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Michał Zabdyr-Jamróz  14 września 2019

Why is there a shortage of medicines in Poland? „Mule” clinics, China and Georgette Mosbacher

Michał Zabdyr-Jamróz  14 września 2019
przeczytanie zajmie 14 min

Poland’s drug crisis was directly caused by two problems that coincided in time. Both result from our country’s involvement in international drug markets – European and global alike. The first reason is the illegal export of medicines, the second is the closure of Chinese manufacturers of active substances. The global pharmaceutical market, however, definitely has wider problems. Although many experts from such organizations as WHO indicate that global drug market standards should be developed, their positions are weakened by politicians from countries that defend the interests of major companies. We saw how it looks in practice, when the US ambassador, Georgette Mosbacher, intervened in accepting the product of an American company Genentech on the list of reimbursed drugs.

Overly effective policy causes the crisis

The media report: There is a shortage of medicines in Poland! The situation triggered a response from the Ombudsman, the Supreme Audit Office, the Supreme Pharmaceutical Council and many others. „Favourable prices of medicine, mainly reimbursed, have increased the attractiveness of exports from our country,” making it „a very profitable enterprise” – officials replied.

In public discourse, it is recognized that the drug shortage in Poland is caused directly by two problems that coincided in time. Both result from Poland’s involvement in international drug markets – European and global alike. The first reason is the illegal export of medicines; the second is the closure of Chinese manufacturers of active substances.

Paradoxically, the illegal export of medicines abroad, which has been going on for many years now, results from the great success of Polish instruments for reducing the prices of medicines, which are much cheaper in Poland than in neighbouring countries (e.g. Germany), making their export for profit beneficial. This problem has been growing for years, and just as long the Polish authorities have been striving to deal with it. The spokesman of the Supreme Pharmaceutical Council, Tomasz Leleno, warned that „dishonest companies set up private clinics that write prescriptions for rare medicines, which then wind their way out of the country”.

The so-called mule clinics buy cheap medicines in large quantities just to export them abroad. The purchases took place with affiliated wholesalers and through pharmacies privy to the process. The medicines purchased were then sent not to patients, but wholesalers specialized in the export of pharmaceuticals.

It is this peculiar practice of reversing the normal direction of distribution – when the drug goes from a pharmacy, not to a patient, but somewhat back to the warehouse – that was referred to by the Main Pharmaceutical Inspectorate as the reverse distribution chain. From then on, the so-called parallel import comes to play. An importer, who – although produces nothing – declares himself as „part producer, part wholesaler”, buys medicines where they are cheaper, repackages them, and then sells them where they are more expensive.

For now, this practice has been combated using bans on exporting subsequent categories of drugs and raising penalty fees, but so far this hadn’t brought the expected results. If only for the fact that it is difficult to enforce financial penalties when the clinics are the so-called mules. There are also staff shortages at the State Pharmaceutical Inspection. „We’re losing the fight against illegal drug exports abroad,” the Supreme Audit Office recently announced. The invisible hand of the global pharmaceutical market still eludes the sluggish hand of the Polish government.

The drug crisis has dramatically increased with the emergence of another issue.

Cut off from Chinese supply

Several active substance factories have recently been closed in China. This not only affected the Polish pharmaceutical market, which depends on cheap imports from China but also hit the global market, as the supply chains to many countries and many companies were broken. It turns out that „nearly 80 percent of active substances used by drug manufacturers are from China”.

Officially, the closure of the factories resulted from an intervention of the Minister of the Environment, who promised last year a campaign to combat air pollution – one of the most important problems in modern China. It is also suspected that the reason were impurities detected in the production process. The factories were closed to avoid an international scandal, similar to that when defective vaccines made in the Middle Kingdom were discovered.

Regardless of reasons, this has shown how unbalanced the global pharmaceutical market is in its dependence on cheap and „dirty” (also in the sense of low quality) production of chemical substances.

The problem, of course, results from the global focus on the price criterion, due to which on the one hand, public payers should seek savings in the era of tightening one’s belt ideology, and on the other, international corporations may draw even greater profits in the era of maximizing shareholder value. In this context, Professor Zbigniew Fijałek points out that the aggressively competitive Chinese manufacturers of active substances do not meet quality control standards, which may harm final medicinal products.

We thus have a conjunction of two problems that reinforce the deteriorating situation of the Polish health system. While searching solutions at the source, we also need to understand how the Polish system works in terms of making its drug policy, as well as the context it was created in.

Regulating drug prices

The pharmacy and health care sector is an extremely problematic market. There is a drastic asymmetry of information and inequality of entities that may result in vast disparities in access to care.

