Greece’s crisis could hit European prices
pharmafile | May 6, 2010 | News story | Sales and Marketing | Greece, industry, parallel trade, prices
GlaxoSmithKline’s chief executive Andrew Witty has warned that the economic crisis in Greece could have a knock-on effect across Europe, pushing governments to squeeze spending on medicines.
Greece itself has just slashed drug prices by on average more than a fifth, but the fear is that either these kinds of measures become more widespread or they have a knock-on effect due to parallel trade within the EU.
Greece’s economy is in danger of collapsing under its huge public debt, and ministers from the EU’s 16 eurozone countries are working with the International Monetary Fund to finalise a €100bn ‘safety net’ loan system.
There are concerns that Greece’s economic instability may spread to other EU countries with economic problems, most notably Portugal and Spain.
GSK’s Andrew Witty, speaking before the country’s latest measures were unveiled, tried to forewarn investors that painful measures could be on their way: “We see countries like Greece clearly beginning to wrestle with some very, very serious fiscal issues,” he told Reuters news agency.
“It’s obvious we are going to see some kind of impact in some countries,” Witty said in a conference call following GSK’s first quarter results.
“We don’t expect price increases in Europe; we expect there to be price pressure.”
Pharma companies operating in Europe are already well acquainted with enforced price cuts, but austerity measures in public spending across the continent could seriously dent the sector’s revenues.
The concerns are a sobering reminder of continuing economic problems, in contrast to the extremely healthy sales increases seen by many pharma companies in the first quarter.
GSK enjoyed a very strong 13% growth in the period compared to last year (boosted by H1N1 vaccines sales), including 16% growth in Europe.
Leading companies have enjoyed growth in the first three months despite having to factor in the cost of US healthcare reform, which includes a deal to cut medicines prices.
Pharma companies based in Europe have managed to shrug off these losses, partly thanks to diversification and experience in government-enforced measures.
GSK says it is already experiencing annual price cuts, but it was not yet clear how much further pressure would be applied as governments rein in healthcare budgets.
“On average we take about a 3% price cut across the whole of Europe every year,” Witty said. “It might be constituted by four or five countries doing something relatively dramatic and every year you get a different four or five countries. As we go into Q2 and Q3 it is going to become clearer as to whether or not the European-level impact will be much off-trend or not.”
Germany – Europe’s biggest economy and among its healthiest – recently announced plans for a major reduction on spending on prescription medicines.
Meanwhile the UK general election being held today could see the Liberal Democrat party, which is is advocating a large-scale increase in the generic prescribing, form a coalition government with one of the other main parties.
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