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Reflector is Pharm Exec's Brussels correspondent.
The European Commission's latest economic assessment of EU member states does not make for comfortable reading, writes Reflector.
No columnist can hope to grab attention with the arrival of the latest European Commission economic analysis – but don't yawn at the thought of what tedium this promises for anyone in the healthcare business. Because for healthcare, and for anyone working in the field of pharma, the signals are not promising – and risk elicit more groans than yawns.
The analysis arrived in mid-February in the form of the absurdly-named European Semester for 2017 – the bureaucrats' title for the annual economic assessment of the European Union's member states. Amid its extensive coverage of macro-economics, fiscal and labour policy and investment and productivity, it also presents a portrait of the context and prospects for healthcare. And it doesn't make comfortable reading.
The EU has no mandate to tell member state what to do about their healthcare, but it is entitled to push national governments towards balanced budgets – so it gets involved in discussion of public healthcare expenditure because the pressures it exerts can have a negative impact on fiscal sustainability. And it draws some overall conclusions on healthcare from its reflections. One is that there are unexploited opportunities in public procurement as "providing useful instruments to obtain better value for money for medicines and medical equipment." Another is that over the medium and longer term, healthcare systems pose "significant challenges in view of high debt levels and population ageing", and "most member states face either medium or high sustainability risks." The risks "highlight the need for additional reforms, particularly in healthcare," it says. It compliments Ireland, Lithuania, Austria, Portugal, Romania, Slovenia and Finland on making some attempts at reforming healthcare systems to ensure cost-effectiveness, at using spending targets and reviews, and at shifting to less costly care.
But reforms "need to be accelerated to make healthcare systems more effective," it goes on. The recipes include shifting from in-patient to outpatient care, investing in health promotion, primary care and integrated care, improving governance, using medicines more rationally, and centralizing public procurement. For anyone trying to sell into Europe the message is as austere as for anyone managing healthcare in Europe. And there is little cheer to be gained from predictions of public expenditure on healthcare and long term care for the EU, projected to average just 0.9% between now and 2060.
At national level, the picture is in many cases more grim than in the EU-wide assessment. Belgium's long-term fiscal risks stem from the projected increase in age-related spending, including on healthcare, at a time when its productivity growth in health has been very slow for a decade. In Spain, inequalities in access to healthcare have risen significantly. Restraints on healthcare spending in Italy have started to have an impact, and expenditure is falling, while the recent rise in drug spending resulting from innovative new medicines "may be moderated by payback schemes in place". Poland faces challenges to improved cost-effectiveness of healthcare spending, and is urged by the Commission to strengthen primary care, development co-ordinated care, curb excessive use of specialist care, and make more use of health technology assessment. And in the UK, the National Health Service for England is aiming to bridge a €27 billion ($28.5 billion) gap through new efficiency measures, and others are being considered to mitigate the growth in demand for health services.
France, where health care expenditure is one of the highest in the EU, has introduced reforms to improve hospital efficiency and to better control pharmaceutical spending, and further increases are expected to be contained as cost pressures drive more coordinated use of care.
In Ireland, "the sustainability of the healthcare system continues to pose challenges", and "the cost-effectiveness of the health system remains a priority." Efficiency measures have been introduced, including a cost-saving deal concluded with the pharmaceutical industry that should cut spending by €750 million ($792 million), as well as pressure on pharmacists to practices substitution, and plans to use e-prescribing to enable automatic substitution and closer monitoring of prescribing behaviour. But "key cost-effectiveness gains are still to be achieved," and additional funding has been used to cover overspending rather than expanding service provision. "Given the poor level of expenditure control in the past, better monitoring of the budget" is needed.
Austria is under strong pressure to cut back on healthcare spending as it "poses a medium risk to fiscal sustainability". Already a 2013 reform imposed a cost-containment path up to 2016, and now stringent caps on expenditure growth set for 2017-2021 "are expected to help, but they are not sufficient to ensure sustainability." The fragmented organizational and financial structure of the healthcare sector does not encourage cost efficiency, says the Commission's analysis. The "disproportionately large hospital sector" offers "unexploited savings potential", particularly through improved public procurement, and hospitals are to be encouraged to maximize currently neglected savings by aggregating their tenders. To further boost efficiency, 75 out-patient primary care centers are to be set up by 2021, and their success is seen as dependent on new payments schemes involving practitioners and social security funds.
Measures aimed at improving cost efficiency are at various stages of adoption in the Czech Republic, but although current healthcare expenditure and health outcomes are lower than the EU average, healthcare expenditure continues to pose a challenge to the long-term sustainability of public finances. One of the targets for action is better utilization on centralized or joint purchasing in the healthcare sector. But attention is also focused on the need for better health technology assessments, and to improve primary care and improve the cost efficiency of hospitals. So far a push to introduce centralised procurement in the healthcare sector has been met with skepticism among hospitals, concerned over losing autonomy in procurement processes, but a draft law on using pharmacy cost-based groups could boost efficiency of health insurance companies.
Why should all this – or any of it – matter to pharmaceutical executives already hard-pressed to deliver in their own direct areas of responsibility? Most of all, because the ambience in so many European countries is so morose – not just for health, but for public finances in general. And precisely because the relatively new EU responsibilities for member states' fiscal rectitude gives them for the first time a foothold in budgetary issues, the EU is likely to continue to press for more prudent spending across all areas of state expenditure. As one of the biggest elements in member states public spending, healthcare is now up for attention in a way it has not suffered before. What the EU is pressing for today is likely to become the reality of tomorrow.
The news isn't universally gloomy. In Denmark, the Commission has concluded that long-term risks are limited by a favourable budgetary position and because increasing public spending on healthcare and long-term care are expected to be compensated for by falls in spending on pensions. But Denmark, for all its charm, is only a small part of the European market.