Artificial pricing of medicines and government-industry sick fund relationships in Israel

Following the introduction of National Health Insurance (NHI) in 1995, the Israeli government's role in the pharmaceutical sector significantly increased. The first few years saw the establishment of a NHI basket of services with a process for updating, a greater involvement in co-payment policy (leading to a 50% increase in prescription copayments in 1998), changes to the Patent Law and data exclusivity regulations, as well as a number of pricing reforms, according to a report written by Dr Philip Sax, editor of the Israeli PHARMA Drug Bulletin.

The latter involved the introduction in 2001 of external reference pricing (ERP) and of parallel imports. At the same time, the government remained an active participant in the local pharmaceutical market, purchasing medicines for hospitals and the army.

For about two decades there has been a continuous increase in the share of out-of-pocket health expenditure of total health expenditure (currently about 43%, one of the highest among OECD countries). A major driver of this has been the out-of-pocket expenditure on prescription medicines. Surveys over many years testify that patients, especially those in lower socio-economic groups and/or on chronic multiple medications, are going without medication due to the burden of copayments.