The Landscape of Drug Development and the Pharmaceutical Industry in Italy: Challenges, Trends, and the Role of Generics

Like the United States, developing a new drug is not a simple endeavor in Italy. The entire process costs around 1 billion euros, and it takes over a decade to complete this mammoth task.¹ On the other hand, pharmaceutical products seem to be lucrative in Italy, where the expenditure for pharmaceutical products has risen from over 20 billion euros in 2018 to approximately 36 billion euros in 2023.^2,3

Stages of Drug Development

Image credit: Krisana | stock.adobe.com

The drug development process in Italy is more or less the same as in the US.⁴ In Italy, there are 2 organizations that deal with drug development. While the Italian Department of Health approves animal studies, it is the Italian counterpart of the FDA, the Agenzia Italiana del Farmaco (AIFA), which oversees human studies. Additionally, the Italian National Institute of Health (Istituto Superiore di Sanità) supports these agencies by creating technical-scientific reports during both the preclinical and clinical stages of development.⁵

Preclinical studies are carried out in vitro or in vivo. Their aim is to find out the maximum dose for humans to tolerate while receiving maximum effectiveness. Additionally, toxicology testing is performed, linking the pharmacological and toxicological effects to plasma concentration and drug exposure.⁶ The data obtained from preclinical studies follow rules defined in the manual Good Laboratory Practice. The Italian Department of Health also defines suitable facilities for these studies.

Human studies fall under the clinical development stage and follow the rules defined in the Good Clinical Practice manual. The AIFA ensures that pharmaceutical companies comply with the regulations.

• Phase 1 is concerned with the safety of the drug and is carried out on a small group of participants in selected test centers.
• The second phase deals with the efficacy of the drug. Several hundred patients are involved during phase 2, which allows the pharmaceutical company to detect the ideal dosage of the drug.
• The final phase, commonly referred to as phase 3, is performed in several thousand people from several countries. Its primary goal is to establish the effectiveness of the drug by comparing the efficacy of the drug with known products and placebos. Based on the data from phases 1 through 3, the relevant public Italian health authorities evaluate the efficacy and safety of the new drug.

Production and Manufacture

The pharmaceutical industry is not only concerned with the discovery and development of drugs, but also with the manufacture of medicines. In Italy, this process is overseen by legislative decree Number 219, which was passed in 2006. In particular, article 50 deals with authorizing the production of medicine.⁷ The article states that no one can produce drugs either for domestic consumption or for export without the AIFA’s permission.⁷

The AIFA approves a request to produce medications by verifying whether the manufacturer has hired qualified staff and possesses adequate technical equipment. In order to obtain permission, the manufacturer needs to indicate which drug they are going to produce and the dosage form. Furthermore, the AIFA demands that the manufacturer names its production site in the request.⁷

Although the number of pharmaceutical companies in Italy is small compared to the number of companies in China, Italy does have a significant pharmaceutical industry with roughly 300 companies. Over 70% of the employees in this sector work for companies with at least 250 employees.⁸ The biggest pharmaceutical company in Italy, the Chiesi Group, saw revenues of more than 3000 million euros in 2023.⁹ However, the Italian pharmaceutical industry is primarily characterized by rather small and flexible companies, whereas large, multinational companies are dominant in other western countries such as Germany.¹⁰

As one of the top 3 countries in the European Union, Italy’s pharmaceutical industry relies heavily on investments. In 2023, the total investments amounted to about 3.6 billion euros.¹¹ Approximately 40% of the capital necessary to keep production running comes from Italian organizations, while the rest of the funds are contributed by international organizations. Most of this money goes to the production of chemically manufactured and biotech drugs; vaccines; advanced therapies; rare disease research; and plasma-derived products.

Production sites are not equally distributed across the country and are primarily centered around Lombardy, Lazio, Tuscany, Emilia-Romagna, and Venetia. In order to curb the environmental impact, measures are implemented to help to reduce water consumption, waste, and plastic packaging.

Production of pharmaceutical goods takes place on an industrial scale amounting to an overall marketable value of 52 billion euros in 2023. Pharmaceutical goods produced in Italy were worth 2% of the country’s gross domestic product in 2023. However, exports generate the largest revenues. Italy exported pharmaceutical goods worth over 49.1 billion euros in 2023, with medicinal drugs corresponded to 84% of the whole pharmaceutical export volume. With a high export rate of roughly 94%, it is clear that most of the industry’s revenues—70% of the revenues in the pharmaceutical sector—are generated through sales in foreign countries.¹²

In order to produce on a large scale, research is a necessary tool, with yearly investments that are not insignificant. More than 700 million euros are poured into the industry, marking the highest contribution to the national research system. Specifically, 53% is funneled into stage 1 and 2 of the drug development process, 45% is used for the development of biotech drugs, and the remaining 38% go into the research of orphan drugs.

