Europe's innovative pharmaceutical association, the EFPIA, has written to the European Commission warning of the damaging effects of Greece's potential exit from the Eurozone, including shortages of drugs in Greece, a boom in parallel exports from the country, and strong downward pressure on drug prices that use Greece as a market for international reference pricing.
IHS Life Sciences perspective | |
Significance | The EFPIA has warned that a Greek Eurozone exit could result in damaging shortages of medicines in Greece, as well as a major increase in parallel drug exports from the country and increased downward pressure on the prices of drugs in countries that reference Greece for IRP. |
Implications | The head of the EFPIA, Richard Bergström, has called for a high-level meeting of European commissioners to discuss contingency plans that could be implemented in the event of a Greek euro exit, including restrictions on exports from Greece and an exemption from using it as a reference country for IRP. |
Outlook | The result of the bailout referendum planned for 5 July will determine whether the pharmaceutical industry will face these challenges outlined by the EFPIA. However, even if the Greeks vote to accept the bailout package, and therefore to remain in the Eurozone, difficulties and challenges – such as the large accumulation of unpaid bills by the Greek public healthcare sector – remain. |
Greece faces drug shortages in event of euro exit, says EFPIA
The European Federation of Pharmaceutical Industries and Associations (EFPIA), which represents innovative pharmaceutical companies in Europe, has written to the European Commission (EC) requesting urgent action in the face of the threats posed by Greece's potential exit from the Eurozone. According to The Financial Times, the EFPIA is calling for urgent measures to prevent shortages of medicines in Greece in the event of the country's withdrawal from the Eurozone, with Richard Bergström, the association's director general, reported as warning that if withdrawal takes place, the proper functioning of the medicines supply chain in the country could be compromised, posing a danger to public health.
Bergström is reported by the source as warning that an exit from the Eurozone could result in the technical breakdown of the framework that supports transactions, calling the validity of contracts into question, while underlying social unrest could also contribute to a shortage of essential pharmaceuticals.
Parallel export likely to boom, IRP risks are high
Furthermore, as The Financial Times reports, Bergström sees the likelihood, in the event of Greece's euro exit, of a heightened incentive for parallel exports of medicines, if the euro is replaced in Greece by a strongly depreciated drachma. This would exacerbate a problem that is already prevalent in Greece at the moment, where the prices of a significant number of drugs are among Europe's lowest. Bergström also highlighted the potential impact of Greece's dropping the euro in favour of a drachma, which is significantly devalued against the euro, on prices in other EU countries that reference Greek drug prices as part of international reference pricing (IRP). The source reports that he made a strong appeal to the European Commission to exempt Greece from any calculations of reference prices for pharmaceuticals in the event of a euro exit.
Greek market especially vulnerable
UK newspaper The Guardian reports that the EFPIA warned in its letter that the drug supply chain in Greece is more fragmented and complex than in many other countries, making it especially vulnerable in such a situation as a Greek euro exit. At the same time, the source reports that the Greek public healthcare system owes over EUR1.1 billion (USD1.2 billion) to multinational pharma companies, according to EFPIA, and that members of the association have not been paid by the National Organisation for Healthcare Provision (EOPYY) or Greek hospitals since December 2014.
EFPIA head proposes temporary export restrictions
The Guardian reports that Bergström requested a meeting with European health commissioner Vytenis Andriukaitis and other commissioners at which these issues could be discussed, mentioning specifically the possibility of imposing temporary restrictions on drug exports from Greece. The source reports that Bergström stated that he was certain that any extraordinary one-off price crashes in Greece resulting from a potential euro exit would be felt in other EU member states.
Outlook and implications
With the referendum on the latest bailout programme due to take place on 5 July – although even this is uncertain, given the current volatility of the political situation in Greece and between Greece's leaders and their EU negotiation partners – a vote against the bailout is likely to precipitate Greece's withdrawal from the Eurozone, leading to a situation of considerable uncertainty and, very likely, turmoil while the changeover to the new currency takes place. However, there is a good chance that the vote will go the other way. In this event, even though it promises a much less problematic situation for the pharmaceutical industry in Greece overall, there will still be considerable political upheaval in the country, as it will almost certainly mean new elections and, quite possibly, a change of government.
Therefore, although the possibility of Greece exiting the Eurozone does not bear speculation beyond the result of the bailout referendum – assuming it takes place – the difficulties for the pharmaceutical industry in the country will persist. The accumulated debt to multinational pharmaceutical companies, unpaid since before the election that brought the current coalition government into office, is likely to start to have palpable effects on the drug supply chain, and, without the political stability required to make the necessary decisions to pay off these debts, this problem could intensify.
Bergström's requests are reasonable in the context of real danger faced by Greece, as well as the threat to price integrity faced by producers in such an unprecedented situation. It remains to be seen whether the European Commission will see the situation in the same light, abandoning its conventional aversion to the kind of restrictions that the EFPIA is calling for.