There are many people whose thoughts on health care policy are divorced from fiscal math. Medicaid is providing inadequate care, you say? Spend more money. Concerned about the crisis of the uninsured? Spend more money. Raise taxes on the rich, and confiscate the ill-gotten profits of insurers and drug companies, and we can provide health care for all.
I can see the appeal. The deficit feels like an abstraction. We’ve had one for years, and the government hasn’t collapsed. So what’s the big deal?
Today’s Wall Street Journal presents a window into our future: a world in which bankrupt governments can’t pay for needed care. Our future is Greece’s present, where the ancient country’s state-owned hospitals have paid for just $970 million of the $2.62 billion in drugs that they have consumed from January 2010 to June 2011.
Swiss drug giant Roche Holding AG has stopped delivering its drugs for cancer and other diseases to some state-funded hospitals in Greece that haven’t paid their bills, and may take similar steps elsewhere, a stark example of how the European debt crisis that has jolted global financial markets is having a direct effect on consumers.
In Greece, Roche is boosting deliveries to pharmacies, which have paid their bills more reliably, Chief Executive Severin Schwan said in an interview on Friday. Patients at some hospitals now must take their prescriptions to a local pharmacy, and, in the case of intravenous or injected cancer drugs, bring them back to the hospital to be administered, he said.
Mr. Schwan said patients haven’t been deprived of their medication as a result of the new measures, which he said Roche may need to adopt in Spain, as well. Some state-funded hospitals in Portugal and Italy have also fallen far behind on payments, he said.
There are hospitals “who haven’t paid their bills in three or four years,” Mr. Schwan said. “There comes a point where the business is not sustainable anymore.”
Roche, the owner of biotech pioneer Genentech, makes some of the world’s most important cancer medications, including Herceptin for breast cancer; Xeloda for breast and colon cancer; and Avastin for colon, lung, and kidney cancer. Roche let Greek hospitals slide for three or four years before finally pulling the plug, costing the company tens of millions in revenues.
And the problems aren’t limited to unpaid bills. For years, European governments have tried to balance their budgets by forcing mandatory price cuts upon drug companies, a tactic that many Democrats want to bring into Medicare. Greece cut prices so much that Novo Nordisk, the world’s leading manufacturer of insulin, withdrew from the market:
Roche isn’t the first pharmaceutical company to stop supplies to some Greek buyers. Denmark’s Novo Nordisk S/A last year stopped shipping certain brands of insulin after Greece said it would cut the prices by more than a quarter. The cutoff lasted a few weeks, until Greece agreed to less onerous price reductions. Novo Nordisk continued shipping low-cost generic insulin throughout, but it was sharply criticized by diabetes groups and others for halting supplies of the more expensive products.
“Greece’s health-care system is ailing,” the Journal notes, “in part because of budget cuts the country has instituted to try to bring order to its weak finances and stave off a default on its debt. Additionally, critics of the health-care system say it is bogged down in waste.” Sound familiar?
And how about this: the Greek government tried to pay off some of its pharmaceutical debts by giving companies Greek government bonds—bonds that could become worthless if Greece defaults on its debts. “We didn’t have a choice,” said Roche CEO Severin Schwan. “Everybody got government bonds. The question was, you got nothing or you got government bonds.” (Roche sold the bonds immediately, presumably to some gullible European bank.)
What’s interesting in Greece is that privately-run pharmacies have a much better track record of payment than do state-run hospitals. “Pharmacies are perhaps more prompt in paying Roche because they are privately owned and run for a profit, giving them better cash flow to cover their bills,” the Journal suggests, paraphrasing a Roche spokeswoman.
If you’re sick and you live in Greece, things are going to get worse before they get better. The country’s deficit problems are nowhere close to being solved. Politicians’ press conferences to the contrary, Greece is going to be forced to either leave the eurozone and default on its debts, or to engage in a massive austerity program that its own people have yet to accept.
We in America are not much better. Modest proposals to reform Medicare are described in apocalyptic terms, by both parties. We have certain advantages that Greece does not, such as being able to issue debt in our own currency, that have postponed our day of reckoning. But if we don’t act soon, that day of reckoning is coming.
- JPMorgan shuffles its senior ranks
- Fear, uncertainty driving gold rush
- Beehive state No. 6 for residents faced with losing homes
- More fly with Qantas but pay less
- Merck in a post-blockbuster world
- Business Insight: Bullying thrives in the workplace, especially in a downturn
- TTN Weekly update
- Shell claims 10-mile oil sheen is not from its wells
- Falling property values hit Suncorp
- It's time to break up J.P. Morgan Chase
Submited at Saturday, September 17th, 2011 at 11:30 pm on Healthcare Industry by jessica
Comment RSS 2.0 - leave a comment - trackback