Panama’s government expects to be a pioneer in the region through the centralisation of drug procurement.
Law 419/2024, passed by the president on 1 February 2024, was created to guarantee the supply of medicines through centralised purchasing and as such, sanctions companies that fail to deliver medicines through a novel pharmacovigilance guide.
This is the first time that the regulatory system for medicines has been issued a new Law since 10 January 2001, when Law No. 1 was established. The new system effectively establishes centralised purchasing of medicines between the Social Security Fund (CSS) and the Ministry of Health (MoH), protects annual pharmaceutical budgets, creates a pricing database, and improves pharmacovigilance in Panama.
This is not the first time that Panama has attempted to expedite the purchasing process for medicines to avoid shortages. Previously, the country had been issuing decrees and modifications to Law of Medicines No. 1. The most recent modification was Decree No. 97 on 4 October 2019, to streamline procedures and expedite purchasing.
As with other countries recently, Panama has been looking to apply measures designed to mitigate shortages. This law has taken over two years to reach approval and hopes to alleviate the drug shortage concerns that plague many health regulatory systems. Panama’s government expects to be a pioneer in the region through the centralisation of drug procurement with an emphasis on pharmacovigilance, which will both ensure the quality of the medicines and provide drugs at accessible prices for the general population.
Centralised purchasing, and pricing system including IRP
This new law emulates modern health systems typically found in developed countries, while also attempting to diminish the amount of time it takes to acquire medications and fulfill prescriptions in Panama. The convergence of the CSS and the MoH is intended to allow the two entities to make joint purchases through better prices when purchasing medicines at a high volume. In response to the unification of this purchasing power, the law also created a National Medicine Price System (Sinprem).
Sinprem allows for the purchase of medicines for public facilities and pharmacies. This system will contain prices from national and international markets for reference products, which will be used to facilitate the acquisition of medications at reduced prices. The impact is expected to reduce the prices of medicine between 20% and 30%. This reduction in overall prices could potentially deter pharmaceutical companies from launching their products in Panama. Additionally, price is no longer the single determining factor in the purchase of medicines. Health authorities will be able to make decisions based on quality, effectiveness, and cost-benefit. The newly created National Medicines Observatory of Panama will then regulate the pharmaceutical market by publishing both internal and external reference prices and applying maximum reference prices when the national market is out of sync with that of the international level.
The mentioning of international reference pricing (IRP) is one of the first times Panama has proposed this practice. It is uncertain, however, how Panama will set its price concerning the prices in the reference countries it plans to use for IRP (Argentina, China, France, Germany, Japan, Mexico, Spain, Switzerland, the UK, and the US).
MEAs, electronic procurement system, and fixed budgets
The law also created managed entry agreements (MEAs), which were previously not present in the regulatory system. These agreements allow for health authorities to pay for treatments based on the health benefits obtained by the patient, particularly those patients with chronic conditions. These regulations would be a positive for the industry, by providing opportunities to improve market access through the newly launched MEAs alongside the incorporation of cost-effectiveness criteria into drug purchasing decisions.
Pharmacovigilance guide and sanctions
To make sure that the medications maintain quality, the MoH has greatly emphasized plans to implement new measures to strengthen the pharmacovigilance system. The new pharmacovigilance guide establishes sanctions for companies that fail to comply with medication delivery.
Fines within the legislation ensure that contracting authorities may apply a financial penalty to contractors who fail to comply between 5% and 15% of the total purchase amount, and they may be disqualified from launching their products in the market for one year. In the case of late delivery of medicines or other products for human health, devices, and medical supplies, a fine will be applied that will never be less than 10% of the value of the portion not delivered by the pharmaceutical company, plus a surcharge for the days of delay, divided by 30, for each calendar day of delay, of the value equivalent to the portion not delivered.
Is this law enough?
Through this new law, the government hopes to maintain an attractive market for the pharmaceutical industry and ensure a stable supply of medicines without shortages. Panama is attempting to lower overall pharmaceutical prices while also trying to increase the supply and competition of products on the market. Panama however has not been transparent about its pharmacovigilance guide reforms and has only expressed that it plans to monitor effectiveness by sanctioning companies with fines, for those who fail to comply.
The government has stated that this law will also promote more supply and competition in the market by keeping reference prices low. However, it is important to consider that the current plan appears general, and was even questioned in parliament when a deputy abstained from voting because he felt “if the law is carefully examined, he does not see that what the population expects will happen…a reduction in the cost of medicines?” He further stated, “I am not going to sell false expectations to the population that drug prices are going to go down.” Some people may therefore have reservations about the ultimate goal of the new Panamanian law and it is unclear how realistic it will be that this new law can work to reduce shortages and prices in the country.