The pharmaceutical distributors' efficiency in Italy: an assessment of the impact of the 2010 reimbursable drug pricing reform

To assess the impact on pharmaceutical wholesalers' financial viability and efficiency of the reform of the wholesalers' and pharmacies' margins on reimbursable drugs enacted in 2010 that halved the distributors' margins. We perform a stochastic frontier analysis on a large original dataset comprising financial and production data from 2009, a year prior to the reform, to 2019 gathered in order to assess the impact of the reform on firms' profitability and efficiency. The implemented policies have not been successful in fostering the development of a more efficient market that would ultimately benefit social welfare. Overall, our findings indicate that bigger firms lag behind their smaller counterparts in terms of efficiency, even in the long run. Our findings also suggest that an efficient pharmaceutical wholesaler is currently unable to generate normal profit from the distribution of reimbursable drugs. Compared to the other European countries, that seem to have a cost oriented approach, Italy provides one of the lowest margins to pharmaceutical wholesalers without properly considering the costs of the drugs' distribution. A new regulatory approach to wholesaling margins is needed in order to improve efficiency and welfare.