Earlier this year, important amendments to of Ordinance 10 (on the terms and procedure for the payment of medicinal products) of the Ministry of Health (MoH) ushered in some fundamental changes that look set to significantly worsen the pricing and reimbursement (P&R) landscape for pharmaceutical companies operating in Bulgaria – and particularly for research-based companies. These changes follow on from previous regulatory innovations introduced in recent years, involving outcomes monitoring and discounting. However, the latest changes move these on to a new level – and a particularly challenging one for manufacturers.

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Already from the beginning of 2017, there has been a system of additional monitoring in place for new originator medicines considered to lack evidence of therapeutic effectiveness, or which are seen as having an unfavorable cost-benefit ratio. Monitoring is supposed to take place in a defined group of hospitals, and the use of these medicines is limited to these institutions.

The latest changes to Ordinance 10 move this process on even further, and into the realm of payment by results. Marketing authorization holders of drugs previously unreimbursed in Bulgaria and without sufficient evidence of therapeutic efficacy are obliged, under the amendments, to negotiate levels or reimbursement with the National Health Insurance Fund (NZOK) based on the outcome of treatment. Additional monitoring supposed to take place, as before, at a specified list of hospitals, and the use of these medicines is limited to these hospitals; the National Council for Prices and Reimbursement of Medicinal Products (NSCRLP) is given the role of coordinating the monitoring process and the collection of information.

Manufacturers, represented by the Association of the Research-based Pharmaceutical Manufacturers in Bulgaria (ARPharM), have expressed alarm about the vagueness of the regulations and the potential absence of scrutiny of the NZOK’s decisions on paying for medicines under such a payment-by-results system. According to Deyan Denev, ARPharM’s executive director, quoted by Bulgarian newspaper Trud, a major issue is the absence of infrastructure in hospitals to run the monitoring system effectively, meaning that even if a contract is concluded with the NZOK, it may not pay, because of a lack of data.

Payback

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Equally challenging for the industry is the new ‘payback’-style mechanism introduced, according to the MoH, to ensure the sustainability of the NZOK’s budget. This new regulation means that if spending by the NZOK on a medicine exceeds the level of the equivalent quarter of the previous year, the manufacturer must pay the difference – in the case of all medicines reimbursed by the NZOK, both originator and generic including also some hospital medicines (i.e. oncology drugs). Rebates are exempted from the amount to be paid back, and it is also corrected on the basis of the planned budget of the NZOK for the drug group concerned, if applicable; although there are some mitigating elements in the regulations, it still means that for some time, at least, manufacturers are likely to have to provide previously unreimbursed medicines without charge to the NZOK in order to ensure that they are placed on the reimbursement list. In the case of new drugs not previously reimbursed in Bulgaria, which have no reimbursed equivalents, the first quarter of their presence on the market becomes the reference quarter for the payback calculation. However, the first quarter on the market will have no reference period, and when launching new reimbursed products, there tends to be a period of growth before sales stabilize; therefore, producers can be expected to have to provide a fair number of free packages. Furthermore, the payback system is structured in such a way that it aims to ensure that NZOK drug spending does not exceed the level of the previous year, which is likely to have a negative effect on the growth of the Bulgarian pharmaceutical market.

Impact on pharma industry

The payment-by-results system and the payback mechanism are, arguably, the most significant of the recent reforms in the Bulgaria pricing and reimbursement system, and they come after several years in which previous reforms, such as the introduction of systematic HTA evaluation and mandatory discounts on new originator medicines, have failed to curb the strong growth in reimbursement spending. Certainly, NZOK spending on reimbursement has grown at a very dynamic rate in recent years – from BGN366 million (USD209.5 million) to BGN1.1 billion in 2018 – and in successive years, the budgeted amount has regularly proven to be inadequate to meet demand, making top-ups necessary over the course of the year. As Bulgaria has become integrated into the European Union, following its 2007 accession, its citizens have come to expect similar standards to those they see in other EU countries. A surge in the number of new originator medicines available to patients in the current decade has set a standard, and with the incidence of cancer and other serious and chronic disease rising – not to mention the presence of a strong patient advocacy sector – the Bulgarian authorities face a significant challenge to meet the rising demand.

However, these regulatory innovations could have gone a little too far. If the NZOK expects research-based manufacturers to simply donate medicines that are designated to the payment-by-results system, until results are provided, for inadequately defined time periods, it may find that manufacturers simply opt to avoid the Bulgarian market until these products have more thorough data, which could be several years. Equally, the payback system is also likely to act as an additional disincentive. Companies represented by ARPharM are considering making an appeal to the Bulgarian Commission for Protection of Competition.