Italy’s NHS allows both private and public pharmacies to coexist. Private pharmacies are owned by pharmacists who act as independent contractors under the NHS. Public ones, mainly municipal, are managed by pharmacists employed by the municipality in which the pharmacy is located. Despite this administrative division, both types of pharmacies are licensed to sell commercial products and, on behalf of the local health unit, pharmaceuticals. Commercial goods mainly include bandages, contraceptives, items for personal hygiene, baby products (such as diapers and infant formula) and cosmetics (some pharmacies also sell homeopathic products). Pharmaceuticals include drugs and dietary goods and can only be sold if a consumer has a prescription from a general practitioner.
All the revenue goes directly to the owner of the pharmacy: to the pharmacist if the pharmacy is private, and to the municipality if the pharmacy is municipal, which then pays a salary to the pharmacist running the pharmacy.
Pharmacies’ revenue is a percentage, set by law (usually the Finance Act) of the overall price before VAT: the most recent rate, set in 1996, is 26.7%. This rate does not take into account special discounts that pharmacies might be able to negotiate with manufacturers. Conversely, local health units are responsible for reimbursement.
Pharmaceuticals
The turning-point for Italy’s pharmaceutical sector was 1 January 1994, when Law 537/1993 came into force. The pressure to contain expenditure and an impressive series of scandals favoured the most radical change ever in Italy’s pharmaceutical policy. Since 1994, regulatory policies have:
A new positive list
In 1994, the National Committee for Pharmaceuticals was established. The 1978 positive list was abolished, and drugs were reclassified into four groups:
Cost-sharing rules were also modified in 1994: for pharmaceuticals in group A, patients pay €1.55 if the prescription includes only one item or €3.10 for more than one item; and for pharmaceuticals in group B, patients pay only 50% of the price. Consumers pay the whole cost for pharmaceuticals in group C, which are not covered by the NHS.
The new list was established according to four criteria: 1) clinical efficacy, documented by evidence-based criteria; 2) the risk-benefit balance of the therapy; 3) the acceptability of the therapy to patients; and 4) the cost of the therapy.
The National Committee for Pharmaceuticals also introduced caveats for some drugs; these can be considered guidelines for the use of pharmaceuticals.
A nationwide drug expenditure budget
In 1994, the government introduced a ceiling on annual public pharmaceutical expenditure to be fixed yearly by the Finance Act. Although, in theory, the drug expenditure budget should be complied with during the year to prevent possible year-end overruns, in practice, budgets have always been exceeded (Table 15).
The ceiling was €5165 million for 1994 and €7449 million for 2000. Since 1998, private companies, wholesalers and pharmacists have been made responsible for paying 60% of the deficit to control the growth of pharmaceutical expenditure.
New price-setting models
Pharmacists freely determine the prices of commercial goods; prices for each pharmaceutical product are fixed centrally through a negotiation process involving the National Committee for Pharmaceuticals and the representatives of the major pharmaceutical companies. In 1994, the price-setting system for drugs was modified. The Committee on Pharmaceuticals (CIP Farmaci), the body charged with regulating drug prices, was abolished, and a year later the Interdepartmental Committee on Economic Planning (CIPE) announced a new method for determining drug prices based on cost estimates derived mainly from information from private companies that effectively replaced the previous one. According to the new system, prices can be freely set without exceeding the average European price. The average European price was based on the five most sold drugs, including generics. Only France, Germany, Spain and the United Kingdom were taken into consideration in deriving the average European price. Foreign prices were converted into Italian currency based on purchasing power parity (PPP), a price index used for international comparative studies.
The principle of similarity was adopted to identify the European equivalents of Italian products: the same active ingredient, the same route of administration, the same or therapeutically comparable pharmaceutical form and a similar dosage.
The pharmaceutical industry criticized the new model: in particular, restricting the comparison to only four countries, including generics in calculating the average European price and using PPP. As a result of the industry’s dissatisfaction, the Interdepartmental Committee on Economic Planning (CIPE) introduced a sort of reference price in 1996, based on the principle of the same prices for the same drugs. The basic idea is that products in group A and group B that use the same active ingredient, have the same method of administration and have the same or a comparable pharmaceutical form should have the same prices per unit of compound. This pricing mechanism exists only for products in groups A and B, since the prices for Class C pharmaceuticals are freely established by the private sector.
