Note: On April 2, 2015, the Ministry of Public Health announced that Minister Wael Abou Faour had issued a decision to adopt the final form of the unified prescription and to begin printing the new forms immediately, stipulating that use of the new forms will be obligatory starting June 1, 2015.
[pullquote]The new regulation might encourage greater prescribing of generic medication[/pullquote]
The Lebanese people’s preference for the expensive over the reduced price, for the label over the no-name brand, is one based on perception. The thinking goes that a ridiculous price tag distinguishes financial and class superiority. Instead, it is name recognition that serves towards authenticating quality and trust, so companies register trademarks to maintain that recognition and separate themselves from the rest of the pack. In Lebanon, brand name drugs dominate the market, but off label generics are frequently just as effective in reducing pain, alleviating symptoms or curing the sick — oftentimes for a fraction of the price. In Lebanon, new unified prescription forms authorize pharmacists to substitute prescribed medication for generics under specified conditions: the substituted drug must be on the list of comparable medicines published by the Ministry of Public Health, the substituted medicine must be cheaper than the prescribed medicine, the doctor must indicate acceptance of substitution and the patient must give consent.
MEDICAL MARKET
Pharmaceutical sales, according to projections from market research firm Business Monitor International (BMI), amounted to $1.5 billion in 2014, a projected increase of 8.4 percent over the previous year. Imports made up 95 percent of those sales. Going into further detail, BMI estimates nearly 74 percent of total sales in 2014 ($1.1 billion) were for prescription medication and that patented drugs accounted for almost 46.2 percent ($700 million) of total spending on pharmaceuticals and 26.6 percent ($400 million) spent on generics with the remaining sales attributed to over the counter medicines. Put another way, their projections highlight patented drugs as 46 percent of pharmaceutical expenditure in 2014. Meanwhile, generics remain low as a percentage of prescribed medications. Walid Ammar, director general of the ministry of public health, says the figure lies somewhere between 15 and 20 percent by volume. To determine the nominal value of Ammar’s percentages, one must rely upon BMI projections due to the unavailability of government data and the unwillingness by both the Order of Physicians and the Order of Pharmacists to share these numbers.
Local manufacturers’ contribution to pharmaceutical sales, according to BMI, accounted for about 5 percent of total pharmaceutical sales in 2014. Much of the production by local manufacturers is exported mainly to countries in the Arab region, with Saudi Arabia a leading consumer of Lebanese medicine. The government supports Lebanon’s pharmaceutical manufacturers by giving tax incentives on exports. In 2014, Lebanon exported 936 tons of pharmaceutical products worth $38 million.
It is in the larger context of healthcare reform that the Ministry of Public Health attempts to implement these prescription forms — the new regulation might encourage greater prescribing of generic medication thereby improving affordable access to quality healthcare service. At least that is the intention. According to the 2007 Household Survey conducted by the Central Administration of Statistics, 51.7 percent of those residing in Lebanon have no health insurance. While the Ministry of Public Health functions as the insurer of last resort — according to a 2012 report on Lebanon’s health statistics by Université Saint Joseph, it counts approximately 1.6 million Lebanese as beneficiaries (as of 2005). Total healthcare expenditures in 2012, the latest statistics available from the ministry, amounted to just over $3.1 billion, 7.17 percent of the nation’s GDP. Based on those figures, Executive calculates that out of pocket expenses — what individuals without health insurance pay — in 2012 reached nearly $800 million. The ministry, meanwhile, paid nearly $430 million in 2012 on total healthcare expenditures with the National Social Security Fund (NSSF) doling out nearly another half a billion dollars in reimbursements. Medication accounts for a large portion of this spending as the country imported $1.1 billion in pharmaceutical products last year, according to figures from Lebanese Customs. The nominal value of drug sales will likely also be affected by implementation of the unified prescription forms — the volume of imports is projected to rise steadily in coming years but an increase in the share of generics would impact those importing drugs or manufacturing locally (see medical market box).
Furthermore, the new forms supposedly allow the tracking of prescriptions, where statistics could point out anomalies in prescription bias toward certain drugs or pharmaceutical companies, and — perhaps to a certain extent — would allow for the monitoring of incomes of those writing and dispensing prescriptions. There is common agreement among those Executive spoke to that implementing the forms will be a positive measure, promoting public health while also saving money for the patients and the government — which by some accounts could be dramatic. Strangely, however, this acclaimed step has been years in the making, and its future implementation remains in question.
