“The health payback introduced with the declared aim of remedying poor planning and management of spending by the regions, instead imposes a burden on companies that have already supplied the devices, often in the context of tenders with significant and barely sustainable discounts. The Consulta is not concerned about all this”.
This is the comment of the lawyer Piergiuseppe Venturella, of the Tonucci&partners firm, on the recent ruling of the Constitutional Court on the “healthcare payback”, a system that requires companies supplying medical devices to return a portion of their turnover if the overall expenditure of the regions exceeds the established limits. In this case, the controversial decision of the Constitutional Court last July requires companies in the biomedical sector to return to the State over one billion euros to cover the overspending of the regions’ health care in the period 2015-2018.
This measure, designed to balance regional budgets, risks causing the bankruptcy of hundreds of small and medium-sized businesses, with devastating consequences for the entire public health system. In fact, it is expected that not only will thousands of jobs be at risk, but also that the availability of medical devices essential for the functioning of hospitals could be seriously compromised.
Devices such as heart valves, prostheses and scalpels, essential for the treatment of many patients, could become difficult to find, putting the quality and timeliness of care at risk.
The repercussions for hospitals
Every day, Italian public hospitals use thousands of medical devices, from CT scanners to scalpels, from syringes to respirators. The supply of all these essential tools to save patients’ lives is now put at risk by the healthcare payback mechanism.
Healthcare payback could endanger operating rooms and the entire NHS. Hundreds of suppliers could withdraw from tenders to sell to public facilities, reducing the availability of medical devices and compromising the quality of care. If the requirement to repay overspending becomes effective, many companies may not be able to bear the financial burden, leading to a reduction in the supply of essential devices to hospitals. For example, if a hospital cannot purchase enough CT scan machines because suppliers withdraw due to payback, waiting times for diagnoses could increase, compromising the timeliness of care. Similarly, a lack of adequate surgical tools could delay operations, putting patients’ lives at risk.
Attorney Venturella, what are the main reasons that pushed the Constitutional Court to issue this ruling on “healthcare payback”?
“The Court bases its decision on the constitutional principle according to which even private economic initiative must have a social utility. According to the Court, if the purpose is not arbitrary and the planned intervention is not disproportionate, or in any case such as to empty or compromise the organizational and entrepreneurial autonomy of the private individual, solidarity measures are legitimate against a certain category of economic operators. With reference to this web of rules, principles and precedents, the Court held that the so-called payback would be a sort of extraordinary contribution paid by the companies that supply medical devices to the regions and that such a measure would be neither arbitrary nor unreasonable”.
What is the legal basis for the Constitutional Court’s decision, and how does it fit in with the rights of biomedical companies?
«The Consulta certainly recognizes that “the payback mechanism presents critical issues with regard, above all, to the protection of business expectations and the certainty of legal relationships. However, considering the multiple and relevant purposes pursued by the legislator, the mechanism in question, as it operates in the limited period referred to in paragraph 9-bis, does not appear unreasonable or disproportionate”. In particular, according to the Consulta, it would be reasonable to impose a solidarity contribution on biomedical sector businesses to allow the Regional Health System to continue purchasing such devices: as if a retailer who has sold a basic necessity good to a consumer, if the latter, at the end of the year, not having been able to manage his resources well, is in deficit, would be forced to return part of the price paid. Furthermore, the Court held that the payback measure would still be proportionate since, following a subsequent legislative intervention, a reduction of almost half of the contribution would have been foreseen, which the Court also extended to the companies that had appealed, and in any case the damage suffered by the companies would not be demonstrated. This without considering that not only are the contributions not the same for everyone but that not all situations are the same so that the impact is completely different from company to company and without even considering that in any case it is a contribution that is paid today and refers to 9 years ago. Finally, the Court held that since the first rule on the matter dates back to 2015, which has remained unimplemented, the fact that the Legislator intervened ex novo in 2022 to dictate a new discipline, this new discipline would not have retroactive effect”.
