regulation mechanisms existing in Bulgaria may be grouped in two large categories:
 
(а)in the area of supply of pharmaceutical products: (i) price controls – by initial determination and subsequent periodic revision of the cap price (at the level of "producer’s price”, by comparison with the lowest recorded price of the same product/ active ingredient in other countries – "international price referencing”), ban on the increase of prices by more than the statistically reported inflation rate, and price freezes (predominantly for OTC-products); (ii) cost controls – until now solely by provision of voluntary discounts to the National HealthInsuranceFund (the NHIF), and now also by means of mandatory rebates provided in arrears, and/ or (iii) industry profits control – by the setting of maximum margins above the producer’s price for wholesale and retail, or of a fixed fee in retail/ pharmacies;
 
(b)in the area of demand: those measures aimed at: (i)doctors – by setting quotas (for referrals to specialised diagnostics or treatment) and of hospitals’ budgets, and limits on the term of validity of reimbursed prescriptions; (ii) patients – by cost-sharing mechanisms (such as patient’s fee of fixed amount – for an exam and/ or prescription, or co-payment of a proportion of medicines’ cost – for partially reimbursed products), and (iii)pharmacists – by fixing a dispensing fee per prescription (instead of the regulated capped margin per product) for 100%-reimbursed products, as well as (iv)financing/ reimbursement mechanisms– selective financing, by setting a Positive Drugs List (the PDL), and reference reimbursement price-setting, by setting a common reimbursement price (value) for a group of products, at the level of the lowest price in that group.
 
Newly-introduced mechanisms
 
Price controls, especially when competition on the market is feasible, may lead to artificial increased consumption – and costs, increased parallel export, withdrawal – or non-entry at all, of products from or in the market, and in the end of the day – deficits.  Rebate discounts, provided post factum, have the practical advantage to control medicinal expenditures without affecting the determined capped price, whereby – taking into account the internationally-applied systems of price referencing, the published capped price does not reflect for the rebate.
 
The newly-introduced mandatory rebates, in effect as of 14 August 2015, may be described with the following features, having in mind the categorisation inthe previous paragraph:

(a)They are aimed at the supply-side – due and payable by or in the name of the Marketing Authorization Holders (MAHs), and constitute a form of control on thecosts of the NHIF;
(b)They are applied to specified groups of products – new or without analogues (alone in the INN-cluster)in the PDL, including products for treatment of malignant diseases;
(c)Several forms of rebates are provided for: mandatory, to the benefit of the NHIF– individually negotiated, or by participation in an agreement for financial terms; and voluntary, to the benefit of patients – in the form of medicinal services, or discounts on the price of a pack;
(d)Individually negotiatedrebates constitute rebate discounts (pay-back to the NHIFof a specific proportion of the turnover in a given MAH’s products, for a defined period) and thoseby participation in an agreement – a return/ pay-back to the NHIFof sums exceeding a pre-defined threshold of the costs of the NHIF, for a defined period;
(e)Mandatory rebates are provided on the basis of an individual agreement, or by accession to a draft stability agreement.  I.e., to an extent the principle of free negotiation is adopted, although the MAH’s refusal to provide rebates has the grave consequence of termination of the NHIF reimbursement of the respective products.  The negotiation principle may be explained with the recent adoption of this measure and the lack of experience in the administration with its application;
(f)It is prohibited to disclose or publish the rate of agreed-upon rebates – in view of avoiding the international reference pricing by other countries to the price with included rebate in Bulgaria.
 
It deserves mentioning the fact that the draft National agreement on financial terms for foreseeability and stability of the budget of the NHIF and access to effective medication, proposed by the NHIF, was widely rejected by the MAHs and not enough applications for accession thereto were submitted.  The NHIF abandoned this procedure entirely because – as per the information announced by it, less than 20% of MAHs concerned expressed interest in providing this rebate. 
This fact may be explained also with the relative complexity of the proposed structure of the draft multilateral agreement.
 
Conclusion
 
The most common rate of public expenditures in the overall pharmaceuticals expenditure in the older EC Member-states is traditionally around 75% (i.e., EC-patients pay at their account up to 25% of their medication costs), whereas Bulgarianpatients pay at their account between 40% and50% of the price of their medications.  The new rebates, introduced with the most recent legislative changes, shall not lead to positive change in this ratio, because the new mandatory rebates are provided to the benefit of the NHIF and only the voluntary rebates/ discounts/ services provisionare provided to the benefit of thehealth-insured persons.
 
Damyan Ganchev is Senior Associate in Dimitrova & Partners Law Firm and coordinates the firm’s Competition and Pharmaceuticals practices, but has also extensive experience in regulated industries (telecoms, renewable energy, waste management, etc.) and corporate law.  Damyan advises clients on price regulation and reimbursement, advertising, compliance, etc.  He was involved in bringing and defending industry code complaints, pricing and reimbursement claims and penalties, as well as general commercial disputes, before both administrative and court authorities.  Damyan also contributes to the update of the Bulgarian Chapters of Country Analyses and Business & Investment Guides published by International Bureau of Fiscal Documentation.

Damyan can be contacted on +359 2 90 30 300 or by email at Damyan.Ganchev@dplawfirm.bg