Why a pharmaceutical company should take cheap drugs off the market

The message is the same year after year: generic drugs are far too expensive in Switzerland. According to the latest foreign price comparison by the health insurer Santésuisse and the pharmaceutical organization Interpharma, counterfeit products cost an average of 46.5 percent less in neighboring countries.

Santésuisse estimates the savings potential to be correspondingly large. If generic prices were reduced to European levels, CHF 380 million could be saved annually – “immediately and without any loss of quality”. A statement that is not well received by the Swiss pharmaceutical company Streuli.

The reality is different for our own generic preparations, but also for many other low-cost medicines, says André Vecellio, who runs the family business in the fifth generation with his wife Claudia Streuli. “In fact, we wonder how we can still produce cost-effectively at current prices.” The electricity, the active ingredients, the cardboard, the glass bottles – all this has become enormously more expensive due to the war in Ukraine.

Unlike other industries, the pharmaceutical company cannot pass on the higher production costs. This is because the Federal Office of Public Health (FOPH) sets the prices for medicines reimbursed by compulsory health insurance. In recent years, the BAG has announced a price reduction for more than 50 percent of all preparations covered by health insurance.

Streuli generates about 50 million francs per year with 200 employees. The family-owned company produces 80 percent of the 94 medicines offered at its Uznach, St. Gallen factory, including various painkillers, vitamins and anti-allergy medicines. The best-known preparations are the painkillers acetalgin and mefenacid and vitamin D drops. Streuli delivered about 3.7 million packs of medicines last year. For most of them, the factory price was less than 25 francs.

In a company whose margins are often in the centimes or the single-digit franc range, higher energy and input costs have a direct impact on profitability. For manufacturers of new, patent-protected and above all more expensive medicines, these expenses are much less important. Streuli co-director Vecellio says that with the cheapest drugs, the margin is often completely swallowed by the higher costs.

An example is morphine, a strong painkiller given after major surgery. A 1 milliliter injection ampoule currently costs 53 centimes ex works. The enormously higher energy costs place a particularly heavy burden on the production of liquid, sterile painkillers. The cost per ampoule would increase by at least 27 cents, says Vecellio.

The drug manufacturer therefore intends to submit a price increase request for morphine ampoules to the BAG in the short term. Streuli had already requested a higher price in 2020. This first application was only recently approved – “after a processing time of more than two years”, emphasizes Vecellio. The cost situation has since changed considerably.

When asked, the BAG indicated that it would grant a higher price in exceptional cases if the supply had to be assured. About 10 applications per year were received from 2020 to 2022; the BAG approved two-thirds of these. However, if there are alternative therapies, a price increase is ruled out.

Besides Streuli, there are two other suppliers of morphine ampoules: the company Bichsel in Interlaken BE, part of the Galenica Group, and the company Amino in Storf AG. In late 2022, the Swissmedic Institute for Therapeutic Products revoked its operating license due to several manufacturing shortcomings. The company is now allowed to produce medicines in tablet form again. However, the production of sterile ampoules is still prohibited, so the supply of morphine is still scarce.

This is also why André Vecellio hopes that his price increase request will now be approved by the BAG. Yet in the end this is only “a drop in the ocean”. Pricing decisions are currently pending for two other Streuli drugs.

At the same time, the pharmaceutical manufacturer has already decided to stop selling some preparations. Those drugs with particularly low sales and small market volumes are particularly affected. “We now have the extra costs and can’t wait any longer,” says Vecellio.

One drug that will be phased out later this year is the cholesterol-lowering drug atorvastatin. A generic. Streuli had previously obtained the tablets from a foreign supplier. Sales of the drug have long been unprofitable, says Vecellio. The reason: In Switzerland, pharmaceutical companies must offer all dosages and pack sizes offered by the original manufacturer of the generic drug preparation. So when you copy, you have to copy everything – even if there is no market for it.

In the case of atorvastatin, fewer than 30 of the 10-milligram tablets and small packs were sold per year, according to the Curafutura Health Insurance Association’s drug database. Streuli was thus far from being able to meet the minimum purchase quantities. “We have already destroyed more than 150,000 francs of medicines every year,” says Vecellio. Now the supplier has increased the minimum order quantities again. This means that sales of atorvastatin tablets are finally loss-making.

The demand from Streuli and other companies of the interest group Pharma KMU to at least temporarily refrain from price reductions has so far not been heard by the BAG. Parliament is discussing a legislative change that could exempt cheap medicines from regular price reviews. Whether and when this will happen is uncertain. “As a small manufacturer, we no longer see a promising future in the generic sector,” says Vecellio.