With around 136 new medicines awaiting approval for the reimbursed drugs list and a claw back tax that exceeds 20 percent of drugs makers’ sales, the government should move to increase the budget next year and look at other mechanisms that could keep pharma expenditure under control, aside from the claw back, said industry representatives during the third Focus on Pharma event, organized by Business Review last week.
The claw back tax was adopted five years ago and is on its fourth version, but players in the market are angry because they are essentially covering the real consumption of medicines, while the initial goal of the contribution was to rein in consumption.
Claw back covers gap in public funding
Dan Zaharescu, executive director of the Romanian Association of International Medicine Manufacturers (ARPIM), commented that the real consumption of patients is currently 20 percent above the allotted budget.
“The collection rate of the claw back exceeds 90 percent at the moment – it is the tax with the highest collection rate in Romania,” said the ARPIM executive.
The executive added that authorities have used the claw back to control the evolution of the pharma market in the last two-three years, with growth limited at 2-4 percent annually.
Zaharescu also pointed out that the steady revenues collected by the state as claw back are not incentivizing the fight against fraud in the health system.
“The state is not interested in getting and keeping fraud under control because it has someone to pay for it. The claw back mechanism practically eliminates any state intention to control fraud,” said Zaharescu.
According to Anca Grigorescu, coordinating lawyer and founding partner at law firm bpv – Grigorescu Stefanica, the main challenges of the claw back stem from its regulation and the computation mechanism.
Producers of both innovative and generic drugs (products with expired patents) have to pay tax of over 20 percent of their turnover. The sum includes the mark-up of pharmacies and distributors. VAT was also included in the total payable amount, but in 2011 the Constitutional Court ruled that provision unconstitutional.
Producers of generics complain that the current claw back tax is discriminatory, because they have lower regulated revenues, but the tax is the same as for producers of innovative drugs.
Laurentiu Mihai, executive director of the Generic Drug Manufacturers Association in Romania (APMGR), said the quarterly payment of contributions by producers of generics has become a “life or death issue”. It has also seen cheaper drugs starting to be taken off the market in recent years.
Some 1,332 drugs have disappeared from the local market since 2011, including 500 in the last 14 months. Almost 900 of them cost less than RON 50 and half are manufactured in Romania, said Mihai, citing a report by Cegedim Romania, a data provider for the pharmaceuticals sector.
Medicines under a certain value (RON 25) are produced at a loss due to the claw back, according to another Cegedim study cited by the APMGR head.
“I am afraid that although the tax was introduced as a temporary measure, it will stay around for longer,” said Mihai.
A draft bill is currently going through Parliament, which aims to amend the claw back by introducing a differentiated computation mechanism for the innovative and generics industries.
According to Mihai, the bill requires a final vote in the Chamber of Deputies and would see generic drugs makers pay a claw back at 65 percent of the 20 percent levied on sales.
This would reflect another legal provision, which forces generics producers to price their medicines at a maximum of 65 percent of the innovative alternative.
If the current budget for drugs is maintained, Zaharescu of ARPIM estimated that generics producers would end up paying a claw back of 15 percent, while producers of innovative drugs would pay 22-24 percent, if the amendments for the differentiated tax get approved.
Zaharescu said there was also an issue with the quality of data collected by the authorities to establish the consumption of drugs, commenting that some producers have challenged these figures in court.
How to replace the claw back?
Cristian Busoi, an MEP that sits on the Committee for Environment, Public Health and Food Safety, suggested that cost-volume agreements should replace the claw back in the next two years.
“Price-volume agreements don’t have to be invented by us, because they already exist in many EU member states, which we can adapt to Romanian realities. Once agreed by most players they should replace the claw back mechanism, maybe at the start of 2016,” said Busoi.
However, Grigorescu of bpv – Grigorescu Stefanica pointed out that Romania does not yet have the legal framework that would allow the closing of such agreements.
Zaharescu of ARPIM added that price-volume agreements will not bring more money into the system on their own, urging the authorities to increase the budget for pharma spending.
He said that the current regulation bars the National Healthcare Insurance House (CNAS) from getting involved in negotiations over price-volume agreements.
The discussions regarding price-volume agreements come against the backdrop of the government’s intention to update the list of reimbursed drugs by the end of this year.
Zaharescu of ARPIM said that out of 132-136 medicines pending approval for inclusion on the reimbursed drugs list, there are 20-30 drugs that could get on the list through price-volume agreements. However, he stressed that these agreements will require at least three months of negotiations, adding that they could probably get on the list from the second quarter of 2015 at the earliest.
“Medicines are underfunded – we are the only country in the EU that has not had the list of reimbursed drugs updated since 2008,” said Busoi, who also had a stint as head of the CNAS, resigning in February.
He said that during his tenure at the body, officials were concerned about the financial sustainability of the list update.
“In the Romanian healthcare system, if we had another half of the current budget it would work at decent parameters,” said Busoi.
The government let 17 new orphan drugs onto the list this summer and funded the move from the public coffers. At the moment there is no clear decision regarding the mechanism that will finance the update of the list.
Players are calling for a balanced approach that would see both producers and the state finance the move.