FROM THE ECONOMIST INTELLIGENCE UNIT
Greece's austerity measures are once again hitting the country's pharma industry, as cost-containment tightens.The pain is far from over for pharma companies in Greece, as new cost-containment measures for the sector come into force. As part of its efforts to cut spending in the wake of its latest EU bailout, parliament has passed a new law limiting drug spending by the country's social insurance funds to ˆ2.88bn (US$3.8bn this year. The industry itself will be liable for any overspend.
The new law also makes it a criminal offence for doctors to prescribe drugs by brand rather than generic name. This draconian measure will apply to the top ten therapeutic classes from April 1st, and then to all drugs on the reimbursement list from June 1st. The country's reimbursement scheme will only cover the generic cost, with any additional cost to be covered by the patient. In addition, doctors will be fined if they fail to prescribe via the new electronic prescription system, while pharmacy opening hours will be extended.
The aim of these measures is to slice ˆ1bn off the country's drugs bill this year.
In December 2011, while Greece was negotiating its latest bailout, the EU and IMF reportedly asked for drug spending to be reduced to 1% of GDP. The Greek National Organisation for Medicines declared this goal was unrealistic. If the latest measures do succeed in cutting spend to ˆ2.88bn, then that will amount of around 1.4% of Greece's projected ˆ199bn in GDP this year.The government also wants to raise the market share of generic drugs, which is currently one of the lowest in Europe at around 16% by volume in 2009, according to the
European Federation of Pharmaceutical Industries and Associations . Critics attribute this low share to the minimal difference between generic and branded drug prices, as well as incentives in the pharmacy sector which favoured more expensive drugs. The government has already moved to limit pharmacy profit margins to a flat fee, a measure that is expected to cut the number of pharmacies by 30% over the next few years.These and other measures have already proved highly controversial. In May 2010, in the wake of previous austerity measures, pharma prices were cut by a weighted average of 21.5%, prompting protests from pharmaceutical producers. Two Danish pharmaceutical companies, Novo Nordisk and Leo Pharma, withdrew a number of their products from the Greek market (they reversed this action only after the government eased the price-cuts slightly .
Despite this, the government introduced a new referencing pricing system in September aligning Greek prices with the average of the three lowest-priced EU countries. The effect was to cut prices by a further 20%.
As a result, Greece now has some of the lowest pharma prices in Europe, a fact that has prompted a huge parallel trade with other EU markets. Moreover, many hospitals have failed to pay for the drugs they have received, with debts to pharma companies deepening every month.This latest announcement will lead to more controversy and further deter launches in the pharma sector. The government is clearly prepared for that, however. According to Pharma Times, ministers have in any case been contemplating banning new drug launches until such drugs have been accepted for reimbursement in 8-10 other EU countries. Though that measure would probably exclude cancer drugs, the main losers would be Greek patients.
Greece's parliament has passed major new pharmaceutical cost-containment legislation which will require drugmakers to cover, each quarter, any overspending on the strict limits which the bill sets for the national drugs bill.
The new law - which passed on a 213-58 vote, with a number of deputies abstaining - states that overall drugs spending by Greece's social insurance funds must not exceed 2.88 billion euros for this year.
The legislation also mandates that, from April 1, clinicians must prescribe medicines from the 10 most-widely used therapeutic classes by generic name only, and from June 1 this requirement will apply to all products on Greece's positive reimbursement list. The funds will reimburse at the level of the cheapest product in each class, and any cost difference between this and the product supplied will have to be paid for by the patient.
Moreover, "inappropriate" prescribing - ie, of medicines by other than their generic name, and not of the cheapest product available - will now be classed as a criminal offence, according to local reports.
Generics currently account for just 18% of the pharmaceutical market in Greece, one of the lowest levels in the European Union (EU , and the latest measures aim to bring this up to the EU average of 50%. Health Minister Andreas Loverdos - who says he intends to slice a massive one billion euros off the nation's drug spending in a single year - has condemned a "coalition of interests" for allegedly attempting to cast doubts on the quality and safety of generics with the aim of hindering their wider uptake in Greece; however, counterfeit drugs are a significantly greater problem for Greece than for other EU nations.
The new law also seeks to save money by mandating the use of computerised prescriptions, with the imposition of a 1-euro fine on doctors for each hand-written prescription, and deregulation of pharmacy opening hours.
The legislation constitutes a requirement by the EU, the European Central Bank (ECB and the International Monetary Fund (IMF - Greece's "troika" of creditors - for agreeing a second bailout of 130 billion euros for Greece.
It is also reported that Yiannis Tounta, president of Greece's National Organisation of Medicines (EOF has been in talks with the troika concerning moves to delay the introduction into Greece of innovative new medicines until the products have been accepted for reimbursement by 8-10 other EU member states. Cancer drugs would be excluded from the proposals.
Commenting on the new legislation, analysts at IHS Global Inslght say that the requirement for pharmaceutical companies to pay back any spending above the stated limit in each quarter is "very negative." This is especially so given that many multinational and Greek drugmakers are owed considerable amounts, by the public hospitals in particular, and that the multinationals which have been paid in Greek government bonds have seen their value plummet, they note.
• A number of decrees concerning implementation of some of the major measures contained within the cost-containment legislation are expected to be announced shortly.
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