A Greek EU Exit? Pharma Watches On

June 16, 2015
Julian Upton

Julian Upton is Pharmaceutical Executive's Online and European Editor. He can be reached at jupton@mjhlifesciences.com

With the talk shifting (again) to a Greek exit from the Eurozone, what is pharma thinking?

With Greece looking increasingly likely to default on its end-of-June loan repayment of €1.6 billion ($1.8bn) to the International Monetary Fund (Greece’s next crisis meeting with EU officials is Thursday, but the country’s finance minister has warned that he has nothing new to propose), talk is now shifting (again) to “Grexit”, a Greek exit from the eurozone.   A sovereign default would likely result in Greece’s banks failing, pushing the country out of the single currency. It is widely agreed that this will be catastrophic for Greece, sending the country into a state of emergency. But there is uncertainty on the implications for the EU, save for the inevitable, damaging effect on the prestige of the eurozone.
   Reuters’ Paul Carrel writes that a Grexit could expose the European Central Bank (ECB) and the euro “to hundreds of billions of euros in losses, landing Germany and its partners with a crippling bill”. He adds that France “would take a big hit too”, costing the French taxpayer up to €66.4 billion and “[saddling] the country's banking system with €20 billion in lost loans”.   As for the UK, currently demanding EU reforms to secure its own position within the Union, Open Europe’s Raoul Ruparel writes that a Greek exit “would completely derail [UK PM] David Cameron’s current timeline for the negotiations and the eventual EU referendum”. If the British referendum goes ahead without the EU reforms under way, the result could also see British exit (or Brexit).   In the midst of all this, what are the implications for the pharmaceutical industry? Last month, Reuters reported that Greece owes a total of €1.2 billion to multinational pharma companies, with EFPIA’s Richard Bergstrom confirming that none of his Association’s members have received any money from Greece since December 2014. As of November last year, for example, Greece owed Merck & Co. $71m for drugs supplied on credit. But if the country falls into a state of emergency, pharma may need to continue to supply drugs without being paid (for the time being), as it did for Argentina in 2002.   However, GlobalData analyst Joshua Owide pointed earlier this year to a post-Grexit ray of light. Speaking to in-Pharma Technologist, he said the eventual benefits of measures such as exiting the eurozone “might provide a more long-term platform for economic recovery, and increase [Greece’s] ability to settle its trade deficits in the future”. But in that event, MNCs “will have to rethink their drug pricing structures and existing trade receivables owed on the basis of the strength of the Drachma”.   All this might not happen. If Greece fails to pay the IMF on 30 June, it still has four weeks find the money. It could still secure a reform deal if it agrees to further cuts. But Greece’s current Syriza government was elected on a strident anti-austerity platform, which doesn’t bode well for the country’s scheduled payment to the ECB on 20 July. Then it really will be “crunch time”.