Family Planning Clinics: Strain of Norplant's High Up-Front Costs Has
Subsided (Letter Report, 10/07/94, GAO/HEHS-95-7).

When Norplant was first introduced in the United States in 1990, its
high upfront cost made it difficult for federally-funded family planning
clinics to provide Norplant to all clients requesting it.  Because the
demand for Norplant has since leveled off and in some cases declined,
the price of Norplant in the United States is no longer a major
budgetary issue for these clinics.  The subsequent decline in demand for
Norplant appears to be due to the fact that it lasts 5 years and is
reported to have adverse side effects.  Further, women have turned to
another more recently introduced injectable contraceptive that does not
involve surgery and costs $30 plus physician fees for three months of
contraceptive protection.  Comparing Norplant's U.S. price to its
international prices is difficult because different pharmaceutical
companies distribute the implant in the United States and abroad.
Wyeth-Ayerst Laboratories, Norplant's U.S. and Canadian distributor,
sells Norplant for $365--about $100 more than Roussel Cuclad sells it
for in Great Britain.  Also, the contents of the Norplant package vary
widely among distributors.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-95-7
     TITLE:  Family Planning Clinics: Strain of Norplant's High Up-Front 
             Costs Has Subsided
      DATE:  10/07/94
   SUBJECT:  Health services administration
             Contraception
             Birth control services
             Health care cost control
             Health care services
             Comparative analysis
             Health care facilities
             Health care planning
             Developing countries
IDENTIFIER:  Canada
             United States
             Great Britain
             Sweden
             Germany
             France
             Netherlands
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Regulation, Business
Opportunities and Technology, Committee on Small Business, House of
Representatives

October 1994

FAMILY PLANNING CLINICS - STRAIN
OF NORPLANT'S HIGH UP-FRONT COSTS
HAS SUBSIDED

GAO/HEHS-95-7

Norplant


Abbreviations
=============================================================== ABBREV

  FDA - The Food and Drug Administration
  HHS - Health and Human Services

Letter
=============================================================== LETTER


B-258533

October 7, 1994

The Honorable Ron Wyden
Chairman, Subcommittee on Regulation,
 Business Opportunities and Technology
Committee on Small Business
House of Representatives

Dear Mr.  Chairman: 

The Food and Drug Administration's (FDA) approval of Norplant, in
1990, made available the first new contraceptive in the United States
in 30 years.  This new contraceptive--a surgically implanted
device--was expected to provide women a simple way to prevent
pregnancy for a 5-year period.  Questions remain, however, about why
U.S.  Norplant prices are higher than those in other countries and
whether such pricing restricts access by women who must pay for
Norplant out of pocket because they are uninsured or underinsured. 
Therefore, as agreed with your office, we focused our efforts on
determining how (1) Norplant's U.S.  price compares with its price in
Canada and other countries, (2) the price affects the budgets of
Title X family planning clinics, and (3) the U.S.  price has affected
the demand for and acceptability of Norplant. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Norplant, a contraceptive implant, comprises six match-sized capsules
that contain the hormone used in oral contraceptives.  The capsules,
inserted under the skin of a woman's upper arm, slowly release the
hormone over a 5-year period, after which they must be removed. 
Since FDA approved Norplant in December 1990, about 900,000 implants
have been inserted in women nationwide, according to American Home
Products--Wyeth-
Ayerst's parent company. 

The Population Council, a nonprofit organization that conducts and
sponsors research on international population activities and human
reproductive biomedicine, developed and owns the license for the
Norplant contraceptive system.  Norplant combines the active hormone
levonorgestrel with a tubular drug delivery system--silastic. 
Wyeth-Ayerst developed and owns the rights to levonorgestrel; Dow
Corning developed silastic. 

Under an agreement with the Population Council, Wyeth-Ayerst has the
right of first refusal to manufacture and market any products the
Population Council develops using levonorgestrel.  Wyeth-Ayerst
refused the right to manufacture Norplant but is currently Norplant's
licensed distributor in the United States and Canada.  The Population
Council and Wyeth-Ayerst licensed Leiras Oy to manufacture and
distribute Norplant in foreign markets.  Leiras sells Norplant
directly to Sweden and Finland, as well as to international family
planning organizations that, in turn, distribute Norplant in many
developing countries.  Roussel Uclaf distributes the implant in Great
Britain. 

