A government-sponsored health insurance program does not exist in United States. As such, access to healthcare depends on the financial status of the patient. The forces of a free market play a major role in regulating drug prices (Gelband, Wiley and Laschober 10). These forces are determined by competition between “rival pharmaceuticals, the position of a drug in the market, the number of prevailing drugs in the market and the cost incurred for research and development of new pharmaceutical products which can meet the challenges of emerging and resistant strains of disease-causing microorganisms” (Ginzberg 15). On the other hand, government-led pricing controls have been used in Europe for a long time. The European pharmaceutical industry is therefore regulated through such government interventions as reference pricing, price setting and positive and negative listing.
The forces of demand and supply determine drug prices in United States. Unfortunately, the demand side of the market plays a bigger role in fixing prices in the pharmaceutical industry. Big pharmaceutical companies purchase large supplies which enable them to control the market price for various pharmaceutical products. They include MCO’s, Medicaid and Medicare (Jonas, Knick man & Kovner 12). The government is only compelled to include or exclude pharmaceutical formulations which are too costly to support the national healthcare system. The current healthcare system is such that government negotiates with private pharmaceutical companies for drug prices. Evaluation of the prevailing pharmaceutical market is necessary before determining pricing and reimbursement policies.
Private health insurance, health maintenance organizations (HMO’s) and Federal sponsored health insurance plans (health risks determine the amount of premiums charged on a patient). Health maintenance organizations are popular in the US healthcare market since it combines an insurance policy with particular medical teams as a cost-cutting measure. Patients are required to pay a flat rate of premiums which is an average of high risk and low risk health status (Mooney, Henderson & McGuire 18). As such, individuals who consider their health status to be significantly lower opt out of the system in order to save on the premiums. A significant proportion of the population cannot afford to pay premiums to HMO’s as well as those charged by private health insurance schemes. Medicare is the alternative healthcare insurance provided by the Federal government whereby each state operates its policy (Medicaid). This serves to assist the very poor of the population to access medication despite of the financial status and the economic situation in the country.
This is a health insurance policy provided by the state to persons over the age of 65 years, which corresponds to about 15% of the population. Medicare has two main segments, one which covers hospital care and post-hospital nursing (Wilsford 20). Under this scheme, Medicare reimburses certain hospital costs during the period the old patient is sick in whichever facility. The other segment covers medical outpatient costs which may include laboratory tests, dialysis, medical equipment and cardiac pacemakers (Rodwin, Kimberly & Kervasdoué 15). However, the cost of buying prescription drugs is not paid under Medicare as well as the regular medical examinations which may be required during illness. Essentially, Medicare covers about 50% of the medical bills for patients that fall under its health insurance scheme. Medigap is a health insurance scheme which supplements areas where Medicare does not cover by reimbursing patient’s affiliated costs apart from the actual medication costs.
Old patients who are unable to subscribe with Medigap in order to purchase prescription drugs affordably are therefore incapacitated from benefitting from Medicare as a whole. Patients in that age group are attributed to approximately 30% of the population’s drug expenditure. Market price for prescription drugs is determined by the forces of demand and supply in the pharmaceutical market of which the demand side is higher causing inflation of drug prices (Witteloostuijn 25). Suggested reforms for the government-sponsored Medicare for seniors include administrative changes, subsidized cost of prescription drugs, high-quality healthcare and greater treatment and preventive care services. Tiered formularies are used to allow the circulation of low-priced drugs into the market while highly-priced pharmaceutical drugs are restricted.
This is a government insurance plan which is available to people according to their income levels in different states. Medicaid offers an alternative health insurance scheme for individuals who cannot afford private insurance policy. Medicaid supports patients from poor backgrounds as well as disabled persons to access healthcare through a comprehensive coverage for prescription drugs. The fifty states and the District of Columbia operate independent health insurance programs for their people for reimbursement of medical fees and prescription drugs with Federal government approval. Federal government matches state spending based on per capita incomes of the respective states.
Private health insurance schemes
Cost-containment programs have been developed to address high inflation in health costs in United States. Enrolled patients are assisted to access affordable treatment and preventive care from a determined pool of health providers. The quality of healthcare under this scheme is not predictable since enrolled patients are restricted in terms of physicians and prescription drugs they can access (Hammack 23). Central management of private health insurance companies determines primary medical workers and specialists which can be accessed by their clients.
