PharmExec
There are some evident challenges for pharma in
the ongoing Greek crisis. But, writes Reflector, 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 which 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 million 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.
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
hospitalisation. Hospitals have little tradition of analysing 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 2000 a month.
The situation has been aggravated by the deal that the Greek prime minister
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
liberalisation 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 issued a statement in July calling on the European Union and member
state leaders “to halt the humanitarian crisis in Greece”, where, it said,
“millions are deprived of basic health and mental health care” and suicide
rates have risen by 35% over the last four years. And 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 Alexis 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 of 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.
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 Belgian workers party 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 radicalisation, 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.
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, it 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 or 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, so knows the country as well as anyone – said, “I’ve stopped even
trying to second-guess the future. It’s just too volatile”. And not just Greece.