Healthcare Ministry and pharma industry form workgroup for clawback change

Pharmaceuticals companies argue the current clawback tax forces them to cut production and jobs in order to contain costs, dragging some into insolvency, so the Healthcare Ministry has set up a working group that comprises of public authorities and pharma industry to provide a new clawback taxation mechanism by June 15.

The work group includes members of the Ministry of Public Finance, Healthcare Ministry, the national insurance house CNAS, as well as the association of international pharmaceuticals producers (ARPIM) and the association of generic pharmaceuticals producers (APMGR).

“This issue has been of concern for me ever since I started my mandate. Unfortunately, this is a situation we took over and we are trying to solve it in the shortest time possible as emerging tensions can block the supply of pharmaceuticals,” said on Monday, Healthcare minister Vasile Cepoi.

The clawback tax has reached its third version since 2009 and represents 33.6 percent of the total subsidized sales of pharmaceuticals. The industry has to pay a quarterly EUR 100 million for the clawback, but companies argue it is used to cover the deficit in the pharmaceuticals budget instead of controlling the pharma consumption.

Romania had a pharmaceuticals consumption amounting to RON 6.8 billion (about EUR 1.5 billion) in 2011, while the public budget covered a consumption of RON 5.7 billion (around EUR 1.3 billion).

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“The attempt to force the pharmaceuticals industry to finance the whole deficit in the healthcare system can only lead to its destruction, impacting patients and the economy,” warned Dragos Damian, APMGR president.

Damian, who is CEO of generics producer Terapia Ranbaxy, said the clawback paid by the industry in Q4 2011 amounted to EUR 200 million (EUR 45 million). The clawback is a fiscal tax which has to be fully supported by companies and can’t be included in the price of pharmaceuticals. This is also eating the profit of these companies. Terapia Ranbaxy lost around 40 percent of its profit due to the clawback, according to Damian.

Representatives of ARPIM and APMGR said the clawback may become sustainable if it taxes only the production prices, removing the mark up of distributors and pharmacies and the VAT as it is the case right now. In addition, the budget of subsidized pharmaceuticals in the previous year should be used as reference for the clawback.

CNAS seems to be the main culprit in the situation as it uses outdated information to asses the pharmaceuticals consumption. Damian said the clawback is calculated in a non-transparent manner, including products which have been pulled off the market 5 years ago. This leads to errors of 20 to 30 percent in the calculation of the clawback.

Companies are also facing payment terms from the CNAS exceeding one year pharmaceuticals worth EUR 1.3 billion have been consumed but haven’t been paid yet, according to Sorin Popescu, coordinator of the communication group at ARPIM.

The generics market grew by 16 percent in 2011 to EUR 515 million, according to data from PwC consultancy, while the overall market grew by 12.4 percent to EUR 2.55 billion, according to Cegedim.

Ovidiu Posirca