Legislation Increases Downside Risks

BMI View: The ongoing hospital debt situation, in addition to the Italian government's focus on de-reimbursement, will offset any benefits of the recently passed legislation that encourages increased hospital provision of innovative medicines.

The council of ministers in Italy has approved a decree presented in early September by Minister of Health Renato Balduzzi, which put forward a wide range of measures, including important ones relating to the pharmaceutical industry. BMI's assessment of the decree identifies two main measures we believe will enhance the downside risks to drug companies operating in Italy.

Dictating Legislation
Italy: Government Debt (EURbn)

1. Regions and provinces are required to update hospital formularies at least every six months to include new or innovative medicines that AIFA decides are reimbursed on the SSN.

The innovative drugs concept was introduced by the Italian Medicines Agency (AIFA) for reimbursement purposes in 2007. Innovative drugs are defined by a number of parameters, including the severity of the disease they are indicated to treat and the availability of an alternative therapy. AIFA has four options for deciding whether it will reimburse a medicine and any of them can apply to innovative drugs. They are: a drug is not adopted at all; reimbursement occurs without new evidence being required from the drug firm (the majority of drugs go down this route); reimbursement occurs with cost-containment measures (eg: volume cap agreements); and reimbursement is conditional to additional evidence development (which is generally used for hospital anticancer drugs).

BMI believes the Ministry of Health's focus on reducing regional disparities in access to innovative medicines is positive, as it is focus on ensuring the population gains access to new drugs. However, the decision to encourage regions to increase the availability, and therefore consumption, of high-value innovative drugs contradicts overall government sentiment and the message to regions to cut their healthcare expenditure. Additionally, regional budgets have been restricted and while government expenditure on health has slowed down, high levels of Italian government debt have filtered through to the healthcare sector, with public hospitals owing the pharmaceutical industry around EUR5.6 billion (US$7.1 billion), exceeding the hospital drugs bill at 4.4%; although the hospital drugs bill is capped at 2.4% of the healthcare budget. Highlighting a prolonged debt situation, in October 2010, Farmindustria president Sergio Dompé said payment delays to drug companies averaged 220 days and in February 2012 he said delays in payments had risen by nearly 30% over the last two years, with some regional governments delaying payments by nearly 700 days.

2. By June 30 2013, AIFA is to revise the Pharmaceutical Benefits Scheme Handbook with a view to withdrawing reimbursement for products that are therapeutically outdated or seen as having an unjustifiably high price in proportion to their therapeutic benefits.

If at the expiry of an agreement entered into by an Italian pharmaceutical company with a drug product is excluded from eligibility, AIFA may establish further dispensing of the drug to be paid by the Servizio Sanitario Nazionale (SSN) to complete the care of patients who are already taking it. Additionally, if a medicine is considered too expensive, it will be possible to replace it with an off-label one. This is a proposed change to Pharmaceutical Law 648 on the off-label use of medicines, under which any registered, authorised medicine for which the average cost of therapy exceeds cost of therapy with an off-label medicine by at least 50% is considered to be excessively high for reimbursement under the SSN.

This article is tagged to:
Sector: Pharmaceuticals & Healthcare
Geography: Italy

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