Marketing and Distribution

The AIFA not only regulates the manufacturing of drugs, but it also oversees drug pricing. To enhance the transparency of drug prices, the AIFA requires pharmaceutical companies to disclose public subsidies they have received from governments in different countries. Public subsidies may be obtained during drug development, while setting drug prices with local governments, or for reimbursement. This law makes it easier for the AIFA to establish terms with pharmaceutical companies regarding drug prices. Additionally, if the AIFA receives data from pharmaceutical companies containing sales revenue, marketing costs, and the status of relevant patents, patients can benefit from competitive prices.¹³

In December 2023, patent-expired drugs amounted to 51.2% of total pharmaceutical sales in Italy, compared to patent-exclusive drugs (protected or without generic equivalents) which make up 33.4%.¹⁴ As of 2023, generics were not popular among Italian consumers, corresponding to just 15.5% of sales. According to the latest sales data from local pharmacies, the drug tachipirin lead the top 10 list in the third quarter of 2024, followed by the antibiotic augmentin and the vitamin dibase. The oral diabetes medication Rybelsus was the fourth most-sold.¹⁵

With regard to sales generated in hospitals, the percentages of the 3 drug categories are different. Exclusive drugs were 92.4% of those sold, followed by brand-name drugs (5.3%) and generics (2.3%). Based on sales data for 2023, trends indicate a general increase in the consumption of pharmaceutical goods and services, with a higher anticipated demand for generics compared to brand-name drugs.¹⁵

Another trend can be observed when using reimbursement of the country’s only health care system, Servizio Sanitario Nazionale (SSN) into account. In 2023, the SSN reimbursed approximately 150 million packages of pharmaceutical drugs labeled as exclusive drugs. During the same period, it reimbursed more than twice as many packages classified as generics. However, with more than 540 million packages, brand-name drugs made up the biggest proportion. Calculating the average prices of reimbursed packages further suggests that the AIFA is willing to pay more for generics compared to brand-name drugs. The average price of a single package in the category of brand-name drugs amounted to 5.88 euros, with generic drugs costing roughly 70 cents more. However, the average price of exclusive drugs is definitely the highest, at over 15 euros.

Drug Availability

Drug shortages are a well-known issue in today’s world of supply bottlenecks and Italy is not immune to these challenges. For nearly 10% of the absent drugs, there is no real alternative solution available in Italy. Between 2018 and 2024, the AIFA estimated the number of drugs that are likely to become unavailable more than doubled from 1600 to over 3700. Although 44% of the unavailable drugs are related to the discontinuance of their commercialization, another 25% of the drug shortages can be contributed to problems related to their production.¹⁶ Recently, Giampiero Russo, the scientific-technical director of AIFA, commented on the known phenomenon by stating that, “In a globalized world, the issue of drug shortages is a complex and now chronic issue. The new scientific-economic commission of the Ministry of Health, in operation since February, has inherited a large backlog and is trying to reduce the time to intervene, but it is not easy to do so preventively.”¹⁷

As for as the production of drugs, an increase in costs related to raw materials, packaging materials, and transportation costs has been observed in recent years. Inflating prices of raw and packaging materials dramatically influences the situation. Not only is the production of brand-name drugs affected by the rising costs, but the generics branch is, in particular, with the competition in the pharmaceutical sector gradually diminishing. Since 2015, the number of available generic drugs has reduced by 49%. Some molecules are only produced by 1 or 2 manufacturers.

On the contrary, Marcello Cattani, head of Farmindustria (the Italian association of pharmaceutical companies) said in an interview with Il Sole 24 Ore that, “…we are not in an alarm situation.” He added that, “There are point situations that may concern individual products, but there is not a problem of drug shortages in Italy.” Since drug prices in local pharmacies are among the lowest in Europe, this could lead “…to the possibility that drugs go to countries that pay more or that someone comes to buy drugs in Italy because they cost less.”¹⁸

The Generics Industry

The increasing fragility of pharmaceutical supply chains is further deteriorating because of the strong dependence of Europe on its suppliers, namely India and China, especially for the production of active ingredients. Nonetheless, the production of generics comes along with several benefits, some of which are:

• Promoting competition
• Guaranteeing that patients get a broader access to therapies
• Reducing the risk of possible drug shortages
• Less likely supply chain interruptions
• Paving the way for innovations
• Maintaining a broader biodiversity and the usage of active ingredients that are likely to become forgotten but would be useful in especially critical situations

Generics play a crucial role in mitigating drug shortages by offering a real alternative for 80% of drugs that are becoming increasingly unavailable in Italy. Generics have not only reduced the costs but also increased the production of drugs suitable for chronic and serious illnesses. Paradoxically, people in Italy are still quite unaware of which alternative drugs are available. For example, in 2023 only 22.7% of all the packages sold in local pharmacies are generics, corresponding to an annual revenue of 1.8 billion euros. Particularly in southern regions with a lower per capita income, the utilization of generics is less popular compared to northern regions. The overall consumption of generics across the country remains at 32%.¹⁸

REFERENCES

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