The unwanted consequences of regulations in pharma
Ferdinando Scala
Publicis Healthware International
Ferdinando Scala discusses the hidden consequences of pharmaceutical regulations in Italy, looking at how recent changes in prescription rules will affect the industry, GPs and general population health on the medium term.
In the current worldwide economic crisis, it is commonplace for governments to try and find new ways of shortening the list of items of national balance under the “expenses” label. In this framework, healthcare-related chapter is one of the most often hit voices, since its status of prominent expense generator is apparent. In latest years, several European countries, especially the ones where free healthcare is managed by welfare state, have progressively limited the amount of money spent in drugs by introducing containment measures. In particular, the introduction of generics has been one of the most common tools, since it allowed drug prices to immediately, and substantially, decrease. Rules associated to generics’ introduction, indeed, prescribed these to have a price of minimum 20% less than their branded counterparts. In many cases, this prompted a price war between Big Pharma and generics’ producers, often causing prices to be decreased up to 40% with respect to the original level.
In Italy, generics were first introduced in early 2002, and produced very typical dynamics with respect to price reductions. Many blockbusters, like Aulin (nimesulide) and Ranidil (ranitidine), were substantially hit by generics’ competition from price standpoint, whilst they recovered in terms of volume after an initial loss also on that side. In the last few years, the pharmaceutical landscape was completely reshaped, while more blockbusters lost their patent protections and were cannibalized by low-priced generics.
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"...more blockbusters lost their patent protections and were cannibalized by low-priced generics."
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Generics’ introduction and progressive status loss by branded drugs also generate a consistent reshaping of promotional panorama. Big Pharma companies, which had massively invested in sales forces as a priority channel for building and maintaining conversation with doctors, progressively dismissed personnel, whose existence was not anymore justified by a positive cost / revenue balance. Congress-related expenses were also decreased, and there was a progressive tendency, also fueled by the growing availability of digital promotion tools, to refocus promotional budget on digital channels.
Despite the progressive erosion of the edge that Big Pharma had on generics’ producers, the pharmaceutical market reached a new level of stability, where prices were lower, but the force ratio was roughly unscathed. In contrast to the communications’ campaigns performed by genericists and Italian government, Italian citizens still showed a strong tendency to prefer original drug specialty, thus proving the existence of a strong branding power on them. According to the data from the consumers’ associations Federconsumatori and Adusbef, indeed, the percentage of generics choice is around 16-18%, while in other countries reaches levels of 40-50%. Furthermore, and despite the introduction of individual expense budgets, doctors maintained a strong preference toward branded specialties, probably because they were acknowledging the partnership role played by Big Pharma in their professional practice.
The Law Decree n. 95, August 15, 2012, substantially changed the competitive panorama, with special respect to the importance of actors in the drug choice chain. At the comma 11-bis the obligation was introduced for the General Practitioners (GPs) to indicate on their prescription the name of the molecule only, without any mention for a particular brand. The only exception to the rule would be a so-called “no-substitution” criterion, according to which the doctor states and specifies on the prescription that a particular brand has no possible substitution. The decree is evidently aimed to incentivize the use of generics and realizing saving that the consumers’ associations assess to be around 600-700 million Euros per year.
While the spirit and the scope of the decree is quite clear, the outcomes can be regarded as contentious, and even generates unwanted consequences for both doctors and patients.
The immediate consequence of the decree is the re-modulation of the drugs’ buying chain. GPs are not anymore the decision-makers, with respect to which brand will effectively be delivered to the patient – this opportunity is bestowed on the pharmacist. This loss of importance in the eyes of the pharma industry will probably have as a consequence the refocusing of promotional budgets from GPs to pharmacists, thus breaking a long-term relationship between industry and doctors.
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"Italian citizens still showed a strong tendency to prefer original drug specialty, thus proving the existence of a strong branding power..."
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In the eyes of the pharma industry, this could not necessarily be a huge problem, since it will only imply a reshaping of operations in order to transfer the informative potential represented by the sales force, congress sponsorizations and the other promotional activities from GPs to pharmacists. On the other side, doctors will definitely be deprived of the updating service that the pharma sales force represented up to this moment, and that often was pivotal in acquiring news about real-life use of the drugs. Even more impactful, it is foreseeable that GPs associations at national and local level will find tremendous difficulties in gaining the support of pharma industry for sponsoring their congresses.
In the present time of economic restrictiveness, it is not foreseeable that national State will fund periodic updating of doctors of its Servizio Sanitario Nazionale (SSN, National Healthcare Service), nor it will have the economic strength to fund huge events like National Congresses, where doctors in the past had the opportunity to gain information about clinical cases.
When lacking of alternative ways of financing their periodical update, the result of all of the above will probably be in the medium-long term the progressive decreasing of Italian GPs’ preparation. If verified, this could also have negative unintended consequences.
GPs are the primary point of contact for patients, and the most important resource for detecting and minimizing the impact of periodic epidemics like influenza, or life-threatening, chronic diseases like diabetes. When lacking of the periodic update guaranteed by congresses and the relationship with pharmaceutical industry, they could lose grasp to the latest therapeutic advancements, and consequently their skills will be progressively limited to what they learned during medical school.
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"...GPs could lose the sensibility to precociously spot non-common, but impactful diseases..."
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As skillfully outlined by Steven D. Levitt and Stephen J. Dubner in their seminal book “Freakonomics”, social events can often be the unintended consequence of governmental measures in a field which is not apparently directly impacting that domain, but which does in the medium-long term. The loss of medical preparation, resulting from the removal of the update opportunity given from pharmaceutical industry on GPs, could result in the rise of the medical errors’ rate, with obvious consequences in terms of medical responsibility lawsuits and diminishing quality of life for patients. Even worse, GPs could lose the sensibility to precociously spot non-common, but impactful diseases like infections and cancer, thus compromising the possibility to contain epidemics and allow a better outcome to oncologic patients. Both of the abovementioned diseases, when allowed to gain space because of the lacking of early detection, can generate more expenses for the National Health Service than the ones which a GP-led prescribing model could.
As a conclusion, before taking decisions, governments should have to consider more attentively not only the immediate benefits, but also the not-so evident, but impactful, hidden consequences.
Previous articles by Ferdinando Scala:
• ROI calculation for digital programs
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About the author:
Ferdinando Scala is International Digital Strategist at Razorfish Healthware, a Publicis Healthcare Communications Group company. His main fields of expertise are digital strategy, digital metrics modelling, marketing and communications, change management.
An Alumnus of the prestigious Nunziatella Military School of Naples, Italy, Ferdinando holds an MSc in Biology (summa cum laude), received MBA training, and is currently pursuing a BSc in Communication Sciences. He spent 12 years in Big Pharma companies, holding positions in Sales, Marketing and Commercial Operations at national and international level. A passionate Wikipedia author, on June 2011 he has been shortlisted for becoming a member of the Board of Trustees of the Wikimedia Foundation, and he was the Candidacy Leader for the City of Naples to be the hosting town for Wikimania 2013, the global conference of Wikimedia Foundation.
LinkedIn: http://www.linkedin.com/in/ferdinandoscala
Twitter: @fscalapro
How do pharma regulations in Italy compare to other countries?
