Read the Conversation
Meeting highlights:
- Establishing Medac in Italy: Giovanni started Medac Pharma in Italy 12 years ago from scratch, addressing initial challenges such as pricing pressures leading to innovative approaches in product portfolio development.
- Unique Portfolio and Strategy: Medac Italy’s portfolio is divided into generics and branded hospital-only products. Innovative strategies, like integrating unique infusion kits, focusing on patient support systems, and always putting science-based developments as a priority, helped maintain competitive advantages.
- Challenges: Giovanni highlighted systemic issues, including the unsustainable pricing and tender system for generics, coupled with the payback system that disproportionately penalizes successful generics providers.
- Collaborative Efforts: As a board member of Egualia, Giovanni actively works with stakeholders to address these challenges. Proposed solutions include multi-supplier tender awards and exemptions for generics from excessive clawback payments.
- Reflections: Giovanni expressed pride in assembling a capable and value-driven team, fostering a healthy and profitable company. He also emphasized the innovative business models developed, demonstrating adaptability and a commitment to maximizing every opportunity.
EF: Could you share some context about how the Medac Italy subsidiary was established? What are the current key priorities for the subsidiary?
GS: We started this company twelve years ago from scratch. There was no Medac presence in Italy at all. I had prior experience with startups in Italy, so when the timing felt right, I presented a business case for the Italian market to Medac’s management. At the time, Mr. Mohr, the founder, was still alive, and I worked directly with him and with Dr. Kosciessa to present the plan. They approved the proposal, and we got the green light to begin. It was an exciting process, as I enjoy building startups. This one was slightly different, though, because Medac GmbH had a very clear stance on why Italy had not been prioritized before. The main concern was the lower price levels in Italy, which he feared could impact pricing in other markets due to reference pricing practices.
This concern also led to Medac’s methotrexate product—their flagship offering—being licensed to another company, Alfa Wassermann, at the time. When we started, it was clear that methotrexate would not be part of our initial portfolio, but the plan was to revisit that possibility after establishing our base and building the organization. We launched with a few plain generic products and BCG, a biological product for bladder cancer treatment. BCG is not a new chemical entity or a generic but belongs to a unique category with different strains available worldwide. At the time, the market was dominated by products from Sanofi and Merck, so we entered as the third option with our strain.
From the beginning, our portfolio was distinct, combining generics with specialized products like BCG, setting the foundation for our growth. Today, our portfolio is divided into two main categories: generics and branded products. The branded products are where we focus on promotion, marketing, and sales efforts, while the generics are handled by a strong tender office, allowing us to compete effectively in that segment.
On the branded side, in the urology therapeutic area, we have two key products, BCG and Miturox, a mitomycin-based product, both of which are used for treating different types of non-muscle-invasive bladder cancer. These products are packaged with a unique infusion kit, which is included in the marketing authorization, which differentiates them and enables us to participate in tenders without having to face aggressive price competition. This strategic approach ensures sustained value in the tender system.
Additionally, we have Trecondi, a product used to condition patients before stem cell transplantation. This is a proprietary development by Medac, repurposing the known drug treosulfan through clinical trials to achieve this specific indication. Another standout product is GLIOLAN, which is used in the diagnosis of brain tumors, specifically gliomas. It is not exactly a drug but a diagnostic agent. Patients take GLIOLAN, and it is selectively taken up by cancer cells. During surgery, under a special light, the tumor glows purple, making it easier for surgeons to identify and remove cancerous tissue.
Our branded products are actively promoted through a dedicated sales team of 10 key account managers who cover all of Italy, targeting urologists, transplant specialists, and oncologists. Importantly, we focus exclusively on hospital-distributed products with no retail presence.
On the generics side, we have a large and evolving portfolio. These products come either from Medac GmbH or through local in-licensing agreements in Italy, giving us flexibility in business development. The lifecycle of generics is shorter, requiring us to introduce new products regularly to offset the effects of price erosion. Interestingly, we have noticed a shift in dynamics recently: while prices for older generics drop, many competitors exit the market, leaving opportunities for us to supply these products at sustainable prices when others cannot.
For instance, we participate in tenders with older generics at prices that are sustainable for us, even if they are not the lowest. When competitors fail to supply, hospitals or regions approach us directly, allowing us to command reasonable prices and extend the lifecycle of these products. This strategy has made our generic portfolio surprisingly profitable, accounting for one-third of our revenue.
