LONDON International drug companies have offered to cap the total amount the Greek government has to pay for its medicines in a bid to resolve a crisis that is jeopardizing both the supply of drugs to patients and drugmakers' profits.
The proposal was set out by the trade group the European Federation of Pharmaceutical Industries and Associations (Efpia) in a letter to the Greek ministers of health and finance, a copy of which was seen by Reuters.
In exchange for a ceiling on outpatient pharmaceutical expenditure of 2.88 billion euros ($3.70 billion) in 2012, Efpia wants the government to commit to pay off all outstanding debts and promise not to allow further arrears to build up.
Under the plan, individual drug companies would be subject to a "clawback" if the cost ceiling is breached, based on their share of the Greek market.
The move follows growing concerns about the situation in Greece, where the government last month took the highly unusual step of suspending all drug exports from the country in an attempt to prevent shortages.
Richard Bergstrom, Efpia's director general, said the industry's offer to Greece reflected a new realism among major drug manufacturers, who have seen sales and profits eroded by steep price cuts and unpaid bills in austerity-hit Europe.
"Setting a growth cap or budget ceiling is not something we have ever liked to do in the past, but in the current environment it is better to do that and have some stability," he said in a telephone interview.
Other pharmaceutical stability agreements have already been agreed in Portugal, Ireland and Belgium, and the model could be extended to other states in future.
"We've suggested this to a number of other governments as an approach to deal with the financial crisis," Bergstrom said.
Both European and U.S.-based drugmakers have been hit by the worsening situation in Europe and executives have highlighted the issue as a drag on profits in recent third-quarter financial reports.
Andrew Witty, the chief executive of Britain's biggest drugmaker GlaxoSmithKline (GSK.L), told reporters last week it was "not reasonable" for governments to think they could continue to squeeze the industry without serious knock-on effects.
In the latest sign of how the crisis is affecting the provision of healthcare services, German pharmaceuticals firm Merck KGaA (MRCG.DE) said on Saturday it was no longer delivering its cancer drug Erbitux to Greek hospitals.
Another German company, Biotest (BIOG.DE), which makes products from blood plasma, was the first drugmaker to stop shipments to Greece because of unpaid bills in June.
($1 = 0.7785 euros)
(Reporting by Ben Hirschler; Editing by Chizu Nomiyama)