IHS Global Insight Perspective | |
Significance | The government's goal is to contain healthcare spending, whose current growth is estimated to lead to a deficit of 78 million euro in 2011. |
Implications | Savings of approximately 78 million euro are expected to be yielded by a combination of cost-cutting and financial measures, which will affect the primary and secondary sectors, as well as the population, which will be required to contribute via a rise in healthcare premiums. |
Outlook | Total savings of 100 million euro are expected from the healthcare reform in 2011. The reform is not set to extensively affect the pharmaceutical market which is however facing challenges as of 2012 in Luxembourg as the government is planning to establish generic reference pricing and substitution on 1 January 2012. |
Growth in healthcare expenditure was relatively stable in Luxembourg during 2009 as a growth of only 0.8% year-on-year was witnessed over the period. Healthcare spending attained a total of 1.961 billion euro (US$2.674 billion) in 2009, up 16.1 million euro compared with 2008, according to figures published by the national health insurance CNS (Caisse Nationale de Santé/Gesondheetskeess). By comparison, healthcare spending grew by 6.4% y/y in 2008 and by an annual average of 7.4% between 1999 and 2009. The year 2009 is in that sense an exception for a healthcare system used to high level of healthcare spending growth. In terms of pharmaceutical spending, Luxembourg faced a 4.2% y/y increase in expenditure on reimbursable medicines in the outpatient sector to 160.9 million euro during 2009. This growth is a result of a 2.8% y/y increase in the number of patients taking medicines, a 4.4% y/y decrease in net prices and a 5.5% rise in sales in volume. Figures indicate that the average reimbursement rate has slightly increased to 84.9% in 2009, up from 84.8% in 2008. Drugs reimbursed at 100% under the preferential system were those which experienced the fastest growth with a rise of 4.7% y/y in sales in value. The full financial results of the national health insurance are available here.
Drug Spending 2008/09, per Reimbursement Band (Mil. Euro) | |||
2008 | 2009 | Y/Y Change, % | |
Normal Rate (80%) | 80.2 | 83.3 | + 3.8% |
Preferential Rate (100%) | 69.1 | 72.4 | + 4.7% |
Reduced Rate (40%) | 5.1 | 5.2 | + 2.2% |
Total | 154.5 | 160.9 | + 4.2% |
Source: CNS 2010 | |||
Experts foresee a healthcare deficit of 78 million euro for 2011 and the financial situation of the CNS is expected to worsen as of 2012 with an estimated deficit of 134 million euro in 2012. The financial hole could even reach 206 million euro in 2014 according to estimates. The government has therefore compiled a series of measures aimed at narrowing the financial gap as of 2011. Financial and cost-containment efforts unveiled under the new reform are expected to bring in savings able to cover the deficit foreseen for 2011 (78 million euro) in order to balance revenues and expenditures. The reform will follow a clear "25–25-50" formula, which will see savings be triggered at 25% from price freeze and cuts in healthcare services and treatments, at 25% from a reform in patients' participation and at 50% from a 0.4% rise in healthcare premiums.
Healthcare Reform Draft Law—Luxembourg |
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Source: Draft law as of 8 July 2010 |
Outlook and Implications
Total savings of 100 million euro are expected from the healthcare reform in 2011 which is set to be sufficient to cover the 78-million-euro deficit estimated next year. Additional cost-containment efforts will however be crucial to avoid an escalation of deficit in 2012 and beyond. The government is aware of that matter and will this time directly target the pharmaceutical market to slash the deficit as of 2012. Luxembourg's government is indeed planning to introduce major changes in its drug reimbursement system. These measures are on the agenda for 2012 and could see Luxembourg establish generic reference pricing and generic substitution as of 1 January 2012. The generic reference pricing system will be based on the World Health Organization's (WHO) anatomical therapeutical chemical classification. The Health Directorate (Direction de la santé) of the Ministry of Health will establish a list of off-patent or generic drugs according to their therapeutic class and will update it on a monthly basis. Each therapeutic class will then be granted a reference price, which will take into account the price of the cheapest and of the most expensive drugs within the therapeutic area. At the pharmacy level, pharmacists will be required to propose the cheapest drug among products of the same therapeutic area.
No saving estimate has so far been provided by the government but an effective implementation of the law would bring major challenges for off-patent and generic drugs makers as generic substitution is currently not encouraged by any measure in Luxembourg. The introduction of generic substitution has been very successful in Europe so far and especially in neighbouring countries such as France and Germany. One box of pharmaceuticals dispensed out of five is a generic in France where generics only represented one box in 20 sold ten years ago. In France, pharmacists are encouraged to boost generic substitution via contractual agreements with the public health insurer CNAM. On the contrary, in Germany, pharmacists are obliged to dispense the generic under discounted contract. Figures from IMS suggest that generics accounted for 28% of the German public health insurance market by value and for 62% by volume during 2009. Generic substitution can be ruled very differently from one country to another and Luxembourg seems to have opted for a less stringent system under which pharmacists and patients will still have the choice to opt for the most expensive drugs within a therapeutic class.