European court confirms governments have autonomy over drug pricesBMJ 2009; 338 doi: https://doi.org/10.1136/bmj.b1528 (Published 14 April 2009) Cite this as: BMJ 2009;338:b1528
The European Court of Justice has reaffirmed that European Union member states have broad authority to reduce drug prices to protect the financial stability of public healthcare insurance schemes.
The court’s ruling, issued 2 April, concerns price cuts ordered in 2005-6 by the Italian Medicines Agency, the body responsible for monitoring the costs of drug and medicinal products borne by the Italian National Health Service. The service acts as a public health insurer, ensuring that all Italians receive medical care and drugs. The drug price cuts, including a 5% across the board reduction just months after previous selective cuts were made because drug costs were exceeding budget limits.
Drug companies, including Italian subsidiaries of global giants such as Sanofi-Aventis and Schering Plough, filed a lawsuit contending that price reductions did not comply with European Council Directive 89/105. Often referred to as the “transparency directive,” this relates to transparency of price regulation by national authorities of the drug industry. An Italian court referred the case to the European Court of Justice in Luxembourg.
In its ruling, which applies to all European Union member nations, the high court noted that EU law ensures that member nations have unilateral control over their social security and health insurance schemes and may freeze or reduce all drug prices of certain categories. Such actions can be taken more than once a year and for several years if necessary, as long as a review of macroeconomic conditions is undertaken at least once a year to justify the actions. The court also ruled that price measures can be adopted on the basis of predicted spending.
Colin Mackay, director of communication at the Brussels based European Federation of Pharmaceutical Industries and Associations, downplayed the significance of the court’s ruling, telling the BMJ, “My read of it is that this has not changed anything.”
However, he conceded that drug companies based in Italy had indeed tried to change things by filing a lawsuit, adding that EU laws allowing member nations to cut drug prices “had not been tested before” in court.
The price cuts ordered by Italian authorities wanting to balance the healthcare budget unfairly targeted drug companies, because drug costs account for only 10-15% of the total healthcare budget, he said. “I think it [the drug industry] is an easy target for them,” he added.
If drug companies cannot make profits to finance continued research and development, then eventually patients would suffer the negative consequences, he said. He thinks other EU nations realise this and therefore does not expect them to adopt across the board drug price cuts as Italy did. “Were that to happen in other countries it would be a concern,” he said.
Ike Iheanacho, editor of Drug and Therapeutics Bulletin, a BMJ Group journal, agrees that drug companies must be allowed to make “a reasonable profit.” However, “they should not be free to charge prices that are considered unaffordable to national healthcare systems.”
He noted that the court’s ruling emphasises that, within defined circumstances, member nations may adopt price cuts on the basis of objective and verifiable predictions of expenditure. “It seems a very sensible judgment,” he said.
He does not expect the court decision to trigger a “stampede of nations” under the current global economic stress to cut drug prices across the board, but it will catch the attention of healthcare officials. “It will give people pause for thought,” he said.
Cite this as: BMJ 2009;338:b1528