International Players

On Italian land: The case of market access

The third-largest EU country by population after Germany and France, Italy’s over 60 million people represent a key market for global pharmaceutical players. Italy also has a very attractive demographic profile, with 23% of the total population aged over 65 and with a life expectancy averaging 83 years, one of the highest in the world. In fact, the number of Italian centenarians has tripled over the last 15 years. These fundamentals render Italy as an important “silver economy,” served by all the relevant pharmaceutical and biopharmaceutical global players, including Janssen, Pfizer, Sanofi, Sandoz, Astra Zeneca, Bayer, Baxter, Accord, UCB, Ipsen, AbbVie, Medac, Amgen, Teva, Takeda, Daiichi-Sankyo, and others. 59% of companies active in Italy are foreign-owned, reports Farmindustria. Despite these credentials, Italy is considered one of the most challenging countries for market access (and price access), with a very complex regulatory roadmap, a cumbersome approval process, difficult negotiations, and a lower price point for reimbursed drugs, especially for generics. This affects both domestic producers as well as international players.

Across Europe, market access is a postcode game. A report published by EPFIA found that newly approved treatments reach western and northern European countries in up to 200 days once market authorization is received, whereas the south and east of Europe wait between 600 and 1,000 days. Italy scored slightly better than the European average, with a 402 days’ wait, but remains much behind Germany’s 119, Switzerland’s 117, or the UK’s 209.


Within Italy, however, there are stark differences between its 21 regions. One particularity of the Italian healthcare system is its regional structure and dual governance system, composed of the State and the Regions. The Servizio Sanitario Nazionale (SSN) defines the basic benefit package (livelli essenziali di assistenza or LEA), which covers the majority of reimbursed drugs in Italy. This is controlled by the Ministry of Health, which, in turn, coordinates with the Ministry of Economic Development to set annual budgets. AIFA is the designated drug authority (the equivalent of the US FDA) and the agency responsible for managing pricing and reimbursement. Across these levels, the SSN is organized in 19 regions and two autonomous provinces, each exercising a high degree of power. This fragmented system, underscored by multiple sub-systems, does not only slow down market access but also creates differences across regions. The measures taken by some regions to cut spending have created territorial differences, feeding into a North-South divide. Pharmaceutical companies need to liaise with each region independently, which leads to situations whereby a drug available in one part of Italy could take another six months to be available elsewhere in the same country, wasting crucial patent time.

Image courtesy of IBSA

“Italy’s health market is very particular due to its federal structure; it is centrally governed, but strong powers are delegated to individual regions. In this sense, the penetration of generics has been slow and differentiated, with higher percentages in the Center-North of the nation.”

Massimo Versace, Country Manager, Sun Pharma

The interaction and coexistence between these two entities – the State (represented by AIFA) and the Regions – has been a matter of discussion ever since 2001, when AIFA granted more authority to the Regions, and this trend is being reversed. The New Health Pact 2019-2021 approved between the government and the Regions calls for a single Health Technology Agency (HTA) superseding both the work of AIFA and other agencies in the system. The paper suggested more unity needs to be guaranteed within the NHS. Until this is achieved, international companies need to plan well in advance and deploy an expert regional sales force together with very competent regulatory support.

The negotiation procedure

Charged with finding the right balance between ensuring reimbursement of all essential drugs and keeping costs under control, AIFA finds itself in a difficult position. This balancing act often results in strong downward price pressures affecting pharmaceutical companies. Long and complex, the negotiation procedure between the legislative body (AIFA) and the marketing authorization holder (MAH) often ends on pricing agreements lower compared to other European countries. The government also imposes expenditure caps on different budgets, with a separate budget for the hospital market and another one for retail. When these thresholds are crossed, 50% of the expenditure is paid back by pharmaceutical companies through a payback mechanism. Stefano Collatina, country lead at Baxter Italy, calls this a hidden discount: “Every year, pharma companies active in the hospital space must accrue the extra money to cover the hidden discount, which makes planning very challenging.”