In fiscal year 1994, the Congress appropriated $180.9 million for
family planning under Title X of the U.S.  Public Health Service Act. 
Under the act, Title X clinics provide a broad range of family
planning methods, including Norplant, that are approved by FDA as
medically effective.\1

Over 4,000 Title X-funded clinics serve about 4.5 million women,
including low-income families, adolescents, and people to whom other
sources of family planning services are inaccessible.\2 About 10 to
20 percent of the women who receive Title X clinic services are
Medicaid eligible and can obtain Norplant free of charge.\3 Clinics
subsidize services to the rest of the clientele, including the
uninsured and underinsured, by charging for services on a sliding
scale based on income. 


--------------------
\1 Title X grantees receive funds from the Office of Population
Affairs within the Department of Health and Human Services (HHS) to
provide or contract for family planning services.  Grantees include
state and territorial health organizations, local government
agencies, community organizations, and other organizations--such as
Planned Parenthood--that sponsor family planning services. 

\2 For purposes of this discussion, low-income families include
families with incomes less than 250 percent of the federal poverty
guidelines--ranging from about $7,000 for a family of one to $24,000
for a family of eight. 

\3 Medicaid is a jointly funded federal and state health insurance
program for low-income people.  Eligible recipients include
low-income people who are aged, blind, disabled, or the parent of a
dependent child. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

When Norplant was first introduced in the United States in 1990, its
high up-front cost made it difficult for Title X clinics to provide
Norplant to all clients requesting it.  Because the demand for
Norplant has since leveled off and in some cases declined, however,
Norplant's U.S.  price is no longer a major budgetary issue for Title
X clinics. 

Comparing Norplant's U.S.  price to its international prices is
difficult because different pharmaceutical companies distribute the
implant in the United States and other countries.  Wyeth-Ayerst
Laboratories, Norplant's U.S.  and Canadian distributor, sells
Norplant for $365--about $100 more than Roussel Uclaf sells it for in
Great Britain.  Also, the contents of the Norplant package vary among
distributors.  While the U.S.  and Canadian price covers a kit that
contains a set of six Norplant capsules and the surgical implements
clinicians need to insert and remove them, Norplant's price in Great
Britain covers only the set of six capsules.  However, Roussel Uclaf
provides the surgical implements free of charge on request.  In
developing countries, another distributor--Leiras Oy--sells the set
of six capsules for $23 because its licensing agreement with the
Population Council limits company profits on such sales. 

To help meet the initial pent-up demand for the implant, HHS, the
states, and Title X grantees took action soon after Norplant's
introduction to lessen Norplant's budgetary burden on family planning
clinics.  The subsequent decline in demand for Norplant appears to be
due to the fact that it lasts 5 years and is reported to have adverse
side effects.  Further, women have turned to another more recently
introduced injectable contraceptive that does not involve surgery and
costs $30 plus physician fees for 3 months of contraceptive
protection. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To identify Norplant price differences in the United States, Canada,
and Europe, we interviewed officials from Wyeth-Ayerst Laboratories
and got pricing information from health departments in Sweden,
Germany, Great Britain, France, and the Netherlands.  Wyeth-Ayerst
officials, however, would not give us detailed pricing information
because the company considers this information proprietary.  Price
information was unavailable from France, Germany, and the Netherlands
because Norplant has not been approved for sale in these countries. 

To identify the effect of Norplant's price on the budgets of Title X
family planning clinics and steps these offices have taken to provide
access to Norplant, we interviewed officials from HHS' Office of
Population Affairs headquarters and 10 regional offices.  To
determine the effect of Norplant's price on the family planning
budget process, we interviewed state officials of Illinois, Michigan,
and Oregon family planning agencies, as well as an official of six
Chicago-area family planning clinics.  We also reviewed federal
guidance for the regions on providing Norplant and states' budgets
devoted to Norplant. 

To determine consumer demand for Norplant and the factors that affect
the implant's acceptability, we reviewed research literature from the
Alan Guttmacher Institute, Planned Parenthood Federation of America,
Inc., and various medical journals.  We also interviewed officials
and obtained data from FDA, HHS' Office of Population Affairs, state
family planning agencies, and Title X clinics on consumer demand for
and acceptability of Norplant.  Wyeth-Ayerst officials gave us
information on the total number of Norplant kits sold but would not
disclose sales by class of trade because they consider this
information proprietary. 

We conducted our study between February 1994 and September 1994 in
accordance with generally accepted government auditing standards. 


