Is There a Role for Pharmacoeconomics in Developing Countries?

COMMENTARY Pharmacoeconomics 2010; doi: 10.2165/11584890-000000000-00000 1170-7690/10/0000-0000/$49.95/0 ª 2010 Adis Data Information BV. All rights reserved. Is There a Role for Pharmacoeconomics in Developing Countries? Zaheer-Ud-Din Babar and Shane Scahill School of Pharmacy, Faculty of Medical and Health Sciences, University of Auckland, Auckland, New Zealand The special issue of PharmacoEconomics [1] pertaining to developing nations was a welcome move, with authors discussing various themes relating to pharmaceutical economics. The topics discussed included cost-effectiveness analyses and the future of health technology assessment (HTA) in healthcare decision making in the greater Asia region. However, papers in this special issue did not provide an answer to a fundamental question: why is pharmacoeconomics vital for developing countries? Pharmacoeconomics is a complex science and its practical utility depends on the context in which it is being applied. To appreciate the true value of this science as a decision-making tool, it is important to elaborate on the context within which healthcare decisions are being made. Furthermore, an understanding of the local health system is also required in order to establish whether complex economic techniques need to be applied and whether they are feasible and valuable tools for a particular jurisdiction. We argue that there is a need for a model that could aid in determining the perceived need and benefits of using pharmacoeconomics in formulary development in a given developing country. However, we do not present a full model; rather, we highlight some of the components that could be used to build such a model. Health and pharmaceutical indicators from international agencies, evidence-based pharmacy-system research as well as the literature concerning how people perceive pharmacoeconomics in developing countries could serve as these components. 1. The Use and Understanding of Pharmacoeconomics in Developing Countries The application of pharmacoeconomics for comparing pharmacy services and treatment options is an accepted and valuable tool. [2] However, the utility of pharmacoeconomics for selecting drugs for national medicines formularies depends on various factors, including health system design and performance, the pharmaceutical situation [3] and the country s expenditure on pharmaceuticals (evaluating the pharmaceutical situation of a country requires pharmaceutical sector assessment, including whether people have access to safe, effective and affordable essential medicines of acceptable quality). We argue that it may not be necessary for many low-income countries to use complex costutility or cost-effectiveness techniques for selecting drugs for a national formulary. A medicine pricing policy could work as a first-line tool. In the recent issue of PharmacoEconomics, Yang [4] outlined the growth of pharmacoeconomics in Asia; however, he did not differentiate between countries (while discussing the utility of pharmacoeconomics), nor did he allude to any country-specific cost-effectiveness threshold. Although South Korea, Taiwan, the Philippines, Thailand and Malaysia are at different levels of health system development, Yang [4] did not take this into account and used a generic statement that, in all these countries pharmacoeconomics

2 Babar & Scahill has been or will be increasingly used. Although this may be the case in Taiwan and South Korea, for the Philippines, Malaysia and Thailand, the use of the simpler WHO medicines policy framework, [5] rational pricing policies and the use of generic medicines could be more appropriate as first-line strategies. The need for a careful approach in applying pharmacoeconomics has also recently been suggested by Oortwijn et al., [6] who noted that HTA is developing with uneven speed in middle-income countries. Based on the need to understand the context of individual health systems as they relate to the utility of pharmacoeconomics, we provide case study descriptions of three different country groupings. Criteria for the groupings are based on (a) the country s socioeconomic status; (b) recent pharmaceutical reforms; and (c) the advancement and maturity of health systems. 1.1 Group 1: South Korea and Taiwan BothSouthKoreaandTaiwanhavedeveloped regulatory structures regarding pharmaceuticals (table I). [12,13] In addition, pharmacy-system research is advancing and pharmaceutical reforms have recently taken place in these countries. [12,13] Pharmacy-system research encompasses research related to drug distribution, drug regulation, drug selection, procurement, pricing, generic medicines, and access and affordability of medicines. Pharmacysystem research can be integrated into healthsystem research and can be part of the national health policy of a country. [14] Some policy reforms have dealt with more complex issues, such as remuneration of pharmacists and the issue of dispensing separation; where the roles of pharmacists and doctors in prescribing are clearly differentiated. [12,13,15] The parameters on health system performance, income level, expenditure on pharmaceuticals and gross national income (see table I) indicate that both South Korea and Taiwan have relatively advanced pharmaceutical systems and may be ready to apply pharmacoeconomic models to help ensure rational medicine expenditures. That Taiwan has a Centre for Drug Evaluation (CDE) also supports the notion that this country has a relatively advanced pharmaceutical system. The CDE performs regulatory evaluations Table I. Socioeconomic and health indicators of developing countries and the utility of pharmacoeconomics for selecting drugs for reimbursement and essential medicines lists Country Gross national income ($US per capita) 2008 [7] Income level [8] Health system performance rank [8]a Health expenditure per capita ($US) 2007 [9] Total expenditure on pharmaceuticals (as % of total health expenditure) [8] Approximate utility of pharmacoeconomics Iran 3 540 2 96 253 12.6 Medium Indonesia 1 880 1 103 42 26.7 Low South Korea 21 530 2 51 1362 15.9 High Malaysia 7 250 2 89 307 11.2 Medium Pakistan 950 1 124 23 27.1 Low Philippines 1 890 2 113 63 43.5 Low Saudi Arabia 17 870 2 58 531 19.9 Medium Thailand 3 670 2 99 130 29.3 Low-medium Taiwan 22 900 (y 2005) [10] b b 1745 22.8 [11] High a Ranked out of 191 countries according to disability-adjusted life-expectancy. b Data for Taiwan are scarce, as Taiwan is not a member of many international agencies. 1 = low income level; 2 = middle income level; high = pharmaceutical systems are generally well established. Countries either have or are in the process of establishing economic evaluation authorities, using economic guidelines from developed countries. However, local health needs should be taken into account; low = pharmaceutical systems need restructuring and strengthening. The use of pharmacoeconomics could be low; medium = pharmaceutical systems and regulatory authorities are generally established, with few areas still needing improvement and strengthening. Pharmacoeconomics could be used in a few cases and for selected drugs.