Health management organizations are therefore a better alternative for low income Americans based on HMO’s formulary listings of quality and affordable prescription drugs and range of premium prices. Essentially, HMO’s negotiate with pharmacy benefit managers before designing a prescription benefit plan which is affordable to a large group of their clients comprising of Medicaid and Medicare patients, employees, employers and organizations.
Pharmacy benefit managers
This provides a negotiated payment program for prescription drugs for large clients including Medicare and Medicaid, unions, private health insurance companies, employers and government (Almgren 32). It is organized such that over 95% of US pharmaceutical distributors are registered with them increasing their purchasing power, reimbursement portfolios and rebates from drug manufacturers. Consolidation of pharmaceutical distribution and purchasing serves to equip PBM’s with the capacity to provide clients with affordable drugs their network of wholesale and retail outlets.
Patients covered under hospital, institutional and managed care schemes benefit from subsidized prices due to discounting negotiations existing between their organizations and pharmaceutical companies. State-level rebates for prescription drugs provided to Medicaid and Medicare patients have improved acquisition rates for prescription drug. The European national health systems provide for government to control pharmaceutical prices through reference pricing, price setting and drug formulae listing (Bisbee, Berman and Weeks 29). The US pharmaceutical market is dictated by the forces of demand and supply with the former pushing drug prices to the higher side. Medicaid and Medicare are the main state-level actors which serve to negotiate for premium drug prices in the predominantly free market. Drugs sold directly from wholesale and retail pharmacies are more expensive than those provided under the subsidized institutional and managed care schemes.
Maine was one of the states that established a comprehensive policy which ensured that both insured and uninsured citizens are accessible to affordable healthcare. Uninsured Americans pay more than 20% higher in drug prices than their counterparts who are covered by Medicare and Medicaid. The Maine was not received well by pharmaceutical who challenged the decision in court finally winning their case against a comprehensive healthy policy for subsidized drug provision extending benefits to uninsured citizens. The Federal government equally opposed the Maine law stating that it “undermined congressional intent” within the interests specified under traditional Medicaid (Clayton& Byrd 33). The state of Florida also enacted a Medicaid law meant to negotiate discounts for prescription drugs for enrolled patients under Medicaid.
The state demanded a 10% rebate from pharmaceutical companies in addition to the 15% provided by Federal law in order to supplement Florida’s Medicaid program for a reduction in prices for prescription drugs. Another alternative for controlling the cost of pharmaceutical drugs particularly for old and disabled persons is through parallel importation of cheaper drugs from Canada. Parallel importation is receiving a boost from the Federal government in support of suffering low-income seniors and disabled patients who cannot afford the high and unpredictable cost of prescription drugs in United States (Dion, Blake& Blais 22).
Generic drugs are much cheaper than their patented brand equivalents. As such, the law empowers generic drug companies to run production and laboratory tests while the patency for branded drugs exists. Generic manufacturers are therefore legalized to launch their generic equivalents immediately patent exclusivity period expires. This serves to encourage healthy competition between generic manufacturers and brand manufacturers for benefit of patients. On the other hand, brand manufacturers are entitled to further patent protection from generic competition if they provide proof for additional active ingredients and supplements important for medication.
Canadian pricing regulations
There exists a government-funded heath care program in Canada. The Federal government transfers health care payments to each of Canada’s provinces in order to manage and support health care services. The financial support is extended to patients under institutional medical cover. Public funding in Canada is meant to support the provision of subsidized drugs to old persons and those under social care. Provincial health care ministries manage independent pharmaceutical policies which on average ensure that medicines are financed. Private health insurance companies also facilitate provision of affordable prescription drugs to majority of Canadians. Government-led measures also ensure that patented drugs are not extremely expensive while generic drugs are available in large supply to Canadians. Pricing for generic drugs is done at provincial level where formulary listings are also established for purposes of subsidization. Provincial plans target reimbursement of both branded and generic drugs.
EU National systems
Private health insurance companies play a bigger role in provision of medicines and pharmaceuticals in Europe.
There exists a social health insurance system in France which aims at all-inclusive health coverage for French citizens. French health insurance is publicly funded in three comprehensive schemes which take care of different segments of the population. First and foremost, there is a health insurance scheme which covers salaried employees. The second policy administers a health insurance cover for agricultural workers and farmers. Thirdly, self employed and non-agricultural French citizens are covered under a statutory health insurance fund. Most of the medical bills are therefore covered under the public funded health insurance scheme (Rushefsky& Patel 34). Non-salaried and low income French receive further medical assistance from a complementary health insurance which is funded by taxes. The social security system contributes a significant share of health care financial resources. A complimentary insurance coverage is funded from patient contributions.
