• Generic medicine producers welcome the decision of the Constitutional Court to declare unconstitutional the Government Emergency Ordinance 77/2011 regarding the clawback tax
  • Furthermore, third party markups need to be removed from the tax base and the tax clawback, which unduly charge drug manufacturers
  • Several member companies have raised the plea of unconstitutionality APMGR for GEO 77/2011. We expect the final decision of the Constitutional Court on the unconstitutional nature of the tax and the way to recover amounts paid as VAT

BUCHAREST, FEBRUARY 6, 2013– The Generic Medicine Producers Association (APMGR), an association representing the interests of investors on the Romanian market, believes that the Constitutional Court’s decision to admit the complaint of unconstitutionality of GEO 77/2011 on the inclusion of the VAT in the tax base for the clawback tax is a first gesture of fairness to manufacturers of generic drugs that should be followed by other similar decisions.

APMGR repeatedly warned that the current form of the clawback tax is unfair, unsustainable and will destroy the local pharmaceutical industry, with serious social consequences – restricting patient access to affordable pharmaceuticals.
Several companies producing generic drugs challenged in court this contribution, arguing that unconstitutional way in which the clawback tax base was defined: the tax applies to drug manufacturers but is calculated on the shelf price, which includes additions from pharmacies, distributors and until recently VAT.

“The solution of the Constitutional Court is not only correct but also opportune because it comes after a long series of steps that we’ve made in good faith, but which have not really been understood by authorities. Generic medicine producers want the calculation mechanism of the clawback tax to be correct and sustainable. Major weaknesses still exist on how to apply the tax, despite many consultations that took place throughout the year 2012, aimed at improving the mechanism for calculating the tax clawback. We face the same erroneous data provided by CNAS, which differ significantly from the sales volumes recorded by companies, the settlement periods exceed 300 days, while the tax is paid quarterly, while by using the shelf price of medicines as the basis for calculating the tax, generic drugs producers are required to pay up to 30% more, “said Dragos Damian, President of Producers of generics in Romania (APMGR).

Generic medicine producers expect the Constitutional Court to publish the motivation for the decision on 5 February 2013 and expresses their hope that in this way, the arrangements for recovering amounts paid unconstitutionaly to the state in the VAT account, will be clarified. “We are confident that similar decisions will follow. It can’t be otherwise, as we clearly arethe target of an incomplete and unfair legal framework” added Damian.

However, member companies APMGR continues to support the following principles in building a sustainable clawback taxes for the industry:

  • The calculation base of the tax should  be the manufacturer’s selling price, not the shelf price;
  • Previous year’s actual consumption must reference amount used to calculate tax;
  • Payment terms should be correlated with the time of settlement (now 300 days in pharmacies);
  • A new form of the clawback tax, which excludes medicines under RON 30. (In this way, the access to basic medicines is ensured. Meanwhile, these measure would limit very serious negative effects on producers of generic drugs that are leading providers of affordable drugs).