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Cablegate: Romanian Healthcare Part 2: Pharmaceutical Demand Rising,

VZCZCXRO9479
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBM #0604/01 2121410
ZNR UUUUU ZZH
P 301410Z JUL 08
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC PRIORITY 8540
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEAUSA/DEPT OF HHS WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 BUCHAREST 000604

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON ELAB EINV PGOV SOCI AMED RO
SUBJECT: ROMANIAN HEALTHCARE PART 2: PHARMACEUTICAL DEMAND RISING,
BUT ACCESS AND QUALITY REMAIN CONCERNS

REF: A) Bucharest 601

Sensitive but Unclassified; not for Internet distribution.

SUMMARY

1. (SBU) As incomes rise in Romania, pharmaceutical consumption is
also increasing. Better awareness of useful medications has put
pressure on the Government of Romania (GOR) to expand the national
drug list and to include more cutting-edge medications. While any
pharmaceutical which has been on the EU market for at least one year
may be legally sold, even if it is not on the national list, these
medications are not covered under the national insurance system.
This keeps them out of reach for average Romanians. Breakdowns in
the system sometimes leave patients without access to the
prescriptions they need at the right time.

2. (U) This is the second of a three-part series on healthcare in
Romania. Part 1 focused on the public healthcare system, while part
3 will look at the emerging private healthcare market. End
Summary.

THE MARKET FOR PHARMACEUTICALS

2. (SBU) Romanian pharmaceutical consumption is well below the EU
per capita average, which indicates that the market has significant
room to grow. However, the cost of prescriptions already accounts
for nearly 20% of government health expenditures, leaving little
room for expansion absent radical restructuring of the healthcare
delivery system. Because healthcare is publicly financed, payment
arrears to drug makers on the part of hospitals are not uncommon.
Hospitals which do not receive timely reimbursements from the
National Insurance House cannot pay distributors, causing
distributors to halt shipments. Likewise, when distributors cannot
pay pharmaceutical companies, the companies sometimes halt shipments
to distributors. This cycle of missed payments creates intermittent
drug shortages for key medications.

3. (SBU) In a July 23 meeting with EconOff, Romania Country Manager
for Merck Sharp and Dohme (MSD), Agata Jakoncic, stated that while
the issue of payment arrears has improved this year, this is only
because the Government wants to appear responsive to patients in an
election year. She expects payment problems to be a continuing
issue after the parliamentary elections this fall. The difficulties
inherent in working through the state-run system have led some
pharmaceutical companies to focus their energies on direct sales to
the small private sector and on marketing non-prescription drugs.
Still, the pharmaceutical sector is growing despite these
challenges. Sales are expected to increase 5-10% in 2008, on top of
an 11.2% increase in 2007. Imported drugs make up 80% of the
available number of medications but account for only 44% of sales,
meaning that most consumers continue to rely on inexpensive,
locally-produced generic medications.

4. (SBU) Maintained by the Ministry of Health, the national drug
list currently contains 2,106 medications which are covered under
the state health insurance program. These drugs are reimbursed on a
sliding scale of 100, 90, or 50 percent. Drugs reimbursed at 100
percent include select medicines used to treat serious illnesses
such as hepatitis-B and cardiovascular disease. Generics are
reimbursed at 90 percent, and most brand name drugs are reimbursed
at 50 percent. This structure favors generics over brand names,
making it difficult for the branded medications to compete. This
helps to explain the high usage of generics in the Romanian market,
since they are not only cheaper but are also reimbursed at a
significantly higher rate. For drugs not on the list,
pharmaceutical companies are forced to offer their own discount
deals to consumers if they hope to sell the drugs at all.

5. (SBU) While in theory all of the drugs on the national list are
provided at no or reduced cost to any insured consumer, in practice
not all patients receive their medications at subsidized prices.
Under the existing public health insurance scheme, fixed amounts of
insured medications are delivered to each pharmacy, with the
pharmacy permitted to seek other additional supplies directly from
distributors. Medication is only free or at reduced cost so long as
the "insured amount" remains in stock at the pharmacy. When the
allotted amount of medication runs out, patients must choose either
to pay the market price for the prescription or they may wait until
the next official shipment.

6. (SBU) According to Jakoncic, the infrequency with which the
national drug list is updated is a significant source of frustration
for pharmaceutical companies. Although Romanian law states that the
list may be updated as often as once per year, in practice the GOR
does so at very irregular intervals. The most recent revision came
in July 2008 after having remained static since 2005. Companies are
reluctant to sell non-listed drugs because the market for them is
much smaller. In addition, Romanian law does not allow a drug to
enter the local market unless it has already been on the EU market

BUCHAREST 00000604 002 OF 002


for one year. These barriers to entry mean that, depending on when
the list was last updated, some new, life-saving drugs may not be
available in Romania, despite being widely used elsewhere in the EU.


7. (SBU) Control over the quality and the appropriate dispensing of
drugs remains an issue. The sometimes cozy relationships that
hospital directors have with drug suppliers and distributors allows
for kickbacks and the occasional distribution of second-rate
medications. The limited regulation on pharmacies has allowed for
an environment where clerical staff will often dispense medication
without first consulting a pharmacist. It is not uncommon for
pharmacies to have insufficient reference materials to check drug
interactions or dosages. The overall lax enforcement of
prescription requirements has meant that most prescription
medications are relatively easy to acquire from a pharmacy for any
paying customer.

COMMENT

8. (SBU) Comment: The pharmaceutical distribution system
illustrates some of the worst aspects of Romania's "universal care"
medical system. Transparency and predictability are lacking. The
infrequently updated national drug list serves as a central
gatekeeper, making it difficult for new drugs to enter the market in
a timely fashion. In theory, there are no barriers to obtaining any
needed medication approved on the list. In practice, the
availability at the insured price is unreliable. While the ability
to pay cash improves the odds of access to medication, it does not
guarantee it. This access remains a very real concern for many
Romanians, including those whose lives are seriously endangered if
they must miss doses due to temporary supply disruptions. Reforming
the public healthcare system to ensure consistent access to
medication will be a challenge for Romanian policymakers and
provides an opening for private health insurance. End Comment.

TAUBMAN

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