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Do pharmaceutical budgets deliver financial sustainability in healthcare? Evidence from Europe

Mackenzie Mills and Panos Kanavos

Health Policy, 2020, vol. 124, issue 3, 239-251

Abstract: Payers have increasingly implemented a variety cost-containment measures to promote sustainability in the pharmaceutical sector. This paper provides an assessment of a range of different applications of pharmaceutical budgets and assesses their impact in the context of health financing goals. A comprehensive literature review was carried out in order to identify evidence on the presence and impact of pharmaceutical budget-setting and capping mechanisms and an analytical framework was developed outlining relevant tradeoffs between macroeconomic and microeconomic efficiency. Evidence from the literature was validated by expert opinion through a round-table meeting followed by a series of semi-structured interviews. Five broad types of pharmaceutical budgets were identified as relevant : global, regional, disease-specific, product-specific, and prescribing. Fixed global budgets on total pharmaceutical expenditure are used primarily to promote cost-containment; however, their use often restricts flexibility in terms of total health budget allocation. Disease-specific budgets without consequences for exceeding the budget are unlikely to promote fiscal sustainability as these budgets are frequently exceeded. Product-specific budgets and prescribing budgets can play an important role in contributing to microeconomic efficiency; however, evidence on their impact is mixed. Overall, pharmaceutical budgets are present at both macroeconomic and microeconomic levels. While they are important tools for promoting fiscal sustainability, additional policy measures are needed to further enhance value for money in the pharmaceutical sector.

Keywords: Pharmaceutical spending; Budget setting; Resource allocation; Payback; Clawback; Pharmaceutical policy; Financial sustainability (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:hepoli:v:124:y:2020:i:3:p:239-251

DOI: 10.1016/j.healthpol.2019.12.002

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