International pharmaceutical companies say that drug prices must be high because that’s how their research is funded. Meanwhile, the overwhelming majority of the expenses incurred by these companies involve marketing, with the cost of research and drug manufacture being merely a fraction of their price.

In 2018, Andrew M. Hill, Melissa J. Barber and Dzintars Gotham published a study on estimating the actual cost of medicines from the WHO Model List of Essential Medicines. It turns out that in the countries surveyed, drug prices significantly exceed their production cost, which may be very low in most cases.

These studies were an impulse for the WHO to organize a forum in 2019, regarding developing a common policy among the Member States to force manufacturers to offer more honest drug prices – especially for the poorest countries. However, the conclusions of this meeting were weakened by the positions of such countries as the USA, where the largest pharmaceutical companies are based. These countries’ peculiar position – as pharmacist Jerzy Przystajko from the Razem Party notes in an interview for oko.press – was also supported by Polish authorities.

Global drug prices so far have no upper limit and will continue to grow as long as buyers or market circumstances allow. And since many drugs have monopolized saving lives, people are willing to pay a lot for them.

An extreme yet very clear example is Martin Shkreli, who as the CEO of a company that makes life-saving medicine for AIDS patients, decided to raise its price from $13.50 – the price the product had been available at for many years – to $750.00 (sic!) USD per pill. He later honestly admitted that he regrets raising the price this way because he should have… raised it even more. He argued that, in principle, his duty was to satisfy shareholders by securing the maximum possible profits for the company.

An uncontrolled and profit-oriented health care system may easily lead to a situation where a regular band-aid will cost $7 and a hospital-specific service of giving a newborn baby to their mother to hold – the so-called “skin-to-skin contact” – will cost nearly $40. That is why it is so important to regulate prices in the health care system – and especially the prices of life-saving medicines.

Sequenced bias strategy

In the spirit of the constitutional principle of solidarity and under the Refund Act, „Article 6 the Minister competent for health shall, by means of an administrative decision, set the official selling price of drugs, or foodstuffs for particular nutritional uses”. According to Article 12 of the Reimbursement Act, the minister makes a decision based on the position of the Economic Commission and a recommendation of the President of the Agency for Health Technology Assessment and Tariff System (AOTMiT), taking into account a number of medical and economic criteria.

The agency operates on an expert basis, with clear elements representing various public institutions. The Commission is an advisory body to the Minister – made up of representatives of the Minister and President of the National Health Fund – but is primarily to bargain at financial issues with the medical sector. As per Article 18. item 1. of the Act: „The tasks of the Commission include negotiating with the applicant” (requesting reimbursement of a given product), primarily in the area of „determining the official selling price” and the „reimbursement level”. So it seems that expert knowledge and the struggle of interests are biased in separate fora on a sequential basis. Recommendations generated in this way are to be addressed by the Minister, who is the entity selected in the political process.

In theory, this is a model example of a modernist, „rational” system for creating public policies in the modern democratic model. However, this is an outdated model in the contemporary realities of international politics and markets. It involves sequencing the decision-making process by focusing on the selected type of policy contribution – e.g., expert knowledge or one’s interests.

Bias involves expert knowledge being locked away in dedicated expert institutions, and own interests are settled in individual bargaining points, separate from them. Of course, the main goal here is to secure expert knowledge favoured in modernism and logical positivism against selfish self-interest and other considerations of political games.

This mechanism is invaluable with effective implementation. Establishment and statutory authorization of the Agency for Health Technology Assessment and Tariff System (initially: Agency for Health Technology Assessment) was a significant political accomplishment in health policy alone. It guaranteed the presence of evidence in developing drug policies, in establishing the range of guaranteed health benefits and their valuation, as well as an expert assessment of the public health policy.

Bias sequencing is a technique that streamlines state management, as it allows breaking down problems into fragments that are easier to grasp using a single criterion. These pieces are then arranged in the hope that all relevant issues will reach their final decision-makers.

The problem is that this bias enforces a tunnel vision – overlooking the big picture. In individual process sequences, relevant information can be lost, and confrontation between various contributions is mediated strongly. Such a process, however, at least gives the final decision-makers the chance to get a relatively complete picture of the situation.

Ultimately, however, this may end up in a peculiar form of instrumentalising expert knowledge, such as when the US ambassador, Georgette Mosbacher, intervened in accepting Tecentriq – the product of an American company Genentech – on the list of reimbursed drugs. When, as a result of disputes in the Economic Commission, the drug was rejected due to the manufacturer offering an insufficient discount, the ambassador pressed the Polish authorities, using those fragments of Agency for Health Technology Assessment and Tariff System’s recommendations that pointed to the drug’s clinical and practical effectiveness. She completely overlooked the remarks saying that „despite the proposed RSS [risk sharing scheme], the technology is not cost-effective”.

