• Drug speculation threatens supplies, says GlobalData (Photo: Derek K. Miller)

Drug supplies to EU crisis countries at risk, warn health analysts

23.08.12 @ 20:42

  1. By Benjamin Fox
  2. Benjamin email

BRUSSELS - Speculators are threatening the supply of medication to countries worst hit by the sovereign debt crisis, according to research by business analysts GlobalData.

GlobalData's report, published Wednesday (22 August) claimed that pharmacies in Greece and other South Mediterranean countries had cut drug prices in a bid to enable people to pay for their medicines.

But theprice-cuts had led to speculators and wholesalers buying up medicines at knock-down prices in one member state and selling them in another.

GlobalData analyst Michael Leibfried, who asserted that drug companies in Europe were facing "renewed pricing pressure from all directions", described the practice as a "lucrative export carry trade" that was "shrinking prices in other countries due to reference pricing." The practice also threatens the supply of medicines to the EU's crisis-hit countries.

Although OECD figures suggest that European governments are still allocating 8-12% of public spending to healthcare, austerity budgets have already seen attempts by governments to cut back on drug bills, even in more prosperous countries.

Following the lead of the UK's National Institute for Clinical Excellence (Nice), which controls drug purchases for the NHS, the German government last year adopted legislation requiring drug companies to prove the price benefits of new medicines, in a move aimed at tightening costs for new medicines.

Under EU law national governments are solely responsible for negotiating drug prices with companies. However, GSK boss Andrew Witty, who also leads the European Federation of Pharmaceutical Industries and Associations (EFPIA), wants EU countries to agree to exclude bail-out countries from price referencing.

Last month the lobby group asked the EU commission to impose a temporary ban on drug re-exports, although this would breach internal market rules on the free movement of goods and services.

The EFPIA insists that drug companies made discounts and price-cuts worth €7 billion in 2010 and 2011 in the five countries Greece, Ireland, Italy, Portugal and Spain, accounting for 8 percent of the industry's turnover. They were also risking further multi-billion euro losses by making emergency plans to supply drugs to Greece, and other countries, in the event of them being forced out of the eurozone, Witty said.

Pharmaceutical giants are concerned that lower drug prices in crisis-hit countries are being used for benchmark pricing of drugs. Most member states base their medicine purchase prices on average prices across the EU.

Critics claim that the reference pricing scheme prevents companies charging over the odds for new drugs.

Meanwhile, drug giants also have fears about whether governments can pay their bills. In July, Swiss company Roche claimed that the five crisis euro countries owed €1.2 billion to settle unpaid drug bills. Figures collected by pharmaceuticals indicated that only 1 percent of drug sales to the Greek government had been paid for in the first three months of 2012.