Complaints about the fact that medicine prices are higher in Latvia than in the other two Baltic countries have been heard for years. However, it has not been possible to achieve a real price reduction, and this autumn the State Audit Office pointed out the large price difference in the Baltics.
The final price consists of the markup of wholesalers and pharmacies added to the manufacturer’s price, and the value added tax of 12%. Mark-up and VAT are the stages that result in the highest prices in Latvia.
In both of our neighboring countries, the markup has a limited wholesale charge or a specific ceiling. With us, this ceiling is formed as a percentage of the manufacturer’s price.
For example, for a medicine whose price is 2000 euros, Latvian wholesalers are allowed to charge a mark-up of 200 euros, while in Estonia they can charge 6.39 euros, and in Lithuania – 14.48 euros.
“The more expensive the drug, 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 manufacturer’s price is reached, the markup is no longer calculated as a percentage, but there is a maximum. It doesn’t matter how much medicine pays 100 or 200 euros, the surcharge is, let’s say, 6 euros, instead of 10% of the price, as it is now,” said Ilona Loshak, legal advisor of the Ombudsman’s office.
The current health minister, Hosam Abu Meri (“New Unity”), has pledged to introduce a fixed ceiling. He has declared the reduction of drug prices as his work to be done.
“For example, in Lithuania and Estonia, there is a specific amount for a specific medicine price, then in Latvia we have a percentage. Therefore, the more expensive the medicine, the more interest comes to the profit. In Lithuania and Estonia, it is different, there is a maximum ceiling. It doesn’t matter if you pay 100 or 400 euros, at the end there is a specific amount that can be earned,” explained the Minister of Health.
The second way to remove the burden of paying for drugs from the shoulders of buyers is to expand the list of reimbursed drugs. In this respect too, Latvia stands out negatively against the background of the other Baltic states – it is the poorest for us both in terms of volume and innovation
“In next year’s budget allocated to medicine, this could be one part that could go to reimbursable medicines, because we know that we need to invest and invest there. Investing in medicines is better than just putting them in the system and not targeting them. There are targets here – we know , if next year we make 50 million euros compensable for the list of medicines, we will compensate more, it directly affects the population,” said Abu Meri.
These proposals are included in the Ministry of Health’s report on the financial availability of medicines. It is currently in consultation and contains other proposals to reduce drug prices, such as reducing VAT from 12% to 5%, as well as setting a maximum annual patient co-payment, meaning that a person would not have to pay more out of pocket for 250 euros per year.
Currently, however, Abu Meri is more inclined to expand the list of compensable drugs and set a fixed ceiling amount. The industry is cautious about the latter.
“The biggest concern is the question of what the amount will be, the amount. And whether this amount will cover the cost at all. We should also try to follow the Estonian path, when prescription drugs are more or less compensated. Therefore, inclusion in the list of compensable drugs, it is an effective price reduction mechanism. Because the National Health Service evaluates the justification of the medicine and if the manufacturer wants to enter the list, he is obliged to reduce the price,” said Jānis Lībķens, member of the board of the Latvian National Drug Supply Association.
The Ministry of Health has not yet estimated how much the prices could decrease, but it promises that a clearer vision could be in December, but the citizens could see a real reduction in drug price tags in the second half of next year.