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Sascha G. Wolf, Results in:

Sascha G. Wolf

Pharmaceutical Expenditure in Germany, page 39 - 42

Future Development, Political Influence and Economic Impact

1. Edition 2009, ISBN print: 978-3-8329-4164-2, ISBN online: 978-3-8452-2005-5 https://doi.org/10.5771/9783845220055

Series: Neue Studien zur Politischen Ökonomie, vol. 6

Bibliographic information
39 “demographic effect”, “total pro? le effect”, “common pro? le effect” and “relative pro- ? le effect”. The absolute increase in consumption is represented by the “total effect”. Applying the age-related expenditure pro? les from 2004 on the population projection of 2050 delivers the purely “demographic effect”, which would answers the question about the amount of expenditure in 2004 if we had the demographic structure of the projection year (so-called “status quo approach”). The difference between both total and demographic effect must be ascribed to alterations of the age-related pro? les: this is the “total pro? le effect”. The total pro? le effect consists of two components: ? rstly, alterations that do not affect the expenditure ratios between age groups (“common pro? le effect”), i.e. proportional cost increases independent on age; and secondly, diverse developments that result in modi? cations of the relative relationships between disbursements in the age groups (“relative pro? le effect”). Since standardisation of the pro? les eliminates the common pro? le effect, taking the difference between total effect and demographic effect of the standardised prognosis delivers the relative pro? le effect. 2.5.3. Results By the end of the projection period, drug expenditure will increase from around € 20.4 billion in 2004 up to € 35.7 billion in 2050 (table 2.4).22 Table 2.4: Expenditure Prognoses: Results (prices of the year 2000). Total expenditure in € Mio. Men Women Total Absolute values Changes in % Absolute values Changes in % Absolute values Changes in % 2004 8867.51 100 11530.98 100 20398.49 100 2010 10497.32 118.38 12241.93 106.16 22739.25 111.48 2030 15277.62 172.29 14438.43 125.21 29716.06 145.68 2050 19505.27 219.96 16208.19 140.56 35713.46 175.08 Per capita expenditure in €. Men Women Total Absolute values Changes in % Absolute values Changes in % Absolute values Changes in % 2004 269.26 100 308.75 100 290.25 100 2010 316.17 117.42 327.25 106 322.04 110.95 2030 471.83 175.23 393.76 127.53 430.37 148.28 2050 656.60 243.85 474.29 153.62 559.07 192.62 22 Expenditure increases slightly more than consumption (70 %). The consumption results are presented in table A.2.1 in the appendix. 40 Although the degree of future drug expenditure increase differs signi? cantly between men and women, in total they are both affected by the demographic effect at a comparably low extent (table 2.5).23 Table 2.5: Expenditure Prognoses: Indices in Percent. Men Women Men Women Total eff ect Demographic eff ect 2010 18.38 6.17 9.77 11.11 2030 72.29 25.21 25.19 15.22 2050 119.96 40.56 22.76 14.84 Total profi le eff ect Relative profi le eff ect 2010 8.61 -4.94 -1.04 -0.50 2030 47.10 10.00 -5.75 -2.52 2050 97.21 25.72 -1.82 -0.24 By 2050, the purely demographic effect results in an increase of 22.76 % of total drug expenditure for men and 14.84 % for women. Thus the demographic effect plays a minor role for future development, whereas most of the estimated increase is due to the total pro? le effect. In contrast, the relative pro? le effect as a part of the total pro? le effect is almost of no account for both cases. This means that the shape of the expenditure pro? les has become steeper, but the shape of the standardised expenditure pro- ? les has remained nearly constant. The results for total drug expenditure do not arise from homogeneous developments in the individual groups, but from a great variety of diverse peculiarities. Figure 2.9 shows the indices of our indication groups. For groups 1 to 3, no clear pattern in the indices is observable. It can only be stated that the demographic effect has negative impact on diseases which are age-independent. Anyway, these groups have only a minor impact on expenditure development because they represent less than 10 % of total drug expenditure. The other groups – accountable for more than 90 % of disbursements – obviously show a clear pattern: while the demographic effect declines from groups 4 to 6, the total pro? le effect increases. Therefore the more the drugs against chronic diseases are concerned, the less important the absolute number of older people for the expenditure development (demographic effect) is and the more important the in? uence of the total pro? le effect, which represents changes in the expenditure pro? les’ shape, is. Referring to the discussion between the medicalisation and the compression theses, what is most interesting is the relative pro? le effect, i.e. changes in the standardised pro? les. In groups 4 and 23 It might be argued that the stronger increase of male expenditure is due to a convergence process of men and women and both will develop analogically as soon as the same level is reached, but this is just an arbitrary supposition and has not been implemented into the prognosis. Thus the outlook overestimates rather than underestimates real development. 