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Greece’s Financial Crisis and Devastated Healthcare System

April 1, 2012
Nathan Jessop

Nathan Jessop is a columnist for Pharmaceutical Technology Europe.

Pharmaceutical Technology Europe

Pharmaceutical Technology Europe, Pharmaceutical Technology Europe-04-01-2012, Volume 24, Issue 4

Greece’s economic crisis has battered the country’s healthcare system, resulting in medicine shortages, market withdrawals and falling profits for the pharma industry.

The economic crisis in Greece has dominated headlines in Europe for the past few years. The country recently secured a bailout worth €130 billion, but no one believes this will solve the crisis given that previous bail out loans of €110 billion in May 2010 and €109 billion in July 2011 proved insufficient. Greece's public sector has been hit hard by the ongoing austerity measures imposed on it and even now the government is spending more than it can receive through taxes. This perilous state of affairs is having a wide range of negative impacts on society. Unemployment and homelessness is rising, as is crime, and there have also been outbreaks of violence on the streets.

Healthcare in disarray

The economic crisis has devastated the Greek healthcare system, with austerity measures introduced by the government resulting in significant budget cuts for hospitals. The Greek healthcare system was already suffering from understaffing and under resourcing before the crisis. Now, treatment waiting times have increased further and many people are turning to street clinics that had originally been set up by non-governmental organisations for those outside the mainstream system. Médecins du Monde has estimated that the proportion of Greeks now seeking medical attention at such street clinics is around 30%. Before the crisis, it was only 3–4% (1). There have also been warnings of a rise in infectious diseases such as tuberculosis, malaria, hepatitis and HIV (2). These findings are a shocking development considering that the Greek healthcare system was highly ranked by the World Health Organization in 2000 (3).

Nathan Jessop

Another sign of decline in the country's healthcare system is the disruption of the pharma supply chain. The government cutbacks have resulted in shortages of many medicines around the country. In January, the Panhellenic Association of Pharmacists described 500 commonly used drugs as being in short supply, including painkillers and products for hypertension, gastroenterological disorders, kidney disease and cancer (4). A commonly cited point in the media was that some pharmacies had even run out of aspirin (5).

Previously, strikes by pharmacists had accounted for drug shortages, but the current supply problems are more complicated. In 2011, the Greek government enforced heavy price cuts for pharmaceuticals. According to the new law, a drug's price is set according to the average of the three lowest priced countries in the EU. As a result, Greece's spending on pharmaceuticals only amounted to €4.1 billion in 2011 compared with €5-6 billion in 2010 (6). The national spending on pharmaceuticals for 2012 has been predicted to be around €2.8 billion. Recently, Greece's health minister, Andreas Loverdos was quoted as saying that excessive spending on unnecessary drugs amounted to a value of €1 billion per year (6).

The government-enforced price cuts mean that wholesalers prefer to sell their stocks in other countries where they can make higher profits. The problem has also been exacerbated by public insurers delaying payments to pharmacies, which have then been unable to pay their suppliers. The lack of funding has been detrimental for the pharmacy sector. Out of the 12000 pharmacies that operate, 800 are facing closure and a further 200 have severe operational difficulties (4).

Rather than keep their stock lying around in warehouses or waiting for payment from pharmacies, wholesalers are maintaining their business by re-exportation. In 2011, the amount that public insurers owed pharmacists exceeded €400 million (5). As payments can take three months, pharmacists recently announced that they could only supply medicines to patients who paid with cash. For many patients, this is impossible due to their financial circumstances.

Media reports suggest that Greece has become a pan-European source for parallel trade products. Prior to the economic crisis, parallel trade was described as having plateaued in Greece because pharmaceutical companies had imposed supply quotas for the country. However, pharmacies in other countries often turn to Greece to replenish their supplies when they are low on stocks. In effect, the financial incentive to supply a drug outside Greece rather than for domestic customers is creating new clients across Europe. This situation has also led to cases of fraud where a bill is still submitted for reimbursement to public insurers as if the drug had been prescribed to a patient locally. Reimbursement fraud has been estimated by the European Federation of Pharmaceutical Industries and Associations (EFPIA) to cost Greece more than €500 million, which places further strain on the healthcare system (5).

Pharma industry views

Many drugmakers are adopting a negative view of Greece's pharmaceutical market, which is also contributing to difficulties. On the one hand, companies have to conform to the low prices demanded by the government, but then they also find their own products in circulation in other European markets. Consequently, some manufacturers have stated that they are competing against their own products in these foreign markets (5). Another concern has been the influence that Greek prices might have on the way other countries set their prices. As some countries use Greece as a reference point, there could be a steady lowering of prices throughout Europe.