Delays, opposition and shrinking profits
“All the administrative obstacles were solved,” says Minister of Public Health Wael Abou Faour, speaking to Executive about the unified prescription forms. Yet even with all the hurdles out of the way, Abou Faour admits that as of late March the forms were not yet being used to prescribe medication and have yet to be printed.
The legal framework needed to implement the prescription forms was prepared years ago, according to Mohammed Karaki, director general of the NSSF, in a written response to Executive’s interview request. He writes that the adoption of the unified prescription form “came within the framework of applying the Law on the Practice of the Pharmacy Profession,” ratified by parliament in March 2010 amending articles of a previous law. Afterwards, in December 2011, then Minister of Health Ali Hassan Khalil issued ministerial decision 1295 publishing the sample prescription form and the conditions under which a pharmacist could substitute medicines.
[pullquote]Even with the law passed and the implementing decision issued, the prescription forms are not in use[/pullquote]
Yet even with the law passed and the implementing decision issued, the prescription forms are not in use. Until recently, much focus had been upon an administrative hurdle at the NSSF — the fund needed to amend their internal rules. Antoine Boustani, head of the Order of Physicians, had said in February his syndicate could not begin printing the prescription forms until the NSSF amended Article 42 of its bylaws that stipulated pharmacists could only dispense medicine as written in the doctor’s prescription. Karaki confirmed the fund would amend the article noting that the minister of labor had already given approval. Indeed, on March 9 — the day Executive spoke with Nabil Semaan, an advisor at the Ministry of Labor and former administrative director of the NSSF — Minister of Labor Sejaan Azzi announced the fund had ratified the amendment.
There has been opposition, as the four year gap between the issuance of the decision and its supposed near implementation indicates. Abou Faour has all but stated the obvious, that commercial interests of the various stakeholders impeded the process.
According to Walid Ammar, director general of the Ministry of Public Health, recent delays are due to the hesitancy of the Order of Physicians. They were “not convinced for different reasons. Some of them don’t trust the generic [medications], some have their own interests, and some are afraid that this prescription form [enables] the Ministry of Finance [to] have a more accurate figures about their income so they should have to pay more taxes,” Ammar says. Karaki corroborates the notion of taxes as an important aspect. “This is considered a method the Ministry of Finance could adopt to follow up on doctors’ incomes, so doctors will limit the unwarranted prescriptions they issue,” he explains. The forms would facilitate the calculation of a physician’s income since written prescriptions indicate patient consultations, for which income should be taxed.
Taxable income is also likely a sticking point for the Order of Pharmacists, which collect duties on the import of pharmaceutical products. “It is worth noting,” reads a report by Ministry of Public Health official Rita Karam, “that drug importers pay a fee of 0.75 percent of the import bill to the Lebanese Order of Pharmacists, of which 0.25 percent is deducted from the pharmacist’s profit. An additional fee of 0.25 percent of the import bill is also paid to the Lebanese Order of Physicians.” Executive had requested these data points from the Order of Physicians, which deferred to the Order of Pharmacists; the latter declined to share the statistics.
CONTROLLING COSTS
Walid Ammar, director general of the Ministry of Public Health, explains that the ministry set out to mitigate spending by first working towards limiting import prices and profit margins. The ex-factory price is the main target, he says, where ex-factory is the price of the product if it were bought at that factory, e.g. without costs of transportation. The ministry determines the local price by looking first to the product’s country of origin for ways to reduce the profit margin, then to those importers and pharmacists in Lebanon. “We have issued several decisions over the years that have reduced the profit margins gradually and the most recent one is to have categories where you have different profit margins depending on the category. The higher ex-factory price gets lower profit margins — this is to encourage the generics mainly,” Ammar adds.
The ministry also compares prices of medicines in other countries’ markets and prior to 2005 based the local price of a given drug on its mean value across markets, though now the government sets the price to the lowest found in a comparison survey of other markets. What has had a big impact, says Ammar, is the ministry’s altering of the profit allowed to the pharmacists — rather than receiving a percentage of the retailing price for a given medicine the pharmacist now can only calculate their profit by a flat rate lump sum. Ammar gives an example of how the ministry has altered the pharmacists’ profit margin for medicines that fall into the highest category on the drug public price list — instead of allowing the pharmacist to mark up the retailing price of a given medicine by a certain percent the ministry has capped expensive drugs with a flat rate lump sum. “We have transformed the profit margin of the pharmacists from a percentage to a lump sum; everything that has an ex-factory above $300 the profit margin of the pharmacist is $86,” Ammar says.