41 5, negative values of the relative pro? le effect speak in favour of the compression thesis, indicating that the proportion of expenditure between older and younger people has declined. Actually, in group 4 the compression impact even eliminates cost pressure arising from the purely demographic effect and results in decreasing total expenditure. Although group 5 reveals values on the relative pro? le effect which are comparable to group 4, cost enhancing developments in all age groups (common pro- ? le effect, i.e. the difference between total and relative pro? le effect) prevent expenditure from declining. For group 6, the relative pro? le effect shows signi? cant positive values. The combination of positive values for the relative pro? le effect and signi? cantly increasing total expenditure delivers indication for the medicalisation thesis. Figure 2.9: Expenditure Prognoses: Indices in Percent (2004 -2050). -200 -100 0 100 200 300 400 500 1 2 3 4 5 6 Total Effect -20 -10 0 10 20 30 40 1 2 3 4 5 6 Demographic Effect -200 -100 0 100 200 300 400 1 2 3 4 5 6 Group Total Profile Effect -20 -10 0 10 20 30 40 50 1 2 3 4 5 6 Group Relative Profile Effect Men Women Taken together, the prognoses’ outcomes coincide with our results from section 2.4. Additionally they clarify the overwhelming importance of chronic diseases for total expenditure development: the share of group 5 on total expenditure will increase from 42 % in 2004 to 51 % in 2050. The share of group 6’s expenditure even doubles and reaches 20 % in 2050. 42 2.6. Political Implications According to our estimates, the SHI’s pharmaceutical expenditure will increase by around 75 % by 2050. As measured by the long projection period of 46 years, this outlook displays a moderate development of the expenditure situation and refutes concerns of any “cost explosion“ in the pharmaceutical sector. Nevertheless, the burden for individuals will sharply increase since the forecasted cost increase will take place, although the absolute number of the SHI’s members will decline. Looking at the per capita expenditure, which will increase by more than 92 %, makes this fact more obvious. But expenditure on its own possesses limited explanatory power. As long as the SHI is ? nanced by the pay-as-you-go principle, the ageing population causes two problems for the ? nancial sustainability: apart from pressure on the expenditure side, the ageing population leads to changes in the contributors’ structure. Assuming that the quota of retired and employable SHI members changes proportionally to the development of the whole population, the ratio of retired SHI members to non-retired contributors will increase from 0.5 in 2004 to 0.86 in 2050. This will necessitate higher redistribution between younger and older people in the future. How much this development will affect the contribution rates is dif? cult to predict because a wider set of unveri? able assumptions must be made. In 2004 around 2.25 percentage points of the average SHI contribution rate was needed to ? nance pharmaceutical expenditure. This share could reach approximately 3.5 percentage points in 2050, i.e. an increase of more than 55 %.24 Even under the hypothesis that pharmaceutical consumption accelerates more than total health care expenditure, SHI contribution rates of more than 20 % must be expected. With the objective of reducing or at least stabilising non-wage labour costs and to guarantee the ? nancial sustainability of the pay-as-you-go system, political adjustments to the SHI’s regulatory framework usually aim towards cost-containment. But so far the various reform acts have failed to limit the almost linear trend of increasing drug expenditure. However, the analysis of the age-related consumption and expenditure pro? les delivers insights into the causes of the predicted development and should enable more purposeful regulation. We have seen that the purely demographic effect has only a minor in? uence on future expenditure development. With respect to age-independent, acute diseases even a declining impact from the ageing population can be observed. Thus more important than the absolute increase in the number of older people are variances of the age-re- 24 Assumptions: constant share of retired SHI members of all people beyond 60 years as well as of employable SHI members of all people between 20 and 60 years; constant bene? t level of 50 %; annual real growth of gross income according to the development between 1991 and 2004 (0.5 %). All other variables are presumed to be constant. Monetary values have been de? ated with the cost-of-living index (2000 = 100 %). Sources: Ministry of Health (2005a) and German Pension Insurance (2006).

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Zusammenfassung

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.