States versus Pharmas: A Political Analysis of Drug Pricing Reforms in Italy

Over the past two decades, the rising costs of medications have reached an unsustainable level, even for wealthier nations. This price surge is driven by factors such as limited competition in pharmaceutical markets, the increasing financialization of drug companies, and the significant power these companies wield. National and international regulations play a key role in determining prices, but they involve trade-offs between access to medications and controlling costs, often resulting in considerable savings for payers like the state or other entities. Politicians face several challenges when interpreting these trade-offs. What motivates them to pursue reforms? What factors determine whether these reforms succeed? Why are certain regulations chosen while others are not? And what does all this reveal about the power of pharmaceutical companies and the state's capacity to serve the public good? This paper addresses these questions by focusing on Italy. Given the power of pharmaceutical companies and the widespread nature of the costs associated with high drug prices, maintaining the status quo is often the default path. Therefore, reforms aimed at lowering pharmaceutical prices can be considered "deviant cases" worth investigating. Italy is one such case. In 2020, Italy became the first country to require pharmaceutical companies to disclose their research and development (R&D) costs, the public funding they received, prices charged in other countries, and their profits. In 2022, a law was passed to ensure full transparency regarding transfers between the pharmaceutical industry and health actors. However, despite these measures, there was no significant reduction in drug prices. This paper uses a qualitative process-tracing method to analyze the introduction and implementation of the reform in Italy. It triangulates various empirical sources, such as qualitative analyses of official documents and interviews with key healthcare stakeholders, to ensure the validity of the findings. The argument is that certain factors, including strong political will and smart strategies for adoption, explain the introduction of the Italian reform. However, political instability and lobbying hindered its effective implementation. The paper concludes by suggesting that other options, such as stronger public sector intervention, should be considered to meaningfully reduce pharmaceutical prices without jeopardizing innovation and production.