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Price cut for medicines expected next year in Latvia

Next year, a reduction in medicine prices is promised by the Health Ministry (VM), where there is a commitment to persuade the industry to agree to a fixed markup or ceiling. The industry is not immediately saying no for now, but is waiting for the exact extent of the reduction to be known, Latvian Television reported November 20.

Complaints that Latvia has higher medicine prices than the other two Baltic countries have been heard for years. However, no substantial price reduction has yet been achieved. and still this n this autumn the State Audit Office pointed to the great price difference in the Baltics.

The final price includes the markup of wholesalers and pharmacies added to the producer's price, and value-added tax of 12%. It is the markup and VAT that leads to the highest prices in Latvia.

In Estonia and Lithuania, the markup has limited wholesale charges or specific ceilings. In Latvia, the ceiling is formed as a percentage of the producer price. For example, for a medicine priced at EUR 2 000, Latvian wholesalers are allowed to collect a surcharge of EUR 200, while Estonia is allowed to collect EUR 6.39, while Lithuania – EUR 14.48.

"The more expensive the medicine, the higher the markup, the higher the final price for the customer. It could be determined, as is the case in Lithuania and Estonia, that when a certain producer price is reached, the percentage markup is no longer calculated, but there is a maximum. It doesn't matter how much the drug costs, 100 or 200 euros, the markup is, say, 6 euros, not as now, it's 10% of the price," said Ilona Lošaka, legal counsel for the Ombudsman's office.

It is precisely a fixed ceiling that current Health Minister Hosams Abu Meri (New Unity) has pledged to introduce.

The second way to remove the burden of costs from shoppers' shoulders is to expand the list of reimbursable medications. Again, Latvia stands out negatively against the backdrop of other Baltic States – both in terms of volume and innovation.

"In next year's budget allocated to medicine, it could be one part that could go for reimbursable medications because we know there is a need to invest there. Investing in drugs is better than simply putting them in a system without a target. Here are the targets - we know if next year we put 50 million euros on the list of reimbursable medicines, compensate more, it has a direct impact on the population," Abu Meri said.

These proposals are included in the VM report on the financial availability of medicines. This is currently in harmonization and contains further suggestions for reducing drug prices, such as reducing VAT from 12% to 5%, as well as setting the maximum allowable total annual co-payment by a patient, which means that a person would not have to pay more than €250 per year from pocket.

Currently, Abu Meri is more inclined to expand the list of reimbursable medications and set a fixed ceiling amount. The industry is cautious about the latter.

"The biggest concern is the question of what the amount of it will be, the extent of it. And whether that amount will cover the cost at all. There should also be an effort to take Estonia's path when prescription drugs are more or less compensated. Consequently, inclusion on the list of reimbursable medicinal products is an effective price reduction mechanism. Because the National Health Service evaluates the justification of the [reimbursation of] a medicinal product and if the manufacturer wants to enter the list, they have a duty to reduce the price,” said Janis Lübken, a Member of the Board of the Latvian National Association for Drug Supply.

How much prices could fall is not yet estimated by the VM, but it promises a clearer vision in December and a real cut in drug prices in the second half of next year.

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