Hospital Reimbursement Price Cap for Cancer Drugs

In 2005, the French Government implemented a new way of financing high-cost drugs for hospitals in order to promote innovation. Such drugs are gathered on a positive list, established by the Ministry of Health, with a reimbursement price cap. Hospitals still negotiate with pharmaceutical firms, who set their prices freely, and then charge the national health insurance according to their consumption, without budgetary constraints, but on the condition of good use of care. They are not allowed to charge a price higher than this ceiling price, which is called the ‘responsibility tariff’ (RT). This measure is included in another, larger reform, which concerns hospital financing through allotted amounts at a specific diagnosis-based level. The purpose of this add-on payment on top of the health funds is firstly to avoid heterogeneity in costs per diagnostic-related group and secondly to avoid an uncontrolled increase of prices due to a lack of interest in negotiation from hospitals, as supplementary funding could reduce hospital price sensitivity.

The aim of this work was to assess the bargaining power of hospitals with the pharmaceutical firms in the monopoly market of innovative cancer drugs since the implementation of this reimbursement price cap.

This study used data from the French Technical Agency of Information on Hospitals (ATIH; Agence Technique de l’Information sur l’Hospitalisation) and included 487 hospitals, which were public and non-profit private. The analysis was conducted on the cancer drugs of the regulated list. An index representing the ratio of the purchase prices to the RT was built from 2004 to 2007 in order to make a ‘before-and-after’ comparison.

Results showed a transient price decrease in 2005 before an alignment of patented drugs with regulated prices in the context of a dynamic market with a 22.5% yearly growth rate in value between 2004 and 2007.

Hospitals are able to impose the RT for single-brand drugs. However, they are no longer able to negotiate below the RT except for generic drugs. Negotiations take place upstream for setting the RT between the public authorities and the firms.