Greece: More Than the Next Drug Supply At Risk

August 1, 2015
Reflector

Reflector is Pharm Exec's Brussels correspondent.

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-08-01-2015, Volume 35, Issue 8

The volatility of nation's crisis could pose greater challenges down the line

There are some evident challenges for pharma in the ongoing Greek crisis. But there are some less evident challenges which may, over time, prove to be more difficult for the industry to cope with.

First, the immediate challenges. And because the crisis is-at least in its origins-economic, the economic challenges are the most obvious. How to make money through normal commerce in a market that has become conspicuously abnormal? For years, drug manufacturers have had difficulty in obtaining payment for their supplies, in the same way as wholesalers and hospitals have had difficulty in obtaining the money to pay manufacturers because of interruptions to their own revenue streams. Estimates of the level of unpaid debts vary, but European manufacturers have spoken of carrying unpaid invoices worth more than north of a billion dollars. And whichever way the broader discussions with international creditors of a resolution to Greece’s problems play out over the summer, there is little prospect of things getting better, and every prospect of them getting worse. Those debts are likely to pile up.

The abnormality of the market has other facets. Exchange controls and sharpened economic decline have created new liquidity constraints that impede patients from paying pharmacists, pharmacists from paying wholesalers, and wholesalers paying manufacturers. Wholesalers promised the minister of health to continue to supply the market with the usual quantities as well as with the usual economic terms-but with the obvious risk of cashflow problems. One wholesaler said: “I really do not know (and this is my greatest fear) whether the medicines which I supply to pharmacies will be paid in euro, drachmas, or will never be paid if the economy collapses.”

The new strains have come on top of the longstanding disruptions to normal business from parallel trade, where low Greek prices-already among the lowest in Europe-have been a constant temptation to pharmacists and wholesalers to export their supplies to the more generously-priced markets of Germany, the Netherlands, or the UK, rather than sell them locally. The current financial difficulties facing pharmacies is a further inducement for them to make a few euros wherever they can in order to stay afloat. Manufacturers have consequently lost revenues in those more prosperous markets, and-by limiting or even interrupting supplies to Greece to mitigate the problem-have lost revenues there, too.

In principle, parallel trade is entirely legal in the European Union (it is even actively encouraged as a central element of the EU’s vaunted single market). But the particularities of Greece had already led to strong pressures to limit it, both from the local authorities fearful of supply shortages and from multinational manufacturers anxious to stem what threatened to become a haemorrhage. The European Federation of Pharmaceutical Industries and Associations (EFPIA) has urged what it calls exceptional measures for what it describes as exceptional circumstances. And in mid-July, the government imposed a formal prohibition on the export of some medicines, warning of “a humanitarian crisis” from siphoning off important drugs for middlemen’s profits. The picture is, unsurprisingly, confused-wholesalers claim the problems arise only from manufacturers cutting supplies to thwart parallel trade.

 

 

System in shambles

Local reports confirm the dysfunctional nature of much of the health system in Greece. A limited primary care service has for years thrown the principal burden onto hospitals, and the absence of effective triage leads to huge strains, and failings in treatment for patients who really need hospitalization. Hospitals have little tradition of analyzing their expenditure or of accountability, and waste has been endemic. Health insurance coverage is patchy at best, and almost non-existent for the many thrown into unemployment by the downturn, or for the growing number of irregular migrants who reach the country daily. Bribery of doctors remains common-a phenomenon not helped by pay cuts that leave hospital doctors with less than 2,000 euro a month.

The situation has been aggravated by the deal that Greek Prime Minister Alexis Tsipras reluctantly signed up to in mid-July, which prevented immediate meltdown of the Greek banking system, but at a price that included unpopular measures such as liberalization of the pharmacy sector. This precipitated strike action by pharmacies resistant to seeing their monopoly broken by more vigorous competition.

But the real casualties are, as always, needy patients. Mental Health Europe (MHE) issued a statement in July calling on the EU and member state leaders “to halt the humanitarian crisis in Greece,” where, it said, “millions are deprived of basic health and mental healthcare” and suicide rates have risen by 35% over the last four years. And the  European Organization for Rare Diseases (EURORDIS) has written to the Greek government urging attention to the plight of rare disease patients, who will be particularly hardhit by supply difficulties.

“The European Union has above all a social model to defend and to offer to its citizens. No human being should be left aside in such a time of crisis,” said MHE. And this points to the second, less obvious, but arguably more important crisis. The reverse that Tsipras suffered in signing a deal that he was repudiating before the ink had dried has implications that go much wider than Greece’s membership in the Eurozone or its financial equilibrium. Irrespective of one’s personal political views, the blow dealt to far-left politics in Europe cannot be overlooked, and nor can its resonances.

Ripples Across Europe

Only weeks ago, with Tsipras and his radical Syriza party riding high in Greece as they appeared to fight off the massed ranks of the international establishment, the hard left across Europe were riding high with them, in hopes of at last seeing a new pathway carved out to defeat austerity. Podemos in Spain, Die Linke in Germany, the Workers' Party of Belgium (PTB), and other similar new radical anti-austerity movements felt victory was within their grasp. The disillusion that so quickly replaced those hopes has left large sections of society-in Greece and in many other European countries-with a sense of alienation. The risk is that, left unattended, disappointment may turn to disaffection, to increased radicalization, to a widespread anti-European sentiment, and ultimately to a large-scale rejection of the values that Europe is based on (and that, indeed, the pharmaceutical industry relies on).

 

 

Europe is not yet in a revolutionary phase-but it would be an imprudent politician (or business executive) that imagined serenity can be automatically guaranteed now that Syriza’s dreams have been shattered. Bridges will have to be built by the “winners” to restore confidence in the system to the “losers,” and everyone with a stake in the current system will have to be ready to play a role.

The pharma buffer?

Back in Greece, the pharmaceutical industry will doubtless continue, for the time being at least, to supply medicines even as the bills mount up. It is conscious that it is not the only creditor in this predicament-and in addition to any sense of solidarity or humanitarian motivation, Greece knows full well that it could hardly bear the damage to its image that would result from cutting off supplies. To this extent, for good motives and perhaps more self-interested reasons, the industry can itself represent something of a bridge across that widening gulf between haves and have-nots, between the establishment and the disestablished, disenfranchised, or disenchanted. And that offers it the chance of being a valuable role model in a wider panorama.

That, of course, remains tenable as a scenario as long as Greece remains in the euro, and does not resort to massive price-cutting-which would not only increase the risk of parallel imports, but would hit drug prices in all the countries that include Greece in their basket when fixing their own domestic prices. But that is currently too far ahead to see. As one senior executive in a major pharma company-a Greek national who has managed his group’s Greek subsidiary-said, “I’ve stopped even trying to second-guess the future. It’s just too volatile.” And not just Greece.

Reflector is Pharmaceutical Executive's correspondent in Brussels.