   PRINCIPAL FINDINGS
------------------------------------------------------------ Letter :4


      NORPLANT'S PRICE VARIES BY
      COUNTRY
---------------------------------------------------------- Letter :4.1

Wyeth-Ayerst sells the Norplant kit for $365 in the United States and
Canada.  The kit contains the six Norplant capsules and the surgical
implements to insert and remove them.  In addition to the kit,
Wyeth-Ayerst also provides patient counseling materials and health
practitioner training on properly inserting and removing Norplant. 

Wyeth-Ayerst officials told us that Norplant's price was based on the
prices of competing contraceptives, rather than the kit's contents.\4
According to Wyeth-Ayerst, when Norplant's $365 price is amortized
over the implant's 5-year life, its daily cost is within the range of
competing contraceptives, such as birth control pills.  However, most
women do not use the implant for the full 5 years.  The implant's
label shows that during clinical trials, before FDA approval, about
80 percent of women discontinued use by the third year.  Therefore,
using 5 years as the basis for determining Norplant's daily cost may
not be the best way to compare price with other contraceptives.  When
the implant's cost is amortized over a 3-year period, the cost
increases from 20 cents to about 33 cents per day. 

Roussel Uclaf sells the Norplant capsules to Great Britain's National
Health Service for about $100 less than Wyeth-Ayerst's U.S.  price.\5
Roussel Uclaf packages the Norplant capsules separately from the
surgical implements for insertion and removal.  Roussel Uclaf will
provide physicians the surgical implements free of charge on request. 

Under Leiras Oy's agreement with the Population Council, Leiras
limits its profits to 12 percent for Norplant sales to developing
countries.  Accordingly, Leiras sells Norplant for $23 to the U.S. 
Agency for International Development, the United Nations' family
planning agency--the United Nations Population Fund--and to the
International Planned Parenthood Federation. 

Leiras Oy also sells Norplant for about $51 in Sweden.  The Swedish
health care system subsidizes the cost of the implant so that the
consumers' out-of-pocket cost is about $30.  Swedish officials
reported that the product they receive from Leiras contains only the
six Norplant capsules and not the counseling or training materials
that Wyeth-Ayerst and Roussel Uclaf provide. 


--------------------
\4 Wyeth-Ayerst officials told us that they will begin to discount
Norplant's price to the public sector by 1996 in accordance with
their agreement with the Population Council.  However, the agreement
does not specifically state the amount of the discount. 

\5 Norplant in Great Britain is about $100 less than Wyeth-Ayerst's
product when calculated using an exchange rate of $1.50 to ï¿½1.  Also,
Great Britain does not have a private market for Norplant; as a
prescription-only-medication, the implant can only be obtained
through the national health care delivery system. 


      NORPLANT'S HIGH UP-FRONT
      COSTS REQUIRED SOME FAMILY
      PLANNING CLINICS TO ADJUST
      THEIR BUDGETS
---------------------------------------------------------- Letter :4.2

Initially, Title X clinics had to limit availability of Norplant due
to its high price and clinic budget constraints and to ensure that
clients received a broad range of contraceptive options.  To augment
their supply of Norplant kits, some clinics earmarked money
especially for Norplant purchases and sought additional funding from
private sources.  Despite the additional funding, some clinics could
still not meet the initial demand for Norplant and had to ration it. 

Office of Population Affairs instructions require Title X clinics to
provide a broad range of acceptable, effective, and FDA-approved
contraceptive options.  Because Norplant is an approved
contraceptive, clinics must provide it on a sliding fee schedule
either on site or by referral.  However, Norplant's high up-front
cost made it difficult for Title X clinics to provide Norplant and
charge for services based on income.  For example, a teenager earning
less than $7,000 per year would not be charged for the implant,
counseling, insertion, or follow-up visits.  In this case, a Title X
clinic would immediately bear the full cost of services, which could
amount to $500 or more ($365 for the implant plus medical fees),
rather than spread the implant's cost over a multiyear period. 

To minimize Norplant's potential financial impact on Title X clinics
without causing them to serve fewer clients, HHS allowed the clinics
to limit Norplant services based on budget constraints and patient
demand for other contraceptives.  HHS also permitted Title X grantees
to concentrate Norplant services in magnet or hub locations into
which clinics could channel patients.  For example, Planned
Parenthood of Chicago has six clinic sites, but only the Austin
Health Center provides Norplant services.  The other five clinics
channel patients desiring Norplant to the Austin Health Center. 

Grantees may also receive additional year-end funds from the Office
of Population Affairs to augment their budgets.  The Office of
Population Affairs normally reserves a portion of the Title X
appropriation to, in part, respond to special needs that arise during
the fiscal year.  The Office distributes unused funds from this
reserve to the regions that, in turn, award the funds to their Title
X grantees.  In several regions, grantees earmarked these funds for
Norplant purchases. 

