Israelis have access to a secure, safe and stable supply of a wide range of pharmaceuticals.
According to the most recently available data, pharmaceutical expenditure in Israel accounts for approximately 15-20% of total health expenditure (Bin Nun 2003). Within the health plan sector they account for approximately 15% of total health plan expenditure (1999),41 and in household spending for approximately 20% of total household spending on health (1999). Israel has a large, successful and growing pharmaceutical industry. The major companies include several which are traded on the New York Stock
Exchange, most notably Teva, whose market valuation in July 2002 was approximately US $8 billion. However, it is important to keep in mind that these companies focus primarily on the manufacturing and distribution of generic drugs. The vast majority of patented medications dispensed in Israel are imported from abroad or are produced in Israel under license from foreign pharmaceutical companies. Imports account for approximately half to two thirds of the total market in terms of sales.
As in other countries, the vast majority of pharmaceuticals are dispensed in community settings, as opposed to hospitals. Within the community there are three main types of pharmacies: about 500, usually in clinics, owned by the health plans, about 600 independent pharmacies and about 150 owned by large chains. Pharmacies must receive a license from the Ministry of Health in order to operate. In the past decade, the market share of the large chains has increased markedly.
The government plays several key roles in the pharmaceutical sector, including approving pharmaceuticals for sale, establishing the NHI formulary of drugs all health plans must make available to members, setting maximum prices, licensing pharmacists and regulating the pharmaceutical market.
Under NHI health plan members must make a co-payment for drugs (see the section on Health care financing and expenditure). Most community-based pharmaceutical use is provided under NHI and is therefore financed primarily by the health plans and secondarily through co-payments. In addition, individuals purchase pharmaceuticals without contributions from their health plans, especially for over-the-counter (OTC) medications. Individuals cover the full cost of prescribed medications that are not in the NHI formulary and all prescriptions by private physicians.
All four health plans have some pharmacies of their own, but they also have arrangements with the pharmacy chains and independent pharmacists to bill them for drugs dispensed to their members. The role of health plan pharmacies is most pronounced in Clalit. Recently, independent pharmacies have been closing while the pharmacy chains have been growing, and the system is in the end stages of stabilizing itself.
The Ministry of Health establishes maximum prices for all pharmaceuticals approved for sale. These prices serve as ceilings only and are relevant primarily in the case of private purchases by individuals. All the health plans negotiate substantial discounts with manufacturers and importers, which are applied in every type of pharmacy. Various efforts are underway to promote the use of generic medications and the use of lower-cost drugs in particular. For example, the health plans highlight them in various circulars or lists of recommended medications and, in some cases, very expensive patented alternatives can be prescribed only with special permission from supervisors.
Many of the health plans' clinical protocols developed to reduce costs and improve the quality of care are related to pharmaceutical use. Some health plans monitor the prescribing behaviour of individual physicians and groups, by specialty, sending them periodic feedback regarding their prescribing pattern compared with others in the same specialty. Frequent updates regarding suggested prescribing are sent out from the health plans' central offices, based on computerized systems, to register the health plans' prescribing preferences.
There are no formal or automatic financial penalties for physicians who over prescribe. Their supervisors may call them in to discuss their prescribing patterns, give them a chance to explain and exhort them to be more careful in future.
In 2000 Israel had approximately 3900 licensed pharmacists under the age of 65, or 0.61 per 1000 population, up from 0.50 in 1990. Just over half of the pharmacists are women. Approximately 20% of the pharmacists are immigrants who have arrived in Israel since 1988.
Most pharmacists are salaried employees. In community settings they sometimes receive bonuses from the owners of the pharmacies, which can be tied to sales volume measured in revenue or the number of prescriptions.
Pharmaceutical services also play a large role in hospitals. The main services provided by hospital pharmacies are production of pharmaceuticals and inventory management. In general hospitals in 1996 there was an average of 1.23 full-time pharmacists per 100 hospital beds and 1.09 positions for other pharmacy employees (Livne et al 2000). Israeli hospitals are a major locus of large, multi-site international clinical trials. This is believed to be due to the high level of medical care and the reputation for careful adherence to study protocols.
Israelis are generally perceived to be eager consumers of medications. Physicians often feel pressured not to end a visit without writing a prescription and there is substantial public pressure to keep adding new medications to the NHI benefits package.
In recent years, the pharmaceutical market has undergone several important changes, including:
This last item is the most significant and controversial. Until 1999 Ministry of Health regulations stipulated that a pharmaceutical could only be imported by the licensee which initially arranged for the drug to be approved for distribution in Israel - that is, a subsidiary or agent of the manufacturer. This exclusivity arrangement conferred substantial monopoly power to the licensee, that used it to advance the objectives and pricing policies of the manufacturer. In an effort to increase competition and reduce prices the Knesset approved a change in these regulations in 1999, signed into law by the Ministry of Health in 2000. The new regulations permit various non-profit organizations, particularly the health plans, and recognized pharmaceutical traders to import licensed pharmaceuticals from developed countries without approval from the manufacturer or its agent.
The change was vigorously opposed by the large multinational drug companies, their agents and subsidiaries in Israel and Pharma, the association for research-based pharmaceutical companies. They argued that parallel importation violates patent rights and international trade agreements and that there are health risks since some of the medications might be counterfeit or damaged. The battle against parallel imports was waged on two main fronts, legal and diplomatic. On the legal front, the multinationals brought suit, eventually taking the case as far as the Supreme Court of Israel. On the diplomatic front, the office of the US Trade Representative and other organs of the US government put heavy pressure on the Israeli government to disallow parallel imports.
Israel actually began to engage in parallel importation in the beginning of 2001. In mid 2001 the Supreme Court upheld the legality of parallel imports, rejecting claims that it constituted a patent infringement or that it posed health risks, since Israel would be importing only from industrialized countries.
 | From the HiT (Healthcare Systems in Transition) of Israel (2003) [pdf, 690KB] | |
