Simple Questions for Spain
JUST A FEW YEARS AGO, SPAIN WAS FOR EUROPEAN DRUG MAKERS THE COUNTRY OF INFINITE PROMISE. Sales forecasts were as bright as a Valencia orange, with the Spanish market set to vault beyond Italy and the United Kingdom toward the top of the region's league charts as represented by Germany and France. But like Newton's apple, gravity came calling instead, with the dead weight of recession and a budget, debt, and lending crisis that has added new tensions to the traditionally combative relationship between industry and the 17 regional governments that subsidize the cost of medicines to the public.
Participants, including myself, agreed that Spain had reached the end of the road in crafting policy remedies from existing rule books. "My government has adopted no less than 30 reports on sustainability of the public system since IESE convened its first meeting on healthcare in 1994," observed Catalonia's Health Secretary, Roser Fernandez. "With our budgetary resources so constrained, the task of the administrator is to facilitate, not innovate."
Thus, it fell to the pharmaceutical industry to show up with answers to the questions posed by the IESE team. But first we listened to a litany of woe from Farmaindustria President Jordi Ramentol: The government now regulates drug pricing by emergency executive order, arbitrarily, with no opportunity for appeal. Companies wait 535 days on average for payment, with no interest on arrears. A 40 percent cut in the drug budget has been decreed for 2013, on top of double digit declines for each of the past three years. He stressed that company revenues today are at the level of 1998, a virtual lost decade of eroding wages and layoffs for the 160,000 people still employed by the industry.
Farmaindustria presented a three pillar proposal to reverse this backward slide—and asked representatives of the public sector in attendance to stay and listen to it. At its heart is what Ramentol referred to as a "repositioning," not only around policy issues but on the specific manner in which government and industry interact. What companies want most is a uniform, predictable government strategy on pharmaceuticals, applied equally, with legal security, across regions. "We would rather have clarity about the penalties imposed on us than endless, ad hoc changes in regulation. Let's have one approach and stick to it."
The other two pillars are what the industry is offering in return for a clear road map. First up is alliances with stakeholders to promote increased access to medicines, particularly through at-home investments in R&D, which, at just under €1 billion annually, ranks second only to the much larger auto sector. The second is to build new "clusters of production" to pool capacity and improve the sector's job-creating export potential. The Spanish industry exported €8.8 billion worth of drugs last year; Ireland, a far smaller market, shipped out more than €40 billion. So why can't Spain achieve the same?
Farmaindustria is promising more production in return for an industrial strategy that recognizes the innovative industry's contribution to Spain's future—as a knowledge economy, not a fading refuge for tourist touts. The message is: Access to tomorrow's medicines depends on a growth plan for the industry that provides them today. Without more growth in the economy, the public welfare deficit will smother this pivotal Spanish industry for good. Social charges, already high at 26 percent of GDP in 2010, are forecast to reach a staggering 35 percent by year end.
Supply Chain Strategy: Managing risk and opportunity in a changing global landscape