Global Insight Perspective | |
Significance | Venezuela is considering expanding its list of price-controlled medicines, and is stepping up involvement in regional initiatives to monitor and reduce pharmaceutical prices. |
Implications | Branded drug-makers have previously protested against a continuing freeze, but enjoyed respectable margins on non-controlled products. Coupled with the erosion of intellectual property rights, market conditions look set to worsen markedly. |
Outlook | Venezuela may struggle to make headway in regional efforts to cut prices, due to mutually incompatible price regimes and political ideologies, but the new plans are symptomatic of the general drift towards economic interventionism in the country. |
In an interview with the El Nacional newspaper, the Venezuelan vice-minister for Health Resources, Julio César Alviárez, has said that the government may expand a three-year price freeze beyond the 30% of products available in the country that are designated “essential” by the World Health Organization (WHO). The Health Minister is expected to make a formal announcement in the next few days.
Separately, Alviárez also committed Venezuela to participating in efforts by the Andean Community (CAN) to monitor and control pharmaceutical prices. A putative regional Observatory on pharmaceutical prices, set to be debated at a meeting of national health ministers next month, will examine oncology products in particular.
Pharma Swept Up in Venezuela’s New Era
According to the health ministry, the move to exert greater control over drug costs dovetails with its policy objectives, on the basis that “health is a fundamental factor in the new socialist state, and everything being done in the international sphere in this area can count on the presence of the Venezuelan government”. In Alviárez’s words, “medicines are strategic to a nation’s development”. Despite media reports to the contrary, the minister denies that there is any shortage of medicines in Venezuela.
Previously, foreign drug firms had enjoyed healthy returns on non-controlled products in Venezuela, even though—apart from minor adjustments on around 300 products in 2005—drug price controls have not been revised since 2003. The U.S. trade association PhRMA estimates that inflation and currency devaluations have reduced the real value of price-controlled medicines by more than half in the past three years, in addition to a rise in the overall costs of doing business in the country.
So Much for Intellectual Property
Accordingly, the new announcement amounts to a backwards step, as the industry was expecting the government to loosen its grip in future. However, faced with double-digit inflation and mounting criticism over healthcare reforms, the authorities have chosen to intervene. Most worryingly, Alviárez has stated that although “excessive imports” are a problem, “if the importation of any healthcare product is necessary for patients’ quality of life, favourable measures will be taken”.
In practice, this would appear to be a pledge to increase parallel imports of life-saving pharmaceutical products. Such a move would accompany the general deterioration in patent rights in Venezuela over recent years: a compulsory licensing bill has also been doing the rounds in the legislature since 2001, but has so far not been enacted. In any case, the national patent office, SAPI, does not support pharmaceutical patents and Venezuela’s withdrawal from the Andean Community in April 2006 amounted to the effective revocation of national intellectual property legislation relevant to the healthcare sector. According to PhRMA, although applications have been running at more than 500 per year, no new drug patents have been approved since 2003.
Venezuela Finds a Use for the Andean Community
Nevertheless, Venezuela has belatedly identified the Andean Community—a bloc that comprises Colombia, Peru, Ecuador and Bolivia—as a key way to bargain collectively with industry and so keep drug prices appealingly cheap. A regional Observatory on drug prices is planned, prompting a magnanimous Alviárez to comment that “although Venezuela has had several disagreements with the Andean Community, we are obliged to get involved with this work”. In a worrying note for research and development (R&D)-based drug-makers, Venezuela will attempt to build on regional agreements with the industry on lowering the prices of anti-AIDS medicines in order to lower the cost of cancer medicines.
Outlook and Implications
Although the expansion of pharmaceutical price controls in Venezuela appears to be a near certainty—given the overwhelming power of the government of President Hugo Chávez—a regional consensus on cancer medicines and the overall issue of price controls looks unlikely. Regional harmonisation has in the past eluded CAN member states in the area of drug pricing. However, at the national level, this is unlikely to prevent the Venezuelan authorities from acting unilaterally to source copy products from abroad, as local intellectual property rights are steadily rolled back. It remains to be seen what kind of deal the international pharmaceutical community will be able to cut in Venezuela, although officials appear convinced that the government will have the final say on the matter.