Additional measures to reduce the cost of drugs have focused on the primary healthcare network — local clinics and public hospitals — where generics are dispensed when prescribing medication. But Ammar says that the primary healthcare network has reached capacity, so this is no longer an area that can squeeze profit margins. The alternative has been to shift attention back to the market, where “more than 80 percent of sold drugs are branded, and most are originators [brand name],” says Ammar. A strict registration mechanism validates, among multiple quality controlling factors, the manufacturing conditions and drug bioequivalency, enabling the government to control comparisons of generics to originators and to clearly indicate the equivalence.
In combination, these regulations are meant to reduce the cost of healthcare in Lebanon by controlling profit margins and promoting greater use of generics where those medicines can be appropriately substituted in lieu of the expensive brand name drug. Factoring in the soon to be implemented unified prescription forms might further restructure the share of generics prescribed and the landscape of Lebanon’s pharmaceutical market.
The new prescription form would seem to be a good development for pharmacists — the forms would integrate the pharmacist into the consultative process with the doctor and the patient. It is, according to Abdalla el Lakany, dean of the faculty of pharmacy at Beirut Arab University, a needed step towards improving the doctor–pharmacist relationship. “This reform benefits the pharmacists to clarify their role as a medication therapy expert.” Traditionally, he says, the role of the pharmacist has been limited to the dispensing of medications rather than a direct role in patient care vis-à-vis doctors. In Europe and North America the practice is a patient centered, holistic approach where the pharmacist is a cornerstone in a patient’s treatment regimen, says Lakany, because of their drug expertise. “It is very normal for doctors to ask the advice of the pharmacist,” in Western countries, Lakany says, adding that Lebanon’s new prescription forms might be one step towards changing the culture.
The Order of Pharmacists is backing the implementation of the new prescription forms, Rabih Hassouneh, head of the syndicate, tells Executive, but it is not enthusiastic. “Financially, it is negatively affecting the pharmacists, but we have agreed to abide by it and implement this law because we know this should be a huge benefit to the community, public and to the government budget for pharmaceutical expenditures,” he says. He adds that the government should put in place a system to incentivize physicians and pharmacists to prescribe and dispense generic prescription medicine. Hassouneh would not elaborate as to what such an incentive scheme might look like, saying only, “We have to follow what is happening in other countries.” When Executive asked whether the Ministry of Public Health would compensate any of the stakeholders for potential losses in revenue, Abou Faour retorted, “Everyone is going to lose, but the one who is going to win is the Lebanese patient and the state. [Other stakeholders] are gaining a lot of profits — why should they be compensated?”
For the pharmacists, the profit margins have been squeezed at their expense — the government determines the price at which a drug can be imported whereby both syndicates collect duties as a percentage of the import bill. Concerning the pharmacists, the government decides the price at which medicine can retail for. The 2010 law meanwhile also requires that the pharmacist, upon consent from both the doctor and patient, substitute the equivalent, and cheaper, generic in place of the more expensive brand name drug. And, as Ammar explained to Executive, for the most expensive drugs the pharmacist now receives a lump sum as profit rather than a percentage of the cost.
Puzzle pieces
The new forms should theoretically improve transparency in the writing and dispensing of drugs, in part by creating a paper trail from the doctor to the pharmacist. Boustani says that doctors previously were required to purchase stamps to put on each form with the intention of more oversight of the prescription, but it remained an unenforced practice. Boustani notes the presence of barcodes on the new forms, saying, “you can monitor which doctor prescribed what, which pharmacist gave what, you can track statistics. In the past you could go to the pharmacist and get whatever you wanted. Now you can’t — theoretically you can’t. We’re going to see what happens on the ground.”
While the new forms do create a trail, it is hard to see how prescriptions could be regulated without also implementing a computer system for the Ministry of Public Health to track prescriptions all the way to reimbursement from social security. Implementing the forms cannot be the final solution, says Hassouneh, “There should be an electronic solution starting from the Ministry of Health going to the social security [institutions] passing by [the] physician and it has to end at the pharmacist, otherwise the tracking won’t be effective. We cannot track manually thousands of prescriptions distributed in the market.” Boustani says the physicians syndicate will be fully online within the next two months. When asked whether the government might have plans to implement such a computer system to track prescriptions, Abou Faour answers only that “Yes, we are working on [the computer system], but [there is] no time frame.”