Complimentary insurance funds contribute a higher proportion of medical expenses due to increased patient payments arising from higher medical charges.
Table 2: Contribution to main healthcare expenditures (%) in France by source. SOURCE: National Health Accounts 2006.
|Sector||Social Insurance||Complimentary Insurance||Households||Other|
Substantial deficits exist in social health insurance provision due to fiscal budgetary deficits.
Table 2.4: Sources of healthcare funding (%) in France. SOURCE: DREES 2009.
Private health insurance sector
French healthcare system is dominated by private health participants who are also active in policy making pricing regulations and reimbursement decisions. The complimentary insurance market is organized along occupational lines where subscription fees are paid by institutions or individuals. French population is therefore covered by commercial insurers and provident institutions which are run by representatives of employers and employees.
Table 2.6: Profile of private health insurance industry in France. SOURCE: DREES 2009 (based on 2007 data).
|Type of insurer||Total number||% of population with PHI|
Health insurance premiums increased at a higher rate than the reimbursement rate under the statutory health insurance cover. Majority of French citizens are covered under individual health insurance schemes, another significant proportion under the commercial scheme while the rest subscribe to provident institutions (Jonas, Knick man & Kovner 15). Private insurers demand that enrolled patients register with a referral doctor for both primary and specialist health care. Financial penalties are imposed on patients who seek alternative specialist services without following the laid down procedures which take into account the referring doctor as a reference health practitioner. Mutual health coverage insist on enrolled patients to subscribe to specified care pathways since medication costs are determined by the cost of reimbursed drugs and doctor’s fees. In general private health insurance providers do not get involved in direct provision of health services apart from facilitating affordability and accessibility. Ambulatory care is provided by self-employed doctors who are compensated according to reimbursement rates determined by health insurance funds and professional institutions. Hospital care is provided by both private and public health facilities.
State-level funding of national health system is negotiated through collective bargaining between different health insurance providers in Germany. Social health insurance covers subscribers while private insurance schemes take care of those not covered under the social scheme. A dual insurance system prevails because Germany laws demand that the entire population is covered under either the social health insurance scheme or a privately-funded system (Ginzberg 20). Low income earners are particularly expected to subscribe to one of the sickness funds that exist in either the statutory social scheme or the private-controlled health insurance policies. The high income group has a choice of purchasing a health insurance scheme or not. Approximately 88% of Germans are covered under the social health insurance scheme while the rest are covered by private insurance. Payors and providers are separated in terms of health insurance services they provide to their clients. Services provided through the social health insurance scheme are defined in law.
Sources of healthcare funding
Public funds contribute a greater proportion of health insurance in Germany. Households finance private heath insurance schemes through premiums paid. Households and employees subscribe to different health insurance schemes according to their needs and incomes (Wilsford 25). Private funding is an emerging contributor where insured employees are covered according to premiums paid. Premiums and benefits are proportional to income levels. However, the government is currently negotiating with private health insurance companies for flat-rate premiums that are not income-based. The table below illustrates various sources of funding in Germany from statutory schemes to private, households and individual health insurance schemes. The data is obtained from statistics available from the relevant health department at Federal Office.
Table 1: Sources of healthcare funding (%) in Germany. SOURCE: Federal Statistics Office.
|Statutory Health Insurance||56.8%||57.1%||57.5%|
|General govt. excluding social security||5.7%||5.3%||5.2%|
|Social long-term nursing care||7.5%||7.4%||7.3%|
|Statutory pension insurance||1.5%||1.5%||1.5%|
|Statutory accident insurance||1.7%||1.7%||1.6%|
|Private health insurance||9.2%||9.2%||9.3%|
|Private households/private non-profit organizations||13.5%||13.7%||13.5%|
The data reveals the increasing contribution of social health insurance schemes in Germany as well as the supplementary role of private health insurance.
Private health insurance sector
The association of health insurers in Germany represents the private health insurance market there. By the year 2008, its membership stood at forty six full members and thirty small insurance organizations. Out of the forty six, twenty eight were publicly listed organizations while the remainder was mutuals (Hammack 28). Revenue contributions from the publicly listed insurance companies accounted for 57% of premiums which covered slightly below average of the German population. The table below illustrates revenue contributions from different insurers.
