Abstract
Pharmaceutical expenditure growth has outpaced GDP and healthcare expenditure growth rates in Denmark as in most OECD countries for the last decade. A major part of this increase was due to high growth rates in specialist areas that are typically located in hospital settings. Yet the market for hospital medicines and their procurement are still poorly understood. The present paper characterises the market for hospital medicines in Denmark in terms of its organisation and developments between 2005 and 2009. In Denmark hospital medicines are publicly financed and procurement is centrally organised. 98% of all medicines administered at Danish public hospitals are purchased through a public procurement agency by means of public tenders. Using data on actual contract prices we decompose pharmaceutical expenditure growth into the contributions from newly introduced medicines, price and volume increases and use summary statistics to compare market performance in both sectors. The market for hospital medicine is more concentrated than the pharmaceutical retail sector and the share of generics and parallel imported products is significantly lower. Between 2005 and 2009 expenditures for hospital medicines more than doubled -accounting for almost 40% of the total Danish pharmaceutical market in 2009. Price increases however - although positive and higher than in the pharmaceutical retail sector - were only moderate. The majority of the expenditure growth was due to an increase in utilisation and the introduction of new medicines in the hospital sector. Centralised tendering may therefore have important implications for competition and industry structure in the long run.
Highlights
Pharmaceutical expenditures growth has outpaced GDP and healthcare expenditure growth rates in most OECD countries for the last decade, and Denmark is no exception (OECD 2009)
In many European countries the selection, procurement, pricing and distribution of hospital medicine is radically different to the supply chain that operates in the pharmaceutical retail sector
While the pharmaceutical retail market in Denmark is decentralised, the purchase of hospital medicines is highly centralized. 98% of all medicines used at public hospitals are bought through AMGROS, which was introduced in the 1990ies with the goal to limit pharmaceutical expenditures through the joint procurement of hospital medicines
Summary
Pharmaceutical expenditures growth has outpaced GDP and healthcare expenditure growth rates in most OECD countries for the last decade, and Denmark is no exception (OECD 2009). In many European countries the selection, procurement, pricing and distribution of hospital medicine is radically different to the supply chain that operates in the pharmaceutical retail sector. In search for measures to contain pharmaceutical expenditures many EU countries have introduced group purchasing and public tendering approaches to procure hospital medicines. Studying the hospital sector is often complicated by the fact that public statistics do not reflect rebates granted, true contract prices are seldom publicly available This may be one reason why the existing literature on pricing of hospital medicine, group purchasing and pharmaceutical tendering is quite limited. The present study pursues a new approach to assess the performance of this institutional set-up, by decomposing pharmaceutical expenditure growth between 2005 and 2009 and comparing price developments and measures for market structure to the pharmaceutical retail sector.
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