AUTHOR: JULIAN UZUNOV
Lay people normally consider medicines as a field where physicians and pharmacists have the competence and some form of monopoly. It is true that medical professionals have the leading role in drug usage as long as patients are concerned. However, the pharmaceutical sector is one of the most complicated areas of science and economy where digital technologies are indispensable.
First of all, it is good to have an idea of the size of the business: world pharmaceutical sales in 2018 were a little higher than 1.2 trillion USD which is times higher than the market for narcotics and arms… R&D annual spending is above 190 billion USD and this is one of the most science-intensive fields. As expected, the management of such huge business requires the most advanced technologies in the research process and in the management of the investment.
Even in countries where the drug market is quite modest, such as Bulgaria, market growth is impressive as evident from the following chart.
A key factor for pharmaceutical market growth is that much of the money for medication comes from public funds (mainly, from the National Health Insurance Fund, “NHIF”). Managing such a huge public resource is not an easy task and, naturally, it is a great concern for any government which tries to meet people expectations (which are never satisfied in health care, not even in the richest countries) and still keep public expenses within the available budgets. The rising drug expenditure is an issue all over the world and in all EU countries there are some mechanisms to contain public expenses within reasonable limits.
As expected, a key role in money management in the modern world is played by digital technologies which helps the decision makers to monitor the financial trends in the health sector and process large volumes of information.
A typical example is the way in which most EU countries try to control drug prices. The majority of them apply the so-called ‘reference pricing’ which is based on comparison of the prices of prescription medicines covered by the health insurance systems.
Having in mind that we speak of many thousands of medicinal products, each of them in several packages, with very sophisticated systems of price formation in the different countries, you can imagine the volume and complexity of information generated every month in different languages.
Reference pricing requires that each prescription medicine in one country is compared to its “brothers” in a set of other countries at periods of 6- to 12 months, and then by specific formulas the local reimbursement price is decided. In the case of Bulgaria, we speak of 10 EU countries where the same drug could be marketed and reimbursed by health funds.
The EU map of cross-referencing the prices of thousands of drugs looks awe
The EU map of cross-referencing the prices of thousands of drugs looks awesome and the whole exercise would be impossible without advanced data processing. To make better use of technology, the European Union has established a common EU data base called EURIPID which is one more tool for drug price decision makers apart from individual country comparisons.
In each country, the picture is much more complicated, to the point that most pharmaceutical manufacturers employ dedicated staff to take care of drug price formation and reporting (the common EURIPID data base is accessible only to regulators). Practically, the use of software has helped businesses manage better their information and facilitate their dailyactivities which would otherwise be virtually impossible.
This approach is taking a lot of time to real business which is forced to spend immense resources of time and money to supply information various government bodies who have established such requirements only because the tools are available. Perhaps the only justification of such pressure by the authorities is the fact that in each country the public expenses on health care are a big share of public spending.
For Bulgaria, it is about 8 % and is about 2 % lower than the EU average.
Advanced digital technologies in health care give a great opportunity to analysts to process the raw data and to present them in a way which support decision makers better understand the current situation and the trends. The availability of data in the web space has changed the way people think about health care. The ability to make comparisons with the country’s previous periods and with other countries often triggers pressure from the mass media which pushes decision makers to take measures to satisfy the public discontent.
Coming back to the issue of money which has grown in importance in health discussions, the analysis of data has become such an integral part of modern governance that we realize that many of the decisions regarding health management, and pharmaceutical expenses in particular, are made on the basis of scientifically grounded information. A typical example are the debates about NHIF spending on drugs. The amounts are indeed impressive to the general public but the detailed breakdown of figures, made possible by modern database facilities, speak much more to experts.
The above “big” figures are good for the journalists and the general public. Upon detailed analysis, with breakdowns by groups of medicinal products and by therapeutic groups of their applications, field experts can draw conclusions and design strategies for managing one of the major budget items of the national budget. As for health experts, they can also make assessment of the efficiency of spending on drugs and any other items of the health basket.
Financial experts who can make better use of digital technologies can go much deeper. An example of detailed analysis possible only through good software is to find out the actual meaning of the expense figures. One big item of drug expenditure is to deduct 20 % VAT which is included in the budgeted amounts but actually goes back to the Ministry of Finance and is not a real part of drug spending. Another sophisticated analysis would account for payback from the pharmaceutical manufacturers to the NHIF which varies between 10 and 20 % for many of the medicines reimbursed by the public fund in favour of Bulgarian patients.
In the past three years, digital technologies have found new applications in the pharmaceutical sector. An initiative of the European Union is to apply advanced technologies to protect patients from eventually falsified medicines.
The whole process of ‘serialization’ (i.e., placing individual numbers on each package of medicine by the drug maker) through to ‘verification’ at the pharmacy at the point of sales (i.e., using digital technology to verify the identity of each drug package) is a demonstration how modern technology can sort out a potential threat for human health. Of course, this exercise costs billions to market players and some of the critics to this process claim that drug companies and software providers abuse technology for different commercial reasons.
Another problem which could be solved by modern digital technologies is to manage parallel export of medicines from lower-price countries such as Bulgaria to high-price markets such as Germany or Sweden.
The result of illegal parallel trade is shortage of life-saving drugs for Bulgarian patients and the solution of the authorities is to introduce a comprehensive system which will monitor the movement of all prescription medicines from manufacturer to the patient. Again, this is use and abuse of modern technologies as the design of this electronic monitoring system is subject to fierce criticism.
In some cases, there is less controversy – for instance, the introduction of electronic drug tenders for hospital supplies which are intended to lower drug prices and eliminate one element of corruption in the pharmaceutical sector.
In summary, a complicated business sector such as pharmaceuticals is impossible to manage today without advanced digital technologies. Our special point about the implementation of such technology is that they may lead to either beneficial use or abuse depending on the purpose of those who manage each of the market segments.