Government Proposes Comprehensive Reform of Pharmaceutical Services to Cut Down on Medicine Costs

The Finnish Government intends to introduce a comprehensive legislative reform of pharmaceutical services to achieve savings in public medicine costs as part of the current Government Programme. The goal is to improve the cost-effectiveness of medical care while ensuring drug safety and the availability and accessibility of services. This is to be achieved by improving the cost-effectiveness of pharmaceutical care by reducing medicine prices and medical reimbursement expenses financed by the state and the insured.

The Government has proposed the following key changes:

In addition, the Government is simultaneously preparing a legislative proposal regarding the substitutability of biologics at pharmacies and the inclusion of biosimilars in the reference price system.

Under the current Finnish Decree on the Prescription of Medicinal Products, physicians already have an obligation to prescribe the most affordable biological medicinal product. The Government proposes for this obligation to be made stricter by incorporating the provision concerning this obligation into the Finnish Act on Electronic Prescriptions, which elevates it beyond the decree-level, and by making the wording of the provision more stringent.

Furthermore, the Government has proposed that if a physician wishes to deviate from the obligation to prescribe the most affordable biological medicinal product, they must state the reasons for the deviation in the prescription instead of in the patient records where this is currently stated. In addition, another proposed factor that is intended to increase the rate of prescription for the most affordable biologics is physicians’ self-supervision.

If the proposal passes into law, physicians will need to present a report on the biologics that they have prescribed to prove their compliance with the applicable law. The Social Insurance Institution of Finland (Kela) will be the competent supervisory authority and non-compliance with applicable law could lead to administrative sanctions.

While the current Finnish Medicines Act does not explicitly prohibit the substitution of inhalable medicinal products at pharmacies, the Finnish Medicines Agency (Fimea) has consistently interpreted the criteria for their substitutability as requiring that the inhalation devices for the administration of the medicinal product are considered identical. In order to enhance the cost-effectiveness of inhalable medicinal products, the Government proposes to amend the criteria for their substitutability.

Pursuant to the Government’s draft proposal, inhalable medicinal products could be accepted as substitutions for one another if their active ingredients and the quantities thereof are the same, if they are therapeutically equivalent, and if their inhalation devices are similar to the extent that they can be substituted for one another safely once the pharmacist has given appropriate instructions for the use of the new device. The Government has further proposed, for the sake of patient safety, to impose an explicit obligation on pharmacies to provide such instructions at the time of substitution.

Under the current Finnish Health Insurance Act, the existence of just one reimbursable generic or a parallel imported or parallel distributed product that has been placed on the market is sufficient for the formation of a reference price group. Consequently, the smallest possible reference price groups only have one product, which means that no price competition arises.

The Government has proposed to amend the basis on which reference price groups are formed with the explicit goal of promoting price competition. Pursuant to the Government’s draft proposal, at least two reimbursable medicinal products would have to be available on the market for a reference price group to be formed, and at least one of these reimbursable products would have to be a generic or a parallel imported or parallel distributed product.

After the transitional period, all reference price groups with only one product will cease to exist, and the reimbursement of and a reasonable wholesale price would need to be reconfirmed for the affected products.

The Decree on Medicine Tariffs determines the pharmacies’ gross margin for medicines. The Government is proposing a cut in pharmacies' gross margin for prescription medicines as a way to increase savings. The medicine tariff for prescription medicines is proposed to be amended so that pharmacies’ gross margin is cut by EUR 66.3 million, which would reduce the Government’s medicine reimbursement costs by EUR 35.6 million per year starting from 2023.

In 2020, the sale of medicinal products in Finland was EUR 3.5 billion, of which 76% came from sales through regular pharmacies (outpatient care) and 24% from sales through hospital pharmacies (patients in hospital care). In 2020, the Government paid altogether EUR 1.6 billion in medicine reimbursement costs.

The Government’s proposal notes that it is not possible to predict the exact economic implications of the proposal in terms of medicine reimbursement costs as several factors will play a role in how the planned cuts will be achieved. In total, the proposed changes are expected to reduce the Government’s medicine reimbursement costs by EUR 46 million per year from 2023 onwards and by EUR 60 million from 2024 onwards.

The proposed changes are expected to reduce medicine costs for consumers to some extent, depending on the medication they are on. For pharmacies, on the other hand, the promotion of the substitutability of inhalable medicinal products and the related consultation obligations will increase pharmacies’ workload and thus also their costs. Furthermore, the cuts in pharmacies’ gross margin for prescription medicines will have noticeable economic implications for pharmacies. On average, they are expected to cut the profits of the majority of pharmacies by about EUR 30,000–150,000 and therefore impact their profitability.

In terms of the pharmaceutical industry, the implications depend on the market environment. The proposals for increasing the rate of prescription for the most affordable biologics and promoting the substitutability of inhalable medicinal products are expected to increase price competition between pharmaceutical companies. The increase in price competition may have economic implications for pharmaceutical companies and may change the affected medicinal products’ market shares in Finland, but all in all, the proposal is expected to have minor implications for pharmaceutical companies.

The proposed changes are intended to enter into force on 1 January 2023.

If you have any questions about the reform, please contact the undersigned or your regular Borenius contact.