Drugmakers take a hit on Greek bonds

After carrying the public health system's debt on their books for many months--in some cases, more than a year, drugmakers are finally getting paid by the Greek government. Good news, right? Well, there's just one drawback: Greece is paying its drug bills in zero-coupon government bonds.

You don't have to be an economics professor to know that Greece's bonds aren't high-grade securities. So, converting those debts into bonds is costing drugmakers money. Australia's CSL took a $26 million charge against earnings to account for losses in the value of securities it accepted in lieu of cash payments. Some of those securities came from other hospitals in southern Europe, but they're mostly from Greece. "You would have to describe it as collateral damage," CSL Managing Director Brian McNamee said (as quoted by Bloomberg).

Greece paid Roche with a bond, too. The company sold it--at a discount of 26%, CFO Alan Hippe said. "[B]ut we have now the cash," Hippe said on a conference call last month, Bloomberg reports. "And cash is what counts. We are monitoring our exposure, especially in Southern Europe, very very diligently."

The long wait--and discounted payments--have some companies cutting off supplies, or threatening to. Bloomberg reports that Novo Nordisk has stopped selling some products in the country. Roche stopped delivering some drugs to hospitals in arrears, Dow Jones reported back in June. And Nycomed's chief executive, disgusted by the bonds-as-payment strategy, said his company can't operate on faith. "If the situation gets totally out of hand and we don't think we will get paid in the end, we simply cannot continue to deliver products," he has said.

- read the Bloomberg story

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