System to Ease Italian Public Administration Payment Delays Is Set to Exclude Regions with Worst Healthcare Debts
A system of credit certification proposed in a draft decree by Italian prime minister Mario Monti is set to exclude eight regions in which a disproportionate amount of the overdue debt to pharmaceutical and biotech companies in Italy is concentrated.
IHS Global Insight Perspective
Italy's prime minister Mario Monti has issued a decree intended to resolve the problem of late payment of debts to companies by the public administration; however, the eight regions with the worst pharma and biotech debts have been excluded from the system under the draft decree.
The debts of regional healthcare authorities to pharma and biotech companies and medical device producers has been a major ongoing subject of concern for some years now, and the sense of a growing crisis is palpable.
The outrage expressed over the exclusion of the regions with the worst debts may well yet result in a change to the proposed system. There is a sense that it is essential the Italian authorities take action to restore the confidence and faith of suppliers to the public administration, including pharma and biotech companies, which are some of its largest creditors.
Payment Delays Rising
The payment delays of Italian regions to pharmaceutical and biotech companies for products supplied are increasing exponentially, and in the regions with the highest debts, it is likely that companies will not be able to benefit from a system of credit certification proposed in a decree recently issued by Italian prime minister Mario Monti that is aimed at dealing with the debts of the public administration to supplier companies.
As Italian newspaper Il Sole 24 Ore reports, the average payment delay period for the Calabria region's public healthcare administration to companies represented by the Italian biotech association Assobiomedica stands at 999 days, while the average payment delay to pharmaceutical companies overall is 740 days. The source provides information on payment delays to companies represented by Assobiomedica in of a number of local health authorities (ASLs) and hospitals in southern Italy, including ASL Napoli 1 Centro, with delays of 1,686 days, and ASL Salerno, with 1,123 days.
Monti Issues Decrees in Attempt to Solve Late Payment Problem
The decree issued by Monti is one of two certification decrees, one of which deals with the debts of the central government and comes into effect immediately, while the other deals with the debts of the regional government and is still subject to discussion and negotiation between the central government and the regions. There is already significant concern and anger over the fact that the regions with the worst debt problems are set to be exempt from the credit certification system under Monti's decree. This comprises five regions that have public healthcare systems in financial difficulties (Lazio, Calabria, Molise, Abruzzo, and Sicily) and three regions that are already subject to debt-repayment plans (Puglia, Sicily, and Piedmont). It should be noted that Italian healthcare news provider Quotidiano Sanita reports that the Italian regions with debt-repayment plans—which are therefore exempt from the credit certification system—are Lazio, Campania, Puglia, Sicily, and Molise.
In response, as Il Sole 24 Ore reports, representatives of the companies concerned are preparing to mobilise and demonstrate against the exclusion of these regions from the system. Giorgio Fiore of the Campania branch of Confindustria, the main Italian organisation representing manufacturers and service providers, is reported as saying that all political and social forces will be mobilised, while other groups representing the industry have announced that they are preparing to take action. Regional politicians have added their voices to the wave of opposition to the exclusion of the aforementioned regions.
Biotech Association Strongly Opposed to Exclusion of Regions
Concerning the response at a national level, Massimo Scaccabarozzi, the head of Farmindustria, the association of innovative pharmaceutical producers, is reported by the source as welcoming the "spirit" of Monti's decree, while stressing that there are important issues to resolve. In contrast, Stefano Rimondi, president of Assobiomedica, is very opposed to the exclusion of the regions, and is reported as saying that the eight regions excluded from the system are the worst debtors to Assobiomedica's members, noting that they owe 63% of the total debt owed to these companies at present, which reportedly amounts to EUR5.6 billion (USD7.1 billion). Additionally, Rimondi states that Assobiomedica member companies are not able to start enforcement procedures on the debts.
Outlook and Implications
Debts in the public healthcare sector of Italian regions have been an ongoing issue for many months and years, and there is a wide sense of expectation that eventually there will be some very serious and potentially dangerous consequences of this situation, with suppliers possibly being forced to stop supplies of essential drugs or equipment. Thus, when the prime minister comes up with a plan to solve the problem of payment delays and chooses to exclude the regions with the worst payment delays from the proposed solution, it is not surprising that there is such an outpouring of anger. Presumably, it is calculated that the existing measures being taken in those regions—including repayment plans—must not be interfered with.
With concerns over the long payment delays in Italy having been expressed by Swiss pharma major Roche several months ago, there is a sense that without some concrete and definite action in the near future, Italy—or at least certain regions of the country—could become an increasingly risky market for pharmaceutical companies, not to mention the potential consequences of a possible Greek default and exit from the euro and a shift in attention to Italy.
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