In March 2018, the Office of the United States Trade Representative (USTR) published its 2018 National Trade Estimates Report on Foreign Trade Barriers (NTE). Every year, the USTR is mandated to “submit to the President,the Senate Finance Committee, and appropriate committees in the House of Representatives, an annual report on significant foreign trade barriers. The statute requires an inventory of the most important foreign barriers affecting U.S. exports of goods and services, foreign direct investment by U.S. persons, and protection of intellectual property rights.” (Source: USTR 2018 National Trade Estimate Report on Foreign Trade Barriers).
The 2018 NTE report numbers 504 pages; 48 pages of this report are devoted to the European Union and its member states. The USTR, prompted by the pharmaceutical industry, takes aim at the pharmaceutical pricing and reimbursement policies in the European Union, in particular – Austria, Belgium, Cyprus, the Czech Republic, France, Hungary, Italy, Lithuania, Poland, Portugal, Romania, and Slovakia. While the NTE report has a broader remit than the USTR Special 301 report, it does serve as a barometer for what to expect in the Special 301 report.
U.S. pharmaceutical stakeholders have expressed concerns regarding several Member State policies affecting market access for pharmaceutical products, including non-transparent procedures and a lack of meaningful stakeholder input into policies related to pricing and reimbursement, such as therapeutic reference pricing and other price controls. Such policies reportedly create uncertainty and unpredictability for investment in these markets and can undermine incentives to market and innovate further. These policies have been identified in several Member States, including: Austria, Belgium, Cyprus, the Czech Republic, France, Hungary, Italy, Lithuania, Poland, Portugal, Romania, and Slovakia. Additional detail on some of these Member State policies is set out below. Pharmaceutical firms also have expressed concern regarding recent changes to European Medicines Agency (EMA) policy regarding disclosures of clinical trial data, including potential disclosure of confidential commercial information submitted to EMA by pharmaceutical firms seeking marketing authorization. The United States continues to engage with the EU and individual Member States on these matters.
Here are USTR’s entries for Austria, Belgium, Bulgaria, France, Italy, and Romania.
Austria: U.S. pharmaceutical companies have expressed concern regarding non-transparent decisions by the Austrian Social Insurance Carriers Association (HVB). In a system approved in 2016, the EU average price was set as a ceiling for price negotiations, essentially ensuring a below-average price outcome for pharmaceutical products. The HVBalso agreed to a rebate agreement with producers of branded medicine (not demanded of generic drug producers), which requires a so-called “solidarity contribution” for the sector ($148 million in 2016, and even up to $190 million subject to a growth-related calculation method in 2017 and again in 2018). This “contribution” is a de facto prerequisite to receiving reimbursement for prescribed drugs.
Belgium: Over the past 15 years, U.S. pharmaceutical companies have repeatedly expressed concerns about the Belgian government’s lack of adequate transparency in the decision-making process related to cost-containment measures in the pharmaceutical sector. The Pact for the Future, signed between the federal government and the pharmaceutical industry in July 2015, addressed some of these concerns. Still, the budget measures of the Pact are very strict, while the initiatives that purported to lead to faster access of new innovative drugs are being implemented at a much slower pace. The companies have identified several tax-related measures, such as a 6.73 percent turnover tax, the 1 percent crisis tax, the 0.13 percent marketing tax, an orphan drug tax, and the clawback tax (an additional 3.29 percent of turnover as initially defined in 2017), as exemplifying such concerns.The claw back tax system was changed in 2017, and since is defined as 2.5 percent of the total reimbursable drug budget, instead of a fixed cap of €100 million ($112.4 million). This has led to a small increase of the claw back tax to €101.4 million ($113.9 million). In 2017,these taxes amounted to€370 million ($415.7 million). The Belgian government revoked a plan to abolish a 1 percent crisis tax during the 2017 budget discussions and imposed an additional €187 million ($210.1 million) savings in order to respect the budgetary trajectory set in the Pact for the Future. Overall, pharmaceutical companies contributed about 80 percentof the budget cuts in the Belgian healthcare system in 2017.The United States continues to highlight the need for a continued dialogue with the government and meaningful opportunities for stakeholder input into budget and pricing decisions.
Bulgaria: U.S. pharmaceutical companies also expressed concerns about the government’s one-year moratorium on payments for newly-patented and innovative treatments, which the government introduced for 2018 in an effort to contain healthcare costs. The first Bulgarian government e-health tender was fast-tracked in 2017 for hospital purchase of cancer pharmaceuticals worth $518 million, but it is currently on hold pending litigation. U.S. companies have reported that the tender specifics were narrowly written to exclude some branded biotech medicine and included strict sanctions for products with shorter shelf life.
France: Pharmaceutical industry stakeholders continue to raise concerns about the French pharmaceutical market, including with respect to the significant tax burden on the industry and the constraints facing the sales of reimbursable medicines, sales of which dropped by 1.5 percent from 2015 to 2016 and by 2 percent per year over the previous four years. As an example of such constraints, U.S. stakeholders have expressed concern that market access for drugs in France is slower than elsewhere in Europe, resulting from delays in reimbursement approvals of as much as 405 days after marketing authorization, compared to the 180 days required by EU law.
Italy: U.S. healthcare companies face an unpredictable business environment in Italy, which includes highly variable implementation of complex budget policies. One such policy is the “payback system” for hospital pharmaceutical purchases, which was first applied in 2013. It requires that pharmaceutical companies pay back 50 percent of the amount spent over budgetary limitsfor pharmaceutical spending. The pharmaceutical companies pay back the overspending to the national government through the Italian Drug Agency (AIFA), which is the organization in charge of calculating the overspending and collecting return payments. The Italian central government determines the overall annual budget for pharmaceutical products, which is then transferred to each region responsible for managing the healthcare system locally. Industry estimates that the Italian government has asked for roughly $1.48 billion from pharmaceutical companies between 2013 and 2015 as part of this policy. U.S. pharmaceutical firms account for 30 percent of the market but are asked to contribute 50 percent of the payback amount. Several U.S. and European companies have prevailed on appeal to the Regional Administrative Court when challenging the 2013, 2014, and 2015 payback calculations. The 2018 budget law requires companies to refund the overrun on 2016 pharmaceutical expenditures and to conclude the settlement agreements defined with the AIFA for the payback amounts for 2013, 2014 and 2015.
Romania: Innovative pharmaceutical producers have identified several significant challenges in Romania resulting from the Romanian government’s failure to update, despite repeated requests, the lists of innovative pharmaceuticals that are eligible for reimbursement under the national health system. According to U.S. stakeholders, Romania added several new innovative drugs to the reimbursement list in 2017 and concludedthe process of developing treatment protocols to make 19 new drugs available to patients. Numerous applications remain pending with no progress. This severely undermines the ability of U.S. pharmaceutical companies to introduce newer drugs in Romania because the National Health Insurance House will not pay reimbursement for drugs that are not included on the reimbursement list. Both innovative and generic pharmaceutical companies also have started to withdraw drugs from the Romanian market, as the low official prices set in Romania can fall below production costs and create parallel trade problems. The claw back tax, equivalent to 19.42 percent of total gross sales for the third quarter of 2017, is another major challenge for U.S. stakeholders. This tax rate is determined on the basis of the difference between the state’s budget for reimbursable drugs and the amount actually spent on the drugs. U.S. stakeholders continue to raise concerns regarding a lack of transparency, particularly in pricing and computation of the claw back tax.