Austria's Medicine Price Caps: Drug Companies' Limits?

Austria has one of the highest per capita expenditures on pharmaceuticals worldwide, with sales estimated to have reached $8.6 billion in 2022. The country's pharmaceutical market is influenced by several factors, including the growing demand from an ageing population, near-universal health insurance coverage, and notable pricing constraints for reimbursement with the public insurance system.

In terms of drug pricing and reimbursement, Austria has implemented legal changes that have negatively impacted producers of originators and generics. These changes include price caps and reviews, particularly for off-patent drugs and generics, which have resulted in significant price reductions.

Regarding the import of drugs, the Austrian Medicine Import Act generally prohibits bringing medications into the country. However, there are exemptions for travellers residing outside the European Union, who are allowed to carry medicines for their personal use.

Austria also has strict regulations for advertising medicinal products, with specific laws and codes of practice governing promotional activities. These regulations cover various aspects, including the definition of advertising, restrictions on promotional content and comparisons, and rules for providing information to healthcare professionals and the general public.

Overall, the Austrian pharmaceutical market is highly regulated, and companies must navigate complex pricing, reimbursement, and advertising landscapes to operate successfully in the country.

Drug Importation: The Austrian Medicine Import Act prohibits drug imports, but allows travellers to bring medicines for personal use

The Austrian Medicine Import Act prohibits the import of drugs and medicines into Austria, except by pharmacies and entities authorised to distribute medicines and medicinal products. However, there are some exemptions for travellers.

Firstly, travellers residing outside the European Union are permitted to bring in drugs and medicines for their personal use, in quantities that would normally be used by an individual with a health problem requiring such substances. This does not include addictive drugs, for which strict regulations and inspection requirements apply. For prescription medicines containing addictive substances, travellers can bring in enough for a stay of up to five days without an additional certificate, but for longer stays, a prescription from their doctor is required.

Secondly, travellers may receive drugs and medicines for their personal use while in Austria. The quantity sent by relatives or friends is limited to what an individual would normally use during their stay and must not exceed three packages. It is recommended that travellers bring a prescription or a written statement from their doctor confirming that the medicine is necessary for their physical well-being while travelling.

Pricing Constraints: Austria's public insurance system imposes notable pricing constraints on reimbursed medicines

Austria's public insurance system imposes notable pricing constraints on reimbursed medicines. The country's pharmaceutical market is influenced by four key factors:

• The ageing population, with nearly one-quarter of Austrians projected to be over 65 by 2030, driving up demand for pharmaceuticals.
• The comprehensive social health insurance coverage, which finances pharmaceutical needs with minimal co-pay requirements or zero payment for low-income patients.
• The growth in domestic production volumes, creating opportunities for drug precursor producers.
• Pricing constraints for reimbursed medicines under the public insurance system.

Austria's pharmaceutical industry has experienced tensions due to legal amendments impacting the pricing of medicines. In March 2017, a legal amendment was rushed through parliament, introducing changes unfavourable to producers of originators and generics. This amendment included new voluntary discounts on reimbursed medicines, negotiated between the industry and the Main Association of Austrian Social Security Institutions (HV-SV). However, the manner of its implementation caused displeasure, as it was pushed through without full consultation with affected groups.

The amendment introduced several significant changes:

• Medicines not included in the Reimbursement Codex (Erstattungskodex, or EKO) are subject to a price cap based on the EU average price if their sales exceeded EUR750,000 in the previous 12 months.
• Price reviews for "yellow" and "red" box medicines are mandated at specific intervals, with additional reviews possible.
• Maximum prices for generics entering the Austrian market are marginally lower than before, and biosimilars prices are regulated separately for the first time.
• A "price corridor" for off-patent drugs in the Green Box category, which are automatically reimbursed, caps prices at 30% above the lowest-priced equivalent.

These pricing constraints aim to balance the finances of health insurance institutions while ensuring patients' access to innovative drugs. However, the pharmaceutical industry faces challenges due to the rapid implementation of these changes and the complex regulatory environment.

Advertising Regulations: Austria's Medicinal Products Act governs advertising of medicinal products, with strict rules for promotions and gifts

Austria's Medicinal Products Act, or the "Arzneimittelgesetz" (AMG), governs the advertising of medicinal products and imposes strict rules on promotions and gifts. The law defines "advertising" as any form of door-to-door information, canvassing activity, or inducement designed to promote the prescription, supply, sale, or consumption of medicinal products. This includes advertising to consumers (lay advertising) and advertising to persons qualified to prescribe or supply them (expert advertising).

