Sascha G. Wolf, Introduction in:

Sascha G. Wolf

Pharmaceutical Expenditure in Germany, page 15 - 16

Future Development, Political Influence and Economic Impact

1. Edition 2009, ISBN print: 978-3-8329-4164-2, ISBN online: 978-3-8452-2005-5

Series: Neue Studien zur Politischen Ökonomie, vol. 6

Bibliographic information
15 1. Introduction The German Statutory Health Insurance System (SHI) has been characterised by disproportionately high cost increases for pharmaceuticals in the last three decades. German governments have reacted to these increases by attempts to limit expenditure and to ensure contribution rate stability. Thus several health care reform acts have targeted the pharmaceutical sector. But so far the gradually established extensive regulatory framework, which in? uences almost all parts of drug provisions, has failed to stop the expansion of disbursements (see e.g. Schreyögg et al. 2004). Scienti? c literature ascribes the strong expenditure growth in pharmaceuticals to a large variety of factors. Two lines of arguments are especially prominent: on the one hand it is assumed that the two most important cost driving factors, population ageing and medical technological progress, are exogenous and thus rising expenditure is inevitable (e.g. Postler 2003). On the other hand it is argued that the complexity of the legislative procedure and the involvement of many different competing interest groups into the political negotiation and decision process prevent structural reform acts and the introduction of effective control instruments (an overview gives Blankart and Wolf 2005). Both of these approaches, however, have not been suf? ciently examined. Neither the in? uence of the ageing demographics nor of the technological progress on drug costs have been intensively researched; and there exist few empirical surveys which consider the complex set of interests in the decision-making process of the health care reform acts. Indeed, it must be recognised that there has been little intensive research done on the pharmaceutical sector of the SHI, although drug costs development has been a major concern for policy makers for many years. Most ? ndings stem from studies which refer to the total health care system. But due to strong distinctions between the different types of health care services, it is dif? cult to derive consolidated ? ndings from the analysis of total health care to drug provision. This work tries to ? ll this gap in scienti? c literature. It deals with the pharmaceutical sector of the SHI exclusively, focusing in particular on the development of drug expenditure. It is a three step approach. In each step we try to ? nd an answer to one of the most important questions in health economics and health politics respectively: How will drug expenditure develop in the future in the face of an ageing population? Why has politics continuously failed to limit cost increases in the past? How can the regulatory system be modi? ed to reach cost containment without endangering medical services? The work is, accordingly, structured around three main chapters: By delivering an outlook until the year 2050, chapter 2 tries to answer the ? rst question, i.e. how will the SHI’s drug expenditure develop in future. Forecasting health care expenditure is al- 16 ways highly precarious because the results profoundly depend on the assumptions of the impact of age on usage of health care services. The analysis in this chapter is based on the plausible assumption that the age-dependency of drug consumption is contingent on the according diseases which the respective drug is used for. Thus we assume that the ageing population does not affect all drugs in the same way. By means of principal components and cluster analysis we will see that it is possible to compose groups of pharmaceuticals whose members are characterised by similar attributes. There exists groups of medicaments which are mainly prescribed for typical “old-age diseases” and others which are usually needed independent of age. By considering the different developments in these groups, future pharmaceutical disbursements of the SHI will be predicted. In doing so, we will derive several indicators which show the impact of the ageing demographics and technological progress on the development of drug expenditure. Chapter 3 addresses the persistent inability of German governments to contain disproportional cost increases for pharmaceuticals in the SHI. Scienti? c literature usually attributes this incapability to the complex political negotiations and decisionmaking processes that prevent effective reforms. However, this view ignores politicians’ pursuit of self-oriented interests that do not necessarily coincide with the declared goal of cost-containment. According to public choice theory, we suppose that politicians use health politics to achieve sel? sh interests and, consequently, that political decisions which concern medical provision are affected by federal elections. To check this hypothesis, we test two econometric models: an ordinary least squares regression in ? rst differences and an error correction model. Subsequently, empirical observations will be presented which af? rm our econometric ? ndings. Based on these results, a new perspective is offered: regardless of exogenous cost-driving variables such as the ageing population and medical technological progress, the development of drug expenditure cannot be explained without considering the interests of policy makers. Chapter 4 deals with the pharmaceutical regulatory system of the SHI. The costdriving concurrence of the supply-side price setting power and a price-inelastic demand has provoked policy makers in Germany to establish a complex regulatory framework. With the objective to reduce moral hazard effects and to enhance generic competition, reference pricing, the most important price-control instrument in the SHI, was introduced in 1989. The main purpose of this chapter is to compare reference pricing with another new control instrument which has attracted attention in the last years: Medical Savings Accounts. We use a vertical product differentiation model with two ? rms, one brand-name drug producer whose patent has already expired and one generic competitor, to analyse the in? uence of both instruments on competition and price-setting strategies of pharmaceutical manufacturers. Chapter 5 summarizes the results and provides concluding comments.

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Der Arzneimittelsektor der Gesetzlichen Krankenversicherung stand wiederholt im Fokus zahlreicher Gesundheitsreformen. Dennoch ist es bislang nicht gelungen, den Trend steigender Ausgaben nachhaltig zu bremsen. Die vorliegende Untersuchung leistet einen Beitrag dazu, die Ursachen dieser Entwicklung zu erklären und Lösungsansätze aufzuzeigen. Mittels Hauptkomponenten- und Cluster-Analyse wurden Gruppen von Arzneimitteln mit vergleichbaren Konsumeigenschaften gebildet. Jede Gruppe wurde auf den Einfluss der Altersabhängigkeit und des technologischen Fortschritts hin analysiert. Aufbauend auf diesen Ergebnissen wurde eine Prognose der zukünftigen Ausgabenentwicklung bis zum Jahr 2050 erstellt. Obwohl die Hauptkostenfaktoren exogen sind, steht der Gesetzgeber dem vorhergesagten ansteigenden Kostenpfad nicht hilflos gegenüber. Im Gegenteil: Anhand ökonometrischer Tests wird gezeigt, dass die Gesundheitspolitik in der Vergangenheit durch wahl- und klientelorientierte Interessendurchsetzung geprägt war. Mehr Effizienz in der Arzneimittelversorgung könnte durch die Einführung individueller Gesundheitssparkonten erzielt werden. Dies bestätigen die Resultate eines vertikal differenzierten Wettbewerbsmodells.