Today, our company consists of 30 people, with 10 in the field. This lean yet strategic structure allows us to operate efficiently and maintain a competitive edge in both branded and generic markets.
EF: What makes Italy strategically significant to Medac as a global group?
GS: Italy is one of Medac's largest markets, even without the methotrexate product, which is managed separately by our partner-focused group. Italy represents one of the largest non-methotrexate markets within Medac. I am proud of the significant role we play.
Strategically, Medac Italy is important to the company because it demonstrates what can be achieved with the broader product portfolio.
Not having methotrexate forced us to innovate and develop unique business models. For example, the way we have promoted and positioned products like BCG and Trecondi has become a reference point for other subsidiaries. Our approach shows how Medac can successfully create and expand opportunities with complex or niche products across its global network.
For instance, with Trecondi, when we registered the product in Italy and negotiated a reimbursement price with the agency, we, in the end, chose not to go for reimbursement. The price they offered did not reflect the product's value, so it remains in the non-reimbursed C Class.
Interestingly, in Italy, we sell Trecondi at one of the highest prices in the group. This successful value recognition comes from heavily investing in the scientific promotion of the product to key opinion leaders, sponsoring local clinical studies, and demonstrating its real clinical benefit. This scientific approach convinced prescribers to use the product, despite its higher cost and lack of reimbursement, because they see the clear benefits for its specific patient population. Today, Trecondi boasts a market share of over 90% within its indication, and we are working to expand its use into additional patient settings through further clinical development.
A similar strategy applies to BCG. Early on, we leveraged our closed instillation system, which allows the product to be administered at the bedside by nurses instead of being prepared in a hospital pharmacy. This innovation differentiated our product and gave it a competitive edge.
More recently, we have focused on encouraging doctors to treat bladder cancer patients in line with European guidelines, which emphasize not only the acute phase but also maintenance therapy. In the past, maintenance therapy was not widely practiced, partly due to global BCG shortages. However, Medac invested significantly in upgrading our production facilities, ensuring we can now meet full market demand. This was crucial, as we needed to cover the gap left by Sanofi’s Immucyst after they exited the market, while other players’ reduced focus on this product created further opportunities. Today, as the largest player in the BCG market, we take on the responsibility of ensuring supply for every patient, including those undergoing up to three years of therapy, according to European guidelines.
To ensure patients are treated according to European guidelines, we have launched initiatives to fully realize the potential of maintenance therapy. One key step has been the introduction of a patient support program. In this program, Milibra helps patients adhere to therapy by facilitating interactions between hospitals and patients, streamlining appointment scheduling for instillations, addressing questions about side effects, and improving overall communication. This initiative not only enhances the patient experience and improves their quality of life but also strengthens the relationship between hospitals and our product. Italy is leading the way with this program, which is now being considered for rollout to other Medac subsidiaries.
Looking ahead, we are exploring innovative ways to make BCG therapy more accessible. Our closed instillation system already allows treatment in smaller hospitals without preparation rooms, but our long-term vision is to enable home-based treatments. We are collaborating with several Italian regions and hospitals to validate this approach, aiming to provide the same level of care at home as in a hospital setting. This would be particularly beneficial for elderly patients, those with comorbidities, or individuals who face challenges traveling to healthcare facilities.
These initiatives illustrate how Medac Italy is focused on improving the patient experience while leveraging our competitive edge and value proposition. By investing in patient-centric solutions and innovative service models, we have been able to maintain leadership in the market and continue delivering value to both patients and healthcare providers.
EF: How are you collaborating with Egualia and other associations and stakeholders within the healthcare system to contribute to shaping the future of healthcare in Italy?
GS: As a board member and someone deeply involved in the sector, I have observed firsthand the challenges facing the Italian hospital generic market, which is currently at risk of implosion. On one side, there is immense price pressure from tenders; on the other, rising manufacturing and logistical costs post-COVID, compounded by high inflation. This creates a squeeze where companies face declining revenues and escalating expenses.
In addition, Italy’s Clawback system exacerbates these issues. The national pharmaceutical budget is split between the retail and hospital segments, with the latter consistently overspending due to the high costs of innovative drugs. This is mainly caused by the new innovative drugs entering the market at high prices.
