Portugal's MoH and Apifarma Agree to Reduce Expenditure by USD384.3 Mil.
Portugual's Ministry of Health, Ministry of Economy, Employment and Finance, and the Association of Portuguese Branded Pharmaceutical Industry, Apifarma, have signed an agreement to collaborate on reducing expenditure by EUR300 million (USD384.33 million) in 2012.
IHS Global Insight Perspective
According to an agreement signed on Monday (14 May), Portugal's Ministry of Health, Ministry of Economy, Employment and Finance, and the Association of Portuguese Branded Pharmaceutical Industry (Apifarma) will be collaborating to reduce public health expenditure by EUR170 million (USD218 million) in hospitals and by EUR130 million in the retail pharmacy market.
Apart from the reduction in public expenditure, the agreement sees the government also committing to creating mechanisms to reduce hospitals' debts by 60% in 2012.
While the agreement specifies various aims and targets in terms of expenditure, the specifics and mechanisms are yet to be determined. Thus, there could potentially be further regulatory changes to help achieve these targets.
Portugal's Ministry of Health (MoH), the Ministry of Economy, Employment and Finance, and the Association of Portuguese Branded Pharmaceutical Industry (Apifarma) on Monday (14 May) signed an agreement to reduce public expenditure on drugs. The agreement contains a clause stipulating the agreed reduction and ceiling on expenditure as well as a measure to help reduce hospital debt, as listed below.
Expenditure on Drugs
The goal for overall public expenditure on drugs for Portugal's National Health Service (SUS) for 2012 was set at 1.25% of GDP, which is considered to amount to EUR170 billion (USD218 billion). The innovative pharmaceutical industry, via Apifarma, has agreed to reduce public expenditure in hospitals by EUR170 million compared to 2011, and the outpatient market by EUR130 million, thus achieving an overall reduction in expenditure of EUR300 million. Hence, the targeted expenditure for 2012 is set at EUR2.038 billion with benchmarks set at EUR842 million for the hospital market and EUR1.196 billion for the outpatient sector.
Creation of Financial Funds for Hospital and Outpatient Drug Expenditure
The agreement further includes the creation of separate financial funds, by the pharmaceutical industry to reduce drug spending if the aforementioned targets of hospital and retail pharmacy expenditure are not achieved. The funds will be created in a banking institution, which is yet to be designated, and will correspond to 2% of each manufacturer's monthly SUS bill. This will be measured at the end of each month. In the case that hospital/outpatient expenditure is not controlled, the monitoring committee may recommend increasing this value to 4%. This committee is constituted by representatives of all parties signing the agreement.
Payment of Hospital Debts
The MoH has committed to creating mechanisms for the payment of debts for the supply of hospital medicines with an already expired deadline of 31 December 2011, and in vitro medical devices with overdue payments of more than 180 days. The MoH has agreed to pay a deposit of 20% of the debt within the first half of 2012, and a further payment of 40% during the second half of 2012. The remaining debt is going to be paid off at a later date. The ministry has also committed to creating conditions for the payments to be made centrally as well as taking the necessary steps to ensure compliance and payment of the debts.
Under the agreement, the innovative pharmaceutical industry has agreed to make contributions to help sustain public expenditure on drugs in 2012 and 2013. The mechanisms underpinning the breakdown of these contributions are yet to be determined. Furthermore, the MoH in partnership with the pharmaceutical industry, has committed to creating conditions for better patient access to drugs, in particular for those drugs with "well-demonstrated therapeutic innovation". This is to be achieved through the adoption of innovative contracting methodologies, including systems of shared management of risk and the recognition of the specificity of certain drugs, including orphan drugs and those pertaining to specific populations. In addition, the agreement recognises the importance of clinical research. While promoting clinical trials, the government promises to take into account EU law as well as national law, which will take into account the views of Apifarma.
Outlook and Implications
Portugal has been trying to reduce its expenditure on retail pharmacy medicines as well as hospital expenditures. This has led to several important changes to the Portuguese legislation in particular, changing the basket of countries for reference countries Spain, Italy, and Slovenia and the new legislation that restricts the costs of generic drugs to no more than half the cost of the branded drug. In addition, the issue with hospital debts has been an ongoing problem, with public hospital debts to suppliers amounting to EUR3 billion (see Portugal: 22 February 2012: Portuguese MoH Earmarks April to Start Debt Payment, Demands Greater Price Reductions for Key Medicines Sold to Public Hospitals).
The current development is important in terms of cost-containment policies. The agreement sets a target for reduction in public expenditure on drugs and most importantly it also shows a concrete timeline for the government's intention to repay 60% of the hospital debt. The agreement also includes contributions to the pharmaceutical industry itself if the aforementioned expenditure targets are not met. Therefore the creation of the funds are an important commitment for the industry if they fail to fulfil their goals.
While the agreement sets out concrete expenditure targets as well the creation of funds and contributions from the pharmaceutical industry, most of the mechanisms for achieving these targets are yet to be determined. Similarly, even though the agreement addresses the issues of clinical research as well as access to innovative drugs, the methods through which these are to be attained are yet to be specified.
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