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The pharmaceutical industry has responded angrily to the major spending cuts set out as part of Italy's Spending Review, due to be finalised by tomorrow (6 July).
IHS Global Insight Perspective
The pharmaceutical industry has reacted angrily to the cost-containment measures set out in the Spending Review, due to be finalised by 6 July.
Although the cost-cutting measures are a big blow, they are also an inevitable consequence of years of inefficiency.
There will probably be a protracted period of protest and heated debate surrounding the Spending Review, which will almost certainly be passed in something very close to its current form, making the Italian market even more challenging to the pharmaceutical industry.
Industry Reacts to Spending Cuts
The pharmaceutical industry has reacted angrily to the Spending Review that is being finalised by the Italian government, with the final version expected to be announced tomorrow (6 July). It is expected to include some major cost-containment measures aimed at public drug reimbursement spending, as part of a wider set of healthcare spending reductions. Indeed, Italian independent pharmacy association Federfarma claims in its press release reacting to the draft decree that as much as 40% of the entire spending review is dedicated to cuts in pharmaceutical spending.
Extra USD6.3 Bil. in Cuts in 2012–14
To summarise the planned spending cuts in the draft decree, it is intended that in the public healthcare budget, a total of EUR5 billion (USD6.3 billion) will be cut in 2012–14 under the Spending Review, which is in addition to the EUR8 billion in cuts due in 2012–14 under the July 2011 austerity package. As Italian healthcare news provider Quotidiano Sanita reports, the EUR5 billion of spending cuts are due to be officially adopted by the Italian regions and autonomous provinces by 30 September in the case of 2012 cuts, and by 30 November in the case of the cuts for 2013 and 2014 cuts.
A saving of EUR1.7 billion is due to be made on goods and services supplied to hospitals, or 5% of the current cost—much of this is due to be achieved through the imposition of a new system of reference pricing, including a specified group of major hospital drugs (see Italy: 3 July 2012: New Reference Prices Set for 43 Major Hospital Drugs As Part of Major Cost-Containment Package in Italy).
Discounts to SSN Up, Ceilings Down
The discount on reimbursed outpatient drugs due from pharmacies to the National Health Service (SSN) is due to be increased from the date of the decree coming into force to 3.65%—double its current percentage—until the end of the year. The discount due from pharmaceutical companies is also set to double for the same time period, to 6.5%. The ceiling on outpatient pharmaceutical spending by regions is set to be reduced from its present level of 13.3% of total public healthcare expenditure, to 13.1%, for the remainder of 2012, and then reduced further to 11.5% in 2013—this does not include co-payments made by patients for medicines priced higher than the reference price. In the case of hospital medicines, the ceiling is due to be raised from its current level of 2.4% of total public healthcare spending to 3.2%. Pharmaceutical companies are to be liable for 50% of the spending in excess of this ceiling.
Farmindustria Warns of Mass Job Cuts
Reacting to the cuts in the draft decree, the association of innovative pharmaceutical companies in Italy, Farmindustria, has warned that they could result in the loss of an estimated 10,000 jobs, with research and production in the Italian pharmaceutical industry under threat. As reports Quotidiano Sanita, Farmindustria points to the fact that—as it calculates—Italy's spending on drug reimbursement per capita is 26% lower than the average of large EU countries; in Italy, this is estimated to be EUR271, while the average in large EU countries is estimated to be EUR390. According to Farmindustria, multinational investors are aware of the difficult situation in Italy and are already talking about relocation of their operations.
Meanwhile, the president of the Italian Pharmacists' Federation (FOFI), Andrea Mandelli, is reported by Quotidiano Sanita as saying that the cuts risk the very health of citizens, also pointing to the fact that Italy is already well behind countries such as France and Germany in terms of its public spending on healthcare.
Outlook and Implications
The final version of the Spending Review is due to be revealed tomorrow, although the final form which it will take may yet be subject to change as a result of the strong opposition from various sectors. One major complication which the Italian government is having to deal with at the moment is the fact that the cuts will result in the almost inevitable closure of many smaller hospitals, an issue which is causing serious last-minute problems.
Additionally, it should be recalled that the EUR8 billion of cuts which are due to made in the healthcare sector under the July 2011 austerity package are yet to be accepted by the Italian regions and autonomous provinces, even though they were supposed to have been adopted by the end of April. There is a likelihood that a similar impasse could come about in the case of the present package of cuts.
Essentially, the cuts are almost the same in their construction as those revealed last week (see Italy: 27 June 2012: Italian Health Minister Presents Planned Pharma Spending Cuts Balanced with Pro-Innovation Measures). These were "balanced" with pro-innovation measures, although judging by the reaction of pharmaceutical companies, this is unlikely to make any difference to the very negative stance of the pharma industry towards the measures.
However, looking at the situation in a wider context, in spite of the statements by Farmindustria concerning the low level of drug reimbursement spending per capita in Italy relative to other large EU countries, Italy has traditionally invested a proportionately larger share of its GDP in public healthcare compared with the average in Europe, and with regions investing around 70% of their budgets in healthcare provision, the problem has been building and building over the previous decade. It is an uncomfortable reality to face, but one which was always going to materialise.