Unified prescription forms and the potential computer system are but two pieces of the healthcare reform puzzle — there have been past measures as well, according to the Ministry of Public Health. The new prescription pads are “part of a national strategy that we have been implementing for years now,” says Ammar, adding context to the latest regulation by describing previous measures (see box).
The World Health Organization in its 2010 World Health Report on Healthcare Financing found that Lebanon’s various healthcare reforms had curtailed unnecessary expenditures. “Reduced spending on medicines, combined with other efficiency gains, means that health spending as a share of GDP has fallen from 12.4 percent to 8.4 percent,” from 1998 to 2004 and by 2012 that ratio stood at 7.17 percent. No government data is available for the latest year, but projections of healthcare expenditures in 2014 by Business Monitor International reached $3.7 billion; the Institute for International Finance announced in March Lebanon’s 2014 GDP reached nearly $47 billion, thus total healthcare expenditures might approach 8 percent of GDP for that year.
Multiple people Executive spoke to pointed out that the prescription of generic medicines as a percentage lies somewhere between 15 and 20 percent by volume. Ammar says this range is not based on any published studies but instead relies upon the quantity of drugs imported into Lebanon. “We are assuming that what is imported is sold. This is not really accurate, so in terms of importation [generics] represent about 15 percent, and you add the local manufacturing [to reach] 20 percent in volume,” he says. Karaki corroborates, writing to Executive that “15 percent of medicine currently used in Lebanon is generic, while generic medicine comprises 40 percent of the list of medicines approved by the NSSF,” but notes that the NSSF has not conducted any studies as to cost savings.
The indication is that an increase in the prescribing of generics over the more expensive brand name medicines might decrease the financial burden on the government and reduce out of pocket expenses for individuals. But again, the government has not projected what effect this might have on healthcare expenditures, holistically or otherwise, leaving Ammar to speculate. “I think this will lower by 30 percent the overall bill, for everybody — the ministry, the social security [institutions], even the beneficiary,” he says.
A changing landscape
With a retail sales volume forecasted to steadily increase in the coming years, the dispensing of generics might increase in share once the regulation is implemented, but it is the nominal value of those sales that might be subject to change. Byblos Bank, in a September 2014 issue of Lebanon This Week, summarized BMI projections noting that the market research company has “attributed the elevated expenditures on pharmaceuticals in Lebanon to the market’s high reliance on imported pharmaceuticals and on over-prescription of medicine in the country. It considered that the lack of consolidation among importers has maintained medicine prices at high levels and has reduced the competitiveness of distributors.” Byblos Bank also noted BMI’s finding that “patented drugs would account for 62.6 percent of total spending on prescription drugs,” for 2014 and said that BMI “expected the usage of non patented medicines to increase in coming years, mainly due to rising awareness about generic medicines.”
[pullquote]“We’ll never … pay less than before … but instead of having an increase of 20 or more percent each [year] you are flattening the curve”[/pullquote]
“If the market functions well,” says Ammar, discussing the role of local manufacturers and importers in shaping Lebanon’s pharmaceutical market, “everything you do is in the hope of being capable of purchasing the very expensive drugs within the resources available.” He points out that Lebanon will continue to spend lots of money on importing medication because there will always be a need — people are getting older, life expectancy is increasing and there are more noncommunicable diseases, he says. “We’ll never, in absolute figures, pay less than before,” he says, “but instead of having an increase of 20 or more percent each [year] you are flattening the curve.”
Those importing medications tend to agree. Discussing the dynamics of the pharmaceutical market, Armand Pharès, president of the Lebanese Pharmaceutical Importers Association, says that “the dynamics include various forces. You have the generics and such a law which will bring the spending down and you have two forces that will bring spending up: one is the growth in population, access to medical services, improvement in diagnosis; the second is the introduction of highly priced and sophisticated medicines.”
