Global Insight Perspective | |
Significance | The government of Macedonia has decided to cut VAT on medicines, selected medical products and orthopaedic aids from 18% to 5% on the basis of continued economic growth. The list of reimbursed medicines has been updated after five years to include 56 new preparations, of which 80% are aimed for hospital use and 20% for retail sales through pharmacies. |
Implications | Reducing VAT on drugs will cost the budget an estimated 650 million denar (US$14.5 million) but is designed to reduce the state's reimbursement participation in the long term and to lower retail prices for patients by 13%. |
Outlook | The immediate effect of the VAT reduction is expected to be a 30% dip in retail drug prices by 2008, offset by the possibility that retailers may increase their margins. A new pharmaceutical law expected to be passed in September 2007 envisages tighter regulation of pricing through the national drug agency. |
Macedonian Prime Minister Nikola Gruevski has announced a decision to cut the value-added tax (VAT) on drugs, selected medical products and orthopaedic aids from 18% to 5%, as a result of continued economic growth in Macedonia. The government is expected to reduce state reimbursement for medicines on the positive list. This decision has been taken in agreement with the International Monetary Fund (IMF) and would cost the budget an estimated 650 million denar (US$14.5 million).
Most pharmaceutical wholesale and retail companies have welcomed the government's move, saying that lower taxes would reduce the price of drugs and allow customers greater spending power, Dnevnik reports. Blagoj Mehandziski, Managing Director of Macedonia's leading wholesale and retail chain, Zegin , says that drug prices are expected to descend by a minimum of 10%.On the other hand, experts are warning that the VAT reduction will not automatically reduce retail prices if retailers set their prices independently. At present, drugs from the same manufacturer can be sold in different pharmacies at a different price.
Drugs for all, the principle behind the new Positive list
The Ministry of Health has given its approval to the new positive list submitted by the Macedonian Insurance Fund (FZOM), introducing 56 new treatments. Health Minister Imer Selmani said that for the first time the list does not singles out any disease. The new list includes new treatments for cystic fibrosis, oncology drugs for paediatric use, Parkinson's and Alzheimer's disease drugs, epilepsy, infertility, anti-diabetics, newer antibiotics, cardiovascular drugs, as well as medicines for osteoporosis, breast-cancer and prostate cancer. However, revisions have been made with the introduction of new-generation drugs, such as antidepressants, antibiotics, hormones, systemic anti-infectives and imunosupressants. The value of the new drugs on the list is estimated to be up to 7 million euro (US$ 9.489 million). The preparation of the new positive list was effected in accordance with the experience of European countries and recommendations made by the World Bank
Outlook and Implications
The government decision to reduce VAT on drugs is designed to produce savings for the National Health Insurance Fund and to reduce retail drug prices, which are expected to drop by 13% in 2007 and by up to 30% by 2008. The value of savings is estimated at 5 million euro, a sum already earmarked for improving the availability of drugs across the health sector. At present state-reimbursed drug supplies in pharmacies run out and patients are then forced either to pay out of pocket for a replacement or to visit numerous pharmacies in hope of finding the drug.
Cheaper retail prices could be offset partially by the possibility that retailers may increase their margins regardless of the VAT reduction. The government is preparing a new pharmaceutical law, expected to be passed in September 2007, envisaging tighter regulation of pricing through the national drug agency, which would set all retail and wholesale drug prices.
The amended list includes treatments for cystic fibrosis, anticancer medicines for paediatric use, Parkinson's and Alzheimer's disease treatments, supplemented by newer generations of medicines.
It is expected that the government's decision to reduced VAT will pass easily through parliament.