Over the past few weeks, national and international media coverage has been rife with speculation about whether Greece will retain the Euro. At the time of posting this blog, Eurozone leaders have agreed to the conditions for Greece to seek a third bailout and the Greek government agreed to accept the bailout conditions - but several European Union (EU) members, including Germany, must ratify the deal in their parliaments before it can proceed.1 Whatever happens over the next few weeks there is still some way to go and uncertainty about Greece's financial future. This week's blog does not attempt to predict the outcome but examines a key issue challenging the pharma industry, the impact of the current economic turmoil and continued uncertainty on pharmaceutical pricing.
Like many others international businesses, pharma companies have been struggling under austerity in Greece for many years. In May 2015 Reuters reported that Greek hospitals and the state-run insurer (in full EOPYY) owe international pharma companies more than $1.2 billion.2 While earlier debts, incurred between 2010 and 2012, were eventually repaid, some pharma companies received their payment in government bonds that were subsequently written down in value. Furthermore, pharma companies report that they haven't been paid by state hospitals or the government's public health insurer since December 2014.3
Although Greece represents less than one per cent of global drug sales, its impact on the global pharmaceutical market, should it leave the Euro, could be significant due to the impact of international reference pricing (IRP). IRP also known as external reference pricing, is a policy method employed by Governments to try and control the prices of in-patent pharmaceuticals. All countries use a range of policies to control expenditure on drugs, both in and out-of patent. These policies include statutory pricing, price-volume agreements, profit controls, negotiations, rebates and clawbacks and IRP as discussed in the Centre's report impact of Austerity on European Pharmaceutical policy and pricing.4
IRP is one of the most common methods deployed in Europe, with most European countries using some form of external referencing. Indeed, a European Commission study in 2013, comprising 31 European countries (28 EU member states, Switzerland, Norway and Iceland) found that 29 countries applied ERP (exception being the UK and Sweden). The majority of the countries (23 out of 31) use ERP as the...