Referring to figures from the Customs agency, Lebanon imported $1.1 billion in pharmaceutical products last year — Customs does not simplify its categorization methods to represent the value of imported prescription medications or generics. Pharès points to statistics from IMS Health — a market research firm — for a picture of medicines sold in the pharmacies, “The analysis of the IMS gives us for 2013 a total retail market of $750 million at net selling prices. Add $110 million to the public institutions and more or less the same for hospitals and we end up at $970 million — approximately 77 percent at the pharmacy level, about 11 percent public institutions and 12 percent at the hospitals.”
For the importers not much might change in the interim, but Abou Faour surmises they will be affected by the new regulation, “I think they are pretending that it doesn’t affect them; I think it will affect them because you’ll be moving from brand to generic. The generic with the lower prices will have lower profits.” Pharès does not disagree, but neither does he acknowledge a potential decline to importers’ profits, “At the level of each importer, one should look at one’s profits as the reward one can get from conducting its duties properly — in accordance with public interest; you will always have your share of legal profits whether it is a generic sold or whether it is the originator [brand name].”
Just as Ammar noted that Lebanon’s healthcare expenditures will never decrease in absolute value because of a continuous need for advanced medications to treat a growing and aging population, so to does Pharès. “Bringing the newest and most efficient drugs,” he says, “happens [to be] very expensive, but if you have a drug that is life saving and is costing as much as a car, would you prefer to buy a car or save your life? If you save your life you might say ‘oh [look at] these crooks who manufactured [or] imported such expensive drugs’ instead of saying ‘thanks to those who could make such lifesaving drugs available to us’.”
The multinational company that Executive was able to interview for this article spoke cautiously. When asked what the prescription forms might mean to company strategy Fouad Jeweidi, Levant country head for multinational pharmaceutical Boehringer Ingelheim, only says, “I don’t feel it is a threat to multinational companies because at the end of the day we are trying to offer the best to the patient in terms of medication and disease management.”
Local opportunity
Bernard Tannoury, chairman and CEO of Benta Pharma Industries (BPI), a local manufacturer of generic medicines, acknowledges that the regulation will have an impact in the coming years — “Not yet, [but] it will. The unified prescription is an essential tool in any modern, regulated market.”
Perhaps local companies like BPI will help increase the share of generics prescribed in Lebanon. “It will drastically change our [strategy],” Tannoury says, adding, “Hopefully it will boost the generic business and will boost the business of all the local manufacturers — our bread and butter is the generic business.”
But given the strong reliance on imports to meet Lebanon’s medication needs, it is likely that local manufacturers will face difficulty in penetrating the market with their generics. Tannoury declined to share company data on its position in the Lebanese market with Executive, noting its proprietary nature, but did say that BPI’s “revenues rely to date mainly on the Lebanese market; however the company has been working on the development of international markets to increase its exports and revenues from abroad.”
[pullquote]Lebanon exported only $38 million in pharmaceutical products according to Customs figures[/pullquote]
It seems likely then that local manufacturers will look to the Arab region’s markets for exports. In 2014, Lebanon exported only $38 million in pharmaceutical products according to Customs figures, mainly to Saudi Arabia, Jordan, Iraq, the United Arab Emirates and Kuwait. Industry support by the government to local manufacturers is forthcoming. The Investment Development Authority of Lebanon (IDAL) refers, on its website, to the local pharmaceutical industry as immature and presenting many opportunities for growth. To encourage such growth, IDAL offers pharmaceutical companies with “financial and non-financial incentives which can run up to 100 percent exemption from corporate income tax for a period of 10 years.” Meanwhile, the Ministry of Industry is planning to “introduce 100 percent exemptions on [research and development] expenditures as well as a 50 percent exemption from all taxes incurring from export activities,” according to IDAL’s pharmaceutical industry factbook. In fact, BPI was one of several local manufacturers that benefited from such government support.
The main challenge for local manufacturers then, says Ammar, is that “they are operating in a country with a very small population so they don’t have a big market. Our help was to improve the quality of their production, to help them in our pricing strategy to export.”
The atmosphere hanging above the pharmaceutical market reflects a wait and see attitude. With the current lack of available data on all fronts, it is difficult to reach any definitive conclusion on the market’s direction or the effect on retailers — on the rise in share in the prescribing of generics, or the potential savings awaiting the government. Controlling the quality of available generics and encouraging an increase in their share of prescriptions is a step towards improving patient health and decreasing the amount they pay out of pocket. But in this case, only time will tell what impact the yet to be implemented forms might have, and how quickly change might come.
