Pharmaceuticals: facing a Greek tragedy

With the passing of Greece's latest austerity measures, healthcare spending is set to be reduced by a reported E2.1bn ($2.8bn) during 2011-15, primarily through price cuts on pharmaceuticals. This will negatively impact pharmaceutical company sales not only in that nation, but also in other countries that reference Greek drug prices.

Pharmaceutical companies are likely to be reeling with the announcement that E2.1bn ($2.8bn) of healthcare spending cuts will take place during 2011-15 in Greece. This will be implemented by widening the use of electronic prescribing and cutting drug prices.

This latest round of cuts is on top of those implemented in Greece during September 2010, when the prices of 97% of drugs in the national market were reduced by an average of 20%. At the time, opposition from the pharmaceutical industry was extensive, with 25% of pharmaceutical companies operating in Greece challenging the move. Despite the 2010 price cuts, however, Greek hospitals and pharmacies have struggled to meet many of their bills, with the Hellenic Association of Pharmaceutical Companies claiming that these institutions have paid only E332 ($440) of a E70m ($93m) medicines bill for the first quarter of 2011, prompting the latest round of cuts.

As a result of last year's price cuts, Roche began withholding some shipments of non-emergency medicine to some of the most indebted healthcare providers after providers attempted to settle drug bills with Greek government bonds. Other companies, including Sanofi and GlaxoSmithKline, are said to be also withholding shipments or negotiating with the Greek government to recoup some debt payments, while Novo Nordisk and Leo Pharma have pulled a number of drugs from the market.

The latest round of price cuts will also certainly fuel parallel trade out of Greece and could ultimately lead to drug shortages, while any price cuts in the country will also negatively affect other markets, such as Turkey, that reference Greek drug prices. In response, pharmaceutical companies could consider adopting strategies such as delaying any proposed brand launches in Greece until further notice, withdrawing high-value products from the market if price cuts go ahead, making wider use of direct-to-pharmacy supply-chain strategies or dual pricing structures to reduce the impact of parallel trade, or simply preparing for the sales of key brands to be impacted.

via datamonitor.com

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