The AMG sets out specific requirements for the content of advertisements directed at healthcare professionals. For example, advertisements must contain essential information about the medicinal product, such as its name, pharmaceutical form, dosage, and qualitative and quantitative composition. Additionally, all information in promotional materials must be accurate, up-to-date, verifiable, and sufficiently complete to allow healthcare professionals to form their own opinions about the product's therapeutic value.

The AMG also places restrictions on gifts and financial incentives. For instance, it prohibits the granting, offering, or promising of gifts, pecuniary advantages, or benefits in kind to persons entitled to prescribe or supply medicinal products unless they are inexpensive and relevant to medical or pharmaceutical practice. The law also regulates the provision of samples, allowing them to be supplied free of charge to physicians, dentists, and veterinary surgeons if certain conditions are met.

In addition to the AMG, the Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb, or UWG) and the Austrian Pharmaceutical Industries Association's (Pharmig) Code of Conduct also govern the advertising of medicinal products in Austria. These laws and codes aim to ensure that promotional activities are conducted in a fair and transparent manner, protecting consumers and healthcare professionals from misleading or excessive claims.

Patent Expiry: Generics face slower growth due to tight reimbursement system demands, resulting in minimal price differences between branded and generic drugs

In Austria, the pharmaceutical industry has been negatively impacted by a legal amendment that was rushed through parliament without full consultation with the various groups affected by it. This amendment introduced a series of changes that were unfavourable to producers of originators and generics.

One of the changes introduced by the amendment is a "price corridor" for off-patent drugs in the Green Box category of the reimbursement system. Drugs in this category are automatically reimbursed without the need for prior approval by social security institutions. The new regulation states that drugs in this category may not be priced any higher than 30% above the lowest-priced equivalent at ATC Level 5.

The overall price reduction resulting from the regulations for generics is 65%, compared to 60% previously. This means that the price of generics will have to be marginally lower than before, resulting in slower growth for generic drug manufacturers due to the tight reimbursement system demands.

The minimal price difference between branded and generic drugs could have negative consequences for patient access. It may also reduce the incentive for generic drug manufacturers to enter the market, as they may not be able to compete on price with the branded drugs.

Market Dynamics: Austria's pharmaceutical market is influenced by an ageing population, high per capita expenditure, and strong domestic production

Austria's pharmaceutical market is heavily influenced by several factors, including an ageing population, high per capita expenditure, and robust domestic production. These dynamics shape the market and have implications for both the industry and consumers.

The ageing population in Austria has led to a higher demand for pharmaceutical products related to chronic diseases such as diabetes, hypertension, and cancer. This trend is expected to continue, with nearly one-quarter of Austrians projected to be over 65 by 2030. The Austrian government's focus on healthcare for its ageing population has contributed to the increased demand for pharmaceuticals.

Austria has one of the highest per capita expenditures on pharmaceuticals worldwide. In 2022, pharmaceutical sales reached an estimated $8.6 billion, or $941 per capita, accounting for 11.4% of the country's total healthcare expenditure. This high expenditure is facilitated by the country's universal social health insurance system, which covers nearly the entire population. The insurance system finances pharmaceutical needs with low co-pay requirements and even zero pay for low-income patients.

Austria is also a significant producer of pharmaceuticals, with a well-developed market economy and a skilled labour force. Domestic production volumes are increasing, creating opportunities for producers of drug precursors. Multinational pharmaceutical companies have a strong presence in the country, with many maintaining R&D or manufacturing capacities. Local companies are also growing, and the market is expected to expand further with new and expanded production facilities coming online in the coming years.

The Austrian pharmaceutical market is highly regulated, and the government plays a crucial role in drug pricing. The market is dominated by patented drugs, which account for around 85% of prescription sales. Generics have seen slower growth in Austria compared to other OECD markets due to the tightly managed reimbursement system and physician and pharmacy preferences for patented medications.

Overall, the interplay between Austria's ageing population, high per capita expenditure, and strong domestic production shapes the country's pharmaceutical market. The market is expected to continue growing, driven by increasing demand and supported by a robust healthcare system and dynamic production landscape.

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