Global drug companies offer to cap Greece's medicines bill

Global drug companies have offered to cap the total amount the Greek government has to pay for its medicines in a bid to resolve the crisis that is jeopardizing both the supply of drugs to the patients and drugmakers’ profits.

The proposal was set out by the trade group the European Federation of Pharmaceutical Industries and Associations in a letter to the Greek ministers of finance and health.

In the exchange for a ceiling on the outpatient pharmaceutical expenditure of 2.88 billion euros ($3.70 billion) in 2012, European Federation of Pharmaceutical Industries and Associations wants the government to commit to pay off all the outstanding debts and promise not to allow further arrears to build up.

As per the plan, the individual drug companies will be subject to a drawback if the cost ceiling is breached based on their share of the Greek market.

The move follows the growing concerns about the situation in Greece, where the government last month took the step of suspending all the exports of drugs from the country in an attempt to prevent shortages.

Efpia’s Director General, Richard Bergstrom said, “The industry’s offer to Greece reflected a new realism among major drug manufacturers, who have witnessed sales and profits eroded by the steep price cuts and unpaid bills in the austerity-hit Europe."

Other pharmaceutical stability agreements have already been agreed in Ireland, Portugal and Belgium and the model can be extended to other states in the future.

The U.S. and European-based drug makers have been hit by the worsening issues in Europe and executives have also highlighted the issue as a drag of profits in the recent third-quarter financial reports.

Chief Executive of Britain’s largest drugmaker GlaxoSmithKline also said, it was not reasonable for the government to think that they could continue to squeeze the industry without serious knock-on effects.

In the latest sign of how the crisis is affecting the provision of healthcare services, Germany-based pharmaceutical company Merck said, it is no longer delivering its cancer drug Erbitux to Greek hospitals.

Meanwhile, Biotest which makes products from blood plasma, was the first drug company to cease shipments to Greece because of the unpaid bills in June.