Medicines, Nomisma: “To avoid shortages the EU adopt measures to support the sector”

From the analysis of the strategies implemented in the EU, the suggestion is to act on supply and demand

In a still unstable and indecipherable economic scenario, to avoid the shortage of medicines, it appears essential that the European Union adopts specific measures to support the pharmaceutical sector. To date, the concept of public good in off-patent pharmaceuticals, i.e. generics, has been exclusively traced in all EU countries to the reduction of drug prices through the mechanism of reimbursement at the lowest price. It highlights it‘Nomisma Observatory 2023 edition, on ‘Generic drug system in Italy‘, presented today in Rome, which also analyzes the measures implemented so far by individual EU countries to stem the growing shortage of medicines. Acting only on price is “an already obsolete and now unworkable vision” according to Nomisma, which underlines the need to “redraw the boundary between public and private, in search of a new balance that also combines the protection and strengthening of the production system , with actions on both the supply and demand sides.”

In Germany – where around 80% of medicines sold in the country are generic, a regulation in force since July – explains a note – has provided for an increase of up to 50% in the maximum price for pediatric medicines and for antibiotics and an intervention on tenders organized by health insurance companies for the purchase of generic drugs. Those for antibiotics will have to be based on a multi-contractor model (framework agreement) with lots and related needs satisfied for a percentage share by drugs with the production of active ingredients (APIs) in the EU and in the European economic area. Tenders cannot be held for pediatric medicines, for which the reference price will also be abolished and the supply period will be increased to six months for specific medicines purchased in the tender. A list of critical issues for pediatric drugs is also established and an ‘early warning’ system has been created for drugs with a risk of shortages.

In France, the agreement reached in a government technical roundtable launched in light of the shortages recorded at the beginning of the year provides for an increase in the price of some drugs, especially generic ones, in exchange for industrial guarantees aimed at ensuring a sufficient supply to cover internal demand. The measure was deemed insufficient by the association of French generic and biosimilar drug producers, which reiterated the request for a substantial reduction for generics of the safeguard clause which requires pharmaceutical companies to pay a contribution if their turnover has increased more than the rate set annually by law.

In Italy, at the working table established in January at the Ministry of Business and Made in Italy (Mimit), with the participation of the entire pharmaceutical supply chain, generic and biosimilar companies reiterated the need to plan an update of the reimbursement levels of groups of medicines that are subject to a higher risk of unavailability. At the end of July 2023, Mimit opened a tender with an allocation of 391.8 million euros from the Pnrr funds for the ‘Development Contracts’ instrument to support industrial programs of strategic production chains, also in the areas of the Center and North of country, in various sectors, including the chemical-pharmaceutical sector. State aid – explicitly prohibited by European legislation and the Treaty on the Functioning of the EU as it can lead to market distortions – came into play in the context of the pandemic, temporarily adopted in March 2020 by the EU Commission, and remained in force until June 30, 2022 and reportedly exclusively for the production of medicines that were related to the treatment of Covid. Companies in the sector are asking to refine the temporary framework by making it more flexible to eliminate these limitations and to extend the timing of implementation of investment projects, exceeding the expected 6 months.

What makes the request more pressing is the adoption, by the US government, in August 2022, of the Inflation Reduction Act, which provides for the provision of incentives for 750 billion dollars in specific sectors and which could implicitly encourage the phenomenon of the relocations from Europe to the United States of companies that fall within the sectors affected by the measure to benefit from this aid.

The Nomisma report highlights 4 actions to be implemented on the demand front: revision or elimination of the payback for off-patent drugs; on the surge in the cost structure, act on the level of reimbursement of off-patent drugs to stop the hemorrhaging of suppliers that is emerging, identifying those with particular vulnerable conditions or identifying a critical price threshold below which sustainability industrial is compromised. Nomisma then suggests new public mechanisms for purchasing drugs in hospitals, rethinking the mechanism for determining suppliers and prices and, finally, the establishment of incentive and economic support mechanisms to keep the more consolidated drugs in production and with fewer suppliers, safeguarding biodiversity. The intervention on the supply side is more complex: “it means – concludes the report – returning to activate the country’s forgotten industrial policy, leaving companies the time necessary to grow and amalgamate” and offering “an administrative bureaucratic counterpart of equal efficiency”.