Pharmaceuticals set for a showdown

A clash is developing between the Development Ministry and pharmaceutical companies over the issue of the pricing of medicines which has again come to the fore after the ruling by the Council of State – the country’s highest administrative court – in favor of the companies annulling the present system. Companies last week refused to participate in the session of the Drug Prices Committee which was to approve a new price list for 124 medicines, after being refused a request for a postponement. They argued that new prices could not reasonably be set according to a system which has been annulled. According to Regulation 6 from 1997, the price of a drug which is to circulate in the Greek market is determined on the basis of the lowest price elsewhere in Europe. Pharmaceutical firms blame this system for two significant problems in the sector: the steep rise in exports and a dramatic fall in domestic production. The existing system of price determination penalizes domestic production, says the Association of Pharmaceutical Companies of Greece (SFEE). The domestically produced drugs sector has been on the decline in the last 10 years, continuously losing ground in favor of imports. According to a sectoral study by the Institute for Economic and Industrial Research (IOBE), imported medicines have recorded impressive growth in recent years, with market share skyrocketing from 18.3 percent in 1997 to 57 percent today. The study also points out that exports have shown even more impressive growth, from just 17 billion drachmas in 1996 to 103 billion today. Pharmaceutical wholesalers export medicines instead of distributing them in the local market, resulting in shortages of important medicines. A few months ago, the pharmaceutical company Glaxo sited this as reason for refusing to supply wholesalers, who sought recourse with the Competition Commission. The Commission is about to reach a verdict which, according to sources, defends the freedom of intra-EU trade. The existing pricing system was judged as illegal, as there is no relevant legislative authorization. However, its annulment does not necessarily mean a return to the system that was applicable before 1997, which took into account the three lowest prices in Europe. Deputy Development Minister Responsible for Commerce Christos Theodorou told Kathimerini that the ministry intends to maintain the present system, as otherwise prices are bound to rise. We are considering introducing a legislative provision with retroactive effect in order to meet the vacuum. It is our intention to re-examine the the entire issue in depth, our main concern always being consumer protection. Market sources say that the compensation which pharmaceutical companies could claim from the government for possible losses sustained from the present pricing system may be in excess of 200 billion drachmas. The fact that the Drug Prices Committee still conferred last Wednesday without the producers being represented seems to have further fueled the controversy. Importers’ and manufacturers’ representatives say their companies are preparing to take all action possible within the framework of the law. Total expenditure on medicines reached 629 billion drachmas last year against 416 billion in 1995. The share of private spending in these sums rose to 242 billion from 118 billion respectively. The expenses of public hospitals were 144 billion and 79 billion drachmas respectively. The contribution from social security funds rose 30 percent in the same period. Total spending on medicines among OECD countries varies between 0.7 percent and 2.2 percent of GDP, the average being 1.2 percent. According to 1998 data, Greece ranks in the middle of the list. Pharmaceutical products prepared, packed or distributed in Greece last year reached a total of more than 259 million last year drachmas. According to IOBE, 52.2 percent of these were either produced or packed by FAMAR, 16 percent by Vianex, 9.3 by Lavipharm, 4.4 percent by Gerolymatos and 3 percent by Galenica. In terms of sales in 2000, Novartis topped the list with 57 billion drachmas worth, followed by Vianex with 42.3 billion and Roche with 41 billion drachmas.

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