Pharma chief: ‘Governments are hitting this industry very hard’

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Europe’s debt crisis is hitting health budgets, leading to unpaid bills for pharmaceutical products, warns the head of Europe's pharma industry association, EFPIA, in an interview with EURACTIV. According to Richard Bergström, the industry is near breaking point and the issue needs to be discussed at the highest policy making levels.

Richard Bergström has been the director general of the European Federation of Pharmaceutical Industries and Associations (EFPIA) since April 2011. Previously he served for nine years as the director general of LIF, the Swedish Association of the Pharmaceutical Industry. Bergström is a board member of the Karolinska Institute in Stockholm.

He answered questions put by EURACTIV’s Jeremy Fleming

What impact is the crisis having on the pharmaceutical industry?

This is an industry that improves the health and lives of Europe’s citizens, and contributes to the strength of Europe’s economies. It is an industry in which Europe is a world leader. My industry faces extremely difficult circumstances. There is always a challenge between continued increasing demand for healthcare and the affordability of healthcare. The current financial crisis puts unprecedented pressure on EU governments.

Is it not inevitable that the crisis will affect budgets and the pharma industry?

We fully understand the need for countries such as Greece, Ireland, Portugal, Spain and other to take steps to control public spending and restore fiscal credibility. We understand that all sectors of society have to contribute, and that we must take some pain. We have worked with governments across Europe to bridge funding gaps. In just five countries (Greece, Ireland, Italy, Portugal and Spain), the pharmaceutical industry has contributed, through price-cuts and discounts, more than €7 billion for the years 2010 and 2011.

Are the costs being borne by the companies themselves?

Governments are hitting this industry very hard. One of my member companies, AstraZeneca, has announced that austerity measures took $1 billion off its bottom line in 2011. The four southern countries – Portugal, Spain, Italy and Greece – collectively owe my companies more than €15 billion in debt, primarily by hospitals and regional governments. Spain alone owes more than €6.3 billion to my members – it has thankfully recognised the importance of addressing this. But the payment delays are getting longer and longer.

Is this having any side effects?

Europe must ensure that it doesn’t slip into a position where it simply focuses on acquiring medicines at the lowest possible cost. This will destroy the incentivisation for innovation, and will ultimately lead to a loss of the breakthrough opportunities of new medicine research. The importance of this industry to health, healthy ageing, and economic growth is just too great to run that risk.

What action are you advocating to deal with the problem?

We need to sit around the table with others and figure out a sustainable way forward. What’s crucial from a policymaking perspective is that we don’t simply become fixated with the short-term crisis. We must lift our heads up and make sure that we put in place policies that continue to support long-term risk-taking, and long-term investment programmes, so that our children can benefit from an innovative pharmaceutical industry, in way the way that we have benefited from long-sighted decisions which were taken 20, 30 or 40 years ago.

In concrete terms, what could be done to achieve that?

That means that if savings must be made in the healthcare sector, then they should come from all elements of healthcare spending and all parts of the pharmaceutical value chain – savings should be driven out of the off-patent sector so that innovation, the search for new and better cures and treatments, can continue. It also means that we should find a way to ensure that the impact of emergency measures taken in Greece and similar indebted countries to address crisis situations, are not exported to other countries via blunt instruments like international reference pricing, by which countries simply seek to copy lower prices elsewhere.

How long will the industry continue to co-operate with non-paying governments?

Investors ask my companies why they keep supplying customers that do not pay. The financial press wonders how much more pain the industry can take. We are acutely aware of our responsibilities to patients and Europe’s citizens. But collectively we need to ensure that we do not reach a situation where companies are forced to disengage from certain markets. We want all of Europe’s patients and citizens to benefit from what we offer.

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