Are there any legal alternatives or solutions that businesses can pursue to mitigate the negative effects of this decision?
“Unfortunately, the Constitutional Court’s rulings are final and all Italian courts must apply them. This does not mean that a Judge cannot raise a new question of legitimacy, perhaps identifying new elements before the Constitutional Court, or that he or she turns to the Community Judge, demonstrating that this discipline seriously compromises free economic initiative and in particular the profile of the certainty of legal relationships. A company that sells heart valves cannot be called upon to fill the budget deficit of a Region that has made mistakes in its economic planning, and even less so if this has occurred for purchases that do not concern heart valves or other devices, but for example construction expenses or training activities. Perhaps in Strasbourg they will have a more careful view of entrepreneurs”.
Have there been similar precedents in which the Consulta has had to balance public and private interests in a similar way?
“Certainly. This, so to speak, is the job of the Consulta: to verify whether the balances established by the Constitution are respected, or whether in some cases imbalances are created and therefore intervene to protect the weaker party. The ruling of the Consulta recalls several precedents including Sentence 548 of 1990 on the relationship between freedom of organization of transport companies and safety protections, and also Sentence 113 of 2022 on the regulation of employment relationships for the purposes of accreditation of healthcare facilities by the Regions. There are also several other precedents that the Consulta recalls to support its decision. Sentence 140 of 2024, however, on the subject of payback, a ruling has a motivation that at a certain point suffers a logical leap that certainly leaves some doubts even with respect to its precedents”.
The alarm raised by companies
The measure, although aimed at safeguarding public finances, has sparked a heated debate, raising numerous criticisms and concerns among operators in the sector who now find themselves facing a double problem: on the one hand, they must face a significant outlay to cover spending overruns, on the other, they risk seeing not only their investment and innovation capacity compromised but also their survival. The medical devices market in Italy is worth 16.2 billion euros between exports and the domestic market and has 4,546 companies, with 112,534 employees.
“This rule transfers 6 billion of public debt from the regional budgets to those of three thousand private companies” explains the president of PMI Sanità, Gennaro Broya de Lucia.
What can you tell us about it?
«It is a “debt shift” law conceived during the Renzi government for the pharmaceutical sector, but applied to the medical devices sector by Minister Lorenzin with a copy and paste and subsequently activated by former Minister Roberto Speranza in August 2022. But while the pharmaceutical sector is dominated by a few multinationals, such as Big Pharma, which have no difficulty in returning the sums foreseen by the payback, the Italian medical devices market is made up of thousands of small and medium-sized companies for which the restitution means ruin.
Furthermore, companies’ credits can be automatically withdrawn to cover debt, leaving companies without cash flow and forcing them to lay off employees.”
What period are we talking about?
«The reference period for calculating the payback is 2015-2018, but the debt has continued to grow, reaching 6 billion euros. This financial burden weighs mainly on a market composed of 80% small and medium-sized enterprises, unlike large multinational pharmaceutical companies, which are better able to absorb these costs.
The situation could lead to the closure of many companies, preventing the State from recovering the money owed, since companies cannot pay more than they earn. In some cases, payback requests exceed 80% of the turnover of companies, which operate in full transparency»
What are the consequences?
“The consequences of this mechanism will be serious: the lack of materials will lead to the need to redo thousands of contracts for essential supplies (there are currently 10,000 in place) for the supply of devices such as coronary stents, heart valves and prostheses, because many companies will close. Currently, thanks to the procurement code and competition, Italian companies offer prices 30% lower than the European average. If the market is dominated by multinationals, prices will increase significantly. This decision threatens around 200,000 jobs and over 2,000 companies, mainly SMEs, that supply Italian hospitals. The payback system, introduced in 2015 and applied from 2022, imposes a 50% tax on companies in the sector to cover excesses of regional health spending caps, generating an unsustainable burden of 5 billion euros. We cannot save on medical devices, which represent only 4.4% of health spending, but are essential for the quality of care”.
