Tuesday, 13 November 2018

VAT Equalisation: Bell Tolls for Purchasing OTC Drugs Over the Border?

In what will come as very welcome news for many OTC medication users across the country, the Pharmacy Chamber has stated that owing to VAT equalisation, the retail prices of OTC drugs will be reduced by an average of 17 to 18 percent.

As Marija Crnjak/Poslovni Dnevnik writes on the 12th of November, 2018, with the entry into force of the new VAT law, which will equalise the tax rate for all medicines, tax on non-prescription medicines will be reduced from 25 percent to 5 percent by the beginning of 2019, which is why their retail prices will be significantly lower and those in Croatia will hopefully cease buying their medicines over the border in Bosnia and Herzegovina, Serbia, and Slovenia.

Additionally, pharmaceutical companies can expect the growth of the sale of these drugs owing to the tax cuts on OTC medication for which the Croatian pharmaceutical sector has been calling for years.

As it is known, the VAT equalisation regards analgesic drugs, for the treatment of gastroenterological problems, drugs for help with allergies, as well as vitamins. It should be noted that it doesn't include all vitamins, only those registered as actual medicines will see a price drop.

The equalisation of the tax rate does not bring direct benefits to producers themselves, but potential benefits may be experienced by drug distributors if they raise their sales margins, this will include both hypermarkets and pharmacies.

Despite the good news, the aforementioned VAT equalisation isn't going to come into force just yet. In Croatia, the pharmacy chamber claims that the retail prices of OTC medicines will be reduced only at the beginning of 2019.

"In addition, price reductions will be welcomed at the time of seasonal illness when the need for non-prescription drugs increases. Patients have so far been able to go to neighbouring countries for drugs to lower their temperature and reduce pain, precisely because of the price difference, where the national budget also lost out,'' they say.

Pliva explains that this change will not affect their business as VAT is a neutral item for producers, but although Pliva doesn't plan to change its producer prices, they believe this will contribute to the increased availability of non-prescription drugs.

"With this, we've become closer to most European countries where, in line with the EU guidelines, two drugs, regardless of the way they are issued, have the same tax to ensure product competitiveness and market competition,'' explains Mihael Furjan, CEO of Pliva.

For Belupo's business, whose non-prescription drugs account for around 19 percent on the Croatian market, this is very good news, as they plan to strengthen their OTC medication segment in terms of their total sales.

"Therefore, Belupo, independently and as a member of CASI (Association of Non-Receptive Products Manufacturers), actively advocated equalising the VAT rate for non-prescription drugs, led by the practice of 27 European countries applying the same VAT rate, and to all medicines, irrespective of the issuing regime, and respecting the principle of neutrality when it comes to the tax treatment of similar goods,'' they explain from Belupo.

In Rijeka, JGL argues that, with a 20 percent drop in prices, this measure should certainly stimulate self-assimilation and dismantle the withdrawal of medicines from the national insurer.

The Rijeka-based company says that in their semi-annual report, they have secured the growth of total business thanks to the growth of the OTC medication segment, which is growing faster than the domestic average.

PharmaSu also expects the higher consumption of OTC drugs.

"In addition, the state has not only boosted spending, but savings on drugs which are given on prescription, and have similar therapeutic parallels in OTC status. This is mostly related to pain and cold medicines,'' said PharmaSu's Jerko Jakšić.

Expectedly, the Association of Pharmaceutical Manufacturers at the Croatian Employers' Association has naturally welcomed the equalisation of the VAT rate, and recalls that the EU Directive on VAT permits EU member states to apply a reduced rate to pharmaceutical products for the purpose of sickness prevention and treatment. They of course expect this to have a direct and positive impact on the Croatian health system.

"Non-prescription drugs are easier to come by and more widely available than prescription drugs are, there's no waiting around and seeing doctors involved. Reducing the VAT rate on OTC medicines will make them more accessible to consumers as it will lower the cost of the drug, and will therefore reduce the pressure on prescribing medications, and this will have a positive impact on the health budget, as it's self-relieving, without burdening the system,'' they point out from this sectoral Association.

Want to keep up with more news on VAT equalisation, medicine and the domestic economy? Make sure to follow our lifestyle page for more.

 

Click here for the original article by Marija Crnjak for Poslovni Dnevnik

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