Pharmacoeconomics in Developing Countries 3 of marketing application dossiers of new drugs and provides advice to the Taiwanese Department of Health. [6] Taiwan also explicitly evaluates evidence reports from the HTA agencies in the UK, Canada and Australia. [16] Furthermore, South Korea has a Health Insurance Review Agency (HIRA), which has developed pharmacoeconomic guidelines for pharmaceutical companies so that they can prepare economic data before submitting a drug application for reimbursement and pricing. [6] South Korea is also in the process of establishing a national agency along the lines of the UK National Institute for Health and Clinical Excellence (NICE). [17] However, Oortwijn et al. [6] have cautioned that establishing formal HTA agencies in middle-income countries is not the total solution and that complex local healthcare needs, service delivery arrangements and mechanisms available to implement guidance within the clinical community all need to be considered. 1.2 Group 2: Iran, Malaysia and Saudi Arabia According to the WHO, [8] the health systems in Saudi Arabia, Malaysia and Iran are considered satisfactory and established (albeit less than Group 1 see table I), although they still have some unresolved issues regarding access to medicines, affordability and medicine reimbursement. For example, in Malaysia, the prices of branded and generic drugs were found to be 16- and 6-fold higher than international reference prices (IRPs), respectively. [18] These median price ratios were derived from a standard methodology [19] developed by the WHO and Health Action International (HAI), which indicates whether prices are high or low in developing countries. If this ratio is <1 for public sector data (government hospitals, clinics, etc.) and <2 for private sector data (private pharmacies, medical stores), then the prices are considered reasonable. Iran has done well in promoting safe and effective use of medicines and has an effective medicines regulatory authority. [20-22] About 90% of the population has access to affordable medicines and a recent WHO/HAI study [23] suggested that government procurement medicine prices and patient prices for generic medicines were reasonable and that almost all surveyed medicines were affordable for workers on the minimum wage. Few originator brands are marketed; however, they are an average of 3- to 7-fold higher than the price of generic equivalents. Digoxin, metformin and carbamazepine were found to be 6- to 9-fold higher than the IRPs, indicating a need to reduce the prices of these medicines. These results clearly outline the need, particularly in Malaysia, for intervention. Iran, Malaysia and Saudi Arabia have all shown interest in pharmacoeconomics; [20,23-26] however, the data shown in table I and the evidence from WHO/HAI surveys [27] show that using HTA alone for all medicines as a blanket strategy will not solve the issue of cost containment. These countries could be potential candidates for applying mediumlevel use of pharmacoeconomics. By this we mean that countries could apply pharmacoeconomics to selected drugs (such as biotechnologies) together with other cost intervention strategies, including effective pricing policies. This argument is further supported by the lack of trained and experienced personnel to conduct, interpret and use HTA in developing countries, [6] and further strengthened by the way in which researchers perceive the term pharmacoeconomics. In Malaysia and Iran, a universally accepted definition of pharmacoeconomics is understood and used; [20,23,26] however, this is not the case for Saudi Arabia, where there is a relatively effective drug regulatory authority, [28] but there seems to be some discrepancy in understanding of the term pharmacoeconomics [25] (table II). Topics such as pharmaceutical system strengthening, pharmacoepidemiology, drug utilization and Ministry of Health Pricing Committee are covered by the pharmacoeconomics umbrella in Saudi Arabia. In Malaysia, pharmacoeconomics is not used to select drugs for inclusion on the essential drug lists; however, it is taught in undergraduate and post-graduate pharmacy programmes. [26] Iran has an acceptable level of pharmacy-system research, seems to have a good understanding of pharmacoeconomics and appears to use pharmacoeconomic principles in an appropriate fashion [20-23] (table II).

