Synergus

Italian health care budget is composed of regional and national resources. Economic constraints and the willingness to make Regions financially accountable for their planning decisions let the central government implement measures meant to reduce the role of central funding to the sole function of topping-up regional budgets. Nowadays regional resources (in particular IRAP – a regional tax on productive activities – and the surtax on IRPEF – an income tax) constitute the primary source of funding in all the 21 regional healthcare systems. In the Autonomous The impact of regional own-resources and of central transfers from the National Health Fund widely varies across Regions. However, central funding tends to be relatively more important in Southern Regions than in Northern ones, given the historical different wealth and economic standards characterizing the two areas of the country.

Already in 2012 national Law had intervened on medical devices by defining maximum caps of expenditures in terms of central funding of the regional system.  The cap was set to equal the 5.2% of total central funding in 2012, the 4.8% in 2013 and to the 4.4% in 2014 and 2015. Excess costs should have been completely repaid through regional resources.

In light of the enduring economic constraints, the national Government is pushing further to reduce spending for medical devices and is requiring additional financial obligations to the medical device industry in case spending exceeds agreed-upon caps.

On April 29th 2015, the Italian Unified Conference of the State and the Regions, composed of representatives of the Government and 19 Regions and 2 Autonomous Provinces of Italy, postponed the ratification of an agreement on budget cuts impacting resources available for the National Health Fund.

The Text had already undergone several changes and its approval has been repeatedly deferred by the Conference. In particular, Regions claim the inability to bear the cost reduction of 2.35 billion Euros to the National Health Fund required by the Financial Law for 2015.

The last version of the document drafted by the Conference envisages the implementation of measures and procurement conditions meant to drastically reduce expenditures for goods and services, pharmaceuticals and medical devices.

With regards to medical devices, in particular, the Article 2 of the Text would require Regions to:

• Attain to the maximum cap of expenditures for medical devices, set to the 4.4% of total national funding provided to the region (Legislative Decree No.95/2012, article 15). Note that the national cap value has to be adjusted by considering the magnitude of private funding in the regional system at stake. The table below reports current regional patterns of central funding, private funding and the adjusted (percent and absolute) maximum caps to be fulfilled by each single Region.

• Renegotiate procurement agreements with medical devices suppliers and review (possibly reduce) unit prices and/or purchase volumes as previously defined in the contracts. In particular, Local Health Firms - which are responsible for the procurement and purchase of services and goods within their local jurisdiction - benefit of the exclusive right to terminate the contract within 30 days after the renegotiation proposal in case the medical device supplier does not accept the new conditions (This is permitted notwithstanding the instructions in Article 1671 of the Italian Civil Code). Similarly, suppliers can also withdraw the contract within 30 days after notification.

Regional maximum caps adjusted for the percent incidence of private funding

Column 3 = 4.4%*Total of column 2 / row of column 2 

Column 4 = Column 1 * Column 3 

Source: Il Sole24Ore - Sanitá (April 2015)

The text also requires suppliers of medical devices to:

• Repay a percentage of the expenditures exceeding the regional maximum caps for medical devices, as identified by the central Law and adjusted according to the regional incidence of private funding. Methods of repaying should be set at the regional level and approved by the Conference State-Regions. Suppliers´ repayment should depend on the percent impact of its sales volume on total medical devices costs within the regional healthcare system considered. The total amount of suppliers´ repayment contributions in case of excess from the national cap should equal the 40% in 2015, the 45% in 2016 and the 50% in 2017 of the total amount of expenditures exceeding the maximum regional cap.

The instructions included in this draft have not been approved by Government and the Regions yet. However, it is clear that the intent to strongly impact pattern of expenditures and procurement of medical devices exists.

Assobiomedica, the Italian Confederation of medical devices suppliers, expressed its concerns about the agreement already in mid-April. The President of the Confederation, Stefano Rimondi, criticized the chance of unilateral termination of the contract, defining it as an unacceptable violation of legal obligations, as well as the repayment duties for medical devices suppliers, which would hinder the survival course of many firms in the sector.

If proposed changes will be ever put into practice, medical device industry in Italy could be strongly affected in terms of both sales volumes and prices as well as of scope in the market.