Spanish Austerity Measures: Impact on Healthcare and Pharma
The wave of austerity measures enforced by the Spanish government since August 2011 has undoubtedly produced controversial results so far. While managing to achieve, in most cases, a drastic decrease in pharmaceutical and healthcare expenditure, the set of measures have badly hit pharmacies, pharmaceutical companies, citizens and the public sector.
In August 2011, the most famous of all budget saving measures, the Royal Decree 9/11 (Real Decreto-ley 9/2011) on mandatory prescriptions by active ingredient, opened up the way for a wider set of cost cutting reforms encompassing all realms of the public healthcare and pharmaceutical sectors. As a consequence, the generics market in Spain has had some - but only some - growth in terms of volume particularly because of policy initiatives favouring price cuts which has in turn increased affordability. Nevertheless, the market has witnessed a higher degree of competitiveness with brand name drugs under pressure to lower their prices to match generic counterparts.
2012: "War Time" Austerity Cuts Hitting on Citizens and Pharmacies
As a follow-up to the previous 2011 set of measures, which mainly concerned the generics market in the country, the Spanish government enforced another set of austerity measures in all regions across the country from 1 August 2012. These measures have a more direct impact on citizens out of pocket expenditure and add further strain on national pharmacies. Certainly, these policies are largely unpopular with citizens and pharmaceutical associations who see them as unsustainable. These measures have added to public backlash, including citizens demonstrating on the streets against cuts in the healthcare sector, while pharmacies in some regions, hit by the reforms and the series of payment delays accrued by the government, are on the edge of a total systemic breakdown. The measures include:
- Citizens payment contributions: Under the new reforms, retired people earning less than EUR18,000 per year pay 10% of the price of drugs, up to a maximum out-of-pocket payment (OOP) of EUR8 per month. If the retired person earns more than EUR18,000 per month, then he/she will pay 10% on drugs up to a maximum OOP of EU18 per month. Citizens in employment earning less than EUR18,000 per year will have to pay 40% of the price of their drugs, and if they earn between EUR18,000 and EUR100,000, they will pay 50% of the price of their drugs. For citizens earning more than EUR100,000 per year, they pay up to 60% of the price of the drugs.
- Withdrawal of 400+ drugs from national basic list of drugs: The Spanish MoH published on its website the list of 426 drugs belonging to 19 drug classes that have been removed from the national co-payment list (available here). The list of drugs include Synalar (fluocinolone acetonide); anti-inflammatory drugs such as Voltaren (diclofenac); mucolytics such as acetylcysteine; cough and cold mixtures; and artificial tears. According to the source, patients may be exempt from paying the full price of such drugs under specific circumstances, for example, if they suffer from specific illnesses such as Crohn's disease, irritable bowel syndrome, diverticulitis, portosystemic encephalopathy, paraplegia, certain cancers, and Sjögren's syndrome.
Recently, the government has also implemented a new system of centralized drug purchasing for hospital and retail drugs, which is expected to reduce pharmaceutical expenditure by EUR150 million in 2013 by boosting the volume of drugs purchased while obtaining cheaper prices from the wholesaler. While it is still too early to be able to fully forecast the sustainability and positive impact of the measure, this is another governmental effort aimed at reducing public pharmaceutical expenditure in the country.
While Spain is trying to boost its own generics domestic industry, some foreign companies have been interested in implementing generics production in Spain, such as Pfizer who started to operate in the generics market in Spain in March 2011. This decree is already beginning to create a pro generic governmental stand and informing a "generic conscience" among patients, although price cuts here limit the available margins.
And the Drawbacks...
The measures have certainly had an impact - leading to both a 24% reduction in government pharmaceutical spend in July 2012 and a 22.6% month-on-month decline in prescription sales in the three months since the introduction of mandatory co-payments in July 2012. For the government, this has meant consistent savings across most autonomous communitiesAlthough these measures have contributed to the decrease in average pharmaceutical expenditure for the July to September period, they have negatively affected the performance and revenues of pharmacies and hit citizens financially. The consistent decrease in prescription sales is expected to create a long-term problem for some manufacturers operating in the country, especially branded drug manufacturers and some local generic manufacturers. As for the citizens payment contribution, which varies based on income, this is having a significant impact on citizen's out of pocket expenditure and purchasing power - especially that of retired citizens earning less than EU 18,000 per year. The set of measures is expected to create a long-term problem for pharmacies across the country, which are affected in terms of sales revenues and purchasing power, and customers will take a hit to their finances because of soaring OOP expenditure. National pharmaceutical associations such as Farmaindustria have reported serious negative effects since the austerity measures began in 2010, with annual revenues being affected by an average EUR3 million-5 million.
And of course the stakes are very high, as much of what is being achieved is affecting regional pharmacies, pharmaceutical associations, and specifically patients, creating a never ending spiral of debts, internal crisis and non conformity with the system.
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