In developed countries, such as the Czech Republic, medicinal drugs are often taken for granted by the patients who need them. But those drugs are also a big money product for their manufacturers and a potentially high earning commodity for firms who distribute them round Europe. Moves to limit so-called re-export of drugs are now being drawn up by the Czech Ministry of Health and look like pitting producers against these re-distributors. The final shape of the law being closely followed by the European Commission in Brussels.
The Czech Ministry of Health appears to have come rather late onto the scene with moves to limit the re-export of certain drugs. Neighbouring countries, such as Slovakia and Hungary, have had them in place for several years now and Poland has just adopted legislation which is expected to take effect soon. Those moves have in some part acted as a catalyst for Czech action. As regulations closes off the opportunities in some countries, those without controls look all the more inviting.
The rational for action is the following: in certain circumstances key drugs which are needed for the treatment of patients in one country might simply disappear off the shelves and from stocks if re-exporters find that they can make bigger earnings on them by shipping them out of the country to sell in some other EU state. The scarcity could be a life and death issue for some relatively rare drugs which are not easily replaceable.
That’s why legislation in Budapest, Bratislava, and now Warsaw, have put in place a variety of safeguards where re-exports of drugs must be either approved by national authorities across the board or where an alarm is triggered if the availability of certain drugs appears to be threatened.
One of the most vocal backers of the proposed Czech legislation is the Association of Innovative Pharmaceutical Industry (AIFP) which groups around 30 drug companies in the country. These include the Czech units of some of the biggest European and global drugs companies such as Abbott Laboratories, AstraZeneca, Bayer, Lilly, Merck, Sanofi, and Novatis. The association has just released a study which highlights the increasing turnover of the re-exporters in the Czech Republic although they are mainly focused on an ever narrowing number of drugs.
“Drugs are not a classical commodity”
Around 20 drugs account for around two-thirds of their business. Many of those are for treating cancer. But there can be enormous variations in what sort of drugs are crossing frontiers. For example, there has been a more than 22,000 percent increase in the re-export of the diabetes drug Januvia between 2012 and 2014. And the Czech Republic is a temping place to base such re-exporting business with some of the lowest drug prices in Europe.
Jakub Dvořáček is the executive director of the association and he explained why it is enthusiastic for the proposed Czech laws curbing re-exports of drugs to be drawn up and adopted as soon as possible.
“We like it. It is something that we really need and I think that the Czech Republic is ready to have a limitation of re-exports. It is something that other countries have already implemented. If we take the Visegrad region, Slovakia, Poland, and Hungary already have a protection system for their patients so we think its time for the Czech Republic to have something similar.”
You represent producers, so to them is it not the same if the drug sold is produced and sold in the Czech Republic, Poland, Germany, the Netherlands, Belgium or anywhere?
“It is not like that. The pharma business is very specific and it’s all about trust. If the patient does not trust the drug which is prescribed for him or her, it is then very difficult. For us, it is very important that the patients in different countries have the drugs that they need; that they have regular access and don’t have to be afraid or scared that they will not have the supplies that they need. For us, there is a reputation issue that we have enough drugs for the patients in each and every European country.
“But drugs are not a classical commodity. Regulations are very sophisticated and each country has very different regulations about maximum prices and reimbursement. So it is very difficult for us to ensure that drugs stay in the countries for which they were delivered and manufactured. For each and every country you have to have the leaflet and box [for drugs] in the national language. It is not easy, for example, to use drugs which, for example, are produced for Spain in the Czech Republic. So if there is a difficulty with access [to the drugs], it really takes time to have a new supply for the Czech Republic. We think that the legislation here could help us, not in all cases of course, re-export will continue, but at least in the situations that are really dangerous for the patients where the drug cannot easily be switched or where we do not have the proper equivalent for treatment.
And is there legislation in other countries, surrounding countries, that you think could be a model for you?
“I think that we will have to produce something similar. We have to be very careful because European directives about free trade are very clear, so we cannot stop any trade like that. On the other hand we can protect patients in national countries. So in specific cases where the risk to health, the risk to life, should be considered, in those cases we could limit exports.
And how many drugs might we be talking about where there might be some limit?
“This has to be done in a way we can manage, so that means that we should be able to follow dozens of drugs and only the drugs that are really difficult to interchange. So I think that it will be at a maximum 40 or 50 drugs which will be followed and their availability checked. And the re-exporters will have to somehow let the regulators know in advance if they are going to redistribute drugs to other countries. The SÚKL [State Institute for Drug Control] and ministry will need to have enough time to decide, okay this is too risky, Czech patients could have difficulty with access [to drugs].”
“The income is then more than 1.0 billion for those who re-export the products. So of course, it is a huge business”
Who are the re-exporters what sort of companies are they and are they exerting pressure for this law not to be passed?
“Of course, it is a big business. If you take the yearly [turnover] it is about 5.0 billion crowns. It is a really amazing number. And the profitability is more than 20-30 percent. The income is then more than 1.0 billion for those who re-export the products. So of course, it is a huge business. On the other hand they have to take into account the patient and not just their profit. That is something that we think the legislation could change.
But who are these re-exporters? Are they Europe-wide companies?
“I cannot give the names because it is changing over time. But we have companies which are really big which are, let’s say, in all European countries. They are very active and doing business all around Europe. But we have also small Czech distributors who are involved in this business and there are hundreds of them in the Czech Republic. So it’s very difficult to say, you know, who is involved in which kind of re-export. “
For these companies, what is the incentive for re-export? Is it just basically just the price differentials across Europe?
“Yes, that is the only issue. We have different prices in Europe and there is no other difficulty for them. They just take the drugs from the Czech Republic, put them in the vehicle and move it to another country that is all. It is a business without risks and with high profitability.”
And the price differentials are how much sometimes across Europe?
“It could be 50-60 percent in some cases and they really react in response to developments. So if in one country to price is high and if in another country there is some additional regulation and the price drops down, they can immediately react and move the drugs. As I said, they have a wide, wide network across the whole of Europe.“
And it’s as dynamic as that, it can change from week to week, month to month?
Jakub Dvořáček says he hopes the shape of the proposed new law will be finalized by the end of the year and take effect by the middle of 2016. But he expects the drugs re-exporters to put up a formidable fight.
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