Chapter 1 Introduction
The Swiss healthcare system is subject to a variety of regulatory frameworks, including the Health Insurance Benefits Ordinance (Krankenpflege-Leistungsverordnung, KLV) and the Health Insurance Ordinance (Verordnung über die Krankenversicherung, KVV). These ordinances are foundational in the governance of drug reimbursement and pricing within the compulsory health insurance scheme in Switzerland.
As of 1 January 2024, the Federal Council has enacted several amendments to the KLV and KVV with the intention of reducing healthcare expenditure and improving market transparency and efficiency. These amendments affect the listing and pricing of pharmaceuticals on the Specialty List (SL), the reimbursement of medicines in special cases and the pricing of generic and biosimilar medicines.
Chapter 2 Management summary
- Pricing changes: The Federal Office of Public Health (BAG) has transitioned from utilising the public price to the ex-factory price (FAP) for medications listed on the SL, removing VAT from the FAP and appending it to the Public Price (PP) together with the distribution margin. This change streamlines administrative procedures, and requires pharmaceutical firms to adapt to new benchmarks in foreign price comparison and therapy cross-comparison.
- Foreign price comparison (FPC) adjustments: Deductibles for Denmark, the Netherlands, Finland and Sweden have been capped, the German deductibles are revised for patent-protected products, and for Denmark different rates for patent-protected and patent-expired products have been introduced. For the UK, the reference price has been altered from the wholesale to the public/retail price. Actual deductions are now permissible for Denmark and the UK providing they surpass minimum thresholds.
- Therapy cross-comparison: There are no alterations for original products; however, following patent expiry, original products and generics will be compared with other patent-expired products or those with known APIs if they do not offer additional therapeutic value.
- Early access for high-need drugs: The new KVV Art. 69a facilitates early market authorisation and reimbursement eligibility for drugs with a high medical need.
- Cost-effectiveness of generics and biosimilars: New assessment rates for cost-effectiveness have been introduced, with heightened scrutiny for inclusion in the SL for generics corresponding to reference products with a market volume of 4 to 8m CHF. Biosimilars now have variable rates for price differentials based on market volume categories.
- Enhanced transparency with KVV Art. 71: Requires the publication of reasons for the rejection or removal of a drug from the SL, the disclosure of information upon receipt of requests for new drug inclusions, and publication of the basis for any price reductions. It also permits the BAG to provide summary information about the status of pending applications to third parties.
- Fixed rebates for reimbursement for off-label use: Introduction of compulsory rebates (10–50%) for the reimbursement of medications used in special cases (KVV Art. 71a and newly Art. 71b). The fixed rebate amount is based on benefit categories.
- Learn more about VAT refund opportunities under the revised KVV Article 71a and b.
Chapter 3 Regulatory changes simplify drug pricing methodology and introduce new comparison criteria
Changes to the regulation of the ex-factory and public price strategic switch in pricing
The BAG has enacted a change in the pricing methodology for drugs on the SL. The BAG now stipulates the FAP rather than the PP. This strategic alteration means the FAP is now exclusive of VAT, which is subsequently added to the PP along with the distribution margin.
This modification simplifies administrative tasks by negating the need for price adjustments in response to fluctuations in the rate of VAT. It is important to note that this change is not applicable to medications with special distribution conditions such as blood products, according to official communication by the BAG.
The primary consequence of this shift is a reduction in administrative complexity for pharmaceutical companies.
Although the change does not directly alter the FAP, companies must take new criteria into account in foreign price comparison and therapy cross-comparison, as detailed in the subsequent sections.
Updates to foreign price comparison (FPC) calculations
The FPC calculation has been updated with several changes. A new upper limit for deductibles has been introduced for Denmark, the Netherlands, Finland and Sweden, with existing percentage rates remaining the same except for Denmark.
In Denmark, deductibles now distinguish between patent-protected products, which retain a 6.5% rate, and non-patent-protected original products, which have a reduced rate of 5%.
The deductibles for Germany have also been amended, lowering the rate for patent-protected original products from 12% to 7%.
In the UK, the reference price has shifted from the wholesale price to the public/retail price.
