Most nations’ drug spending grows slightly more each year than their gross domestic product, but spending by middle-income countries grows, on average, twice as fast, according to a World Bank expert.

By increasing drug spending at 10 percent a year, a developing nation needs around 18 years to catch up with a developed nation which is spending three times as much but with just a 3 percent annual growth rate, Andreas Seiter told a meeting in Vienna, PharmaTimes reports.

The only developed country where drug spending is lower than GDP is New Zealand, which is very restrictive in allowing new drugs on the market and employs tough pricing negotiations. However, these “frugal” policies come with a price, including the high and rising rates of coronary bypass operations performed in New Zealand compared with its more liberal neighbour Australia, he noted.

Seiter noted that policy decisions become difficult because public expectations grow faster than funding – as more patients enter the system, they gain increased access to health information, and access to effective drugs constitutes a ‘proxy’ for satisfaction with the health system. However, genuine health economic assessment is difficult because of the lack of cost transparency - for example, many countries still spend a great deal on inefficient hospitals - while the high commercial importance of drugs creates pressures for policymakers.

They face navigating between two rocks, he said; either facing fiscal ruin by giving in to the pressures from providers and patients, or losing political support by rationing and restricting access to medicines.

A common problem encountered in emerging countries is the cost explosion created by too-inclusive reimbursement lists with low co-payments. For example, Romania’s top 10 list of products in 2006 for health insurance spending is led by high-cost, specialized medicines - Roche’s NeoRecormon (erythropoetin) and Pegasys (peginterferon alfa-2a) top the list – and at number eight is Servier’s phlebotropic Detralex (diosmin) a nutraceutical product which does not appear on any other reimbursement list in Europe.

Pragmatic reimbursement policy options which he advises emerging and transitional companies to use include a “scoring tool” based on the health technology (HTA) assessment decisions made by other nations, and “hard and smart” bargaining with drugs makers, including risk-sharing deals which pay for outcomes rather than just concentrating on price.

However, Seiter believes that price control mechanisms such as reference pricing may have had their day. Truly innovative drugs have global price bands, which limits the effectiveness of reference pricing models, he said, while regulators have limited bargaining power or and risk trade conflicts, so this is not a sustainable solution. On the other hand, generic prices have downward room in many countries, and reimbursement systems can be used to create more competition among generics and capture the efficiency reserve.

In one such model, the reimbursement authority would invite bids from the makers of a given generic, who would have to state the maximum volume, which they can supply. Winner Brands 1 and 2, who together can supply the whole market, would get 90 percent reimbursement, higher than all others. Brands 3-6 would get 70 percent of the price of Brand 2, creating a significant commercial barrier for these brands, but these manufacturers could come back with a better offer in the next round.