Jerzy Stźczniewski:

Many patients will eventually wind up in hospitals where the government will really get to feel the consequences of excessive saving on drug refunds A new pharmaceuticals law, set for implementation April 1, is designed to bring Polish legislation in line with the European Union. Drug importers, however, are upset with certain aspects of the law, saying it would curtail their right to have medical representatives present information about their products to doctors and patients. Importers are also angry with a government inquiry led by the Central Customs Board (GUC) alleging "unfair practices" by importers. At the same time, the Health Ministry is scaling back the number of drugs eligible for government reimbursement. Jerzy Stźczniewski, president of the Polish Pharmaceutical Companies Association, which represents the Polish affiliates of the world's 50 top drug makers, talked to the WBJ's Robert Wylot about the importers' expectations and positions on these issues. The following is a translated and edited version of their conversation. Q: The Central Customs Board has begun an inquiry into what it calls an ‘unfair practice' by importers, alleging that importers sell their drugs at much higher prices than they pay for them abroad. What do you say? A: The Health Ministry has negotiated the prices for imported drugs for as long as 10 years. These prices are set on the basis of the price for those drugs in Hungary, the Czech Republic and the poorest European Union countries, such as Greece and Portugal, where the prices are the lowest. Also, the price in the exporter's country is considered. So there is no question of excessive pricing. The prices are the same as in other European countries, actually, even those countries where they are the lowest. Q: So it looks as though the prices at which you buy drugs abroad are artificially discounted? A: We buy at the prices previously agreed with the Health Ministry and the agreed margins have never been exceeded. Remember that representatives of foreign firms that operate on the Polish market must have money for their operations, for premises, personnel, registration procedures, information for doctors; they must hire specialists that will reach customers, and all this costs money. This has for years been financed by discounts from producers to importers. Q: If, as you say, this has been the procedure for years, why is GUC running this inquiry now? A: Because the interpretation of regulations changed. The new interpretation is that all the discounts that have financed operations in Poland should not be given. Now, whenever they are stated in the invoice, they are treated as illegal. As a consequence, firms are now facing the threat of not being able to finance their operations in Poland. You can't tell a company operating on a budget that it now has no funds to operate. Q: Do you think that, because of GUC's inquiry, the government will manage to iron out lower prices on imported drugs? A: The government has always pressured for lower prices, for 10 years (that prices have been negotiated with the government). That's why it had prices at the level of the poorest European countries, where the prices were the lowest. And we have always reduced these prices as far as we could. But there is a limit (to reductions), because at some level exporters will refuse to sell and we cannot confine ourselves to drugs that are 100 years old. Aspirin is a very good medicine, but many improved drugs have been developed since. Also, the prices cannot be too low, because then re-exporting from Poland will start automatically. The re-export will be uncontrollable if the prices in Poland become much lower than in Europe. Q: So how do you think this fight with GUC will end? A: I don't know. But we, as an association, will push for setting clear and transparent principles on which the importers should finance their operations. They may, as it is now, live from discounts, or there may be precise transfer prices set in line with the OECD (Organization for Economic Cooperation and Development) directives, as it is the case in the EU, which will come to Poland anyway following our accession to the union. But now we have nothing clear, instead we have a witch hunt in the media against drug importers. Q: The Health Ministry is drawing up a thriftier list of government-refunded drugs. What effect will that have on drug makers? A: The ministry's drug refunding lists have been very frugal for years, which has caused the current situation in which the share paid by the Polish patient in the total price of a drug is the highest in Europe. So refunds have always been modest in Poland. Of course, it's easy to cross another few drugs off the list but the medical treatment in this country will deteriorate. In effect, many patients will be insufficiently treated and will eventually wind up in hospitals where the government will really get to feel the consequences of excessive saving on drug refunds. Q: What will be the consequences for drug makers? A: In the case of firms that sell directly to patients via pharmacies, this business will certainly shrink. For those who sell to hospitals, their business will grow. Q: But the hospital market is much smaller (than the pharmacy market). Would these problems with prices negotiated with or set by the government happen if market forces determined prices naturally. A: I think letting the drug market run wild would be too far-reaching. Every country must somehow take care of its patients. Q: But while the entire economy is doing poorly, the drug market is still expanding quickly. In light of this, might the conclusion be that drug makers are doing fine but only because of government help? A: The government has run expensive programs to promote Polish drug makers for years. The zł. 1 billion ($238 million) program aimed at enhancing production quality at Polish plants ended just two years ago. So the government may have kept the drug prices low but it has also provided local industry with extensive aid. Help also comes through different drug registration procedures for local and foreign producers. If you add last year's increase of (government-set) prices for Polish drugs, which was much higher than for imported drugs, then it's no wonder that local producers are performing well. Q: So you think it's easier for Polish producers to register drugs than foreign producers? A: Yes, the requirements for foreign producers are much higher. Q: Do you think this will change once Poland joins the European Union? A: Well, it has been agreed in the accession negotiations that this will change. But there will be a transition period until 2008 and Polish drug makers have been allowed until that time to sell their products on the basis of previously obtained approval while foreign drug manufacturers have always registered their products with full documentation in line with European directives. Q: The pharmaceutical law enters into force on April 1. What major changes are in store for drug importers? A: We are in talks with the Health Ministry now. It's good that we have the pharmaceutical law, but it was created in a big hurry and many things in it should be changed before it enters into force. Q: But the law has already been adopted. Any change would require new legislation. A: The key change we're calling for is recognizing that (drug makers') medical representatives provide information and not, as the law defines it, that they conduct advertising. In the current situation, there would be no way to finance their work. Many people who worked on this law have agreed that this provision was a mistake and we hope it will be amended. Q: But everyone knows that the representative's job is to promote drugs. So it is marketing, isn't it? A: But they don't trade anything, don't sell anything. Also, a doctor must be informed what a given drug is for. Hundreds of drugs are invented around the world and someone has to get this information out to doctors. Q: If the current interpretation that defines representatives as promoters is not changed, what consequences will that have for drug makers? A: Our costs will rise. If we cannot maintain the costs of keeping those people as part of revenue generation, our total costs will soar. This will affect prices. Q: Corruption is another problem in the health system. What should be done to discourage it? A: Corruption in the health system is common knowledge. Pharmaceutical companies have signed a code of marketing ethics and are trying to establish rules for cooperation with doctors and all member firms of our association have signed it. Incidents that are discussed in the media are only a marginal fraction of drug companies' activity. We have our own industry court that deals with these cases and people comply. Q: Poland is expected to join the EU in less than two years. What major implications will membership have for drug importers? A: Not much will change if the new pharmaceutical law enters into force in the amended form. Q: Many Polish drug manufacturers are looking for international investors. Why have there been so few takeovers by international concerns? A: Big international companies are interested in Polish firms. The reasons in most cases are exaggerated demands by unions regarding social packages and too high a price compared to what a given plant could yield in the future. Often, though, it is low manufacturing quality.