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Anne W McNeill  10/20/2006 02:35:23 PM  From  DB/Inbox:  Search Results

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UNCLAS        WARSAW 01011

SIPDIS
CXWARSAW:
    ACTION: ECON
    INFO:   ADM MGT ORA FCS DCM PAS AMB POL

DISSEMINATION: ECOX
CHARGE: PROG

APPROVED: DCM:KHILLAS
DRAFTED: ECON:DMBIRDSEY
CLEARED: ECON:LGRIESMER

VZCZCWRI893
RR RUEHC RUCPDOC RUEHKW RUEHBS
DE RUEHWR #1011/01 1520541
ZNR UUUUU ZZH
R 010541Z JUN 06
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 0758
RUCPDOC/USDOC WASHDC
INFO RUEHKW/AMCONSUL KRAKOW 1112
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 WARSAW 001011 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
STATE FOR EUR/NCE/MSESSUMS 
STATE PASS USTR FOR DONNELLY/ERRION 
COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS 
 
E.O. 12958: N/A 
TAGS: ETRD EINV ETRD KIPR PL
SUBJECT: POLAND - Letter Delivered on Health Ministry Price 
Cuts 
 
REF: Warsaw 0874 
 
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SUMMARY 
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¶1. (SBU) DCM, accompanied by Econoff, called on Deputy 
Health Minister Boleslaw Piecha and delivered a letter from 
Ambassador Ashe to Health Minister Zbigniew Religa (see para 
7).  At issue is the May 18 announcement by the Ministry of 
Health to cut prices for imported pharmaceuticals, 
ostensibly due to the appreciation of the zloty over the 
past four years.  The announcement, made on the Ministry's 
website, has brought a chorus of complaints not only from 
U.S., but from European firms as well.  The DCM made several 
points highlighting USG concerns with the Ministry's 
proposal to cut the official prices for imported 
pharmaceuticals by 13 percent. Piecha agreed to strengthen 
dialogue and discuss the proposed regulations with industry 
next week.  End Summary. 
 
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TRADE PROBLEM 
------------- 
 
¶2. (SBU) The DCM emphasized that the proposed cuts, which 
affect only foreign firms, represent a potential 
discriminatory trade practice.  He also noted that the 
proposal was announced on the Ministry's website, without 
first consulting with industry.  The DCM said that one of 
the most promising outcomes from the meeting between 
Minister Religa and Secretary of Commerce Gutierrez (see 
reftel) in January was commitment to establish a dialogue 
mechanism between the Ministry and industry.  He noted that 
the USG wanted to avoid a trade problem with Poland, but 
that the discriminatory impact of 13 percent price cuts with 
no apparent justification was a serious matter. 
 
¶3. (SBU) Piecha said that whether or not the proposed 
regulations were discriminatory was the issue to be debated. 
He noted a Baker and McKenzie report, delivered by the 
Association of Innovative Pharmaceutical Companies to the 
Ministry of Health, criticizing the proposed regulations, 
but did not dispute that it accurately reflected the 
methodology used to determine a 13 percent reduction. 
Piecha said that May 31 was the deadline for responses from 
industry on the proposal and that his staff is currently 
working on a response to the Baker and McKenzie report. 
 
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IT'S THE BUDGET . . . 
--------------------- 
 
¶4. (SBU) Piecha noted the difficulties of managing the 
health care budget, especially in view of all the media 
attention related to the recent doctors' strike.  He noted 
that the PLN 6 billion budget currently calls for about PLN 
300 million for reimbursement.  Despite pressures, he said, 
this money would not be reallocated to wages for doctors. 
However, he said that future increases in the budget would 
have to be proportionally allocated to salaries, which would 
mean that prices for pharmaceuticals would have to be 
proportionally cut. 
 
¶5. (SBU) When asked about the Ministry's practice for 
reviewing pharmaceutical prices, Piecha said that the 
Ministry would prefer to rely on cost of production data. 
He acknowledged, however, that firms regard this information 
as proprietary and that Polish law on this matter is itself 
"contradictory."  He said the goal of a price review 
procedure was to establish "flexibility" and to avoid peaks 
of expenditures.  In response to the DCM's question about 
revising prices upward should the zloty depreciate, Piecha 
said it was possible.  Piecha emphasized that a major 
problem is that the Ministries of Health and Finance decide 
on a yearly budget, not quarterly, and that this complicates 
attaining the flexibility goal. 
 
¶6. (SBU) The DCM thanked Piecha for his time, but stressed 
the potential trade ramifications and the need to fulfil 
commitments for dialogue with industry.  Piecha noted that 
he would be responding soon to the industry's submission and 
would have meetings next week on this issue. 
 
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Comment 
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¶7. (SBU) Piecha acknowledged that our understanding of the 
methodology for determining the price cuts was accurate (or 
rather, that Baker and McKenzie's analysis reflects the 
Ministry's actual practice).  He also agreed to enhancing 
dialogue.  A visiting USTR team will meet with Health and 
Economics Ministry officials, and the British, Danes, and 
Swiss are also making their positions known.  In sum, this 
action by the Ministry got everyone's attention.  It remains 
to be seen what effect these united efforts may have. End 
Comment. 
 
------------------ 
Ashe-Religa Letter 
------------------ 
 
¶8. (SBU) Begin Text of Letter 
 
Dear Mr. Minister: 
 
I am writing you regarding an important issue that 
undermines the ability of foreign pharmaceutical firms to 
compete in the Polish market.  I understand that the 
Ministry of Health, through new regulations for establishing 
official wholesale and retail prices of medicinal products, 
intends to link expenditures for imported drugs to an 
arbitrary exchange rate mechanism and impose a 13 percent 
cut in the retail price of foreign 
pharmaceuticals and perhaps even more at the wholesale 
level. 
 
My government is concerned about this proposed action, 
particularly its apparent discriminatory effect on foreign 
firms. It is my understanding that the proposed price cut 
will apply to foreign companies that import medicines, or 
active ingredients thereof, but not to local producers, 
including those who import active substances. The potential 
discriminatory impact of this policy against foreign 
pharmaceutical manufacturers, innovative and generic alike, 
could raise serious questions regarding Poland's adherence 
to EU directives and WTO rules. 
 
My staff will communicate directly with appropriate 
officials in your Ministry, as well as the Ministry of 
Economy, to discuss our concerns and how they might be 
addressed.  I would also ask that your Ministry consult 
closely with the potentially affected foreign firms before 
proceeding. 
 
Thank you for your attention to this matter.  I look forward 
to working with you to resolve these issues and to establish 
the formal mechanism, which you discussed with Secretary 
Gutierrez in January, for dialogue between your Ministry and 
innovative drug firms. 
 
Sincerely, 
 
 
 
Victor Ashe 
End Text. 
Ashe