Italy’s federal government has announced a two-year, 24 billion-euro austerity package which includes measures to reduce pharmaceutical spending by 1.35 billion euros.

The package includes cutting the prices of generic drugs by 12.5% from this month until year-end, continuing the reduction introduced after the Abruzzo earthquake in 2009. Also, from next year the availability of certain generics supplied through the national health service, the SSN, will be decided through a tendering process organised by the national drug agency, the AIFA, similar to the discount contract system introduced between health insurers and manufacturers in Germany. Local reports suggest that, at least for the time being, the tendering process will be limited to four therapeutic categories only.

The austerity measures, which are contained within the 2011-12 budget, will also limit reimbursement of prescription drugs to the cheapest versions only - a measure which has already been introduced in some of Italy’s 20 regions - and reduce wholesale margins by 3.65%.

Observers note that there is considerable potential to grow the market for generics in Italy, where they accounted for just 40% of patent-expired drug sales by volume in 2009. However, they were also the only sector of the state-funded pharma market to experience any growth during the year, with rises of 18.4% by volume and 10.3% in terms of value, according to IMS Health data.

Announcing the austerity package, Prime Minister Silvio Berlusconi said that the expansion of “cradle-to-grave” social protection had led to uncontrolled public spending and that this was no longer sustainable. The measures, which he said should reduce the national budget deficit to 2.7% of Gross Domestic Product (GDP) by 2012 as sought by the European Union (EU), have been welcomed by officials of the EU and the International Monetary Fund (IMF).

France has also announced this week that it will reduce drug prices by 100 million euros this year, as part of moves to cut 600 million euros from healthcare spending for 2010. The price curbs had already been approved but are being brought in earlier than planned after an expert report found that the year's health spending budget of 162.4 billion euros had been exceeded by 600 million euros.

- Meantime, Italians spent 32% more on co-payments for prescription drugs – known as the “ticket” – last year than in 2008, with the total rising to 850 million euros. Consumer spending on the ticket, which is imposed in 12 Italian regions, had increased 20% in 2008.

It is also reported that four Italian regions are to be penalised for breaching the limits on health care spending deficits which they had agreed with the federal government. Under the terms of the accord, entitled the Pact for Health 2010-12, the four regions - Calabria, Campania, Lazio and Molise - will face higher taxes and be unable to access certain funds which are available to the regions until they demonstrate how they intend to tackle their unacceptable levels of health spending deficit.