From next year, the maximum reimbursement rate paid for generic drugs by the Italian health service (SSN) will be based on the drugs’ average prices in Europe, in a move which the government says will save around 600 million euros.

The change is included in the amended version of Prime Minister Silvio Berlusconi’s two-year 25 billion-euro austerity package which was approved by the Senate of the Republic (the Italian parliament’s upper house) late last week, in a 170-136 confidence vote.

The approved package also includes new moves to speed the introduction of electronic prescribing, which is expected to increase generics use still further, and a change to the planned reduction of 3.65% on pharmacists’ margins on sales of Class A reimbursed drugs. This reduction was to have been retained by the SSN but, following strong opposition from pharmacy groups, the cut will now be split between pharmacists and manufacturers, with the former losing 1.82% (except in the case of rural pharmacies whose turnover is low, which are exempt) and the producers taking a 1.83% cut.

However, plans for a tendering process for off-patent drugs, to have been introduced by national drug agency the Agenzia Italiana del Farmaco (AIFA) next year, have now been scrapped.

Proposals in the original package for a reduction in wholesalers’ margins on Class A reimbursed drugs by 3.65% to 3%, and for a 3.65% increase in pharmacy margins on these products, have been retained. However, analysts at IHS Global Insight suggest that the overall effects for pharmacists will be a reduction in margins of 1.82%, despite the 3.65% margin increase, because wholesalers are expected to increase their prices by 3.65% in order to cover the loss in their margins.

The new 1.83% margin cut imposed on the industry - on top of the 12.5% cut in the prices of generics which is set to run from June to December this year and the 12% temporary price reduction imposed from May to December 2009 - is expected to affect producers of branded generics more severely than those in the cheaper unbranded generics sector. Industry sources estimate that, in 2009, generics accounted for 5.9% of Italy’s $24.9 billion prescription drugs market in terms of value and 10.8% by volume, and for 40% of the patent-expired drugs market in volume terms. While sales of unbranded generics fell 5.6% by value last year, they were up 6.2% in terms of volume.

The austerity package will now go before the lower house, the Chamber of Deputies, where another confidence vote is expected this month. After that, it is due to return to the Senate for a final vote on July 29.

Meantime, doctors belonging to Italy’s biggest union, the General Confederation of Labour (CGIL), began a strike yesterday against the employment freeze included in the austerity package, under which around 30,000 doctors retiring over the next four years will not be replaced. Striking physicians will attend emergencies only.