In addition, states recognized the financial burden that Norplant
placed on Title X clinics and took a variety of steps to help
grantees and clinics meet demand for the implant.  For example,
Wisconsin used privately donated funds in 1991 to purchase Norplant
for low-income women not covered by Medicaid.  California set aside
$5 million for Norplant in state fiscal years 1992, 1993, and 1994. 
In 1993 and 1994, the Michigan legislature allocated about $500,000
for Norplant.  Between January 1993 and April 1994, Illinois
purchased more than 250 Norplant kits to distribute to its Title X
clinics on demand. 

Some Title X clinics also augmented their resources by having
clinic-affiliated clinicians apply for Norplant Foundation kits.\6
Wyeth-Ayerst established the Norplant Foundation to provide up to
8,000 free kits yearly to low-income women without medical
insurance.\7 The Foundation limits each clinician to 10 donated kits
annually.  Through July 1994, the Foundation provided about 16,500
kits to low-income women.  However, we could not determine the extent
to which Title X clinics augmented their resources using these
donated kits because the Foundation does not keep data on the number
of kits provided to Title X-affiliated clinicians. 

State family planning and Title X clinic officials told us that
relatively few women received the Norplant Foundation kits.  The
Foundation's requirement that clinicians insert and remove donated
kits without reimbursement may be impractical for nonprofit family
planning agencies, which must collect fees or third-party
reimbursements to remain financially viable.  According to the Alan
Guttmacher Institute, local health departments and Planned Parenthood
clinics' sliding scale fees ranged between $35 and $385 for inserting
Norplant and between $162 and $250 for removing the implant.  Title X
clinic representatives believe that forgoing such fees can compromise
their clinics' financial viability or reduce the number of clients
served and services provided. 

Title X clinics can also make the implant more accessible by allowing
clients to pay for services in installments or with a credit card. 
According to the Alan Guttmacher Institute's November 1992 survey,
more than 40 percent of the 616 responding family planning agencies
offering Norplant reported accepting installment payments for the
implant.  Twenty-one percent of clinics reported allowing patients to
use a credit card to pay for services. 


--------------------
\6 Title X requires its family planning clinics to have a medical
director on staff.  Clinics may contract with local physicians for
additional medical procedures, such as intrauterine devices, Norplant
insertions, and sterilizations. 

\7 To qualify, women must have no insurance coverage for reversible
contraceptives, an annual income less than 185 percent of the federal
poverty income guidelines, and clinician sponsorship. 


      TITLE X CLINIC DEMAND FOR
      NORPLANT HAS DECLINED
---------------------------------------------------------- Letter :4.3

Eight of the 10 Office of Population Affairs regional offices
reported that the initial demand for Norplant has subsided,
decreasing clinic demand for the implant.  Regional officials
attributed the decreased demand to the implant's high up-front costs,
long-term nature, and surgical insertion and removal procedures.  An
official in one region stated, however, that it is difficult to
determine whether demand for Norplant has declined solely because of
its cost or because of patient knowledge that clinics have limited
supplies. 

In June 1994, about 1,000 Norplant users joined a nationwide class
action suit alleging that Wyeth-Ayerst did not adequately warn them
of the lengthy surgery and scarring that may occur when the implant
is removed.  Moreover, some women found Norplant's side effects, such
as irregular menstrual cycles and weight gain, intolerable. 

Some women have chosen to use an alternative contraceptive called
Depo-Provera that FDA approved in 1992.  Each injection costs about
$30 plus physician fees and protects against pregnancy for 3 months. 
While Depo-Provera has many of the same side effects as Norplant, its
lower cost, shorter duration, and quarterly injections are preferable
to some women. 


---------------------------------------------------------- Letter :4.4

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days after its issue date.  At that time, we will send
copies to the Secretary of Health and Human Services, the Surgeon
General, the Assistant Administrator of the Office of Population
Affairs, and other interested parties.  We will also make copies
available to other interested parties on request. 

Should you or your staff have any questions about this report, please
contact John Hansen, Assistant Director, at (202) 512-7105 or
Enchelle Bolden, Senior Evaluator, at (312) 220-7684.  Other major
contributors to this report include Shaunessye Curry and Janina
Johnson. 

Sincerely yours,

Leslie G.  Aronovitz
Associate Director,
 Health Financing Issues