Assessment of Cost-Effectiveness for Generics and the Level of Deductible for Pharmaceuticals

Facts

A. AG is the marketing authorization holder for the original product X., which has been on the Specialty List (SL) since July 1, 2005. X. contains the active ingredient Y. and is used to treat neuropathic pain, epilepsy, and generalized anxiety disorders. The patent protection for the latter two indications expired on April 20, 2015, and the one for neuropathic pain on July 16, 2017. In November 2014, the Federal Office of Public Health (FOPH) reviewed, at the request of A. AG and with a view to the impending end of the market exclusivity of X. for the two indications of epilepsy and generalized anxiety disorders, whether the medication still met the SL admission requirements after the expiration of the patent. On January 22, 2015, the FOPH determined by order that the current ex-factory price (FAP) of X. in Switzerland was 5.04 percent too high and accordingly reduced the retail prices for the SL as of May 1, 2015.

In a letter dated May 18, 2015, A. AG argued that the relevant provisions of the Health Insurance Act (KVG), the Health Insurance Ordinance (KVV), and the Health Insurance Benefits Ordinance (KLV) did not address the present situation, in which only the patent protection for two of the three indications of a product had expired. On October 28, 2015, the FOPH ordered a price reduction to the extent requested by A. AG. It set the deductible at 20 percent of the costs exceeding the franchise, as the product would be offered at a price as of December 1, 2015 that exceeded the threshold for the differentiated deductible (of 10 percent).

Considerations

The Federal Supreme Court dismisses the appeal of A. AG. It holds that in calculating the generic price level under Art. 65c(2) of the KVV, the entire Swiss market volume of the original product must be taken into account, regardless of whether all indications have already lost patent protection or not. The appellant cannot draw direct conclusions from patent law for the pricing of (partially or fully) patented pharmaceuticals, as patent protection does not mean price protection.

The Federal…