Nova workboard

a blog from young economists at Nova SBE

According to an article published by Jornal de Negócios on November 6th, the Portuguese government is planning a reduction on medication subsidies that will allow for the saving of approximately 30 million Euros in 2014, a year in which the health sector of the State budget predicts a reduction of 9.4% compared with 2013, and a cut of 250 million Euros in health expenditure. Fernando Leal da Costa, secretary of state and assistant to the Minister of Health, has also mentioned the possibility of “reducing subsidies on cheaper and older medication, in order to guarantee subsidies for innovative medication associated to better treatments, which can make a difference in the treatment of diseases such as cancer.” While the position of Infarmed – the institution that does the economic assessment needed for a decision on the subsidy for a particular drug – is yet unknown, an analysis of the incentives that may have induced the advancement of this proposal can be made.

It is known that the enforcement of commitments assumed by the memorandum of understanding requires a particularly difficult budget gymnastics in the search for cost control, efficiency and maintenance of equity in the access to healthcare. However, the comparison of older and cheaper treatments with others more recent and promising, although less tested, can become both a clinical and a strategic mistake.  While the reduction of subsidy costs with cheaper treatments used at a large scare may, on a short term, even exceed the costs with a niche of innovative and more expensive medications, the unawareness about the repercussion of a possible reduction in the use of well-established treatments that have a proven preventive or therapeutic value may become counterproductive in the long term.


If, on the one hand, the reduction of subsidies for cheaper medication can generally benefit from the consumer’s lower sensitivity to the price (because the absolute increase of the price/drug is still relatively low), it is important to consider that some fractions of the population may become exceptionally price sensitive, such as citizens with an indication to comply with a specific treatment that prevents the onset of a disease or the aggravation of a condition that is already established but is asymptomatic. This short-term rupture with prevention is simultaneously an open door to long-term expenditure, mining the strategic goal of efficiency and of healthcare cost control.


The resource to innovative medications in serious pathologies such as neoplasms may not significantly change between this year and the next, since it occurs mostly on a hospital environment, where the influence of medication subsidies is considerably smaller than that associated to prescriptions for primary healthcare, since neither doctor nor patient immediately support the opportunity cost of using resources.


Besides complex ethical issues, this proposal for the allocation of public resources on certain treatments at the expense of others renews the challenge of improving the mechanism for financial protection against the uncertainty of healthcare costs.





Author: studentnovasbe

Master student in Nova Sbe

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