In the experts’ opinion, the health impact obtained from using the drug will disproportionately burden the budget of the Polish payers, who already have drastically limited resources. „In its current shape, the RSS does not fulfil its role, i.e. it does not properly secure the payer’s budget for the reimbursement of the technology requested and does not take into account the uncertainty related to the size of the target population. The instrument also does not ensure the cost-effectiveness of the technology requested. Given the above, it is necessary to modify and deepen the proposed scheme, e.g. through introducing a threshold, above which an applicant [manufacturer] would cover the cost of treating patients”. Therefore, the first page of the recommendation contains a statement in bold, saying that, yes, „the President of the Agency recommends reimbursement of the Tecentriq medicinal product”, but only „provided that the risk-sharing scheme is deepened to ensure cost-effective therapy”. Eventually, Tecentriq was covered by a refund.

The strongest actors: Big Pharma

The global pharmaceutical market is ruthless, which is why the poorer countries – like the ones with the least bargaining power – pay corporations the highest prices for medicines. The Polish Ministry of Health is under strong pressure from foreign drug manufacturers and often has to accept their prices. Manufacturers threaten to completely withdraw from the Polish market, and this would be disastrous for patients.

This was admitted by the Deputy Minister of Health in an interview for Gazeta Prawna: „Drug prices in Poland are very low compared to other countries, and companies – particularly those with international headquarters – prefer to opt-out of refunds in Poland than agree to another reduction. The reason is simple: the Polish price affects the price of a given drug in other countries in the same region: in the Czech Republic, Bulgaria, Romania. It happens that after balancing the profits and losses, a company recognizes that it is financially more profitable to fall out of our reimbursement system than to lower its price in Poland, as that would also reduce prices in other countries. So the manufacturer makes it clear: if you force us to reduce prices, we’ll opt out of the reimbursement scheme. […] It may be a bluff or the beginning of negotiations, but it may as well be true. Only that the Minister of Health cannot risk that 100,000 patients would lose access to their medicine overnight”.

The problem is structural

Paradoxically, instead of increasing access to medicines in the sense of affordability, reducing the price of medicines leads to limited access by triggering their shortages in Poland. What should improve the patients’ situation makes it worse instead. Poland has become a victim of its success.

To prevent drug exports, some experts suggest „raising their official prices while maintaining prices after reimbursement”, as well as better aggregation of pharmacoeconomic data to strengthen the Polish authorities’ bargaining position to foreign concerns.

Dependence on external manufacture is being criticized by the Polish Association of Pharmaceutical Industry Employers as an extremely short-sighted solution, designed to support production in Poland. In this case, however, both the leadership of the Ministry of Health and the Minister of Entrepreneurship and Technology were unfavourable.

With their minority share in the market, Polish drug manufacturers complain that the current policy of reducing drug prices not only leads to the export of medicines, but also cuts their wings (i.e.: profits, and thus their market position) and further reinforces our dependence on foreign sources for cheap medicines and active substances. Asian producers are mainly those who benefit from the low price requirement. Polish manufacturers call to change the paradigm of the Economic Commission. For now, it is focused on lowering drug prices – i.e. the NHF’s economic interest. As it turns out, however, the interests of Polish patients cannot be reduced to the narrow and short-term interest of the National Health Fund.

By focusing on the payers’ financial self-interest, the Economic Commission pursues hard bargaining with the manufacturer. With their weaker bargaining positions, Polish manufacturers give up easily. However, the situation concerning international corporations is different entirely; these have a strong bargaining position – sometimes directly supported by political-diplomatic interventions by the US ambassador.

In this context, what we need is to look at the problem from a broader perspective – to break away from the bias strategy. Not to give up the focus on cost-effectiveness for the benefit of patients, but to supplement it. To view the matter comprehensively and in the long term on the one hand, and on the other, to protect against such susceptibility to instrumentalisation that strong entities practice. The fact that drug policy is biased causes Polish decision-makers to fall into the so-called tunnel vision. It’s not just that they fail to see the considerations wider than just the cost-effectiveness of drugs. These issues are well-known. The tunnelling present in sequential bias primarily involves the lack of political instruments to build a comprehensive, long-term drug policy.

Polish version is available here.

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The publication co-financed by the Ministry of Foreign Affairs of the Republic of Poland as part of the public project "Public Diplomacy 2019" („Dyplomacja Publiczna 2019”). This publication reflects the views of the author and is not an official stance of the Ministry of Foreign Affairs of the Republic of Poland.