Under the new KLV Art. 34b para 2, market authorisation holders (MAHs) can utilise actual deductions instead of standard ones for Denmark and the United Kingdom if they can substantiate the difference. However, these deductions must meet minimum thresholds: at least 3% of the pharmacy purchase price for patented drugs in Denmark and at least 2% of the public/retail price in the United Kingdom.
Updated to the therapy cross-comparison
There are no changes for original products. However, post-patent expiry, the original product and its generic will be assessed against other patent-expired original products or those with known active pharmaceutical ingredients that are not listed as generics on the SL. This is contingent on them not offering additional therapeutic benefits compared to the SL-listed original product.
Challenges
These updates introduce an additional layer of complexity to the pricing calculations, necessitating a comprehensive analysis of pricing strategies in Switzerland. Differentiating deductibles for patent-protected and non-patent protected products, along with changes in rates across various territories, will require meticulous adjustment.
Moreover, comparing original products and their generics against other patent-expired products or those with known APIs post-patent expiry suggests increased competition and potential price pressures.
Best practice approaches
- Review and update ERP system configurations and master data to reflect the new pricing structures.
- Collaborate with distributors to ensure correct invoicing.
- Consider the appropriate deductions for FPC calculations, focusing on the amended rates for Denmark, Germany and the United Kingdom as well as the maximum cap.
- Incorporate the new therapy cross-comparison criteria for patent-expired products into Swiss pricing strategies.
Chapter 4 Accelerating market access for high-need drugs
For drugs with high medical need, the new KVV Art. 69a offers an option for early access, allowing MAHs to achieve simultaneous market authorisation by Swissmedic and reimbursement eligibility.
Early dialogue option
MAHs may request an early dialogue with the BAG for complex applications. This dialogue is designed to identify potential obstacles and establish price expectations prior to the submission process.
A specific timeframe is not provided by the new Article, however our experts estimate this to be 6 to 12 months prior to the estimated market authorisation by Swissmedic.
Application submission before preliminary decision
With Swissmedic's involvement, MAHs can apply for SL inclusion at the BAG before Swissmedic's preliminary decision. This method facilitates concurrent market authorisation and SL inclusion.
However, this expedited process necessitates adequate clinical documentation, a definitive indication and a high probability of approval.
Challenges
It is imperative to ensure internal coordination among key stakeholders, including regulatory, market access and finance teams in order to present a unified approach to the authorities.
Moreover, having comprehensive clinical documentation and a well-conceived pricing strategy is vital for supporting and expediting the approval process.
Best practice approaches
- Engage with regulators at an early stage to expedite the process and increase the likelihood of approval.
- Ensure internal coordination among all key stakeholders involved in the approval process to maintain a unified strategy.
- Compile and prepare all necessary data, including clinical documentation, clear indications and evidence supporting a high probability of approval in order to aid and accelerate the process.
Chapter 5 Evaluating the cost-effectiveness of generic drugs and biosimilars
The assessment rates for the cost-effectiveness of generic drugs and biosimilars have been revised. The specific changes for each market volume are depicted in Tab. 1.
The updated rates for evaluating cost-effectiveness now include a higher rate for generic drugs that correspond to reference products with a market volume of 4 to 8m CHF. This alteration means that these generics are subject to increased scrutiny for inclusion in the SL.
Additionally, there is a universal increase in the price differential for all generics during their triennial review.
For biosimilars, the previous flat rate for their price differential relative to the reference product's market volume has been substituted with variable rates based on different market volume categories.
Notably, biosimilars associated with original products with a market volume in the 4 to 8m CHF range will now experience a 5% reduction in the rate for SL inclusion, whereas the rate for the higher market volumes will remain steady or increase from the previous flat rate of 25%.
The challenge
A greater price differential for generics and biosimilars relative to the original product's market volume could potentially reduce market share and profitability by raising barriers to SL inclusion.
Best practice approaches
- Financial planning: Revise financial forecasts and budgets to consider the potential impact.
- Pricing strategy: Re-evaluate the pricing model for generics and biosimilars in your portfolio.
- Cost optimisation: Conduct a comprehensive review of production and distribution costs.
