Greece slashes drug prices, spawning fears

Last week, drugmakers were publicly worrying about Greece's financial problems--and their possible effect on pharma prices. Well, this week those worries proved well-founded. Greece is cutting pharmaceutical prices by more than 20 percent on average, with some of the highest-priced meds getting 27 percent lopped off.

The moves have met with opposition from drugmakers, and the Hellenic Association of Pharmaceutical Companies is considering a legal challenge, Reuters reports. Among the objections: that Greek price cuts will make medications so cheap, they'll be exported for resale in other countries, rather than used at home. "It will be a big issue for the country," Yannis Chryssospathis, the group's lawyer, tells the news service. "Although it is a relief for the social security system, low prices will fuel parallel trade, so products will go out of the country."

EU trade rules allow drug wholesalers to buy pharmaceuticals in low-priced markets and resell them elsewhere--a.k.a. parallel trade. Drugmakers have long opposed the practice. It's easy to see why: Price cuts in one market can quickly erode prices all over the region.

Price cuts also are exported another way. Many EU countries set maximum drug prices based upon prices in other countries. "Greek prices were already among the lowest in Europe," pharma analyst Brendan Melck tells Reuters, "so cutting them again will ratchet up the pressure even further in terms of profitability for companies."

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