Pharma group may securitize Spain's unpaid drug bills

Here's one solution to pharma's collections problem in southern Europe: Securitize the unpaid bills. In Spain, the Farmaindustria lobbying group is negotiating with officials to sell state-guaranteed securities backed by €5.4 billion in outstanding invoices, Bloomberg reports. That's more than $7.1 billion worth of unpaid debt.

The securities move would let Spain's regional governments put off paying their drug bills for up to 6 years, while giving pharma companies access to the money they're owed. "It would allow the payment of debt to be deferred...and has a government guarantee which allows it to be sold in the market," Farmaindustria's Humberto Arnés told the news service. The facility would remain open to the addition of future unpaid bills, he said.

Just as in Greece, Spain's regional governments are in big-time hock to pharma, with many invoices in arrears for more than a year. The average overdue payment, in fact, is 430 days late, Arnés said. In Greece, the government has been paying some drug bills in government bonds--which, given the 20%-plus yields, means pharma companies have been taking quite a hit.

So many Greek bills are unpaid, however, that drugmakers have been trying to force repayment by threatening to pull out of the market. Roche has gone so far as to cut off some very delinquent hospitals, while making sure that patients have access to meds via nearby pharmacies that have been paying their bills. The Spanish approach would give the industry control--and presumably more cash.

- read the Bloomberg story