The shaping of pharmaceutical governance: the Israeli case

This article focuses on governance of the pharmaceutical sector in Israel. It traces the relationships between the state, industry, and sick funds from before the establishment of National Health Insurance (NHI) in 1995 to the beginning of this decade, in particular as they have grappled with the challenge of making national formulary decisions in a rational manner. Subsequent to the introduction of NHI there have been shifts in the modes and mix of governance. This research shows empirically that a relatively complex mix of hierarchical and network modes of governance can be successfully established over an extended period of time when flexibility is maintained through the implementation process. The system for defining and updating a standard basket of health services has coped well with the challenge of managing a range of difficult and potentially volatile stakeholder relationships in the pharmaceutical sector and of distancing ministers from controversies of funding and listing decisions. Government has succeeded in containing drug costs whilst still maintaining a basket of reimbursable drugs that, from an international perspective, is comprehensive and technologically advanced.

On the other hand, network arrangements appear to have delayed the introduction of suitable accountability relationships and hindered their development. The state has traditionally played an intermediary role between unavoidable corporate interests of industry and sick funds, with little transparency and to the detriment of more pluralistic access to decision making. Governance arrangements in Israel appear to limit the potential and incentive of the state and the sick funds to realize their potential countervailing powers in subsidy and pricing decisions.