The drug budget silo mentality: the French case

The objectives of this study were to give a review of the complex system of budgetary constraints to which the French health-care system has been committed since 1996 and to evaluate the consequences on drug policy and on efficient use of pharmaceuticals.

Literature review, legal texts analysis, and interviews with policy makers and companies managers were performed.

The budgeting process applies to health insurance expenditures as a whole, but also to each of its components, especially hospital expenditures and pharmaceutical expenditures. Because the targets are set by reference to the gross domestic product growth while health-care expenditure is driven by demographic factors, technology, and expectations, there is inevitably a gap between the top-down budget and the bottom-up cost pressures. The pharmaceutical budget is achieved by a payback system that "taxes" companies when the growth target for aggregated pharmaceutical expenditure is exceeded. The government is now seeking to set more realistic overall global budgets and for pharmaceuticals in particular. It is also encouraging generics, delisting from reimbursement drugs of limited therapeutic value, making a special budget for new drug purchases available to hospitals, and replacing price control for innovative products with a more selective process of intervention in the expectation that companies will seek to price at a European level.

The budgetary system produces a perverse incentive for companies to heavily promote new products in the knowledge that the budget overruns will be spread across all companies, as well as lacking incentives for using pharmaceuticals efficiently. Although the new drug policy will increase the efficiency of pharmaceutical expenditure, it is not apparent that they change the poor incentives facing doctors, hospitals, and insurers to use pharmaceuticals cost-effectively to achieve the optimal gain in health care. They will not remove "silo budgeting" at the national level for pharmaceuticals, which inhibits the efficient substitution of drug therapy for hospital treatment.