Table 1: Profile of private health insurance industry in Germany. SOURCE: PKV 2008.
|Insurer type||Publicly-listed companies||Mutuals|
|No. of companies||28||18|
|No. of insured members||4, 269, 700||4, 369, 600|
|% of privately insured population||49.4%||50.6%|
|Revenues from contributions(Germany currency)||17, 243.6||13,095.9|
German’s health insurance industry is quite dynamic comprising of nine publicly-listed health insurance companies with a market o share of about 68.4% while private insurance represented 50% of the population.
Private health insurance benefits
Members of private health insurers are the main contributors of the comprehensive covers they have subscribed to. 50% of private insurance membership is made up of employees who receive financial support from their employers as far as premiums are concerned. Premium contributions are independent of income levels. Long-term care is mandatory which demands that members of private insurance schemes must also me members of statutory health plans. Most Germans are therefore covered by double health insurance schemes from both government-sponsored and a supplementary health plan from private insurers. Reimbursements are paid to cover outpatient services, medical fees, screening checks, hospital accommodation and dental care (Dion, Blake& Blais 30). The table below illustrates services rendered under supplementary health care usually provided under private health insurance schemes.
Table1: Types of supplementary PHI purchased by Germans covered by GKV. SOURCE: PKV.
|Type of supplementary||2007||2008||% change|
|Outpatient tariffs||6, 347, 100||6, 627, 800||+4.4%|
|Elective services in hospital||5, 167, 600||5,382, 700||+4.2%|
|Dental care||10, 794, 300||11, 769, 700||+9.0%|
NB: Individuals may have more than one type of supplementary insurance.
The table below further illustrates membership of private insurance companies in accordance with services rendered.
Table 1: Profile of population with private health insurance in Germany. SOURCE: PKV.
|Type of insurance||2008||2009||% change|
|Comprehensive||8, 639, 300||8, 738, 100||+1.1%|
|Long-term care||9, 352, 400||9, 450, 000||+1.0%|
|Supplimentary2||20, 983, 200||21, 136, 200||+0.7%|
|Outpatient tariffs||6, 627, 800||6, 662, 600||+0.5%|
|Elective hospital services||5, 382, 700||5, 461, 200||+1.5%|
|Dental care||11, 769, 700||12, 053, 300||+2.4%|
- At 2009.
- Individuals may have several supplementary insurance policies.
The basic tariff is applies to individuals who may not qualify for regular premiums paid under the statutory health insurance schemes. The basic tariff is the premium paid according to member’s sex and age. Regular premiums are paid based on age, sex and medical history (Bisbee, Berman and Weeks 40). Medical history does not cover the basic tariff. Reimbursement benefits extended to members covered under private health insurers are almost similar to those provided by government. Outpatient services constitute the largest proportion of reimbursements apart from dental care and medication. Health workers and providers usually operate independent from private health insurers and government entities. Legislation prohibits private insurers from owning dispensaries and clinics. Medical fees are negotiated between private health insurers and healthcare providers. However, ambulatory care is usually paid directly by private insurers which claim reimbursements from members at a later date.
A national health system is publicly funded to cover defined medical fees in Italy. A private health system only covers aspects of health insurance which are not addressed under the National Health Service. Medical fees cover initial therapy although prescription drugs and specialist services are reimbursed. Diagnostic tests and medical check-ups are also not covered under the government-sponsored National Health Service (Witteloostuijn 35). Administration of the government health policy is within the jurisdiction of the twenty one regional authorities. There are 180 health authorities transact provision of health care for government-sponsored beneficiaries and members of accredited private insurance companies. Gatekeeper care similar to that used in the USA exists where beneficiaries are expected to register with a medical doctor to access healthcare. Different regions administer and manage unique healthcare budgets where cost-sharing is largely contained. Co-payments from patients cover most of the medical fees.
Sources of healthcare funding
Public funds from payroll taxes from various regions, direct premiums from patients which are income-based and value-added taxes are the main sources of healthcare funding in Italy. Private expenditure is obtained directly from patients’ pockets. The table below illustrates different sources of healthcare funding in Italy
Table 1: Sources of healthcare funding in Italy. SOURCE: CERGAS.
|% of total expenditure||21.8%||21.7%||21.5%||21.3%|
The figures in the table above reveal that public spending outweighs private expenditures by far. However, trends in pharmaceutical spending indicate a greater role of private funding.
