The Greek government has said that the maximum price of generic drugs will be set at no more than 60% of the originator product’s price, rather than 72% as it originally proposed last September.

This tough new pricing measure is part of the latest austerity package announced by Greece, under a memorandum of understanding (MoU) agreed with the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB) as part of their bailout package for the country. The measures seek to save Greece approximately 900 million euros a year and reduce the share of Gross Domestic Product (GDP) accounted for by healthcare spending from more than 10% in 2008 to under 6%.

The new package also includes measures to increase the use of generics. Greece currently has one of the lowest rates of generic penetration in Europe, and the aim is for generics to account for 50% of all medicines used in hospitals by the end of next year.

It also states that the Greek National Organisation for Medicines (EOF) will take over responsibility for drug pricing from the Ministry of Health and will have the new positive drug reimbursement list completed by the end of this month. The list, which will be created using the new pricing mechanism and replace the partial list put in place in September, will be updated on a quarterly basis. Its introduction has been strongly opposed by the Hellenic Association of Pharmaceutical Companies (SFEE).

Other features of this latest austerity package relating to healthcare cost containment include: - expansion of the negative drug list; - the lifting, next March, of the cap on drug price cuts imposed in September; - a cut in value-added tax (VAT) on medicines from 11% to 6.5%; - a reduction in pharmaceutical wholesalers’ margins by at least a third from next January; - use of the electronic prescription system - which has already cut drug spending 50% in a pilot programme at the OAEE fund - to be in place at all the major social security funds.

Commenting on the implications of the new austerity package, analysts as IHS Global Insight believe the measures will benefit generics producers to the extent that they are “highly likely” to get a greater volume of their products onto the Greek market. However, they add, these benefits will be limited by the “fairly drastic” price cuts being sought for generics and that manufacturers could find it difficult to maintain profitability on cheaper drugs, unless they are supplying them in large volumes.

Furthermore, they say: “the fact that the cap on price reductions is to be lifted in March next year, combined with the proposed quarterly updates to the positive reimbursement list, could mean more frequent and more intense price reductions in Greece, particularly considering the fact that the country references its prices to the average of the three lowest-priced markets in the EU.”