Argentina Pharma Industry: Scenario in Early 2020
On October 27th, 2019, presidential candidate Alberto Fernández was elected president of Argentina defeating the Macri Administration with more than 48% of votes. The key proposals of Fernández’s political campaign were based on socially-friendly reforms, such as helping the most vulnerable population to progress in the struggling economy, aiding the local industry and blue-collar workers, and ending with the increasing external debt and economic crisis. Another key element to the campaign was his political message promising everyone’s better access to the basic health services, vaccines and medicines.
Fernández’s four-year term of office started on December 10th, 2019. Its administration has moved with significant speed to implement core reforms and agreements with key sectors, such as the local pharma association agreement in where they manage to lower medicine prices by 8%. Nevertheless, the most relevant and recent reform was the issuing of Law No. 27,541 of Social Solidarity and Productive Reactivation.
Law No. 27,541, published on December 23th, 2019 in the Official Gazette, declared a public emergency in economic, financial, fiscal, administrative, pension, tariff, energy, health, and social matters. In addition, pursuant to article 76 of the Argentine Constitution, the Law delegates important legislative powers to the Argentine Executive (the “PEN”, after its Spanish acronym).
In connection with the health emergency declaration, Law No. 27,541 within the framework of Public Emergency strengthens the Ministry of Health’s regulatory powers and grants a wide range of options within which to act. The main aspects from a health perspective include:
- Health Emergency: The PEN is delegated with the possibility of: (i) ensuring the supply of medicines for outpatient treatments of patients in highly vulnerable social conditions, access to medicines and supplies for the prevention and treatment of non-transmissible infectious and chronic diseases; (ii) ensuring effective compliance with the law when it comes to the control of diseases that are prevented by vaccine; and (iii) ensuring that beneficiaries of the National Institute of Social Security for Retired Persons and Pensioners (“PAMI”, after its acronym in Spanish) and the National Health Insurance System have access to essential medical assistance provisions.
- PAIS Tax Exemption: All those expenses related to health benefits and purchase of medicines are exempted from the Tax for an Inclusive and Supportive Argentina (the “PAIS”, after its acronym in Spanish) (art. 36, subsection a).
- Ministry of Health Programs: The priority provided for some of the Ministry of Health Programs is maintained (e.g. Fight against HIV, Control and Prevention of Non-transmissible Chronic Diseases, etc.) (art. 64).
- Exemption from import duties: Vaccines and disposable items imported by the Ministry of Health and/or the PAHO Revolving Fund are exempted from import duties and any other customs, port taxes or tariffs (art. 73).
- National “Remediar” Program: The objective of developing a universal access to essential medicines through the National “Remediar” Program is restored (art. 76).
- Public healthcare insurance providers’ contracts: Suspends the restrictions that limit the public healthcare insurance providers’ freedom to contract with entities that have direct or indirect jurisdiction over the control of professional license or limit the right to contract directly to their members (art. 78).
- Suspension of Enforced Budget Implementations: Until December 31st, 2020 forced implementations of credits and precautionary measures held by the Argentine State and the Argentine Tax Authority against public or private hospitalization, diagnosis and treatment healthcare facilities registered in the National Registry of Providers of the Superintendence of Healthcare Services (the “SSS”, after its acronym in Spanish), as well as against geriatric and rehabilitation facilities providing the PAMI are suspended (articles 79 and 82).
- Faculties granted to the Ministry of Health: (i) To establish a mechanism for monitoring the prices of medicines and supplies in the health sector and alternatives for direct imports and compulsory licenses in the event of availability problems or unjustified price increases affecting the population’s access to them; (ii) To issue supplementary legislation to implement: (a) list of medicines and supplies to be acquired by PAMI and the SSS, (b) reference prices of supplies and essential medicines by therapeutic band, and (c) controls and devices that promote the validity of Law No. 25,649 -Law on Generic Drugs-, and (iii) The agreements made within the framework of the health emergency can be made, apart from the valid ways of contracting, by any of the following modalities (a) direct contracting mechanism (art. 25, paragraph 5 of Decree No. 1023/2001); (b) use of resources from the PAHO/WHO Regional Revolving Fund for Strategic Public Health Supplies and the World Health Organization; and (c) other means offering alternatives through international organizations, multilateral agencies, non-governmental organizations or other countries (articles 70 and 71).
- Suspension: The right of beneficiaries of the National Health Insurance System to choose between a social security scheme or an entity whose purpose is to provide health services under the National Health Insurance System must be suspended for the duration of the health emergency in all matters that are contrary to this Law (art. 84).
Although this Law brings about tax benefits for the health industry and promotes the population’s access to health services, the real impact for the industry will be contingent on how the PEN and the Ministry of Health use their delegated powers, such as price, purchase and import controls. In addition, other less friendly measures were implemented, such as the partial suspension of Law No. 27,506 (Biotech Law) which provides for a promotional tax regime for many innovative companies, such as: biotechnology, neurotechnology and genetic engineering, nanotechnology and nanoscience industries. Law No. 27,506 was to become effective on January 1st, 2020, but the Ministry of Productive Development Regulation N° 30/2020 suspended its implementation based on the grounds that a new regulation for the Biotech Law was needed.
It seems that the pharmaceutical industry will be immersed in several negotiation rounds with the Fernandez’s Administration for the next months and that prices, import controls, public procurements, investments and tax matters will be at the center of all negotiations.