Life Sciences Blog

Bulgaria's recent IRP change: A testament to the impracticality of seeking to reference discounted prices




In a comparatively unexpected move, Bulgaria's caretaker government has decided to introduce significant changes in the country's international reference pricing (IRP) system for setting pharmaceutical prices. Bulgaria applies IRP to set the prices of both originator drugs and generics. For reimbursable generics it also uses internal reference pricing and applies the lower of the prices yielded by the two different calculations.

The IRP change took me by surprise because a caretaker government, in power for a few short weeks, rarely undertakes such dramatic policy changes in a country's IRP system. Secondly, the IRP system in Bulgaria had already undergone significant changes relatively recently - in April 2013.

However, looking at what is changing in the Bulgarian IRP system following last week's decision of the caretaker government, the move does not appear so unusual any more. There are two main changes approved by the government: one to the country's basket of reference countries and one to the type of prices Bulgaria seeks to reference. The full text of the bill, in Bulgarian, is available here.

IRP basket is amended Prior to the change, Bulgaria had 17 countries in its IRP basket. Of these, 12 countries (Denmark, Estonia, Finland, France, Greece, Italy, Lithuania, Portugal, Romania, Slovakia, Slovenia, and Spain) formed the primary basket of countries. If prices were not available in these 12 countries, Bulgaria would reference prices in 5 additional countries (Belgium, the Czech Republic, Hungary, Latvia, and Poland).

With the current change, Denmark, Estonia and Finland have been moved from the primary basket to the additional basket of countries. Latvia has been moved from the additional countries to the primary countries to be referenced. Following the change, Bulgaria now has 10 countries in its primary basket of reference countries and 7 in its additional list of countries.

List prices to replace discounted prices In addition to re-shuffling the list of reference countries, the government has also amended the wording of the law in relation to which prices should be referenced. The previous version of the IRP regulation stated that for drugs included in the Positive Drug List (PDL; i.e., reimbursable drugs) Bulgaria should be referencing prices negotiated between the pharmaceutical manufacturer and the public health insurance fund of the reference countries. Parts of the wording have now been removed in the new law so for PDL-listed drugs Bulgaria should be referencing prices of these drugs in the reference countries. In essence, with this change Bulgaria is abandoning its previous intent to reference against the discounted prices agreed for reimbursable drugs in the reference countries and would instead reference against the list prices of the respective medicines in the reference countries.

In addition to the two main changes above there are a few small changes in the new law - mainly focused on how quickly the country's pricing and reimbursement council (The National Council on Prices and Reimbursement of Pharmaceutical Products) would cap prices after it initiates a price re-referencing procedure.

Why the changes make sense All changes to the country's IRP system seem to have been driven by one motivation: to simplify the job of the Council in capping pharmaceutical prices based on IRP. After the April 2013 IRP regulation required the council to re-reference prices based on IRP every six month, keeping track of the various price changes in the reference countries, reviewing manufacturer price declarations and conducting mandatory re-referencing in cases when the manufacturer fails to submit a price declaration - and doing this for both originators and generics - must have been an onerous task indeed. The current changes in regulations comes a few months after another small change to IRP was introduced in Bulgaria - namely removing the requirement for the Council to re-reference prices every six months for on-patent drugs with no equivalents and for which no price change in the reference countries has occurred.

The current changes go a step further to remove requirements from the previous IRP law whose implementation would not have been practical. Moving Latvia to the primary list of countries makes sense, according to the government, because prices in Latvia tend to be available relatively early. Meanwhile, removing Denmark - which does bi-weekly price changes - from the primary list means that Bulgaria would rarely use Danish prices and would not be forced to re-reference prices every six months for all medicines because of Danish price changes. Meanwhile, the decision to stop requiring the Council to reference discounted prices is also reasonable: finding out and confirming discounted prices negotiated between the pharmaceutical companies and public payers in the reference countries has been difficult: such negotiated discounts remain confidential. List prices, on the other hand are available on services such as IHS PharmOnline International (POLI). It seems that Bulgarian authorities have finally reconciled themselves with the fact that price discounts manufacturers negotiate behind closed doors would have to remain confidential and that it is not in the interest of either the pharma company or the payer to disclose what discount was agreed. If the payer breaks confidentiality, next time a discount agreement may be next to impossible to reach.

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About The Author

Milena Izmirlieva is head of the Life Sciences research team at IHS Markit. Her areas of expertise include market access, pricing and reimbursement, HTA, generics and biosimilars, corporate strategies, and pharma promotion and advertising.