On Friday Roche confirmed it had come to the end of its tether with state-funded hospitals in Greece. In an interview with the Wall Street Journal, CEO Severin Schwan announced that the company has increased shipments of drugs to pharmacies in the country, while cutting off supply to those Greek hospitals that have failed to pay their drugs bills or have paid them in government bonds. Roche has been stung by Greek bonds before, having had to sell a recent batch at a 26% discount. Further, if Greece defaults on its euro debt its government bonds would be rendered worthless. Bloomberg stated recently that Greece has a 98% chance of defaulting in the next five years (although, as we speak, the EC and the IMF are trying to agree on another bailout).
The move seems yet another international blow for an already beleaguered country, but the decision is pragmatic: Schwan explained that some Greek hospitals haven’t been paying their bills for three or four years. “There comes a point where the business is not sustainable anymore,” he added, not unreasonably. There has been talk across the EU of co-opting the private sector to underwrite a portion of the eurozone losses, but clearly Roche (and others) have already been doing this as far as Greek hospitals are concerned. Even the most philanthropic private sector company is going to have to think hard about dishing out ‘aid’ to a country in Greece’s position.
But as Jeff Harding writes on dailycapitalist.com, it is the eurozone that is in serious trouble; Greece is “just a symptom.” From a creditors’ perspective, following the logic of the ‘domino effect’ that threatens to envelop similarly cash-strapped countries (Italy, Spain, Portugal), Roche, and eventually the rest of Big Pharma, might find itself having to cut off supply to hospitals all over Europe. So far the Swiss drugmaker has countered the ethical implications of its draconian move, saying patients in Greece haven’t been deprived of their medication as a result. (They now have to take their prescriptions to a local pharmacy, and bring them back to the hospital if they need to be administered by a specialist.) Thus, it is considering implicating the same measures in Spain. But just how feasible is this for large and increasingly elderly patient populations? We may find there is more of an outcry when similar cut-offs are imposed on countries that are currently viewed with more sympathy than Greece.