Private healthcare spending
Since pharmaceutical costs are not covered by National Health Service, private spending covers the cost of prescription drugs, outpatient services and self medication (Rodwin, Kimberly & Kervasdoué 23). The following data shows the trend in healthcare expenditure between public and private schemes with regard to pharmaceuticals in Italy.
Table 1: Public and private spending (Italian currency) on pharmaceuticals in Italy. SOURCE: Osmed, ALFA.
|Class A:SSN||9, 933||10, 267||9, 484||9, 523||9, 651|
|Class A: Private||688||492||624||706||807|
|Class C:Private||2, 290||2, 273||2, 304||2, 329||2, 385|
|Self-medication: Private||1, 624||1, 570||1, 605||1, 554||1, 530|
|Total drug spend||14, 536||14, 603||14, 017||14, 111||14, 244|
|Of which private||4, 603||4, 336||4, 533||4, 589||4, 721|
Private health insurance sector
Italian private health insurance sector plays a minor role in provision of healthcare except in non-reimbursed segment of pharmaceuticals and diagnostic procedures. Co-payments for direct medical services also account for co-insurance premiums paid by members of private health insurance companies. The state extends tax concessions to private health insurance companies, most of which are publicly-listed for complementary and supplementary health covers to citizens.
Private healthcare providers
Outsourcing plays a major role in healthcare provision in Italy. National health system procures the services of privately accredited hospitals where reimbursements are provided for services rendered to patients under the statutory health system. Private and public hospitals provide health services of comparable quality.
A national health system support patient care at the point of delivery except for the cost of prescription drugs and dental services in Spain. Health policies differ in different administrative regions. A dual and fragmented health system exists where private services are sought to supplement state-operated health system in areas such as pharmaceutical provision and dental care. The national health system covers preventive care, pharmaceuticals, diagnostic and orthopedic products (Rushefsky& Patel 42). It is mandatory for civil servants to subscribe to the state-organized national health insurance system. Three mutual funds operate health systems for civil servants for various government employees, namely; “general judicial mutual society, social institute of the armed forces and the genera civil servants’ mutual society” (Rushefsky& Patel 56). Civil servants have a choice to be covered under the national health system or private service providers. Health services rendered are almost similar in either public or private health institutions.
Sources of health funding and private healthcare providers
Private funds and public coffers are main sources of public funding in Spain. Private health insurers also run their independent clinics and hospitals of comparable quality to government health facilities. Private insurers pay medical fees directly to typical health facilities affiliated to them if members seek treatment from them.
UK National Health service (NHS) supports free healthcare for its citizens except for dental care and eye care. There is also provision for reimbursements for prescription drugs. UK citizens are required to register with a gatekeeper care doctor in order to access hospital and specialist care (Witteloostuijn 44). Devolved governments of England, Scotland, Wales and Northern Ireland administer different health systems. The UK National Health Service is mandatory for all UK citizens. Private healthcare provision lays a supplementary role to the public health services. Expensive medicines which are included within government formulary listings are paid by patients. Medical fees are reimbursed for patients suffering from terminal illnesses such as cancer and heart disease.
The National Health Service reimburses cancer patients to the extent of paying for the expensive medicines they need to support their life. Sources of funds include contributions paid by employers for their employees as well as contributions from individual patients. Public funds accounts for the largest share of health reimbursement which is obtained from taxes. UK government does not extend tax incentives to private health insurance companies for their complimentary role in healthcare provision. Healthcare providers obtain their revenue from negotiated contracts between medical health insurance companies and hospitals (Almgren 38). There are independent hospitals which are legalized to operate their own private health insurance schemes for patients parallel to private health providers. Public and private health systems supplement each other in provision of healthcare. UK citizens are therefore at liberty to join a complimentary private health insurance scheme in order to obtain medical services which are not covered under the National health system.
A comparison of health care system in different countries indicates a greater role of private health care providers in the US. It is practically evident that a government-sponsored health care system is not in place in the different states of USA. However, the government has taken some positive strides towards helping its citizenry access affordable health care particularly the elderly and the disabled under Medicare and Medicaid. The role of private pharmaceutical companies in determining pricing regulations of prescription drugs is dominant in a free market where the demand side carries the day (Almgren 40). European national healthcare systems are managed by respective governments even though private healthcare providers are allowed to play a supplementary role. EU national health systems are mandatory for citizens where reimbursement for medication is provided with respect to basic healthcare. A common phenomenon exists where a gatekeeper care physician acts as the link between government-sponsored health systems and access to medication for enrolled patients in both EU national systems and that of USA.
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