The Italian Senate last week passed a law changing the way meds are regulated as of next year, but not everyone is thrilled. Branded drugmakers are largely pleased with the forms, which cut taxes and provide more R&D incentives, but generic makers say competition will be undermined, APM News reports (subscription may be required).

The most important reforms:

- A new pricing system based on the assignment of annual reimbursement budgets for each drug of each company; the amount that the national health service can spend on individual drugs will be calculated according to the price and volumes of the drug in the preceding 12 months; the proportion of the national health service’s budget that can be spent on drugs has been raised from 13 percent to 14 percent; and a further 2.4% of the national health service’s budget can be spent on drugs to be used in hospitals; this will excluded from the national health service’s drugs spending ceiling.

Also, two tax rates for pharma companies have been cut, and there are incentives for doing research and for those producing innovative drugs. However, if a drug’s spending ceiling is breached the entire pharmaceutical production and distribution chain will have to contribute to cover the deficit, including drugmakers, pharmacies and wholesalers (until now, spending deficits have been covered by cutting prices).

In a statement, Sergio Dompe, who heads Italy’s trade group, Farmindustria, was pleased with the tax cuts, incentives and aproach to deficits: “For the first time the sector is not being seen as just producing spending (for the national health service) but also for the value that it is able to create.” But he also criticized the amount boe spent, based on preceding sales over a 12-month period. “The rigidity comes most of all from the fact the budget is calculated on the basis of the past situation whereas we would like a method which interprets the changing situation,” he said.

He also warned that the reforms are potentially contradictory, and cited the example of an epidemic when the pharma industry might be obliged, by law, to supply large quantities of medicines. “We are faced with a contradiction because we are being simultaneously obliged to supply medicines and to pay for the consequences of any spending deficit that results,” he explained.

Generics producers were much less pleased with the final version of the reforms which was converted into law. Their association, Assogenerici, complained that the government had not responded to fears expressed by Italy’s antitrust authority that the reforms will undermine competition. The competition regulator had argued that, since annual reimbursement quotas will be calculated for each generic drug, the growth of the whole generics market will be stunted by the reforms.

In a statement on Thursday, Assogenerici said the new law “will have the effect of making the market less flexible and weakening competition between companies which will inevitably have consequences for research into new products and on the movement of prices.” The association said that companies producing generic drugs would be hit hard if the amount to be spent on their products is calculated on the basis of the previous year’s sales.

“These measures will have the single effect of discouraging the development of generic medicines,” Robert Teruzzi, head of AssoGenerici, said in the statement. The association said that the new system will be a violation of principles of allowing companies to operate freely in a market which are enshrined in Italy’s constitution. It also suggested that EU rules, guaranteeing the free movement of goods, people, services and capital, would be broken.

Source: APM News