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Spain's drugmakers warn on jobs as new cuts loom
August 11, 2011 / 2:25 PM / 6 years ago

Spain's drugmakers warn on jobs as new cuts loom

* Industry warns fresh price cuts could mean job losses

* Pharmacies in one region shut doors for a day in protest

* New cuts follow wave of spending curbs across EU in 2010

By Rodrigo de Miguel

MADRID, Aug 11 (Reuters) - Delays in government payments for medicines and a planned further round of price cuts threaten jobs in Spain’s pharmaceutical sector, according to industry officials.

Both drugmakers and pharmacies are hurting from the latest austerity moves, prompting drugstores in one region to shut for a day in protest.

Spain is targeting the drugs bill again as it tries to slash its budget deficit. The new curbs add to an earlier round of cuts in 2010, which were mirrored across much of Europe, including Germany, Italy, Greece, Portugal, Ireland and Britain.

“We’ll have to make the needed adjustments, perhaps not marketing some medicines, and very probably laying people off,” said an executive at one major international drugmaker in Spain.

Up to 85 percent of the 1,300 pharmacies in the region of Castilla-La Mancha, south of Madrid, were closed on Thursday to protest about the 130 million euros ($184 million) in payments owed by the government, said Dolores Espinosa, president of a regional pharmacy industry group.

Pharmacies’ profit margins on drugs are fixed by law, so they have little room for manoeuvre when payments are delayed.

Spain’s 17 autonomous regions reimburse pharmacies for filling prescriptions from the National Health System and also pay drugmakers for medicines used in public hospitals, using transfers from the central government.

Drugmakers are now having to wait as long as two years for payment from the heavily indebted regions, while payment terms for pharmacies are more than two months.

The regions have agreed to cut spending even more steeply this year as many of them are not in line to meet the 2011 target of a total regional deficit equal to 1.3 percent or less of gross domestic product.

Spain is under intense pressure to improve its fiscal health due to the euro zone debt crisis and any sign that the regions are not complying with cuts, and thus jeopardising the government’s overall deficit slashing goals, could cause additional sell-offs of Spanish sovereign debt.

ZAPATERO APPROVAL

Socialist Prime Minister Jose Luis Rodriguez Zapatero plans to approve a series of measures on Aug. 19 to save 2.4 billion euros, including cutting prices on brand-name medicines by 15 percent in the case of those that have been on the market for 10 years and have no generic substitute.

The pharmaceutical industry, which generated 15 billion euros in sales last year and employs 40,000 people, is lobbying against the latest cuts, saying it already lost 2 billion euros after the government slashed prices last year.

Spanish spending on National Health System prescriptions dropped 11 percent in the first half of 2011 compared with the same period last year, according to figures from the health ministry.

In a further step to drive down costs, the government is also making it obligatory for doctors to use generic drug names on prescriptions, not brand names.

The industry argues too much of the cost cutting is falling on its members.

“The autonomous communities must define their priorities, whether it’s more important to pay for an official car or pay for medications,” Luz Lewin, technical and quality director for Cofares, Spain’s biggest drug distributor, told Reuters.

The average payment time is now 410 days for National Health System payments to companies for drugs used in hospitals and at end-March the health system owed medical suppliers 5.2 billion euros, up 11 percent from the end of 2010, according to industry association Farmaindustria.

Industry analysts say expectations of a continued squeeze on margins means the impact of the latest moves may already be priced into Spanish drug industry stock prices.

Faes Farma has seen its stock price fall almost 50 percent this year, while Almirall is down 18 percent, in line with the Madrid General index which is down almost 20 percent.

(Editing by Carlos Ruano, Fiona Ortiz and Ben Hirschler)

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