Assogenerici Condemns Freezing of Local Health Companies' Overdue Drug Payments; Generics Prices Rise 12%

Italy's association of generic pharmaceuticals, Assogenerici, has hit out at the measures contained in the Italian budget act (Finanziaria) for 2010, which provide a legal barrier to pharmaceutical companies and distributors seeking to obtain payments due from state local healthcare companies (ASLs) and state hospitals. Suppliers of medical devices are also affected by the measures. Effectively, the measures mean that the repayment of outstanding bills by ASLs and hospitals is frozen for one year, until the beginning of 2011.

Measures are Threat to Pharma Industry and National Economy

The head of Assogenerici, Giorgio Foresti, has stated in the association's press release on this subject that the measures preventing pharmaceutical companies from obtaining payments due to them by ASLs and hospitals are a "very serious matter for the pharmaceutical industry, and for the whole national economy". According to Foresti, delays in payments usually extend to as long as two years. The companies that are most affected by the severe delays in payments are often small and medium-sized enterprises (SMEs), which produce highly genericised, low-price pharmaceutical products, and which often rely almost entirely on sales to hospitals for their income. Consequently, when the local authorities in charge of the hospitals have a legal basis for withholding payments to these companies, their livelihood comes under threat.

Larger Companies Will Also Feel Effect of Payment Block

Although larger pharmaceutical producers and distributors will be less affected by the legal block to payments by ASLs and hospitals, they will also feel the effects. Michele Uda, health economics affairs manager at Assogenerici told IHS Global Insight that, "Large players on the market have a limited amount of income from hospital sales—between 10% and 20%—so it is less of a problem for them, but it is still a problem".

Suspension of 12% Cut in Generics Prices from Beginning of 2010

Meanwhile, in another development affecting generics, the 12% reduction in generics prices—introduced as part of a series of measures to transfer funds to the reconstruction of the Abruzzo region following the earthquake in April 2009—has expired. The price of generics reimbursed under the national health service via pharmacies was therefore due to have been raised by 12% from the beginning of 2010 (see Italy: 21 July 2009: Series of Measures to Cut Drug Spending Introduced in Italy, Funds to Be Redirected to Earthquake Region).

In connection with the cancellation of this 12% increase in the price of generics, its impact is likely to vary between Italy's regions, as demonstrated by the situation in the Piedmont region. According to health news provider Salute Domani, the Piedmont region has raised the reimbursement level of a number of generic drugs following the cancellation of the 12% price cut, so that patients in the region will not be affected by the rise in prices. However, as the Italian regions are able to allocate reimbursement independently from the federal authorities, there are likely to be some discrepancies between the regions in terms of response to the increase in generics' prices.

Outlook and Implications

The legally sanctioned block to the repayment of bills owed by local health authorities to pharmaceutical companies and distributors is likely to have a very detrimental effect on Italian pharmaceutical SMEs producing older generic drugs, due to their reliance on hospitals for their income. Although larger producers and distributors will be less affected—having larger turnovers and being less reliant on the hospital drug market—it is a factor that could negatively affect their profitability and the overall ease of operating on the Italian market. Considering the likely impact of the budget measures on the Italian pharmaceutical industry, it is likely that the Italian pharmaceutical associations Assogenerici and Farmindustria (which represents innovative pharmaceutical producers) will continue to oppose them vehemently.