Minister suspected of lobbying for drug giants

TALLINN - Less than a week after taking office, Siiri Oviir, the Center Party's minister of social affairs, has been making news headlines accusing her of lobbying on behalf of pharmaceutical companies.

Earlier this month at a conference of experts from the Social Affairs Ministry, the State Medicines Agency, the Health Insurance Fund, pharmaceutical companies and other organizations, Oviir proposed working out a more flexible mechanism for regulating profit margins and establishing reference prices on generic drugs.

The Estonian newspaper Postimees published a paragraph from a legal amendment Oviir introduced in the Parliament in February that exactly matches a proposal sent by the Federation of Pharmaceutical Manufacturers to the Health Insurance Fund last November.

The Health Insurance Fund rejected the proposal.

The amendments related to rates of compensation paid to drug companies by the state in return for reducing the prices of prescription drugs and to the setting of maximum prices for generic medicines.

The federation comprises about 20 large pharmaceutical producers working in Estonia and controlling about half of the drug market.

Kai Sinimaa, a board member of the federation, told Postimees that Oviir had cooperated with experts from the federation in elaborating the amendments, although Oviir herself insisted they were all her own work.

Sinimaa heads the Estonian branch of Merck, Sharp&Dohme, one of the world's largest drug producers.

Generic drugs are normal medicines without well-known brand names, which are often 10 times as cheap, explained Kadi Lambot from the Estonian Health Insurance Fund. "Drug manufacturers are clearly against the generic drugs, backing the famous and more expensive brands," she said.

Risto Kukk, PR manager for the Estonian Association of Generic Drugs, an organization of generic drugs producers working in Estonia, said the EAGD fully supported Oviir's idea to set maximum prices for medicines. "But the prices cannot be based on those of expensive brand medicines. Otherwise it may not legally be possible to put a stop to the price hike," he said.

The present regulations of the EHIF foresee full or partial compensation for every medicine prescribed by a doctor to a member of the fund. The burden of drug compensation has been hitting the national budget harder and harder every year, surpassing any funds allocated for that purpose.

From 2000 to 2001 the compensation sums have risen from 460 kroons ($27 million) to 664 million kroons, while the 2001 budget had only 500 million kroons allocated for the purpose.

The medicine market turnover in Estonia is roughly 1.8 billion kroons, with annual retail sales of over 1 billion kroons. Involved enterprises can boast of a profit margin of up to 70 percent.

According to the Estonian Health Insurance Fund, medicine producers can add up to 70 percent to the prime cost because they are not obliged to reveal the cost of the production.

Wholesalers then add about 5 percent or 6 percent to that, according to Tarvo Vaasa, director of Tamro, a drug wholesale company.

Pharmacies can add another 15 percent to 70 percent (depending on the wholesale price), sending the final price skyrocketing.