POLAND: SECOND ROUND OF PRICE REDUCTIONS FOR

UNCLAS WARSAW 002064 SIPDIS SENSITIVE STATE FOR EUR/NCE/BPUTNEY STATE PASS TO USTR FOR DONNELLY/ERRION COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS, JBURGESS, JKIMBALL E.O. 12958: N/A TAGS: ETRD KIPR ECON PL SUBJECT: POLAND: SECOND ROUND OF PRICE REDUCTIONS FOR INNOVATIVE DRUGS ¶1. (U) Sensitive but Unclassified/NOT for internet distribution ¶2. (SBU) At a September 15 meeting, Piotr Blaszczyk, the Acting Director of the Drug Policy and Pharmacy Department of the Polish Ministry of Health, issued a second round of price cuts to 27 pharmaceutical companies. The price reductions vary by company and product, and appear to range from 4 to 23 percent. (Note: at a September 7 meeting with American companies, Deputy Minister of Health Boleslaw Piecha stated that the second round of price cuts would be from 5 to 8 percent. End Note.) The price cuts apply only to sales of innovative drugs to hospitals, and affect approximately 100 active substances comprising about 30 products. The cuts could become effective as soon as September 29. ¶3. (SBU) At the September 15 meeting, the Health Ministry delivered individual papers to each company via sealed envelope detailing the price cuts. The companies are required to respond to the Health Ministry by September 25 on whether they agree to the terms dictated by the Ministry (which could be done in writing) or wish to negotiate (which will be done in person on September 25 and 26). Companies generally do not believe that negotiating will change the situation or defer the price cuts, and could cause the Health Ministry to discontinue using them as suppliers. Some companies are considering not selling to the Health Ministry at the new prices as they will not be able to make a profit. The pharmaceutical companies all agreed that there was a total lack of dialogue and transparency throughout the process. ¶4. (SBU) The Health Ministry explained to the companies that it arrived at the new prices by asking other European countries for their pricing lists; by surveying 320 Polish hospitals for their pricing data (which had been previously negotiated with each pharmaceutical company on an individual basis); and by examining global sales data in IMS. (Note: IMS is the leading global provider of business intelligence for the pharmaceutical and healthcare industries. End note.) The Health Ministry also directly requested more information from 27 companies on their products and pricing, to which 22 companies reportedly responded. Beyond this, the Health Ministry did not explain its methodology or evaluation criteria for selecting the products which were reduced in price. According to the pharmaceutical companies, the products selected for price reductions tended to be their most expensive. ¶5. (SBU) Comment: This second round of price cuts follows an initial round of price cuts which reduced the reimbursement price by up to 13 percent for imported pharmaceuticals and pharmaceuticals manufactured in Poland by foreign firms using imported active ingredients. Prices were not cut for domestic producers in either round. During the first round of cuts the Ministry of Health speciously explained that the cuts were necessary because of "exchange rate fluctuations". Apparently learning from this experience, the Ministry offered no explanation for the second round of cuts. American and European innovative pharmaceutical companies are increasingly frustrated by the Ministry's non-transparent price cuts and lack of dialogue. Post will continue to work with the companies to try to foster a constructive, transparent dialogue with the Ministry of Health. ASHE