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Greek hospital debt could drive pharma firms 'out of business'

Hellenic Association of Pharmaceutical Companies says hospitals operated by Greece's national social security organisation and the military have debts of around €500m

Inflating levels of debt at Greek hospitals could threaten the supply of medicines and force some pharma companies out of business, according to the Hellenic Association of Pharmaceutical Companies (SFEE).

The trade organisation notes that hospitals operated by Greece's national social security organisation (the IKA) and the military have already run up debts of around €500m - equivalent to more than a year's worth of drug supply.

"The situation appears out of hand, especially at IKA which seems to have informally suspended payments to pharmaceutical companies," claims the SFEE.

The situation comes against the backdrop of Greece's latest austerity package to help secure a second €130bn bailout package from the EU that will prevent it defaulting on its debts next month.

The Greek parliament is currently debating a €576m reduction in pharmaceutical spending out of total cutbacks of €3.18bn.

Added to earlier austerity measures, the country is now looking at reducing its overall spend on pharmaceuticals by more than $1bn this year from €4bn in 2011, which at 2.4 per cent of GDP is one of the highest among industrialised nations.

One of the principle features of the latest round of measures is a debt swap with private investors - including pharmaceutical companies - to halve the value of bonds issued by the Greek government in settlement of overdue claims.

This measure passed the committee stage in parliament yesterday and will be discussed in plenary today.

The SFEE notes that the bad hospital debts go back even before 2010, when the prospects of a Greek default on its debts was first being discussed publicly.

IKA's bad debts are running at €343.5m, including nearly 17 per cent of the medicines supplied in 2010 and almost €9m from invoices issued even earlier. Military hospital debt is now running at €100m, equivalent to two years' worth of supply it claims.

"Unless the government addresses the problem very soon, the supply to these institutions with pharmaceuticals will be in immediate danger," according to the SFEE.

SFEE president Dionysios Filiotis said: "The bonds that the government issued to pharmaceutical companies in settlement of their overdue claims are currently at risk of becoming worthless."

"The accumulation of new debts, on top of past debts which … are at risk of not being paid at all, will spell catastrophe, and it is quite probable hundreds of pharmaceutical companies and firms in the healthcare sector in general may already be facing he spectre of going out of business."

23rd February 2012

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