Small firms in the health sector are waiting up to 700 days to be paid by public bodies, John Wilkinson, chief executive of Eucomed, the European Medical Technology Industry Association, told EURACTIV in an interview.
John Wilkinson is chief executive of Eucomed, the European Medical Technology Industry Association.
Earlier this year, you raised the alarm over late payments threatening the viability of medical technology companies. Since then, the Late Payments Directive has been updated. Have you noticed any difference?
In our industry, the majority of our customers are public sector and these are covered by the directive. But there is zero evidence that things are getting better, and no evidence that the long-term trend towards increasingly late payments has been addressed.
We were disappointed with the final draft of the Late Payments Directive. I think the Commission did a good job of putting it together and making the case for tackling the issue, but the final version was somewhat weaker than we'd hoped – perhaps because some member states were unhappy with what was proposed.
How long are the delays currently facing SMEs in your sector?
Typically, in some countries, we are waiting between 200 and 300 days. In the worst cases, it can be as long as 700 days.
Which countries have the worst record?
Southern Europe is more challenging and Northern Europe has been more proactive in advising public bodies on the implementation of late payment rules. But it's a chronic problem and the level of acuity varies with the economic cycle. Governments are facing increased public sector debt at the moment so this is exacerbating the problem – but this isn't something that began since the credit crunch.
What are the consequences of late payments from public bodies?
Well, the obvious result is that small businesses are forced to close because they have no cash. The credit crisis is making things worse, because the markets do not trust government debt as much as they used to.
Until recently, government debt in Europe was AAA-rated, but that is no longer the case. Banks are reluctant to lend against public debt and, when they do, a higher premium is demanded. Confidence in government debt has dropped.
In the past, companies would survive to a degree by borrowing against the promise of public debt. I know of cases where CEOs have committed suicide because public bodies have them over a barrel and they can see no way out.
Do you believe governments are abusing their virtual monopoly as purchasers in the health sector?
Well, yes, most clients are either government agencies or are funded with public money. We're now in a position where public bodies which have outstanding invoices are coming back and saying they will pay, but only if the invoice is discounted. It's morally reprehensible. They are forcing a non-negotiable discount.
In the medical technology sector, what are the implications for patients?
Companies are less inclined to invest in countries where late payments are a chronic issue. In practical terms, this means delayed access to innovative technologies. It also encourages an uneven distribution of how technology is distributed across Europe. Late payments might appear to be a victimless crime, but this is not the case.
How does this trend of late payments affect innovation?
Ultimately, small innovative companies don't get a look in because they cannot afford to wait a year for payment. This is bad news for innovative SMEs which, in turn, damages a major source of innovation. SMEs account for 80% of our sector.
Will companies simply stop supplying hospitals with products?
That's really the very last resort. This isn't like simple business-to-business relationships, where if you don't get paid, you stop providing a product or service. If you're producing a life-saving product and you stop the supply, it will be bad for patients. Companies don't want to be blamed if patients die, so the trend is to keep supplying in the hope that payment will come soon. The authorities in member states and Brussels are promoting innovation and support for SMEs.
Do you believe late payments should be top of this agenda?
Governments are seeking ways to help small companies stay in business. One thing they could do is pay their bills on time. Our goals it to have the spirit of the Late Payments Directive translated into reality across the European Union.