Spain's hospitals are reportedly in debt to the pharmaceutical companies that supply them with drugs and medical devices to the tune of 12 billion euros. Last week Sagrario Pérez Castellanos, the director general of Basic Services and Pharmacy at the Health Ministry, told reporters that she couldn't confirm the figure, saying that the government didn't have data for hospitals' full costs because regional governments, who are responsible for budgeting their health services, can't - or won't - provide accurate figures.
Farmaindustria, the body that represents Spain's pharmaceutical companies, has a clearer picture of the problem: it says that of the 12 billion euros, "6.4 billion covers medicines, and the rest covers items such as disposable gloves, bandages, syringes, etc." It adds that regional health authorities take between 18 and 26 months to pay their suppliers.
In a bid to reduce its drugs bill, the Health Ministry says that it has already cut subsidies to patients on prescriptions by 11 billion euros a year. But Farmaindustria says that more needs to be done, and paints a stark picture of the challenges facing Spain's national health service. "The current model cannot cover everything. If we want to avoid a collapse, then the budget needs to be increased; if not, then we'll have to establish new criteria for services and who receives them, and on what basis," declares Farmaindustria president Humberto Arnés.
For the moment, the multinational pharmaceutical companies that keep Spain's health services running have not cut supplies, as they have in Greece and Portugal. But the danger is there. In the meantime, the government has announced a 35-billion-euro bailout fund for the regions to keep suppliers paid.
Spain's 17 semiautonomous regions control their healthcare and education budgets. Given that they overspent in 2011, reforms in these two areas are seen as key to improving the country's fiscal position.
Public health spending was 2,336 euros per capita in 2009, below an average of 2,560 per capita in the OECD club of wealthy nations, based on the latest available data.
The Health Ministry has cut subsidies on prescriptions by 11 billion euros a year
Either way, Farmaindustria says that it is fed up negotiating the mounting debt with Spain's regional governments on an individual basis, and wants Madrid to appoint an intermediary, as well as setting out clear guidelines and a timetable for the 12 billion euros to be paid back, with interest, along with guarantees that such a debt will not be allowed to build up again. It also knows that the central government is unlikely to be in a position any time in the foreseeable future to step in again to clear the regions' healthcare debts.
Another sign that the pharmaceutical companies are now playing hardball is that companies such as Bayer, Sanofi, Abbot, as well as other multinationals, are boycotting an auction for suppliers that the regional government of Andalusia has announced, hoping to bring prices down.
So would the multinationals really pull the plug on the health service if they don't get their way? "I don't think so: these players have plenty of cash, and they know that if the health system in this country collapses then they will have lost the goose that lays the golden egg. They will continue to lobby and to make a lot of noise, but they can afford to wait, and they will eventually reach an agreement," says a former senior official in the Health Ministry, who now works in the pharmaceutical industry.
An example of the noise that the sector can make came on February 7, when the Spanish medtech industry association, FENIN, along with Farmaindustria and several European chambers of commerce, published an open letter to the Spanish government warning of the dire economic consequences of Spain's mounting healthcare debt.
Farmaindustria says that it is fed up with negotiating the mounting debt
The thinly veiled threat called the current situation "unsustainable for the pharmaceutical and healthcare technology industries" and responsible for "spoiling the reputation of Spain in international markets." It noted that "economic pressure has prompted some companies to abandon operations or decrease labor forces, which in turn threaten the supply of several products."
The letter described the government's recent statements as "positive" but "insufficient," and called on Rajoy to take measures to more effectively address the debt of Spain's regions and counter the growth of debt across the country.
"The current state of affairs," said the letter, "has created uncertainty and distrust among investors, healthcare companies and the general public. These stakeholders deserve immediate action toward a more sustainable path."
Humberto Arnés says the letter's warning was clear: "A country that cannot pay its debts will find it harder to borrow money on the international markets." He says that Farmaindustria has made its position clear to the Health Ministry, as well as to the health authorities of all 17 regional governments. He says the multinationals are unhappy, for example, that regional health authorities are increasingly opting to save money by buying generic drugs based on their active ingredient, thus bypassing the multinationals' brand names, along with other measures by the previous Socialist Party administration that he says has cost the multinationals five billion euros over the last year, along with five thousand jobs - "That's 10 percent of the sector."
Will multinationals really pull the plug on the sector if they don't get their way?
Spain may only represent two percent of the multinationals' global turnover, but Arnés says that they have "had enough."
"We have reached crisis point. It is hard to maintain investment in Spain; I am having a hard time convincing the board that we should continue investing here," says Marc-Antoine Lucchini, the president and director of Sanofi Iberia.
"Our debt has grown by 56.2 percent in 2010, and then by 41.4 percent in 2011, and by eight percent in the first two months of this year. The head office is telling us that the situation is not sustainable and that we should take every measure we can to get our money back," says Ana Céspedes, the president of Merck Spain. Lucas Urquijo, communications director at Roche, says that his company's priority is to get paid. "We will take measures in response to the replies we get from the regional governments, because this debt cannot be allowed to continue growing. We are owed around one billion euros."
Carlos Gonzalo, of the French Chamber of Commerce in Barcelona, adds: "Until now the big players have not had to cancel any projects, but there are many that are on hold waiting for this situation to be resolved."
"The current state of affairs has created distrust among investors"
The government believes that it can continue to make savings by improving efficiency in the health service, and last week Economy Minister Luis de Guindos mooted the idea of making those on higher salaries contribute toward treatment. According to a law passed last Thursday, the central government can take control of any region deemed to be failing.
A press release on the latest cuts outlined plans for privatization, education and healthcare "reform" and "the elimination of duplication" of large public services. Ana Céspedes of Merck Spain says that the government has three choices: to spend more money on the health system; to reduce the services currently available; or to improve efficiency. So far the government has cut salaries of health staff, and, to the annoyance of the pharmaceutical companies, told the regions to start buying generic drugs rather than brand names.
The next step will most likely be to begin privatizing the management of hospitals, a policy backed by the neocon premier of Madrid, Esperanza Aguirre of the ruling Popular Party.