Romania loses EUR 18.6 bln on long term due to poor healthcare

A new study on the pharmaceuticals industry in Romania published this week reveals the domestic economy losses around 15 percent of GDP (2010 level), amounting to EUR 18.6 billion of economic output over the medium to long term, due to the poor health condition of the population. The result was drawn up by analyzing the Disability-Adjusted Life Year (DALY) index developed by the World Health Organization.

The study was carried out by the Economic Forecast Institute within the Romanian Academy, and was supported by the Romanian branch of the Pharmaceutical Research and Manufacturers of America – Local American Working Group.

Increasing healthcare expenditure by 5 percent of GDP sequentially over the next 10 years would help Romania achieve the EU average health status, also adding 6 percent to GDP, or EUR 6.7 billion, due to increased labor force participation and productivity. At present, around EUR 4 billion are allocated for healthcare in Romania.

The pharmaceuticals industry has outstanding claims over EUR 1 billion from the National Health Fund, due to delayed payment terms which exceed 300 days at present. This made companies to pursue parallel exports in order to remain profitable.

The study authors estimate parallel exports in Romania reached 17.1 percent of total domestic drug sales in 2010, or 18.4 percent of total drug imports, but this percentage will increase dramatically this April, when the Health Ministry might impose an overhaul price revision.

At present the public healthcare system is kept alive with short term solutions that include the extension of payment terms, arrears and the claw back tax, which could force some pharma players to restructure their business in Romania. The estimated quarterly average revenues from the claw back tax stand at RON 135 million, which is 8 percent of total consumption.

“The pharma industry in Romania has reached at present a taxation level similar to the gambling industry,” said Lucian Albu, director of the Economic Forecast Institute.” The study shows the healthcare system in Romania is profoundly underfunded,” he adds.

The pharma supply chain to the central and local budgets generates more than 20 percent of the total market value of prescription drugs. Thus, the government collected RON 1.7 billion in 2010. If the claw back tax is taken into account, the figure jumps to 30 percent of this market.

Ovidiu Posirca