Joint Baltic Drug Procurement Agreement to Be Signed in May

Remigijus Bielinskas, an advisor in Lithuania's Ministry of Health, announced that the agreement between Lithuania, Latvia, and Estonia to engage in joint procurement of medicines is due to be signed on 2 May, reports the Baltic News Service. The agreement will be signed in Riga and, according to his statement, would definitely go ahead unless there are serious concerns raised by the ministries of finance of the respective countries at the last minute. Last minute objections, however, seem unlikely considering that earlier statements from Estonian radio ERR, as reported by the Baltic News Service, indicate that Estonia and Lithuania have already completed the administrative requirements and only approval by Latvia's parliament is still pending before the agreement could be signed.

Outlook and Implications

The idea for joint procurement of medicines in not new, but it seems that only now bureaucratic hurdles are finally about to be resolved (see Estonia - Latvia - Lithuania: 14 November 2011: Plan to Unify Baltic States' Drug Procurement Delayed by Bureaucratic Issues).

The agreement makes sense from a payer standpoint: purchasing jointly would allow payers to negotiate higher discounts on larger pharmaceutical orders. The pharmaceutical markets of Lithuania, Latvia, and Estonia individually are relatively small, but theoretically together they should be able to achieve a scale that makes them attractive to pharmaceutical companies.

The downside for the pharmaceutical industry, of course, is that the negotiating power of the Baltics as a whole will be greater and the pressure to offer discounts on pharmaceutical prices will be higher than is currently the case.

Another issue to ponder is that the three countries have separate, nationally set reimbursement lists for medicines. If the three are going to be purchasing publicly funded medicines jointly, there would be growing pressure for conformity among the three separate reimbursement lists. It is yet uncertain how the move for conformity will play out. In principle, it could be a positive development for pharma if they manage to secure reimbursement in one of the three countries and that then translates into positive reimbursement listings in the other two.

The joint procurement agreement—if it works successfully as a cost containment tool—could be expanded into medical devices as well and even expanded to encompass additional countries in the regions, based on earlier announcements (see 20 March 2012: Estonia - Latvia - Lithuania: Joint Baltic Procurement Programme for Drugs and Medical Devices Moves Forward). If this happens, downward pressure on pharmaceutical companies will intensify further and medical device manufacturers will be also adversely affected.