Further, in 1997, the Interdepartmental Committee on Economic Planning defined a new price system for innovative drugs authorized by the European Agency for the Evaluation of Medicinal Products. Prices are set by negotiation between the National Committee for Pharmaceuticals and private companies, using the following criteria: a) cost–effectiveness; b) foreign prices; c) internal market forecasts; and d) investment by the company related to the introduction of the new drug.
Since July 1998, the average European price method (used for non-innovative drugs) has been modified to include all European countries and current exchange rates.
Changes in distribution margins
Controlling public pharmaceutical expenditure required focusing on pharmacies also. Wholesale and pharmacy margins were traditionally set as a fixed markup on ex-factory prices and have not varied much during the last 15 years. From 1981 to 1997 the wholesale margin has changed from 8.0% to 6.65% and the pharmacy margin from 25.0% to 26.7% of drug prices excluding VAT.
In 1992, a fixed compulsory rebate on pharmacy margins was introduced for products covered by the NHS. The rebate was initially set as a fixed proportion of the price (2.5% of the price excluding VAT, 3% since 1995).
From 1997, pharmacists were forced to apply a discount to products covered by the NHS. Different discount rates apply to different price ranges to make the pharmacy’s margin regressive (decreasing with the price). The discount was 3.75% for prices less than €25.8; 6% for those between €25.8 and €51.6; 9% for those between €51.6 and €103.3; and 12.5% for prices equal to or greater than €103.3.
The introduction of generics
Despite all the interest in cost containment, Italy’s authorities have not given generic drugs much attention. As a consequence, their use is very limited. The 1995 Finance Act introduced the term generic into legislation. The law provides pricing incentives to promote generics, stating that, if the product is marketed at a price at least 20% lower than the equivalent speciality, it is automatically listed in the same co-payment class. Other incentives come from the financial accountability of regions over health care and the consequent process of management improvement and cost containment in the local health authorities of the NHS (18).
Because wholesale and pharmacy margins were traditionally set as fixed mark-ups, this has made the distribution of expensive drugs more profitable. Since 1997, the pharmacy margin on NHS-covered products became inversely related to the product’s price.
However, the regressive effect is still very slight and does not favour the use of generics. As a matter of fact, the generics market in Italy is still negligible. The latest data show that generics account for only 3% of all prescribed medicine units sold (18). However, recently passed regional acts (Tuscany being one of the most active regions) aim at promoting the prescription of generics by distributing lists of generics among general practitioners and encouraging them to prescribe generics. These reforms are nevertheless still in their early stages, and nationwide implementation is far from being achieved.
Attempts to influence general practitioner prescribing
The prescriptions of general practitioners have never been strictly controlled. Only after the series of scandals affecting the whole pharmaceutical system did the 1992 reform of the NHS create greater incentives and opportunities for making general practitioners accountable for their prescribing activities, such as an expenditure budget for each general practitioner and incentives for general practitioners to achieve this target. The specific impact of each new regulatory measure is difficult to assess, even though the reclassification of drugs by the National Committee for Pharmaceuticals substantially affected NHS drug expenditure. In particular, since 1993, the measures described above have had two main effects. First, they dramatically reduced NHS pharmaceutical expenditure from 1993 to 1995. The introduction of guidelines from the National Committee for Pharmaceuticals and the introduction of a nationwide drug expenditure budget largely achieved this aim (Fig. 20). Second, much of the reduction in NHS pharmaceutical expenditure resulted by shifting costs from the public sector to patients. The demand for drugs is steep: despite an increase in the prices of drugs in group C, consumption has increased (Table 16).
Nevertheless, these cost-containment strategies were not long-run manoeuvres but just emergency measures to stop the never-ending increase in drug expenditure. This could explain why expenditure increased again rapidly from 1996 to 1999 (Fig. 20).
 | From the HiT (Healthcare Systems in Transition) of Italy (2001) [pdf, 515KB] | |
