Pharma to EU officials: We need 'contingency' supply plans in case of 'Grexit'

Drugmakers are raising an alarm about shortages in Greece as the possibility of a "Grexit" looms. That "worst-case scenario" could put supplies in peril, the European Federation of Pharmaceutical Industries and Associations (Efpia) warned European Commission officials, with suddenly cheap meds in Greece diverted for sale at higher prices in neighboring EU countries.

EU Health Commissioner Vytenis Andriukaitis

In a letter to EU Health Commissioner Vytenis Andriukaitis, Efpia chief Richard Bergström cited a variety of technical worries--along with "general social unrest"--as reasons why drug supplies could be disrupted. But the fear of parallel trade, triggered by Greece's switch back to the drachma and the ensuing devaluation of that currency, was an overall concern.

Plus, if drug prices fall dramatically in Greece, that could trigger big price drops in other countries that use "reference pricing"--basically, pegging their own prices to those in other countries--to control drug spending.

Individual companies are working on backup strategies, Bergström noted, but antitrust laws keep drugmakers from working too closely together, he said in the letter, which was seen by the Financial Times. He asked for a meeting with Andriukaitis to enable "concrete contingency plans."

This is far from the first time that economic problems in Greece have triggered concern in the pharma industry. Public hospitals have been in debt to drugmakers for years, and pharma companies have taken big haircuts on those bills just to get them paid. Currently, Greece owes more than €1 billion to pharma companies; drugmakers say they haven't been paid by state hospitals or the government's public health insurer since December.

Companies whose drugs are generally supplied through hospitals--including Roche ($RHHBY), whose cancer drugs are often administered intravenously--have been hardest hit by the country's economic woes. Some companies stopped shipping their newer, more expensive products to the country as debts went unpaid, limiting access to older, less expensive alternatives. Merck KGaA, for one, stopped delivering its cancer drug Erbitux to public hospitals at one point but continued supplying the drug directly to patients through pharmacies.

Greece has feuded with drugmakers over their decisions to restrict supplies; in 2013, health officials accused 50 pharma companies of cutting off supplies of necessary meds, threatening to fine 8 of them. Roche, Pfizer ($PFE) and Sanofi ($SNY) were among those saying they had pulled products, but only "non-essential" drugs with clear alternatives. Just last week, the Pharmaceutical Development Institute of Greece claimed that multinational drugmakers were engineering artificial drug shortages.

- read the FT story