The restrictions of the Greek pricing system were so severe when first introduced that some manufacturers started to reduce supply. In 2010, Novo Nordisk took some of its insulin products off the Greek market, claiming that as well as price cuts reducing profits, it was also owed around €26.1 million by the Greek government (7). An estimated 50000 diabetic Greek patients were using these products and the company's move led to an outcry. Novo Nordisk responded forcefully, accusing the government of mishandling the economy and putting patients and the company in the difficult position.

Another Danish company, Leo Pharma, took a similar approach and issued a Notification Letter of Discontinuation covering the potential withdrawal of 18 of the company's 29 products on the Greek market (8). The company also claimed that it was owed $300 million (€223.4 million) by the Greek government. However, Leo Pharma was particularly worried about the impact of Greek prices on pricing decisions in other countries that use Greece as a reference market.

In 2011, Roche halted delivery of some of its anticancer products and other therapies to some of the public hospitals that had not paid their bills (9). It stated that some hospitals had failed to pay the company for more than four years, but that it was boosting supply to pharmacies that had been reliable clients. In general, privately-run pharmacies have had a better track record of fulfilling payment than public hospitals. Patients could take their prescriptions to these pharmacies and, in the case of intravenous or injected cancer drugs, take them back to a hospital to have them administered. In this way, the company believed that patients would not be deprived of their medicines.

Representatives of the Greek pharma industry have also complained about the government's attitude (9, 10), arguing that pharmaceuticals only account for a small proportion of the healthcare expenditure and that little is being done about other aspects of spending, such as diagnostic tests and medical procedures.

As Greece already has some of the lowest prices in Europe, the government has already exhausted all possibilities to extract savings from medicines. They have also stated that the pharmaceutical industry understands how critical the current circumstances are and the need for flexibility, and therefore seeks sincere dialogue with the authorities. However, the representatives add that the current approaches being used will do nothing to resolve long-term problems. It has also been suggested that the government is basing its decisions on flawed data. One recommendation was to harness the benefits of information technology so that a full picture of the waste in the healthcare system could be revealed (9). By studying the way in which the supply chain was monitored from product distribution to use of medicines by patients, the effectiveness of the whole system could be improved.

Outlook

The situation in Greece continues to look bleak. As it is unclear what comes next for the economy as a whole, it is difficult to see how the healthcare sector will receive improved funding. In the short term, Greece will remain an unattractive market for companies seeking to launch innovative medicines with high prices. However, pharmaceutical companies already have experience of operating in tough markets. They will likely continue their presence in Greece, but will be highly selective in the products they bring to market there.

References

1. A. Kentikelenis, "Health effects of financial crisis: omens of a Greek tragedy" (Lancet website, 2011) ww.thelancet.com, accessed 27 Feb., 2012.

2. A. Carassava, "Euro crisis: Why Greece is the sick man of Europe" (BBC News website, 2011). www.bbc.co.uk, accessed 27 Feb., 2012.

3. Healthcare Economist, "Health Care Around the World: Greece" (Healthcare Economist website, 2008). http://healthcare-economist.com, accessed 27 Feb., 2012.

4. E. Karamanoli, "Greece's financial crisis dries up drug supply" (Lancet website 2012). www.thelancet.com, accessed 27 Feb., 2012.

5. N. Kresge, "Greek Crisis Dries Up Drug Supply as Even Aspirin Can't Be Found" (Bloomber GusinessWeek website, 2012). www.businessweek.com, accessed 27 Feb., 2012.

6. Pharmaceutical-Technology, "Greece confirms state pharmaceutical spend" (Pharmaceutical-Technology website, 2012). www.pharmaceutical-technology.com, accessed 27 Feb., 2012.

7. Pharmalot, "Novo Nordisk Pulls Insulin From Greece Over Money" (Pharmalot website, 2010). www.pharmalot.com, accessed 27 Feb., 2012.

8. L. Taylor, "Danish drugmakers' "no" to Greek price cuts" (Pharma Times, 2010). www.pharmatimes.com, accessed 27 Feb., 2012.

9. A. Roy, "America's Future? Greece Defaults on Cancer Treatments in State-Owned Hospitals" (Forbes, 2011). www.forbes.com, accessed 27 Feb., 2012.

10. C. Papachlimintzos, "Medicine in Greece is cheap" (Athens News, 2011). www.athensnews.gr, accessed 27 Feb., 2012.