Health Ministry threatens subsidies

The Health Ministry and foreign drug makers locked horns last week after the ministry declared it would reduce or even eliminate government subsidies for many of their products unless drug importers lowered their prices. Health Minister Mariusz Łapiński said the government plans to trim zł. 1.3 billion ($310 million), about 25% of the money refunded to pharmaceutical companies for hundreds of their products, and pressure foreign firms to cut their prices by 20-30% before April 10. By that day, the ministry is required to publish a list of drugs that will continue to be refunded by the state. Drug makers receive about 40% of their income from the government and 60% from retail sales, according to a 1998 agreement between pharmaceutical importers and the previous government. "We're spending an enormous amount of money refunding foreign concerns and this money is flowing out of the country," Łapiński said last week. Industry watchers, however, said the government is using the drug-refund savings issue as a tool in its battle with foreign manufacturers and to foist blame on the last government for agreeing to refund their products. "What the government wants to achieve is for the pharmaceutical industry, and foreign makers in particular, to lower their prices," said Tadeusz Chruściel, a board member of the Supreme Chamber of Physicians.

Blackmail? The government has the upper hand in this conflict, according to Radosław Biadoń, pharmaceutical sector analyst at Bankowy Dom Maklerski PKO. "If a drug is no longer refunded, the importer will have to face a drop in sales by dozens of percentage points," Biadoń said. Drug makers will eventually give in and lower their prices, he added. "But the cuts will not be as big as the Health Ministry may wish," he said. The prospect of being excluded from the government's list of refundable drugs has already prompted several companies to reduce their prices, said Renata Furman, spokeswoman for the Health Ministry. While the ministry declined to reveal which drug makers have agreed to slash their prices by 20-30%, industry representatives suggested they were ready to make concessions, although they called on the government to initiate talks. "The industry understands the difficult situation of the state budget and we want to talk," said Irena Rej, the president of Farmacja Polska Industry Chamber, an association of 168 pharmaceutical firms. "Foreign drug makers will try to reduce their prices but we expect some kind of invitation to talk about this."

For its part, the Health Ministry, which is legally obligated to publish the new list of refundable drugs by April 10, is maintaining a firm stance on the refund issue. "It will be the cheapest drugs in each therapeutic category that will be included in the refunds list," Furman said. The least-expensive drugs in each category are mostly Polish versions of costlier medicines created by global producers. Prices of foreign drugs have stagnated since being set by producers and the previous government four years ago, according to Jerzy Stęczniewski, president of the Association of (International) Pharmaceutical Cos. Representatives in Poland (SPFFwP). Some importers receive discounts from their parent companies, which would allow them to lower their prices by about 20%, Biadoń said. According to the Health Ministry's Furman, foreign drugs are sold at higher prices in Poland than in the European Union. Importers contest that claim. "Our prices in Poland are in most cases on the lowest European levels," said Jerzy Garlicki, vice president of SPFFwP. "Saying that those drugs cost 30% more in Poland than in the EU is not true."