The recent presentation of the book “Payback in the Government of Pharmaceutical Spending"of Michael Hall (published by Giuffrè in the “Market Law” series in 2024) offered a detailed and critical overview of the payback system and its implications in pharmaceutical expenditure. The event, which saw the participation of industry experts, highlighted key issues regarding the functioning of this mechanism and its impact on the various actors involved, from pharmaceutical companies to government institutions.
What is Pharmaceutical Payback?
The payback system was introduced in Italy for contain the costs of public pharmaceutical spending. First implemented by Law No. 405/2001, the mechanism obliges pharmaceutical companies to contribute to the reimbursement when total spending on drugs exceeds the limits established by law. In other words, if public pharmaceutical spending exceeds the established limit, companies must "return" a portion of the excess amount to the State, with the aim of avoiding an excessive increase in costs for the National Health Service (SSN).
Over the years the system has undergone numerous adjustments over time. Originally conceived to ensure a balance between the right to health and financial sustainability, the payback has been modified to respond to growing economic and political challenges. In 2022, the mechanism generated revenues of 213 million euros, representing approximately 2% of the revenues of the SSN.
Pharmaceutical expenditure in Italy
According to the OsMed Report 2022, total pharmaceutical expenditure in Italy, public and private, reached 34,1 billion euros, with an increase of 6% compared to 2021. This figure represents 1,8% of the Gross Domestic Product (GDP). Public pharmaceutical expenditure was 23,5 billion euros, equal to 68,9% of total expenditure and 17,9% of public health expenditure, showing an increase of 5,5% compared to the previous year. Territorial pharmaceutical expenditure, including public and private expenditure, rose to 22,5 billion euros (+6,5%), with public expenditure for class A drugs in direct distribution and on behalf of the company contributing to the increase.
Il national health needs, set by the 2022 Budget Law, was 124.061 million euros for 2022, with growth forecasts for the following years. Despite the increase in healthcare funding, the system faced significant challenges, including the economic crisis and the COVID-19 pandemic, which put financial sustainability to the test.
Le changes to pharmaceutical governance, such as those introduced by the 2017 Budget Law, have attempted to restructure spending by increasing the cap on hospital pharmaceutical spending and reducing the cap on territorial pharmaceutical spending. However, the system continues to be under pressure from rising costs, technological progress, and an aging population.
Despite the efficiency of the National Health Service (NHS) compared to other health systems, the disinvestment in public health has led to shortages, particularly in staffing. Furthermore, resource allocation remains limited, with the NHS covering 75% of total pharmaceutical spending.
Continued innovation in the pharmaceutical industry, with new high-cost therapies that can significantly impact spending patterns, requires careful consideration to ensure a balance between protecting public health and the financial sustainability of the system.
The European context and the gap with the USA
The comparison with the European context reveals important differences in the management of pharmaceutical spending. In Italy and Greece, containment measures have generated resistance and numerous legal appeals. On the contrary, countries such as Germany and France, although they adopt spending control systems, have less rigid approaches and greater opportunities for access to therapeutic innovations.
The gap between Europe and the United States is evident. In the United States, the less regulated pharmaceutical market allows for a faster access to new therapies, while in Europe, the payback system limits access to innovations and creates disincentives for pharmaceutical companies.
The problems of payback
During the book presentation, Sergio Marullo, managing director of Angelini group, illustrated the problems arising from the payback system. Marullo explained how the uncertainty related to spending caps makes planning difficult for pharmaceutical companies, which have to face huge investments, often exceeding 2 billion euros per drug, with high failure rates during the clinical trial phases. Fluctuations in the spending cap can discourage innovation and the forecasting of healthcare spending in Italy is often imprecise, with overruns of 30% compared to the established caps.
The doctor Carla Cantelmo, director of the AIFA Litigation Office, discussed the critical issues related to regulatory developments of the payback system. Cantelmo highlighted how regulatory changes, such as those introduced by Law No. 145/2018, have attempted to simplify the reimbursement process, but have encountered resistance and generated legal disputes. Legal challenges have confirmed the legitimacy of the system, but businesses continue to view it as an obstacle to innovation.
Il payback system it is seen from the pharmaceutical companies as a unsustainable burden. Recent rulings by the Constitutional Court have confirmed its legitimacy as “solidarity contribution” necessary to maintain the supply of medical devices. However, many business owners fear that such measures could lead to layoffs and business closures.
There is a need for a reform of the system
Le pharmaceutical governance reforms, introduced by the 2017 Budget Law, aimed to rationalize spending by increasing the ceiling for hospital spending and reducing that for territorial spending. However, the continued growth of costs and the challenges related to innovation require further adjustments and a review of the payback system. Among the reform proposals is the idea of freeze the current payback system and develop more reliable forecasting models, with the aim of ensuring greater stability in spending forecasts, reducing the risk of overruns and making the system fairer, while incentivizing innovation without penalizing pharmaceutical companies.
There needs to be a balance between health and finance
Michele Sala highlighted the challenge of balance the interests of the State, businesses and citizens. Although pharmaceutical innovation is crucial, it must be regulated to respect the budget and guarantee the right to health. The future of the payback system requires in-depth reflection and legislative interventions that harmonize economic needs with the promotion of innovation and public health.
