Romania: Medicine Producers, You Must Comply with Your Public Service Obligation! But How?

Last Updated: 6 October 2017
Article by Dominic Morega

The Ministry of Health has adopted a set of rules for quantifying and monitoring the fulfilment of public service obligation. However, these rules do not solve the causes of the shortage of essential medicines and pose real interpretation issues. Medicine producers have legitimate doubts as to how to appropriately apply such measures.

According to the Romanian authorities' traditional policies, medicine prices (except for non-reimbursed OTCs) were set at the European minimum level.

Furthermore, it has been decided that the price of innovative medicines that are no longer protected by a patent should be aligned with the generic/biosimilar reference price (i.e., no more than 65% / 80% of the price of the innovative medicine upon the approval of the first price of the corresponding generic/biosimilar product); this measure has already caused effects on the reimbursement price of relevant innovative medicines and, as of January 2018, it will also impact the official manufacturer, wholesale and retail prices thereof.

The logical consequence was that numerous essential medicines, in particular innovative ones, are now being massively "exported" by wholesale distributors to EU countries where considerably higher prices are charged. As a rule, this parallel trading is lawful, perfectly justified economically, and a pillar of the European Union market, but its effects on Romanian patients are deeply harmful.

The Romanian authorities have become increasingly aware of the magnitude of the parallel exports carried out by Romanian distributors and the shortage of essential medicines on the local market, and have recently adopted measures to report and control the effects of this situation, without, however, dealing with its causes.

At the end of 2016, the Ministry of Health (MoH) adopted Order No. 1345/2016 regulating the obligation to electronically report, on a daily basis, stocks and commercial operations involving medicines subject to reimbursement (i.e., included in the national price catalogue – Canamed); this obligation applies to wholesale distributors, importers and producers, as well as pharmacies, and fully came into force at the end of February 2017.

Order No. 269/2017 on the obligation to ensure appropriate and continuous medicine stocks was published on 15 March 2017, aiming to regulate the measures for quantifying and detailing the public service obligations set forth under Law No. 95/2006 on healthcare reform.

Order No. 269/2017 in Short

Essentially, Order No. 269/2017 provides, inter alia, as follows:

  •  Wholesale medicine distributors and marketing authorisation holders/their legal representatives (hereinafter MAHs) must ensure, as regards reimbursable medicines (included in Canamed), the fulfilment of the justified orders issued by pharmacies and healthcare units that have contractual relations with insurance houses (beneficiaries); delivery deadlines to be observed by the wholesalers are very short - 24 / 48 hours;
  •  The MAH observes its public service obligation by ensuring for each medicine a quantity at least equal to the average monthly turnover (rolling); the average is calculated for the last 3 months of sales, as per the information communicated to the electronic system for reporting the stocks set forth under the aforementioned Order No. 1345/2016;
  •  In their turn, wholesale distributors must observe their public service obligations by keeping safety (buffer) stocks equal to the monthly average turnover for each distributed medicine, so as to be able to comply with any justified order from the beneficiaries with whom it has contractual relations; distributors must notify the MAH or other wholesale distributors from which they acquired the relevant medicine of the received justified order;
  •  The decrease of the medicine stock below the monthly average at national level for 7 consecutive days triggers a national alert level launched in said electronic system; the relevant medicine shall be included by the MoH on a special list of products under surveillance (the export of which is temporary banned). Also, if the MoH notices at a wholesale distributor the decrease of the medicine stock for 7 consecutive days, below the monthly average turnover, it will notify the National Agency for Medicines and Medical Devices (the NAMMD), which immediately triggers an inspection procedure;
  •  Exemptions from this public service obligation are strictly limited and concern safety/quality issues relating to a temporary discontinuation in manufacturing the specific medicine.

Although Order No. 269/2017 does not expressly provide so, breaches thereof constitute violations of the public service obligation regulated by Law No. 95/2006, subject to fines of RON 50,000 – 100,000 (applicable to MAHs and wholesale distributors) and even the suspension of the operation (wholesale) license (in the case of wholesalers).

Legal and Factual Issues Raised by the Enforcement of Order No. 269/2017

Order No. 269/2017 does not clarify certain essential elements concerning the fulfilment of public service obligations by the medicine producers (MAHs and their local representatives). Since its publication, numerous pharmaceutical companies have sought legal advice on the right enforcement of the order, in particular after having received a deluge of notices from the local wholesale distributors which related to the exponential increase of orders for Canamed medicines, and urgent requests to meet justified orders received by distributors, respectively.