This payback does not apply to orphan drugs and oncological drugs, which are covered by two separate 500 million euros funds. Nevertheless, branded innovative pharmaceuticals in other therapies are affected by the payback, and innovators can think twice before launching their products in Italy. Collatina explained: “Average Italian prices are lower compared to other countries; also, the Italian system is more complicated because in countries like the UK or Germany there is a faster approval pathway and no negotiation. If a satisfactory price agreement for a highly innovative drug cannot be reached with AIFA, the product may well not end up on the Italian market.” (not approved) Innovative pharma suppliers can also choose to withhold product launches in the country because of the European “referencing system”, which allows all regulatory agencies in the EU to see the prices in different countries. Looking at these references, national agencies can start negotiations by requesting a lower-than-EU-average price. It makes sense then for MNCs to begin their product launches with the countries that offer the highest prices before moving down to cheaper markets.

“We must work with the public authorities to redress the short-term budget focus and instead look at long-term KPI indicators and the impact that a new drug will have in a 10-years timeframe to create a more comprehensive value package for new innovations.”

Stéphane Brocker, Managing Director Italy, Ipsen

For hospital generic products, prices are settled through tenders rather than direct negotiations. Generics are automatically assigned to the same reimbursement class as the branded drug if the owner can propose a rebate between 30% to 75%. With a highly competitive tender system in place, Italy can secure very high discounts, adding immense pressure on generic players. Giovanni Sala, general manager at Medac Pharma, explained the long-term consequences of a low-price regime: “Due to hindered commercial viability, some products become scarcely available or run out of stock. Unless a different system to reward the value of hospital generic products is brought into place there will be more issues with their availability.” Despite the different measures to contain spending, national pharmaceutical expenditure has been growing over the years, the hospital budget being consistently overrun. Between January-July 2020, the ceiling of total pharma expenditure was exceeded by 16.7%. Hospital spending, in particular, was 2.7 billion euros above the limit. At the end of 2020, drug manufacturers were billed 1.35 billion euros for exceeding the expenditure ceiling according to IQVIA. As a solution to relieve the pressures on both national budgets and pharmaceutical companies, some opinion leaders see the answer in generics: By increasing the share of generics, the government could make savings and use these to reimburse critical innovative drugs.

“The Italian market is well-served and patients benefit from great service. To sustain this level of service, all stakeholders must recognize that having first-in-class drugs on the market requires a system that will continue to attract investments in research. The role of the generic products is fundamental in contributing to freeing the necessary resources.”

Giovanni Sala, General Manager, Medac Pharma

Equivalent drugs

Equivalent drugs - including generics, biosimilars, and value-added medicines (VAMs) – form a very peculiar landscape in Italy. While generics have the lowest penetration rate in Europe, biosimilars enjoy the highest. Generics came later in Italy because the country only introduced the patent law in 1998, 20 years later compared to Germany, for instance. By that time, many patents had already expired. There are big discrepancies between the hospital and retail segments, since doctors are more likely to choose the cheaper, generic version, while consumers buy more based on brand preferences. This explains why biosimilars, which are typically specialized drugs handled by doctors, represent a high share of about 30% in the hospital market. The hospital and retail channels for generic drugs also have different business models, explained Massimiliano Rocchi, senior director at Accord Healthcare Italia: “In hospital tenders, generics enjoy a very high market share because any company with the active ingredient in their product can tender, and the lowest price wins, regardless of other criteria. Because of this, the value of hospital generics is low. At the opposite end, generics occupy only about 20% of the retail market, comparably lower to other European countries like Germany or the UK where the market share is somewhere above 70%. Nevertheless, retail generics have a high value of around 2 billion euros.”


“Paradoxically, Italy is the largest generics market by value, but we have the lowest prices. Unsustainable in the domestic market, Italian generics leveraged export markets. Once again, this can lead to domestic product shortages, even if Italian-based plants work at capacity.”

