Roche Keeps Drugs From Strapped Greek Hospitals

By JEANNE WHALEN

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."
Europe's efforts to prevent a Greek default have become politically fraught as economically stronger nations face popular resistance to additional contributions. Many are proceeding with budget cutting plans despite weakening economies. On Friday, U.S. Treasury Secretary Timothy Geithner urged the continent to increase the size of a bailout fund.
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.
And companies in other industries are also worried. VeriFone Systems Inc., which sells payment-processing systems, said that so far customers have been paying on time. But CEO Doug Bergeron said the company is monitoring clients closely, and if conditions worsen, it will require buyers to obtain letters of credit before making purchases.
Greek hospitals have large debts to many drug companies, according to the Hellenic Association of Pharmaceutical Companies, or SFEE. As of June 30 this year, Greek's state-financed hospitals had paid for just 37% of the €1.9 billion ($2.62 billion) worth of drugs delivered by SFEE member companies in the 18 months to June, 2011, the organization said in a recent report.
Greece's health-care system is ailing 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. The country's health ministry couldn't be reached to comment on Friday.
Europeans have been reluctant to offer additional assistance to a country they view as spending far beyond its means. Finland, for example, has insisted that Greece put up collateral in exchange for further rescue aid.
Early this year, Greece tried to clear some of its pharmaceutical debts by giving companies government bonds. "We didn't have a choice. Everybody got government bonds. The question was, you got nothing or you got government bonds," Mr. Schwan said, adding that Roche sold the bonds immediately.
He said he isn't aware of any Greek patient complaints about Roche's decision to cut off certain hospitals, but that he can imagine hospital administrators "didn't like it." A representative of the Greek Cancer Society said no one was available to comment Friday.
Roche started cutting off certain Greek hospitals this year, Mr. Schwan said. A Roche spokeswoman declined to name the hospitals involved, but said the company began warning them last summer, in an effort to give them as much time as possible to make their payments.
Greek hospitals and pharmacies generally pay Roche directly for drugs, and then seek reimbursement from the taxpayer-funded health-care system, she said. 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, she said.
Mr. Schwan said state-funded hospitals, which are nonprofit, "had this habit of not paying the pharma industry." Some have become better at paying since Roche has cut them off, because they realize their reputation with patients is at stake, he said.
Should Greece's financial situation deteriorate further, Roche could "have even more troubles to collect," he said.
—Dana Mattioli contributed to this article. Write to Jeanne Whalen at jeanne.whalen@wsj.com