The Ministry of Health will make remuneration for pharmaceutical innovation more flexible.

Spanish pharmaceutical companies are on the verge of achieving a historic victory. Next week, the Senate will approve an amendment excluding drugs that present incremental innovation from the reference pricing system—those improvements on an existing molecule that provide significant clinical, therapeutic, or social value. This way, the Ministry of Health will be able to compensate these types of products at a higher price than the previous version.

To date, the healthcare system only recognizes mechanisms for financing new medicines (disruptive innovations) or generics (copies of drugs that have lost their patents). The industry association Farmaindustria points out that most Spanish companies are divided between these two categories and fail to achieve a commensurate price for their innovation, despite the fact that other European countries do recognize this type of investment effort.

“Medium-sized pharmaceutical companies want to innovate, although we have to do so in line with our capabilities. Right now, we're introducing new products, but the Spanish healthcare system isn't recognizing our efforts,” explains Reig Jofre CEO Ignasi Biosca, who is also a member of the Farmaindustria board of directors.

The Drug Law passed in 2006 establishes a reference pricing system that makes no distinction between incrementally innovative drugs and generics. Thus, all products with the same active ingredient and the same route of administration must have the same price, and this must be the cheapest alternative on the market. "You can't recoup your investment, and in a way, the subliminal message is that it's better to copy than to try to innovate," laments the CEO of the Catalan pharmaceutical company.

The Pharmaceutical Price Commission will have the final say on implementing the increase.

Incremental innovation can manifest itself in several ways. For example, formulations that allow for the administration of a monthly injection instead of daily administrations, inhalers that incorporate multiple medications in a single device, and products that allow for better absorption through the skin or make swallowing easier. "This situation also affects a pharmaceutical company conducting a clinical trial of an already known active ingredient for an indication for which its efficacy was unknown," the executive notes. Farmaindustria states that these drugs that provide incremental innovation represent nearly 40% of the products marketed in the last decade.

The amendment, which modifies Article 98 of the Medicines Law, will be included in the bill for the creation of the State Public Health Agency, proposed by ERC. This legislation was on the verge of approval two months ago; it was ultimately rejected by the PP, Vox, and Junts. Carles Puigdemont's party has now reportedly changed its mind, so there should be a sufficient majority to pass the measure in the vote scheduled for next Thursday in the Senate.

Farmaindustria hopes that political parties will now maintain unity on this regulation, which benefits the industry, especially in Catalonia, where more than 60 factories producing these types of products are located.

Biosca points out that the flexible remuneration for incremental innovation does not entail a direct surcharge on patients' pockets. "First of all, the amendment allows the experts of the Interministerial Commission on Drug and Healthcare Product Prices to evaluate whether or not this innovation should be remunerated," he explains. Within the usual dialogue between the ministry and industry, the public sector can ask the private sector to seek such solutions and then face reimbursement difficulties. "Another aspect is that these innovations generate savings for the healthcare system. Furthermore, with the new drug law, pending approval, a new financing mechanism will be established that will balance the budget," he adds.

Spanish pharmaceutical companies sell their mid-range products at generic prices.

Biosca points out that drug prices in Spain are at very low levels. "Two-thirds cost less than ten euros, while one-third costs less than three euros," she explains. In this regard, Biosca points out that many companies find these products unprofitable, and their supply ends up depending on large multinational generic manufacturers with production facilities in countries such as China and India.

"It's a dangerous situation in terms of stocks. We already saw this during the COVID pandemic. These are necessary, critical medications that provide tremendous value to society, but they have prices that are 25 years old, even though their costs are current," the executive explains.