Stefano Collatina, Country Lead, Baxter International

Nevertheless, the expiration of many blockbuster drugs over the past decade has given a boost to both generics and biosimilars, while market uptake is growing. “Luckily, today the ‘generic culture’ has taken root both among citizens and pharmacists. Until a few years ago, there was a certain distrust in the clinical world among GP and specialists, but this is being overcome. I believe that we are moving towards a positioning of the generic which reflects the situation of the other major European countries,” said Massimo Versace, country manager at Sun Pharma (NSE: SUNPHARMA). This cultural shift may also drive change at the policy level. The pandemic reiterated the importance of generic products. In Italy, 70% of the products used in acute therapies, including antibiotics or anti-infectives, are generics, informed Enrique Häusermann, president at EGUALIA, the association representing the equivalent market in Italy. Häusermann observed that the industry’s struggled to meet demand at the height of the pandemic, which raises questions about the future: “Without added capacity in key areas like liquid and powder injectables, which are more difficult to produce in large volumes, our ability to meet future demand is put into question,” he said. The pandemic also called into question the pricing model that favors the cheapest drugs, which are typically imported. With prices dropping tender after tender, Italy must revisit its price model. Today, competitiveness in the generics space is largely determined by “the lowest price,” but companies like Accord are calling for a different approach based on the “most economically advantageous tender” (MEAT): “The lowest-price model is a very simple adjudication criterion that led to a dependency on the cheapest imported drugs, but the industry needs to move to a different direction, to acknowledge quality and added features,” said Massimiliano Rocchi, senior director at Accord Healthcare Italy. Defined as the opposites of “originals,” generics are marked by an underlying perception that they cannot be innovative. However, original and generic drugs can also be seen as part of a continuum, each playing key roles in the market. Often, a generic goes beyond copying a branded drug and can offer added features in terms of patient compliance, accessibility, bioavailability, administration, or even improved shelf life and sustainability. In recognition of these evolving complexities, the country’s association representing equivalent drugs changed its name from Assogenerici, a name which only made reference to the classic generic drugs, to EGUALIA. The new name emphasizes a stronger focus on equal access to health enabled by equivalent drugs, but it also encompasses a broader range of products, including biosimilars and value-added products (VAMs). VAMs are products that offer additional benefits such as higher-dosage concentrations or a novel delivery system that increases compliance. “VAMs contribute to addressing unmet patient needs. Moving from a one-size-fits-all to a much more tailored and patient specific approach, VAMs are one of the key components of the customization of healthcare,” said Enrique Häusermann, president of EGUALIA. The centrality of “added value” resonates with the AIFA’s new degree which places greater focus on the therapeutic value of each drug. Pharmaceutical companies starting reimbursement negotiations will need to show the possible added therapeutic value of the new drug compared to other existing treatments on the market. The 2020 decree is a modification to the previous 2001 law and comes with different reforms, including a simplification of the requirements for biosimilar reimbursement. The pharmaceutical company can inform AIFA of the biosimilar planned to be launched in the market 30 days before the patent on the original drug expires. This change seeks to facilitate the uptake of biosimilars in the hospital market, where they can replace costly biologics. Finally, AIFA plans to amend the payback shares required from pharma companies in a bid to increase the country’s attractiveness to the industry. The changes are expected to be finalized by the end of 2021. Though these reforms should bring some relief to the industry, they also raise concerns. “The initial objective of the new law introduced in 2020 was to increase transparency but by making the process more burdensome we fear it may further slow access to innovation in Italy. The new law requires AIFA to renegotiate pharmaceutical products every two years. We think this will create an unnecessary burden and excess workload for AIFA and may negatively impact innovation as our sector needs a predictable and stable environment to operate,” said Stéphane Brocker, managing director, Ipsen Italy (EPA: IPN).

“In 2021, we are not only celebrating our 75th anniversary as a group, and also 25 years since the Origgio plant plant became part of Grünenthal Group. The site produces solid pharmaceutical forms and small volume liquids, as well as offering biopharma packaging, pharma development, and lab services. We recently updated our infrastructure to 1,600 cold storage pallet places.”

Aldo Sterpone, General Manager, Grünenthal Italia