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Belgium to Pilot Toned-Down Version of 'Kiwi Model' for Drug Reimbursement in 2007

Published: 6/16/2006
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The Belgian Ministry of Health is planning to introduce a softer version of the New Zealand reimbursement model, which will see generics and off-patent drugs compete in tenders to obtain the highest reimbursement rate in exchange for the lowest price.

Global Insight Perspective

Significance

Next year will see a tender to find the lowest price of simvastatin, which will be rewarded with a preferential 75% reimbursement rate.

Implications

The move is a dry run for the implementation of the ‘Kiwi model’ of drug reimbursement, which works exclusively through such tenders for all drug classes. In Belgium, however, patented pharmaceuticals will be exempted from the scheme.

Outlook

A saving of around 15 million euro is expected next year, and that will grow significantly once additional drugs are included in the scheme. The move is unpopular in Belgium's generics industry, and producers will fear heavy losses in turnover.

Ministry Hopes Kiwi Model Will Fly

From 1 January 2007, Belgium's newest weapon in the war on drug expenditure will be imported from New Zealand. A new system of drug reimbursement known as the 'Kiwi model' will be test-driven in the country next year, initially focusing on just a handful of active ingredients, the most prominent of which will be cholesterol treatment simvastatin. The Kiwi model operates by encouraging drug producers to underbid each other in proposing the lowest price for the same treatment. Whoever wins the tender is compensated for having the lowest price by becoming eligible for a preferential 75% reimbursement rate, while all other existing versions of the same drug will be reimbursed at just 50%.

However, following intense pressure from the pharmaceutical industry, the Belgian government has adopted a 'softly softly' approach in adopting the Kiwi model. The key difference will be that in Belgium, for now, the new system will not apply to patented drugs. The decision is something of a victory for the brand-name drug industry, but has put the country's generics producers in an awkward position; the manufacturers' association FeBelGen has warned that some generics could be forced to leave the Belgian market, in search of more business-friendly environments elsewhere. Meanwhile, the Belgian model also differs from its New Zealand counterpart in that it has reduced from three years to just 18 months the period of time the government must wait before carrying out a price tender on a drug that has already undergone the procedure.

The softer version of the Kiwi model will be initially applied to U.S. pharma Merck & Co's Zocor (simvastatin), which comes off-patent on 1 July 2006, and the nine generic versions of simvastatin that are currently available on the Belgian market. Two other, as-yet-unspecified drugs are also slated to participate in the scheme, triggering expected total savings of 15 million euro (US$18.9 million) over 2007 as a whole. If Belgium extends the Kiwi model to more drug classes the following year, these savings are expected to grow accordingly. Proton pump inhibitor (PPI) omeprazole, sold as Prilosec/Losec by U.K. drug-maker AstraZeneca, was also originally tabled for inclusion in next year's trial run, but the ministry has since abandoned the plan, given the significant across-the-board price drop already recorded for omeprazole since Prilosec went off-patent.

Outlook and Implications

While Belgium's brand-name pharmaceutical industry may be breathing a sigh of relief at not having to submit to further enforced price reductions, the exemption of patented drugs from the Kiwi model has not come cheaply. Health Minister Rudy Demotte is understood to have granted the industry's demand in exchange for applying a 23-million-euro increase in government clawbacks on pharmaceutical sales, and has also amended a law on lowering the prices of older off-patent drugs that will see the reductions applied more quickly and stringently.

The new reimbursement model also heralds a significant shift in sales expectations for the generics industry in Belgium. According to APM Health Europe, the Belgian generics market currently has annual turnover in the region of just 200 million euro, out of a total pharmaceutical market of some 2.7 billion euro. Savings of 15 million euro, which are subsequently expected to increase rapidly, will therefore act as a major hindrance to fostering growth in the generics industry, which - until now - the government has appeared keen to promote. However, it is premature at this stage to talk of a potential collapse of the generics industry. Belgium still has other policies in operation that specifically encourage the prescribing of generic drugs - in particular, via the low-cost prescribing scheme that has been in place since 1 April (see Belgium: 24 January 2006: 31.7% of Belgian Prescriptions Deemed 'Low Cost' in 2005). In spite of this, FeBelGen has come up with its own alternative model, suggesting that market conditions should be reviewed every six months, and that reimbursement levels should be calculated based on the average price of the three cheapest drugs in a therapeutic class.

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