Firstly, it is essential to clarify the concept of "public health needs" used by Article 1.g) of Order No. 269/2018, which defines the average monthly turnover of medicines imposed on MAHs. According to Article 2(2) of the same order, MAHs must ensure a monthly level at least equal to the average monthly turnover of a relevant medicine, which, according to the above definition, would constitute the "necessary minimum to meet the public health needs".

At first sight, the interpretation of the two pieces of legislation would indicate, from a mathematical perspective, that the public health need was strictly related to the average volume of monthly sales of a reimbursable medicine, as reported in the Electronic System reports (SER). On the other hand, considering that the SER reports include both the distributors' deliveries to beneficiaries (pharmacies and hospitals) and intra-Community deliveries conducted thereby (a highbrow name for parallel trade), while the purpose of Order No. 269/2017 as well as of the service obligation regulated by Law No. 95/2006 is to protect Romanian patients, the "public health needs" and MAHs' correlative obligations should be considered to relate to the monthly quantities of the medicines effectively delivered to Romanian beneficiaries, which, therefore, do not include intra- Community deliveries. We believe that an official clarification of the above issue by NAMMD is required.

" Since the publication of Order No. 269/2017, numerous pharmaceutical companies have sought legal advice on the right application of the order, in particular after having received a deluge of notices from the local wholesale distributors concerning the exponential increase in Canamed medicine orders, and urgent requests to cover justified orders received by distributors.

Another major aspect that has not been taken into consideration by Order No. 269/2017 concerns a situation common in the Romanian market, where a company affiliated to a foreign MAH acts as a local/legal representative thereof and also holds a wholesale medicine distribution license, based on which it sells the MAH's medicines to third party distributors and beneficiaries. It is obvious that such a company cannot cumulatively fulfil the public service obligations imposed both on the MAH and the wholesale distributor; otherwise, that company should ensure, firstly, the monthly average turnover covering the entire public health needs in Romania, but also an additional safety stock at least equal to the monthly average turnover, which is obviously excessive and illogical. In this case as well, official clarification by NAMMD would be advisable, i.e., a company acting as a legal representative of a MAH and also holding a wholesale distribution license should exclusively fulfil the public service obligation imposed on the MAH, without having the obligation to ensure the safety stock imposed on the wholesale distributor.

Further to an analysis of the public service obligations incumbent upon MAHs and wholesale distributors, another issue becomes clear, which concerns the actual level of the average monthly turnover that needs to be ensured by MAH.

Although Order No. 269/2017 defines the monthly average turnover (applicable both to MAH and to the distributor) as a monthly average of the turnover of a relevant medicine for the last three months, the same order obliges distributors to keep a safety stock equal to the monthly average turnover; such safety stock is generated by the MAH as well, but, if we include it in the average monthly turnover required from the latter, this would lead to an artificial and illegitimate increase of the level required by law (in effect, by the amounts related to the turnover for an additional month). Again, intervention by the authorities is necessary, this time amending Order No. 269/2017, by clearly stating that any amount of medicines delivered by a MAH to a distributor for providing/ replenishing the safety stock (and declared as such by the MAH) would not be included in the monthly average turnover that must be observed by the MAH.

" This legislative act must be correlated to the actual situations on the market and interpreted in good faith both by the subjects of the regulated obligations (wholesale distributors, MAHs, beneficiaries), and the competent public authorities.

Finally, we reckon that the justified orders received by wholesale distributors from beneficiaries must be sent to MAHs in good faith, in line with the spirit of the law. Thus, the MAH may be requested to meet the justified order placed by the beneficiary only if the distributor is objectively unable to deliver the medicine to the beneficiary (according to Article 2(9) of Order No. 269/2017), as a result of an exceptional circumstance (e.g., shortage of the product in stock or absence of the safety stock provided by law, but only for reasons unimputable to the distributor).

From this perspective, the automatic sending by a wholesaler to an MAH of any justified order (especially if the MAH is a foreign entity), without the wholesaler unequivocally attesting that it does not have the ordered medicine for reasons beyond its control, may be interpreted as abusive conduct.

We believe that Order No. 269/2017 was adopted by the authorities in an effort to mitigate the shortage of essential medicines, for the benefit of Romanian patients, and this should be appreciated. However, this legislative act must be correlated with the actual situation of the market and interpreted with good faith by both subjects of the regulated obligations (distributors, MAHs, beneficiaries) and competent public authorities i.e., NAMMD and MOH. Otherwise, we will soon see numerous disputes between MAHs and distributors, on the one hand, and between pharmaceutical companies and NAMMD, on the other hand.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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