4 Babar & Scahill Table II. How do different countries perceive the term pharmacoeconomics? [20,21,25,29] Country Concepts regarding the term pharmacoeconomics Agreement of concepts with the standard definition of pharmacoeconomics a Pakistan Generation of local research data in priority areas Standard treatment guidelines and training Improving pharmacy and pharmacological education Development and strengthening of drug control organizations (district level) Need for evidence-based educational, managerial and regulatory interventions Low (discrepancies) Iran Saudi Arabia Health technology assessment Pricing New medicines Drug evaluation in hospitals Drug utilization review Ministry of Health Pricing Committee New guidelines for pharmacoeconomics and pricing High Medium (some discrepancies) a ISPOR defines pharmacoeconomics as the scientific discipline that evaluates the clinical, economic and humanistic aspects of pharmaceutical products, services, and programs, as well as other health care interventions to provide health care decision makers, providers and patients with valuable information for optimal outcomes and the allocation of health care resources. [30] ISPOR = International Society for Pharmacoeconomics and Outcome Research. 1.3 Group 3: Indonesia, Pakistan, Thailand and the Philippines Indonesia and Pakistan are considered lowincome countries [8] (United Nations [UN] income level 1), whilst Thailand and the Philippines are categorized as middle-income countries (UN level 2). [8] Health system performance in these four countries ranges from a rank of 99 to 124 of 191 countries, according to disability-adjusted life-expectancy (table I). These countries are less likely to benefit from applying pharmacoeconomic strategies than other countries, as their drug regulatory authorities need strengthening and other medicines policy interventions could more easily be employed in the initial stages. In Pakistan, a WHO/HAI pricing study [31] revealed that prices of branded drugs are an average of 2- and 3-fold higher than the IRP in the public and private sectors, respectively. As a result of non-availability of drugs at government hospitals, the people of Pakistan spend 77% of their healthcare budget buying medicines. [8] There are issues with availability, affordability and unethical medicine promotion. Understanding of the principles of pharmacoeconomics does not appear to be clear, with concepts such as standard treatment guidelines, and pharmacy and pharmacology education all referred to as pharmacoeconomics [29] (table II). Indonesia has similar problems: procurement prices paid by local government were 74% greater than IRPs for generic medicines. Patient prices were 2.4- and 2.8-fold greater than IRPs in the public and private sectors, respectively. [32] In Thailand, prices of public sector-procured generics were 1.46-fold higher than IRPs, while innovator brands were 3.3-fold higher. The prices patients pay in the private sector were 11.60- and 3.31-fold higher than IRPs for branded and generic drugs, respectively. [33] The results of this study highlight priority areas for action and a requirement to improve the drug pricing policies. [33] In the Philippines, a survey in 2005 using WHO/HAI methodology [34] found that prices of originator brand medicines sold from private retail outlets were an average of 15-fold greater than the IRP, while the lowest-cost generic equivalents were more than 6-fold greater than the IRP. The situation in public facilities was similar, with reports of originator brands and lowest-priced generic medicines being procured at 14- and 5-fold the IRP, respectively. [34] Given this situation, it would be more rational for the Philippines to apply other pricing strategies before utilizing pharmacoeconomics. Thailand appears to have the expertise and capacity to understand and apply pharmacoeconomic techniques. [35] The Philippines and Thailand both have HTA programmes that help guide and apply pharmacoeconomics. [6] However, additional benefit

Pharmacoeconomics in Developing Countries 5 could be gained from strengthening pharmacy systems and applying pharmacoeconomics for selected drugs. Medicine prices are very high in Thailand and the Philippines, and pricing-intervention strategies could improve the access to and affordability of medicines. In this context, Thailand also seems to be on the higher economic scale in this group and is in a better position to apply low- to mediumlevel use of pharmacoeconomics. 2. Moving Forward We argue that the use of pharmacoeconomic theory and modelling should not be hyped-up but should be realistic according to a country s health status, academic capacity and pharmaceutical situation. We demonstrate that, in many cases, the country s socioeconomic and health indicator status matches performance in the pharmaceutical sector. 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