Witty: EU can avert drug-supply disaster in S. Europe

Is there a way out of the drug-supply mess in cash-strapped European countries? Pharma leaders think so. In a letter to European Union officials, GlaxoSmithKline ($GSK) CEO Andrew Witty urged them to make two regulatory changes to keep drugs flowing into Greece, Spain and other troubled countries.

Pharma's position in southern Europe is a difficult one; governments in Greece and Spain are way behind on their drug bills. They owe billions of dollars to drugmakers. Some companies have tightened up their credit--such as Roche ($RHHBY), which is owed beaucoups euros because of its oncology sales to broke hospitals--and others have restricted the flow of newer, more expensive drugs when cheaper alternatives are available. One, Germany's Biotest, has said it will stop shipping products altogether if its bills aren't brought up to date.

These moves have drawn fire from critics, who say the companies are putting finances before patient needs. But how long are drugmakers expected to ship their products on credit, especially when they can't be sure bills will ever be paid in full? Already, Greece has paid some bills with deeply discounted bonds, forcing drugmakers to take their losses.

Witty, current president of the European Federation of Pharmaceutical Industries and Associations, recommends a way forward. Curb reference pricing to keep price cuts offered in strapped countries from rippling their way across Europe, he said. A 10% price cut in Greece would cost €299 million ($375.8 million), but the industry would lose 7 times that much if those prices were re-referenced worldwide.

And bar parallel trade, the practice of buying drugs in lower-price countries for resale in markets where prices are higher. A recent "significant increase in this arbitrage trade" has touched off shortages of some products. "There is a genuine risk of supply disruption in several countries," Witty stated in his letter.

- see the letter from EFPIA
- see the Wall Street Journal story