The Ministry of Health, Social Policy and Equality in Spain has been quoting with some satisfaction the savings they are achieving in public pharmaceutical healthcare services.[1] Over the ten month period ending in April 2011, the Ministry of Health, Social Policy and Equality calculated that savings of €1.27 billion have been made on pharmaceutical expenditure.[1] Public pharmaceutical expenditure in Spain dropped by 12.71% in March 2011 compared with the same month in 2010. Although prescription numbers have increased (up 3.6%), expenditure has decreased, mostly due to heavy reductions in the average cost per prescription (-15.7%).[1] The average expenditure per prescription in March was €11.34; an average price not seen for eleven years.[1] In most part this reflects price cuts on patented drugs implemented in 2010 in a bid to save €1.3 billion.[1]
Now the Government is turning to generics to achieve further savings. The negative trend in average prescription costs was further accelerated in March by a Ministerial Order which changed the new reference pricing system and affected 7,200 off-patent pharmaceuticals.[1] The revised reference pricing system uses only the price of the cheapest pharmaceutical on the market. In addition, the length of time that a company can take to reach the final price reduction has been reduced from three years to two years (i.e. 50% per year minimum percentage reduction).[2] This reference price system is expected to save the healthcare system €1.0 billion (US€1.3 billion).[2]
The changes to the reference price system were part of the Law of Guarantees & Rational Use of Medicines, introduced in 2006, which created new groupings and price updates. The fourth Ministerial Order (Real Decreto de Racionalización del Gasto Farmacéutico; RDL 4/2010), issued in late 2010, generated an average price cut of 25% on generic pharmaceuticals.
The most recent cost-saving measure was the introduction, in August 2011, of a law that requires physicians to prescribe with the generic name wherever possible, rather than the brand name.[3] In turn, pharmacists will be required to provide the cheapest available version of the drug prescribed. This generic name prescribing measure has been introduced to try and save the health service a further €2.4 billion ($3.4 billion) a year.[4]
Whilst the government is justifiably pleased with the savings that their policies are making, the pharmaceutical industry is understandably worried that further reductions in pharmaceutical expenditure would mean an important loss of resources for pharmaceutical companies [1] – a concern shared by both the branded and generic sectors of the industry. In response to the 2010 price cuts, the President of the Spanish pharmaceutical industry body, Farmaindustria said: "The turnover of pharmaceutical companies operating in Spain will be reduced by 20%, and you will lose about 20,000 jobs, 5,000 of them directly."[5] He also indicated that the value of Spain's pharmaceutical market had fallen by 8% or €2.0 billion in one year – the largest ever contraction of Spain's pharmaceutical market.[6]
The Spanish Association of Generic Pharmaceuticals (AESEG) has commented that it considers the reforms “harsh, stringent and puts in danger the economic sustainability of AESEG´s member companies, especially of those that are SMEs.”[7] The European Generic Medicines Association (EGA) wrote an open letter to the Spanish Health & Social Policy Minister following Spain’s RDL 4/2010 law. The EGA believes that financial incentives need to be offered to physicians in order to encourage them to prescribe affordable generic medicines. The EGA suggested allocating prescription budgets to physicians which would allow them to use their own discretion to save money in some areas, in order to be able to prescribe more expensive treatments where necessary. The AESEG, supported by EGA, believe that, in order for their sector to survive, generic medicines penetration needs to reach 50% within three years.[7] Currently, the market share by volume for generics in Spain is low (14%) compared to most European Countries (around 50% by volume).[8]
The Spanish government remains under pressure to reduce its national deficit, with International observers such as the International Monetary Fund (IMF) applauding their success but insisting that there is "no room to relax the austerity measures".[6] At the same time, the Government does have a strategic plan to make Spain's pharmaceutical industry more competitive in research and development and thus more attractive for investment.[6]
Clearly there is a need for government to make savings to their healthcare budgets but there is a difficult balancing act required between the need to make savings and the need to maintain investment in innovative drug manufacturing. To paraphrase Stephen Silver of Abbott, Spain: “these cuts erode the country’s credibility as a mature and predictable market”.[6]
For further information or advice, please contact Nigel Seear, VP Europe, in our London office. nigel.seear@bridgehead.com
References
[1] Farmaindustria. The pharmaceutical market in Spain. http://www.farmaindustria.es/Farma_Public_ING/Internacional/index.htm. Published April 2011. Accessed September 2011.
[2] Espicom. The Pharmaceutical Market: Spain. June 2011. Accessed September 2011.
[3] García Rada, A. Mandatory generic prescribing is expected to save Spain €2bn a year. BMJ 2011; 343:d4803.
[4] InPharm news article. Spain to cut 2.4 billion euros from drugs bill with new generics rules. http://www.inpharm.com/news/165533/spain-generic-prescribing-drugs-bill. Published August 2011. Accessed September 2011.
[5] InPharm news article. Spain to cut prescription drug priceshttp://www.inpharm.com/news/spain-cut-prescription-drug-prices. Published May 2010. Accessed September 2011..
[6] InPharm news article. Spain’s austerity sees pharma market shrink by €2 billion. Available at: http://www.inpharm.com/news/162388/spain-budget-cuts-see-pharma-market-shrink-2-billion Published July 2011. Accessed September 2011.
[7] EGA. Press Release. Open letter to the Spanish Health and Social Policy Minister: Price cuts must be followed by increase in patient access to generic medicines. Available at: http://www.egagenerics.com/pr-2010-05-06.htm. Accessed May 2010.
[8] de la Cuerda, ALR. The Spanish Generic Market: Opportunities and Challenges. Journal of Generic Medicine. April 2010 vol. 7 no. 2 139-144.
