Pharmaceutical products may enter the market by permission of the National Agency for Medicines, which is subordinate to the Ministry of Social Affairs and Health. New drugs can also enter the market by the integrated European market authorization system.

Pricing matters are dealt with at the Pharmaceuticals Pricing Board, which is attached to the Ministry of Social Affairs and Health. The Board regulates the prices of those drugs that are reimbursed by the NHI; there are no restrictions on pricing for other drugs having a marketing licence. For a pharmaceutical to be licensed as a reimbursable drug, its wholesale price– as determined by the Pharmaceuticals Pricing Board – must be reasonable. The “reasonable” wholesale price refers to the maximum price at which a drug may be sold to pharmacies and hospitals. The Pharmaceuticals Pricing Board also deals with applications for wholesale price increases for reimbursable drugs.

The retail price is determined by a combination of the wholesale price, the pharmacy’s profit margin at the rate set by the Government and value-added tax.

The majority of drugs that have been granted sales permission in Finland also are licensed as reimbursable. Some mild analgesics that are sold in very small packages, and pharmaceuticals whose manufacturer has not asked for a reimbursement licence, are excluded. In these cases the manufacturer decides on the price of the pharmaceutical. This is done, for example, in the case of preparations used in hospitals (anaesthetics and radiological contrast mediums); the hospital and the producer negotiate a contract on the amount and price of such products.

Pharmaceuticals can be sold only by pharmacies. Prescription drugs are sold on the order of a medical doctor, a dentist or a veterinary surgeon. Pharmacies are privately owned but require a licence from the National Agency for Medicines. The number and location of pharmacies are therefore controlled.

The use of generic prescribing is modest, although it is now permissible to write the generic name of the pharmaceutical on the prescription instead of the brand name, which was obligatory before. Prescribing in electronic form is also permitted, so that drugs can be prescribed by fax or electronic mail if the sender and the recipient can be identified. However, the reimbursement procedure for electronic prescriptions is still under development.

As in many other European countries, pharmaceutical costs are rising continuously in Finland. From the beginning of the 1990s until 1998, pharmaceutical costs grew by about 10% every year. This growth was in contrast to the trend in other health expenditure categories, where expenditure decreased in the first half of the 1990s. The main reason for the growth is the use of new expensive drugs.

Since 1997, a number of measures have been launched to contain rising pharmaceutical costs:

• The purpose of the compulsory stockpiling system is to ensure pharmaceutical supply under exceptional circumstances. It is calculated to supply certain essential drugs for a specified minimum period. Previously, there was a stockpiling surcharge on the wholesale prices of such drugs to cover the additional costs arising from stockpiling. Since 1998, the additional expenditure arising from stockpiling has been covered by the National Emergency Supply Fund.
• The Pharmaceuticals Pricing Board has been obliged to check occasionally that wholesale prices remain reasonable.
• A holder of a sales permit applying for inclusion in the reimbursement scheme is required to carry out an economic evaluation and present it to the Pharmaceuticals Pricing Board as part of the application. Guidelines on the conduct of pharmaco-economic studies were issued by the Ministry of Social Affairs and Health in 1999. 
• The therapeutic value and cost–effectiveness of new drugs must be demonstrated (data on effectiveness and experience of usage in daily life) before they can become eligible for 75% or 100% reimbursement. In practice this means that drugs are likely to be sold in the basic reimbursement category for two years, after which they can be considered for the higher reimbursement categories.
• In the case of new and expensive drugs, specialist doctors must issue patients who qualify with a separate patient-specific certificate to prove their eligibility for reimbursement. Examples of these kinds of drug are betainterferon and medication for Alzheimer’s disease, which are both very costly.
• The formula for determining pharmacy profit margins was simplified and made more regressive. This means that pharmacies do not make the same percentage profit on higher priced drugs as they do on lower priced drugs. Cheaper drugs have thus become more expensive and, vice versa, more expensive ones cheaper. 
• The value-added tax on drugs was lowered from 12% to 8%.
• A national development programme was launched to change doctors’ prescribing practices. The objective of the programme is to encourage more rational and evidence-based prescribing. It aims at making doctors more aware of the cost–effectiveness and safety of the medication they prescribe to their patients.

The above measures seemed to slow down the growth in pharmaceutical spending after their introduction. In 1998, the growth in retail spending was less than 1%, and reimbursement spending grew by 2.1% compared to 9–10% in the previous years. In 1999, however, drug expenditure and reimbursement costs started growing faster again (the former grew by 8.9% and the latter by 8.2%). Although some of the above-mentioned measures may still have an impact in the long run, it seems that the problem of growing pharmaceutical costs has not been solved and that further measures are needed.