The current system places generics and cutting-edge therapies, such as last-generation immunotherapies, into the same budget basket, which creates a deeply flawed dynamic. While older generics are still essential for providing cost-effective healthcare, their success in tenders paradoxically leads to higher Clawback repayments. The more savings generics bring to the national healthcare system through competitive pricing, the larger the repayment burden on the companies that produce and distribute them.
This issue underscores the need for reform. Together with industry associations, we have consistently tried to illustrate to the government and healthcare authorities the irrationality of this setup. There must be a clear separation between innovative drugs and generics.
Although an Innovative Products Fund was established to address this, its impact is limited. After a few years, high-cost innovative drugs transition from the fund into the general hospital budget, placing further pressure on generics to compete with these costly therapies.
To prevent this unsustainable situation, we need regulatory adjustments that reduce the price pressures created by tenders. Without these changes, generics—critical for cost savings—will continue to face declining viability, jeopardizing their role in the healthcare system. One of our key proposals is to modify the tendering process so that contracts are not awarded to a single company. Instead, similar to the approach used for biologics and biosimilars, we suggest allocating approximately 50-60% of the tender to the lowest-priced supplier, 20-30% to the second lowest, and the remaining percentage to the third.
This multi-award strategy alleviates the immense pressure on any one company to win the entire tender, allowing suppliers to secure some business even if they are not the lowest bidder. As a result, prices are less likely to be driven down to unsustainable levels, which currently forces companies to withdraw their products from the market. In addition, having more than one company winning a tender means there will be multiple sources of a given product, minimizing the risks of stock-out.
We should not forget that the high level of price pressure has led to numerous stockouts and a significant reduction in the number of suppliers. Over the past decade, a large portion of products have lost most of their suppliers, leaving only one or two providers per molecule. This concentration creates serious supply chain vulnerabilities; if one supplier encounters issues, there are no alternative sources to meet demand.
On one side, we need to continue working—alongside the association—with the government and relevant agencies to advocate for changes in the tender system. On the other hand, we must address the issue of the clawback system. Products that are designed to save the national healthcare system money should have reduced Clawback obligations or, ideally, be exempt altogether.
We have presented several technically feasible proposals to achieve this. Currently, the impact of Clawback on generic portfolios is unsustainable, with projections indicating it could reach 15-17% of turnover in 2024. Considering that generic products already operate on very slim margins, having to return such a high percentage of sales to the system explains why so many products are being withdrawn from the market. Without a solution, this trend will continue to undermine the availability and affordability of essential generics.
When I first said the hospital generics system in Italy was heading for disaster, this is exactly what I meant. If we do not take action, the system will collapse because companies will no longer find the market sustainable. It is difficult to convince stakeholders, and finding solutions is equally challenging. For example, we could consider reallocating a fraction of the unspent resources from the retail budget to hospital products since the retail threshold often is not exceeded. There are various ways to address this issue, but action needs to be taken urgently.
The latest financial bill from the government contains no measures to support generics or create a sustainable hospital products market. As a result, we see growing clawbacks year after year, with companies shouldering an ever-increasing burden. When you are already paying back more than 15% of your revenues, it is clear this situation is unsustainable.
I am glad to be working with the association to explore solutions and advocate for the sector. We have unified our voice and remain hopeful, but it’s been an uphill battle.
EF: Could you briefly share the accomplishments you are most proud of and the achievements that have brought you the greatest satisfaction over the past 12 years at Medac?
GS: First and foremost, we have built a very healthy company with strong profitability—something our shareholders certainly appreciate. But what stands out the most for me is the incredible team I have been able to assemble over these 12 years.
From my management team to the sales team to the office staff, we have always prioritized finding the right people—those who align with our company’s values, which, naturally, reflect my own since this is a company I built from the ground up. It has not always been easy to find the perfect fit, but over time, we have succeeded in putting together a team I am genuinely proud of.
I am also particularly proud of our unique business model. Not having methotrexate pushed us to be more curious, innovative, and resourceful. We had to explore new opportunities and maximize the potential of what we had rather than relying on a blockbuster product. Every opportunity was thoroughly studied and evaluated; we never allowed ourselves to be superficial or let a chance slip by without understanding its true value.
If I had to sum it up, my pride lies in the team we have built and the innovative, thorough approach we have taken to grow the business. That is what I am most proud of.