Market volume |
Generics (price difference upon inclusion) |
Generics (price difference upon triennial review) |
Biosimilars (price difference upon inclusion)* |
Biosimilars (price difference upon triennial review )** |
Up to 4m CHF |
20% (unchanged) |
15% (increase of 5%) |
n/a |
n/a |
4 to 8m CHF |
40% (increase of 10%) |
25% (increase of 10%) |
20% |
10% |
8 to 16m CHF |
50% (unchanged) |
30% (increase of 5%) |
25% |
15% |
16 to 25m CHF |
60% (unchanged) |
35% (increase of 5%) |
30% |
15% |
> 25m CHF |
70% (unchanged) |
40% (increase of 5%) |
35% |
20% |
*Before: flat rate of 25%
**Before: flat rate of 10%
Tab. 1: An overview of the necessary price reductions that generic or biosimilar products must offer compared to their original or reference counterparts for inclusion in the SL. It also outlines the price reduction thresholds that these products must meet during their triennial review to be considered cost-effective.
Chapter 6 KVV Art 71 – enhancing transparency
The updated KVV Art. 71 introduces several measures to augment transparency in the drug approval and reimbursement process.
General changes
The new regulation mandates the publication of reasons for rejecting an original drug's inclusion in the SL and for removing a drug from the list.
It also requires the disclosure of information upon receipt of requests for new drug inclusions, indication extensions or changes in the limitations of an original drug. This includes the drug's name, the disease for which therapy reimbursement is requested, the authorisation holder's name, the type of request, the date of request receipt and the status of Swissmedic authorisation at the time of request.
Moreover, the updated version mandates the publication of the basis for any price reductions. It specifies that the BAG must publish the basis for assessing the effectiveness and appropriateness of the original drug, the therapeutic cross-comparison and the innovation supplement, excluding the calculation basis for confidential reimbursements by the MAH.
Additionally, the average price from reference countries must be published when comparing foreign prices.
Procedural information
The revised ordinance permits the BAG to provide summary information to third parties about the status of pending applications for original drugs. This includes detailing which admission conditions are still under clarification without providing substantive justification. It also sets specific timeframes for when the BAG can provide information on pending applications, depending on whether the application was submitted to the BAG with a preliminary decision from Swissmedic or after Swissmedic's approval.
Publication of legal challenges
The new ordinance clarifies that if a decision by the BAG is contested by appeal, the BAG may now publish the type of procedure of the contested decision in addition to the name of the affected product.
Challenge
Pharmaceutical companies are confronted with the challenge of managing public perception and investor relations in light of the increased transparency stipulated by KVV Art. 71. This could lead to a strategic dilemma, whereby companies must weigh up the necessity to defend their interests against the potential reputational risks associated with publicised data relating to regulatory affairs.
Best practice approaches
- Maintain an open and proactive dialogue with the BAG and Swissmedic to stay abreast of the status of drug applications and any pending procedural information.
- Form a cross-functional team that includes legal, regulatory and communications experts to oversee the publication of information and manage the strategic implications of transparency.
- Establish protocols for the swift assessment and response to the publication of reasons for drug rejections or removals, as well as price reductions, to mitigate any potential adverse impact on the company's reputation or market position.
- Develop a comprehensive legal strategy that considers the potential for public disclosure of legal challenges and the associated reputational risks.
- Prepare contingency plans for managing public relations in the event of a legal dispute, including clear messaging and communication channels to address stakeholder concerns.
- Continuously monitor the legal environment and adapt strategies as necessary to align with the evolving regulatory landscape and to protect the company's interests.
Chapter 7 Conclusion
The shift in pricing from public to ex-factory prices, together with the updates to FPC calculations and the introduction of early access for drugs with high medical need, means that existing pricing and market access strategies for pharmaceutical companies need to be re-evaluated.
The intensified scrutiny on the cost-effectiveness of generics and biosimilars, particularly in certain market volume categories, requires companies in this sector to refine their financial planning and pricing models.
Meanwhile, the enhanced transparency measures introduced by KVV Art. 71 highlight the importance of maintaining proactive communication with regulatory bodies and forming cross-functional teams to manage the strategic implications of public disclosures.
PwC's Regulatory specialists are looking forward to assisting and guiding you at every stage of your market access journey to ensure that your company secures swift entry into the Swiss market and helps in delivering essential therapies to patients.
Tax and Legal Services for your business
Explore our Pharmaceuticals and Life Sciences expertise and services.
Contact us
Director, Pharma & Life Sciences – International Indirect Tax & Regulatory, PwC Switzerland
+41 58 792 93 08
