EU could cut sales taxes on Rx drugs

The European Union's Commissioner for taxation and customs union, Laszlo Kovacs, has introduced draft regulations which envisage a reduction in value-added tax on pharmaceuticals. The move has been welcomed by the German drug industry organization, the BPI. Hennig Fahrenkamp, the group's executive director, said: "if the European Union proposal becomes reality, then the federal government can hardly continue to isolate itself from a reduction in drug taxes, demanded by us for years."

The current position is that, apart from Germany, in the EU, only Denmark, Norway, Austria and Bulgaria levy the full rate of VAT on prescription drugs for all patients. The French rate is 2.1%, Spain's 4% and Belgium and the Netherlands both levy 6%. VAT is not applied in the UK for National Health Service patients, but hospitals in most of the UK and private patients are charged 17.5% except for family planning products for which 5% is levied. No VAT on prescription drugs is applied in Sweden.

The BPI argues that a reduction in the German VAT rate for prescription drugs to 7% would free up between 2.5 billion euros ($3.92 billion) to 3.0 billion euros for use by the health funds (Krankenkassen) and help reduce health insurance premiums as an alternative to imposing price reductions on drugmakers (Marketletters passim).