Reducing financial hardship by introducing reference pricing for medicines and abolishing balance billing in Georgia

Georgia

Photo: WHO Georgia Regulating and reducing medicine prices for patients played a role in lowering the country’s overall inflation rate.

Reducing financial hardship through health reform

Since the inception of health reforms in Georgia in 2013, the Government has striven to improve access to quality care. In alignment with WHO's universal health coverage (UHC) guidelines, the country aimed to minimize financial hardship by increasing the share of the population with publicly financed health coverage and decreasing reliance on out-of-pocket payments (OOPs). Efforts led to OOPs dropping from 73% in 2012 to 40% in 2022.[1] Despite this success, key issues like balance billing - where healthcare providers were allowed to bill patients for the difference between the provider's charge and the amount covered by the government funded program - and unregulated medicine prices remained, contributing to financial hardship for many people in Georgia. To combat these issues, in late 2022 and early 2023, the Government rolled out two pivotal reforms: a reference pricing system for medicines, and the abolition of balance billing in hospitals as part of a provider payment reform to introduce Diagnosis Related Groups (DRGs).[2][3] According to reports from the Georgian Government, these measures have significantly reduced medicine prices and patient co-payments for inpatient care (which decreased from 27 percent of the total cost of inpatient care in 2022 to 10% in 2023), alleviated financial hardship, and increased funding for hospital services in 2023. [4] This is in line with SDG 3.8, which aims to ensure that everyone can use quality health care without experiencing financial hardship, which is included in the United Nations Sustainable Development Cooperation Framework in Georgia. These measures are also an example of putting “Delivering United Action for Better Health – a strategy for collaboration between the WHO Regional Office for Europe and Member States in the WHO European Region,” into practice, tailoring WHO’s support to the country’s needs, balancing responsive support with longer-term strategic goals.

Key WHO Contributions

Provided continual strategic guidance, policies, and priorities - rooted in the WHO Biennial Collaborative Agreement (BCA) - steering Georgia towards making health care – including essential medicines – more affordable for people.
Conducted a comprehensive study in 2021, analysing Georgia's household budget surveys to identify the primary causes of financial hardship related to out-of-pocket payments for health care. Updated this information and made it easily accessible through an interactive platform, UHC watch (https://apps.who.int/dhis2/uhcwatch).
Played a pivotal role in policy discussions, collaborating closely with the Government of Georgia and international experts to draft key reports and offer strategic insights into health reforms.
Provided hands-on technical support to the Government in implementing the reference pricing system for medicines and the DRG system for hospitals.
Facilitated collaboration with key partners, particularly the World Bank, to ensure an integrated approach to health reforms in the country, fostering a collaborative ecosystem for change.

"Since the implementation of the DRG model, and the abolition of balance billing, patient co-payments for medical services in hospital have been significantly reduced - which was one of the main goals of the reform."

-Ilia Ghudushauri, Deputy Minister, Ministry for Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Affairs, Georgia

How did Georgia, with the support of WHO, achieve this?

To assess the situation in Georgia, the WHO Regional Office for Europe conducted a study in 2021, analysing data from the country's household budget surveys. The WHO assessment indicated that the primary causes of financial hardship at that time were out-of-pocket payments for outpatient medicines and inpatient care. [5] The main factors driving catastrophic health spending were identified as balance billing in hospitals, lack of robust price regulation, a ceiling on government-funded coverage, and no mechanisms to control service volume. The assessment data were regularly used for advocacy purposes in high-level meetings and policy dialogue events, and WHO Georgia’s launch of the financial protection report was highly successful, receiving widespread media coverage and resonance among the public, leaders, and politicians. [6] WHO provided interviews to TV channels on the topic and had a meeting with representatives of the pharmaceutical industry to explain WHO guidance on improving access to essential medicines, with the final goal of improving financial protection of the population.

^{Regulating and reducing medicine prices for patients played a role in lowering the country’s overall inflation rate.}Photo credit: WHO Georgia

In late 2022 and early 2023, the Government rolled out two pivotal reforms to address these challenges: 1) introducing a reference pricing system for medicines and 2) abolishing balance billing for hospital care as part of a provider payment reform to introduce Diagnosis Related Groups (DRGs). [7] WHO Georgia conducted analyses, drafted reports, spearheaded policy dialogues with the Government and international experts, and offered technical support in rolling out these reforms. WHO also collaborated with partners, notably the World Bank, on these matters. The subsequent drop in medicine prices for patients was so significant that it contributed to a reduction in Georgia's overall inflation rate, as noted by the World Bank.[8] The list of reference-priced pharmaceutical products continues to grow, now encompassing over 2300 medicines, including antihypertensive, anticoagulant, antihistaminic, antibiotic, gastrointestinal, analgesic, anti-inflammatory, and oncological medicines.[9]

The new hospital payment system standardizes pricing for priority population groups and curtails balance billing.[10] The success of the reference pricing and DRG payment system, coupled with the elimination of balance billing, is credited to several factors: a commitment to increased health funding; robust national leadership aligned with UHC goals; unwavering political commitment from both the Minister of Health and parliamentarians; strategic guidance and policies from WHO; an effectively managed and transparent price regulation system ensuring monitoring and enforcement and therefore distributor and pharmacy compliance; and the synergistic collaboration between stakeholders and development partners. Notably, the implementation of reference pricing and DRGs is tied to disbursement linked results for loan and grant allocations by the World Bank and the Asian Development Bank (ADB).

WHO's efforts in Georgia were anchored in the WHO Biennial Collaborative Agreement (BCA), which prioritized reducing financial hardship and enhancing access to medicines. By implementing these changes, Georgia has made significant strides in making health care more affordable for people, potentially serving as a model for global initiatives

References

National health accounts data, 2005 – Global Health Expenditure Database, 2022 (unpublished data).
External reference pricing is the practice of regulating the price of a medication in one country, by comparing with the price in a "basket" of other reference countries, see WHO guideline on country pharmaceutical pricing policies for more details. In Georgia see the Georgia Ministry of Health. Reference pricing [web portal]. Georgia Ministry of Health Reference Pricing, accessible only from Georgia.
DRGs is a classification system for inpatient hospital services that groups patients with similar diagnoses and treatment into homogeneous groups and is also used for reimbursement purposes. See WHO guidance - Diagnosis-related groups (DRG): A Question & Answer guide on case-based classification and payment systems. WHO DRG Q&A Guide, accessed 20 March 2024.
Ministry of Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Affairs of Georgia [web portal]. Ministry of Health of Georgia News Portal, accessed 22 January 2024.
WHO Regional Office for Europe. Can people afford to pay for health care? New evidence on financial protection in Georgia [report]. Financial Protection in Georgia Report, accessed 19 March 2024.
WHO Regional Office for Europe. Georgia on the path to universal health coverage, but gaps persist. Georgia UHC Progress Report, accessed 19 March 2024.
World Health Organization. Diagnosis-related groups (DRG): A Question & Answer guide on case-based classification and payment systems [report]. WHO DRG Q&A Guide, accessed 22 January 2024. (Repeated entry)
World Bank. Georgia monthly economic update – June 2023 [report]. Georgia Economic Update June 2023, accessed 22 January 2024.
Georgian Public Broadcaster. Reference prices to apply to over 2300 medicines in Georgia. [news article]. News Article on Reference Prices in Georgia, accessed 22 January 2024.
The Minister of Health, together with the deputies and members of the working group, evaluated the DRG reform [news]. Evaluation of DRG Reform in Georgia, accessed 23 February 2024. (Repeated entry)