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Feb 9, 2012

With Progress on Debt Accord, Greece Scrambles to Cut Pharma Costs

  • Shortly before Greece made global headlines again with news that the nation’s political leaders agreed on new austerity measures to contain Greece’s debt, the financially fragile cradle of Western civilization also signaled it would continue agreeing to disagree with its creditors over how much it spends on pharmaceuticals for its state-run health system while striving to control costs going forward.

    The European Central Bank (ECB) this morning announced the compromise by Prime Minister Lucas Papademos and other officials, needed for Greece to obtain a €130 billion ($172 billion) debt restructuring agreement, complete with a swap that will mean a 7% loss for investors, from ECB and two other creditors, the EU and International Monetary Fund (IMF).

    The accord by the three parties within Papademos’ ruling interim coalition government outlines how Greece will save €300 millionfrom defense and other unidentified areas and avert reductions to the pensions of state employees. As reported in Pharma Times, which cited local press reports, Greek Health Minister Andreas Loverdos announced the agreement to pharma industry representatives, adding one important detail: Greece will spend no less than €2.8 billion ($3.7 billion) and expects to shell out €3.1 billion ($4.1 billion).

    That puts Greece at odds with its creditors ECB, EU, and IMF, collectively nicknamed “the Troika” by Greek politicians and austerity-weary citizens. The Troika wanted Greece to cut back its pharma-spending to €2.1 billion ($2.8 billion).

    Even at €3.1 billion, that’s still just a substantial savings from the €5.6 billion ($7.45 billion) that Greece spent on pharmaceuticals in 2010, the year Greece was forced to embark on austerity measures. Last year, Greek spending on medicines fell nearly 27%, to €$4.1 billion ($5.5 billion), still about 8% above its target of €3.8 billion ($5 billion).

    That likely explains why Business Monitor International (BMI) has estimated the size of Greece’s pharma market slipped 10.1% last year to €6.48 billion ($8.6 billion) from €7.2 billion ($9.6 billion) in 2010. Overall, healthcare spending dropped 5.4% to €21.64 billion ($28.8 billion) from €22.87 billion ($30.4 billion) a year earlier. 2011 marks a reduction of an earlier BMI forecast for last year’s Greek pharma market, reflecting continued deterioration of Greece’s economy.

    Needing an excuse for the continued overspending on drugs, Loverdos and Greece have found one in the nation’s doctors, who he says continued to prescribe more "when they should have been prescribing less,” resulting in the cash-strapped government spending too much on medicines.

    Yet perhaps mindful that it needs to show some sign of cost control, if only to convince its creditors it is doing what it should, Loverdos told Greece’s Skai TV the nation would control pharma costs henceforth through a new crackdown on doctors and how much medicine they prescribe. According to the Greek daily newspaper Kathimerini, Loverdos told Skai that some 20 doctors wrote what the government deems an inordinate amount of prescriptions. In one case a doctor wrote prescriptions totaling more than €400,000 ($531,708.44) in just three months, despite the recent introduction of a new electronic prescription program designed to cut down on waste and corruption.

    “Despite the electronic prescription system, there are currently doctors who issue 100 or more prescriptions a day with more than 10 different drugs in each prescription,” Loverdo said, as quoted by Kathimerini.

    Loverdos has also tried to cut its spending on pharmaceuticals by directing the new National Organization for Healthcare Provision to prescribe only generic drugs. Generic drugs account now for only 18% of the medicines prescribed in Greece, a percentage Loverdos hopes to raise in order to achieve €1 billion ($1.3 billion) in cost savings. Currently, only 18% of drugs prescribed in Greece are generic.

    Another source of pharma savings Loverdo told Skai is targeting Greek citizens, who collectively each year throw out some €1 billion worth of medicines because they have expired. Next month, he said, Greece will roll out a program to collect past-date medicines, a program the country can, presumably, afford on the basis of projected savings.

    If Greece needed a reminder of why it must scramble to cover drug costs, one appeared in employment figures released this week. Greek unemployment stood at 20.9% in November, with unemployment among under-25-year-olds having reached 48%.


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