Affordable medicines, savings of over 2 billion, but cost pressures threaten the sector

A robust sector, which has so far withstood the growing pressure from production costs but is now showing the first signs of a slowdown: net profitability has fallen by 0.3 per cent to 2.8 per cent, and this figure calls for reflection on industrial sustainability as well as a review of pharmaceutical governance that takes into account the specific characteristics and objectives of companies. This would be to their benefit, but also to the benefit of the entire National Health Service, particularly when one considers that the use of generic, biosimilar and off-patent medicines generates savings running into the billions: 8.2 billion recorded between 2016 and 2025, with 850 million in 2025 alone.

The picture painted by the 11th Report of Egualia’s Observatory on Affordable Medicines – produced with the support of Nomisma and the TEHA Group and presented in Rome – highlights, on the one hand, the scope and resilience of the system; and on the other, the strain caused by the surge in costs, against a national backdrop of rising pharmaceutical expenditure, with hospital expenditure projected to reach 13.1 billion (+5.2 per cent) by 2025, 94.7 per cent of which is attributable to patent-protected medicines, whilst generics account for only 2.1 per cent. So much so that “two pharmaceutical economies are emerging,” explains Egualia, “both of which contribute to the sustainability of the health service but operate according to different industrial logics: on the one hand, innovation, with smaller volumes and high unit prices; on the other, affordable, off-patent medicines, which ensure large volumes of treatment at affordable prices and with much lower industrial margins”.
“Companies specialising in affordable medicines have demonstrated a strong ability to adapt, continuing to invest, innovate and create jobs despite rising costs. Today, however,” explained Lucio Poma, chief economist at Nomisma, “we are seeing the first signs of a downturn in profitability. The point is that, in a price-regulated market, efficiency has its limits and cannot indefinitely offset rising costs. This is a sign that should not be underestimated, because over time it may result in lower investment and a gradual reduction in supply.”
According to Daniela Bianco, Partner at The European House-Ambrosetti and Head of Health & Life Sciences at TEHA Group, ‘the rise in pharmaceutical expenditure and the challenges facing the supply chain require us to rethink governance, moving beyond an approach focused primarily on cost containment. Innovation and affordable medicines play different but complementary roles for the National Health Service; this is why greater integration is needed between health policy and industrial policy, recognising that affordable medicines not only contribute to the sustainability of expenditure but also have strategic value for the resilience of supply chains and the security of supply.”

These are issues of which the authorities are well aware. “Generic medicines are a vital resource for ensuring access to treatment and the sustainability of the National Health Service,” emphasised the Minister of Health Orazio Schillaci in his video message. In a complex international landscape, it is essential to strengthen production chains and ensure continuity of supply. We are working towards a more modern and efficient pharmaceutical governance system, capable of responding more swiftly to citizens’ needs. The challenge is to combine effective and accessible treatments with the sustainability of the NHS and the robustness of the production system. To achieve these objectives, constant dialogue between institutions, businesses and all stakeholders in the pharmaceutical sector is essential.” A dialogue which, in the view of the Under-Secretary of State for Health Marcello Gemmato, is encapsulated in the Pharmaceutical Reform bearing his signature and which, he noted, replaces two Royal Decrees dating from 1934 and 1938. “With the Consolidated Act,” he stated, “we aim to harmonise pharmaceutical legislation to provide certainty regarding investment and citizens’ access to treatment: Europe and Italia must seize this extraordinary opportunity to regain control of the production of active pharmaceutical ingredients. It should be noted that in Italia, despite being Europe’s leading country in terms of pharmaceutical production, with a turnover of 72 billion euros, we import 80 per cent of our active pharmaceutical ingredients from India and China.”

This is an issue that is closely linked to accessibility and sustainability, which, as AIFA President Robert Nisticò went on to say, ‘must be considered together. Generic medicines – he added – are a key tool for ensuring effective, high-quality care for an ever-increasing number of citizens, contributing to the sustainability of the National Health Service and freeing up resources for therapeutic innovation. There is still scope to increase their use: uptake is lower in the southern regions, and to bridge this gap we must strengthen information and build trust amongst patients and healthcare professionals. Access also depends on the availability of medicines: we are working with the entire supply chain to prevent shortages, and generics can ensure continuity of treatment when a product is unavailable. ‘The challenge for AIFA is to maintain a rigorous and transparent regulatory framework that safeguards quality, safety and efficacy, and promotes timely and uniform access to treatments throughout the country,’ he concluded.

With revenues of €6.8 billion and 11,792 employees (+1.9 per cent year-on-year), the affordable medicines sector continues to create value and jobs; and when direct and indirect effects are taken into account, the economic impact reaches 20.4 billion and the employment impact is close to 50,000 jobs. However, the conditions that have enabled its development, as explained by the Observatory, can no longer be taken for granted because “efficiency has its limits in a price-regulated market and cannot indefinitely offset rising costs”, which have increased by over 32 per cent in five years, with a 30.9 per cent rise in raw materials and a 34.4 per cent rise in services. It is therefore an ‘increasingly delicate’ balance that companies find themselves in, as they are called upon to guarantee large volumes of medicines – often essential ones – whilst operating in mature product markets, at affordable prices and with margins that are progressively being squeezed. This is an issue affecting the production capacity of Italia and Europe, in a context where the EU relies on China and India for 60–80 per cent of its active pharmaceutical ingredients. The call here is for the EU’s new regulations, including environmental ones, to be designed with due consideration of their cumulative effects on the production of affordable medicines. These medicines are “a component of the country’s health and industrial infrastructure”: we are talking about antibiotics, cardiovascular medicines, cancer drugs, anaesthetics and many of the treatments used daily by patients. Keeping such production economically viable means safeguarding public health and supply chains.