The value of drugs released to patients reached 2.93 billion lei (EUR0.66 billion) in wholesale prices in the first quarter of 2012, up 21.6% against the first quarter of 2011.
Petru Craciun, manager of research company Cegedim, explains the growth of the market, partly affected by the development of parallel exports, both because of the significant treatment needs of patients, and because of the a higher risk due to the major payment delays.
“We are happy that the volume of the market has rebounded after the 2008-2010 declines, but we are concerned by the much higher increase of the clawback tax (the tax paid by drug producers for the difference between the state-allocated budget and the actual consumption), which can damage the entire drug supply,” Craciun also says, predicting growth of 8.9% for the whole year.
Dragos Damian, chief executive officer of pharmaceutical company Terapia-Ranbaxy and president of the Generic Drug Manufacturers’ Association, draws attention to the “true measure of the market evolution, which was not presented in the Cegedim report”: the fact that the market fell 2.7% against the last quarter of 2011. The decline, Damian says, confirms the public stance of the generic drugs producers, which is linked to the dramatic evolutions that followed the faulty calculation of the clawback tax: although the drug market fell in the first quarter against the previous one, the clawback tax asked of producers is 50% higher on the same segments.
“It is once again obvious that the healthcare system is trying to finance the deficit that owes to the lack of reform in the system, making producers of generic drugs pay for the system’s own lack of efficiency.”
The head of the generics association sees as an explanation for the growth by a fifth in the first three months of the year the fact that the corresponding quarter of last year was modest.
Sales were weak then because of threats of non-registration and non-payment of prescription drugs and because cancer injection drugs were moved to hospital drugstores.
One element of growth was the demand and sale of seasonal products, mostly antibiotics and drugs against the cold and the flu. Demand was more significant in 2012 because of the freezing weather in February. In parallel, patients continue to buy and stock up on drugs in excess, fearing they will not be able to cater to their treatment needs. According to data from the Local American Working Group, the financing of healthcare is at two thirds of the optimal needs.
The LAWG report shows that Romania is the country with the lowest spending for healthcare to GDP in the European Union, 5.6% in 2009 against the EU average of 9.9%.
In 2011 public healthcare spending amounted to 3.7% of GDP, down from 2010. Out of all resources allocated to healthcare, 80% are public, largely managed by the Health Insurance Home, and 20% are private resources.
“One of the most important reforms of the system is the involvement of the private sector in social health insurance. At EU level, Romania is one of the countries with the lowest spending to private health insurance (only 0.01% of GDP against the EU average of 0.4%).
Dragos Damian notes that despite the change of the subsidizing mechanism, which favors cheap products, the evolution of generic drugs is below expectations, although such drugs have multiplied.
In addition, at least 20% of the figures supplied by companies that publish market studies are in fact a reflection of parallel exports, which deprive Romanian patients from decent access to therapies. It is a known fact that prices of drugs sold in Romania are below the European minimum, so profits increase considerably if the drugs go on to be sold in countries like France, Germany or the UK, where they cost several times more.
Debts to companies amount to around RON2 billion, according to officials in the pharmaceutical industry. The profits made in the past, of as much as 30% of the turnover, are diminished because of the delays, with payments being largely covered through bank financing or through financing from parent companies, as well as because of the overtaxation. Damian says in the case of generic drugs, the profit is “only on paper”: “In fact, producers of cheap drugs post huge losses, threatening the stability of the pharmaceutical market and patients’ access to treatment.”
Irrespective of quarterly results, the industry talks unanimously about the pharmaceutical market as an atypical, overregulated one, with quarterly fluctuations, defrauded through various methods.
Dr. Carmina Rogojinaru Smith, country manager of Ewopharma, calculates the taxes that the company has to pay: the clawback tax is around 20%, the exchange rate difference between the leu and the euro, and the 7% bank interest rate to ensure financing for a year until the drugs are paid by the state. In total this amounts to over 30% of the turnover.
“Products with over 30% margins are most likely to survive,” says Smith, who anticipates that it will not be possible to support products with lower profitability for very much longer, though they are used by patients. Profit margins for Ewopharma drugs range between 10% and 50%, according to the manager.
Dragos Damian concludes: “Although they have voiced their best intentions, the authorities aren’t planning any concrete measures to support the generics industry and, in general, don’t consult with the industry during the process of adopting legislative measures.” And the lack of dialogue is the industry’s main point of discontent with the authorities. (EUR1=RON4.4616)
(English version by Daniela Stoican)