Greek pharma cuts amount to $1.3B

Greece's bailout package includes some more austerity for drugmakers. The plan will cut drug spending by $1.3 billion, with patients, pharmacies, branded drugmakers, generics makers and wholesalers sharing the pain. Doctors will be forced to boost their use of generic drugs. Overall, the cuts will put Greece's drug spending more in line with the rest of Europe at about 1% of GDP by 2014, rather than the 5% of GDP recorded in 2010, Bloomberg reports.

One of the key provisions of the austerity package is an increase in generics utilization to 35% of the total volume of drugs sold. That's a target expected to be reached by year's end. By the end of next year, utilization is expected to take another big leap upward to 60%. There's no need to explain how that increasing utilization will crimp the sales of branded drugs.

But generics companies will also be affected; as Bloomberg reports, the plan cuts the prices on copycat meds to 40% of the branded price. Currently, generics are sold in Greece at a smaller discount to brands than in other countries.

Even though the changes will no doubt be painful--especially since Greek hospitals owe millions of euros to drugmakers already--they're reasonable, market-watchers told the Financial Times. In fact, healthcare spending cuts in Greece amount to a dose of reality, said Antonis Karokis, Merck's director in Greece, as quoted by the FT. "There were no controls on spending in the past, the whole system favored consumption," Karokis explained. "It was not only supplier-led, but demand-led by doctors and patients."

- see the story from Bloomberg
- get more from the FT