PharmaCircular | New Regulation for Pharmaceutical Companies on Undue Material Benefits – Specific Swiss Regulation on Discounts and Refunds

The revised Act on Therapeutic Products will bring significant changes to the Swiss healthcare system with respect to both undue material benefits as well as transparency. These obligations are going far beyond the Swiss code of conduct for the pharmaceutical industry.

The Act on Therapeutic Products (ATP) is the main legislation for the authorization, manu­facturing, distribution, and marketing of medi­cal products in Switzerland. On 18 March 2016, the Swiss parliament adopted the revised ATP. To prepare the implementing ordinances, the Department of Home Affairs has published the respective drafts for public consultation. It has announced that the effective date for the relevant provisions of the revised TPA that concern undue material benefits as well as transparency, along with the respective ordinances, is most likely 1 January 2020.

The new law will bring significant changes to the Swiss healthcare system. The provisions on the prohibition of undue material benefits and the exemption for discounts and refunds are most controversial and nearly led to a failure of the revision.

Current situation with material benefits

At present, the TPA prohibits monetary benefits that constitute an inducement to prescribe or dispense medical products. Subject to this provision are medical professionals, such as physicians, pharmacists, and organizations that employ such persons, like hospitals. For the finding of inducement, the law requires a connection between the monetary benefit and the activities of the medical practitioner. How­ever, a remote connection is sufficient. The prohibition for monetary benefits does not apply to:

  1. monetary benefits of modest value (up to CHF 300), which are related to the medical or pharmaceutical practice or
  2. commercially or economically justified discounts, which are directly reflected in the price.

Unlike discounts, refunds are strictly forbid-den. In addition, but only with respect to medicinal products whose costs are reimbursed by compulsory health insurance and that are listed on the list of pharmaceutical specialities (“Spezialitätenliste” or SL respectively), the Health Insurance Act (AHI) requires that medical professionals pass on material benefits, including discounts, to the patient or its health insurance company. This legal framework had been criticized for being unclear and ineffective. In particular, the obligations under the AHI were not enforced for lack of a competent enforcement agency.

The revision aims at improving the safety of patients, also with respect to material benefits offered to medical professionals. In addition, the revision intends to improve the transparency in the market and to provide more clarity whether discounts and incentive systems are admissible. Contrary to a preliminary draft of the revision, the right of physicians to dispense drugs to their patients remains unchanged. Unlike most foreign jurisdictions, many cantons in Switzerland allow physicians to dispense drugs to their patients. The profit margin that physicians make dispensing medical products is widely accepted as a necessary means to keep the tariff for the physicians’ services low.

Prohibition of undue material benefits

Unlike the current legislation, the prohibition has now been limited to undue material benefits for prescription drugs (Rx). The Federal Council, however, is given the competence to extend the prohibition to other categories of therapeutic products as well, including non-prescription drugs (OTC) and medical devises. The new law prohibits undue material benefits irrespective of whether they affect the prescription, the dispensing, the administration, or the purchase of prescription drugs as such. Consequently, a connection between the material benefit and the medical practitioner’s actions is no longer required.

New list of exceptions

As a result of this per se prohibition of undue material benefits, the list of exceptions has been amended. The following shall not be considered as undue material benefits:

  1. material benefits of modest value;
  2. contributions to research and advanced training;
  3. compensation for services of equal value; and
  4. discounts and refunds on therapeutic products that do not affect the choice of the treatment.

Some of these exceptions are in line with the enforcement practice of Swissmedic or the code of conduct for the pharmaceutical indus­try itself. By contrast, the provisions on discounts and refunds are unique to Switzer­land. There is no equivalent provision under any industry regulations, such as the EFPIA, IFPMA, Pharmacodex, or Pharma Cooperation Codex.

Of particular concern is the requirement that discounts and refunds should not affect the choice of treatment. This new requirement conflicts with the objective of discounts and refunds to increase the sales of a particular product. In addition, it is not always possible to distinguish between the choice of treat­ment and the choice of a drug for a certain treatment. For instance, the choice of treat­ment is at stake if a discount is given for a specific drug, such as an AT1 antagonist like valsartan (Diovan® or generic drugs). Such discounts, however, do not relate to this particular drug, but also affects the compe­tition with other hypertonic agents, such as ACE inhibitors, beta blockers, diuretics, and others, so that there is an inherent risk that granting discounts for a specific drug also affects the treatment choice.

The AHI requirement that discounts and other refunds must be passed on to the consumer or its health insurance company has been amended: The revision empowers medical practitioners to agree with health insurance companies that discounts and refunds must no longer be passed on in full, but only by the majority, according to the parliamentary de­bate at least by 51%. The use of the remain­ing funds is not at the discretion of the medi­cal practitioner; rather, he/she must use them to improve the quality of the treatment. Copies of such agreements must be delivered to the enforcing agency, and evidence of the improvement in the quality of the treatment must be demonstrated from time to time.

New transparency rules

As a new obligation, the TPA requires that all parties involved in the purchase and sale of therapeutic products must maintain proper records, showing all discounts and refunds both granted and received. This transparency obligation is not limited to prescription drugs; it applies to all therapeutic products, including OTC and medical devices. The invoices and accounting records must be stored for 10 years, and the enforcement agency may require the disclosure of these documents at any time.

New enforcement authorities

With respect to the enforcement of the provisions relating to undue material benefits, Swissmedic is no longer competent. Rather, it is the Federal Office of Public Health – the same authority also competent for reviewing the reimbursement price for pharmaceutical products.

New compliance obligations

The revised TPA is a trade-off where controversial issues were shifted to the ordinance level. With its draft Ordinance on Integrity and Transparency on Therapeutic Products (OITP), the Department of Home Affairs intends to achieve the aims of the TPA by implementing many of the controversial issues, but in great detail.

Most controversial is the obligation to appoint a person who is responsible for all matters relating to undue material benefits. This obligation applies to all parties involved in the manufacture and trade of therapeutic products. The burden placed on this person is extraordinary, and further intensified by personal criminal liability. It remains to be seen whether the Department of Home Affairs is willing to reconsider this obligation in response to the public consultation.


Professionals within this publication

O.Kaufmann 042.1

C.Willi 008.1

Dr. Christoph Willi, LL.M.

M.Stauffacher 061.1

Matthias Stauffacher