Drug subsidy changes no panacea for pharmacies

Pharmacies are bracing for lower sales starting April 10 when the Health Ministry will eliminate or reduce government subsidies for a number of drugs. "The government's policy to look for savings will lead to a fall in the profitability of pharmacies," said Wojciech Giermaziak, vice president of the Supreme Chamber of Pharmacists. Last week the ministry presented pharmacies with a new list of medicines that will be reimbursed by the government and the official prices that drugstores will be required to charge for their products. The government is looking to cut subsidies by about 25% or zł. 1.3 billion ($317 million) this year.

Druggists fear the changes will squeeze them in two ways - fewer government reimbursements mean lower sales as a number of customers will be unable to pay more for medicines, and less revenue from overall sales as government pressure has forced down the prices of a number of other drugs. "The profitability of pharmacies will fall because their sales will fall," said Barbara Kamińska, who runs a pharmacy in Warsaw. While pharmacy sales soared in the past two weeks as patients stocked up on selected medicines before next month's changes, drugstore owners fear that many patients won't be able to afford the sudden price hikes for their medicines, industry sources said last week. The turnover of cardiovascular drugs increased by some 20% at Kamińska's pharmacy in March but next month pharmacies will begin to feel the pinch, according to Giermaziak. "There will be a substantial fall in turnover of some categories of medicines such as cardiovascular and diabetes drugs," he said.

Gov't pushes prices While the government plans to eliminate reimbursement for some drugs, it has threatened to cut off subsidies unless pharmaceutical companies agree to reduce the prices of their products. The strategy is already paying off, according to Renata Furman, spokeswoman for the Health Ministry. "Many companies have decided to reduce their prices," she said. "In some cases even by dozens of percentage points." But coercing producers into lowering their prices does not bode well for the industry in the long term, according to Ryszard Zajdel, a Warsaw pharmacy owner. "A pharmacy's turnover will fall in terms of value because drugs we buy from the distributor (and sell to the patient) will be cheaper," Zajdel said. Pharmacies that sell a big share of the more expensive foreign medicines will be hit most severely, Zajdel added. "A small pharmacy in the countryside will lose little because it sells few imported drugs, which will be affected by biggest cuts," he said. Pharmaceutical companies also stand to lose by the changes as many of them have stocks of medicines they purchased at current prices but will have to sell for less. One of Zajdel's pharmacies, which earned some zł. 6 million ($1.4 million) in revenue last year, has a stock worth zł. 300,000. "Our first estimates show that after the reduction of prices, the pharmacy will lose zł. 31,000 from the transition alone," Zajdel said.