Commercial reality check – TLV needs to reconsider its’ current position on Side Agreements

The Swedish and Nordic life science industry comprises a vast number of companies and enterprises, both large and small, all of which play an important role in providing patients and healthcare providers with pharmaceutical, medtech and medical device products that are efficient, enhance quality of life and save lives. These companies range in size all the way from multinational corporations to local Nordic or Swedish enterprises, to individual entrepreneurs developing innovative products and technologies aimed at meeting medical needs or improving care and processes in the healthcare sector.

The life science industry is highly regulated – and rightly so – given that its products and services are used by patients and caregivers in some of life’s most critical situations: acute care, treating life-threatening conditions and helping patients lead productive, meaningful lives despite illness. In addition to ensuring patient safety, legislation and regulations are in place that aim to ensure access to good-quality pharmaceutical and healthcare products at a reasonable cost, to the benefit of publicly-funded healthcare systems and, ultimately, taxpayers.

While important, such rules and regulations sometimes impinge on reasonable commercial interests. This is especially true when it comes to small and medium-sized enterprises (SMEs), whose margins are often smaller than those of larger corporations, for whom industry-specific legislation and regulations are often devised. One such example of regulations, where the result is prohibitive practical circumstances for the companies affected, is in relation to agreements concerning managed introduction (sw: ordnat införande) and related side agreements signed with Sweden’s county councils. Under managed introduction rules and related side agreements, providers of pharmaceutical products can strike rebate agreements with county councils in relation to the price set by Sweden’s Dental and Pharmaceutical Benefits Agency (TLV). The evaluation of the health-economic impact of new treatment options and the ability to ensure access to innovative treatments for Swedish patients made possible by these agreements benefit both the healthcare system and patients and should be maintained and further developed.

However, TLV’s demand that rebates negotiated with county councils via side agreements should apply to all quantities of a pharmaceutical product sold within Sweden, regardless of the supplier, could result in prohibitive market conditions for individual suppliers. The practical consequence of TLV’s demand is that the original supplier who signed the side agreement with the county council could be forced to reimburse rebates on products sold by a completely different company, the parallel importer.

TLV’s position is that only the companies themselves can affect parallel imports into Sweden through their product pricing in various markets. This might be true of multinational manufacturers, who control operations across all European markets, but it is definitely not true of smaller local and regional companies with a licence or distribution agreement for a specific pharmaceutical in the Swedish or Nordic markets.

For these companies, which often have relatively modest financial margins compared to those of the original manufacturers, it might not be possible to lower prices in Sweden to even out the disparity with other European markets. Prices in other EU markets are dependent on product supply, currency fluctuations and local price conditions – factors well beyond the control of a local Nordic company not active in other EU markets. Moreover, local companies do not have the ability to influence what prices other licensees or distributors set in their respective markets. The requirement to reimburse rebates triggered by products supplied by a parallel importer, unaffiliated with the original local supplier, could make supplying products unfeasible.

In summary, TLV’s current position creates both a commercial hurdle and risk, especially for local and regional SMEs who offer a pharmaceutical product in the Swedish market on behalf of the marketing authorization holder based on a licence or distribution agreement. This problem needs to be urgently addressed by the current Swedish government inquiry Ökat fokus på kvalitet och säkerhet på apoteksmarknaden (Dir. 2015:118), so as not to erect commercial hurdles for local SMEs and, ultimately, risk denying Swedish patients and healthcare providers access to innovative pharmaceuticals that meet real medical needs.

Tom Rönnlund
CEO, Navamedic ASA