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MULTINATIONALS, ROMANIA AGREE TO NEW DRUG PAYMENTS DEAL

October 13, 2005

Romania, which has been one of Europe's fastest-growing drug markets in recent years, is reported to have agreed to a new deal with drug companies. The agreement comes in the wake of soaring state deficits on drug reimbursement -- estimated at some EUR200mn (US$252.70mn) in 2004 -- and lengthy delays in repayment.

The full terms of the deal are unclear, but distributors report that pharmacies will now report twice per month on how many drugs reimbursable by the government are sold, and hospitals will be obliged to account for drug spending separately in financial statements. In 2004, it was reported that Romania had only one large private sector hospital. Further, leading manufacturers claim that the deal agrees to price cuts in exchange for predictability in government drug spending.

Nevertheless, some health officials appear to be in denial over the healthcare situation in Romania, a key European Union (EU) accession candidate. One government drug official claims there is "no delay," although in early 2005 it was reported that auditors had discovered a EUR600mn (US$758.01mn) black hole in health funds, a sum roughly equivalent to two-thirds of the drug market.

Romanian market leader GlaxoSmithKline has commented that the deal will be "suitable if implemented well." However, in the longer term, it is clear that real progress on healthcare finance will have to be made. Romania spends just 3.8% of GDP on health, and with co-payments nearing 45%, forcing consumers to pay more out of pocket looks like an unpopular option.