Branded Drug Firms Lament Italian Cost-Cutting

Italy's research-based firms have bitterly opposed the latest round of drug price cuts. Above all, industry groups have singled out a mechanism introduced in January, which imposes a 10% discount on all branded pharmaceuticals with sales rising above the national average.

New studies indicate that the local pharmaceuticals sector is already suffering from low launch prices, amid a series of cost-cutting reforms introduced in 2004. Last year's measures included regulations obliging the industry to repay 60% of the cost of public healthcare budget overspends, new taxes on promotion and the partial re-introduction of patient co-payments. A new reference pricing system, which was intended to improve transparency, is also expected to reduce margins.

Additionally, reforms in recent years have limited reimbursable repeat prescriptions and imposed a ceiling on pharmaceutical spending within the healthcare budget at 13% (roughly EUR10.2bn), further affecting multinational sector profits. With reference drug prices now set at the lowest price of an equivalent generic substitute, and generic substitution now compulsory for Italian pharmacists, the outlook for the industry is deteriorating sharply.

Indeed, the latest approvals by local regulator AIFA suggest that the Italian government is at least as enthusiastic over the medicines' cost-cutting potential as its European peers. Ninety-four new additions to the national reimbursement list, known as the Prontuario, are known to include 62 generics and only 10 innovative medicines. As sharp falls in drug prices continue this year and Italy's drug prices remain among the lowest in the European Union, authorities are likely to conclude that current cost-containment strategies have been effective, and will continue to disregard the research-based industry.