Drugmakers keep reps while state budget loses cash

The Sejm last Friday passed an amendment to Poland's pharmaceutical law that will save drugmakers millions of złotys in annual taxes, industry sources said last week. MPs told the WBJ they lowered the taxes because drugmakers would have found ways to avoid paying them anyway. "We mustn't establish laws that will be immediately circumvented," said Elżbieta Radziszewska, a Civic Platform MP and a member of the Sejm's health committee. Poland's new pharmaceutical law was passed last fall but its implementation had been postponed twice due to industry protests. It is now set to take effect Oct. 1. Before last week's amendment, the expense of employing representatives to promote drugs to physicians could not be treated as costs according to the tax office. Consequently, the tax office would not recognize companies' costs to employ armies of sales representatives. The amendment saves drugmakers at least zł. 300 million ($73.2 million) in annual taxes, industry sources said.

"The average monthly remuneration of a representative is zł. 5,000-zł. 8,000," said Irena Rej, the chairwoman of the industry chamber Farmacja Polska. With some 10,000 representatives employed across the country, their total annual payroll is zł. 600 million-zł. 960 million ($146.3 million-$234.1 million). If drugmakers were to pay 28% income tax on this amount, the tax office would take zł. 170 million-zł. 270 million ($41.5 million-$65.9 million) from the pharmaceutical industry. Those figures would double when non-payroll costs, such as business expenses incurred by representatives, are added. Pharmaceutical lobbies in Parliament have argued that they could not afford the tax burden imposed by last year's law and that it leaves them no option but to dismiss all representatives.

"It's a question of 10,000 jobs," said Maria Gajecka-Bożek, a Democratic Left Alliance (SLD) MP and deputy chairman of the Sejm's health committee. Drugmakers welcomed last week's vote in the Sejm, but MPs said they changed the amendment not because they wanted to relieve drugmakers of a potential problem, but because they knew that the industry would circumvent the law anyway. "We wanted to protect Polish producers in the first place," Gajecka-Bożek said. "Foreign makers could register these costs in other countries, where taxation regulations are more convenient to them." But according to Radziszewska, Polish drugmakers would also find ways to evade the tax. "They would, for instance, set up some kind of marketing department, where these people would officially be employed to perform other duties," she said. "Or they could establish a subsidiary abroad and employ their representatives there."