PharmExec Blog

The Pain in Spain

The pain of the Spanish drug-spending squeeze extends way beyond the plain, says Reflector.

The cries of anguish at Spanish drug-spending squeezes are coming not only from Madrid, but from many of the autonomous regions around the periphery of the country too.

EU-flag2After almost a decade of continual disruption and downward pressure on pricing, the medicines industry there was beginning to think that things couldn’t get any worse. That was before 2010 — which has neatly demonstrated that things could indeed get worse — much worse.

First, the reference pricing system first introduced in 2004 was tightened up, with the prices determined by the least expensive daily treatment cost, based on defined daily dose. Products with prices more than 30% above this level have to bring their prices down or lose reimbursement status. And all older products have to cut their prices by 30% even if there is no generic rival in Spain. Then in May price cuts of up to 30% were imposed on generics. In June, new rebates of 7.5% were imposed on medicines still under patent and not affected by the reference price system, with orphan medicines generously permitted a rebate of only 4%.

And as if these attacks from the country’s central administration were not enough, medicine manufacturers found themselves simultaneously assailed from the regions too. Back in 2002, Spain granted its autonomous regions a range of rights and responsibilities for health care. These did not include issues like marketing authorisations or decisions on pricing and reimbursement for medicines, which remained at national level. But the regions, as desperate for savings as central government, have now taken matters into their own hands and started trying to bring down demand and limit supply.

Some regions are setting up agencies to conduct their own assessment of therapeutic value, and creating their own regional prescribing guidelines. Others are establishing their own regional reference pricing systems. And some are vigorously encouraging – even requiring – generic prescribing. In Galicia, for instance, local officials estimate they will save 300,000 euros a day from the limited list they have instructed doctors in the region to abide by. The Spanish industry association, Farmaindustria, has already initiated legal action against these moves – as has the central government.

The seriousness of the problem can be easily gauged from the unlikely alliance formed last month by branded and generic manufacturers (along with wholesalers and pharmacies) to fight the spending squeezes coming from central government and from the regions. They said the cheaper prescribing campaign “impacts citizens” — which may be true. What is certain is that it also hits the players in the medicines market, with the cuts estimated to total 2.8 billion euros, or 14% of the sector’s turnover, and to threaten 25,000 jobs.

But like the rain, the pain could spread much further still. Regional drug lists are not new, but what makes them a more significant risk nowadays is the fashion for – indeed close to obsession with – health technology assessment. Serious questions have been raised about the quality of the evaluations by Spain’s regional authorities. There are also concerns over how appropriate the resulting guidelines are, and over the fitness of the mechanisms for imposing them.  Right now, the European debate on health technology assessment is starting to take off in a big way, and just at the time when the European Union is beginning a review of its rules on what member states can and cannot do in terms of drug pricing and reimbursement. If the trend towards local assessments of products’ merits gathers pace and goes unchecked, in Spain or elsewhere in the EU, it will destroy any hope of fixing the minimum standards for health technology assessment that the European industry has been seeking as a way of preventing abuse.

One can guess what Eliza Doolittle might have said to encourage the European drug industry to move a little faster in responding to the challenges it faces.

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  1. Posted February 16, 2011 at 7:42 pm | Permalink

    You’re absolutely right. Spain has become an unbelievably complicated place to do business. This is one country where having a local, experienced infrastructure is vitally important in order to deal with these national and regional issues.

  2. Posted February 23, 2011 at 8:48 am | Permalink

    2010 has been the first year in which the Industry has been hit seriously, as they have never been before, by regulations from the Government and the Ministry of Health.
    Up to 2010, the impact was on medicines loosing patent protection and suffering from competition of generics. Now For the first time protected brands has seen their prices reduced and their profit line directly impacted.
    The trouble is that the governrment keeps an open right to reduce price of medicines when necessary and with no limits in the frequency for this to happen. So 2010 was just the begining.
    The question is if the Ministry of Health will be sensitive to the economic impact on the industry who is announcing massive employment reductions (Sanofi Aventis Spain has just been in December through a severe jobs cut for the second time after early 2010).
    The fact is that the Ministry is adopting the easy measures based on taking the profit from the Industry and the pharmacy. But they are reluctant to identify and correct the un-efficiencies of the Healthcare system. The Association representing Pharmacists in their Entrepreneur activity, FEFE (Federacion Española de Farmaceuticos Empresarios) offered to the ministry of health to gain savings of 900M€ by using the support and collaboration of pharmacists. The Ministry did not respond but there are certainly ways to be more efficient and spend less without taking money away from the major stakeholders of the Healthcare system.
    Finally, this could become an opportunity for the Self-Medication sector. It is a market whose profitabiltiy remains independant from public intervention, and where average profitability is twice the profitabilty in prescription.
    The OTC industry is aware of that, and is putting efforts in making pharmacists realise that they can earn much more by focusing on OTC’s than on prescription.
    S 2011 will be an interesting year to keep an eye, waiting for new decisions from the Ministry, and changes of strategy from RX and OTC labs, in order to survive in a pretty complicated market.

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