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ORIGINAL PAPERS.....FROM PFS TO LOV... AND PAPA...

22.3.11
HELLENIC REPUBLIC
PANHELLENIC PHARMACEUTICAL ASSOCIATION (PFS)
Legal Person of Public Law
Athens 10 March 2011
Protocol No. 3032
To:
The Minister of Finance
Mr.     
Georgios Papakonstantinou

Notification
To:
The Minister of Health
and Social Solidarity
Mr.
Andreas Loverdos
Re: Updated Memorandum No. 4 (page 119)


Dear Minister of Finance Mr. Georgios Papakonstantinou:

We have been informed with much surprise that on page 119 of the Updated Memorandum No. 4 (Actions for the Eighth Review) the following are expressly provided: “Effective 2012 the profit margin for pharmacies shall be calculated as a single lump sum or a lump fee combined with a small profit margin aiming at an overall restriction of the profit margin to no more than 15%.”  

We take the occasion to express our complete objection. Our remarks on this issue are as follows:

  1. The profit margin (the gross profit margin) in effect is 22%,...... while by virtue of Law N. 3918/11 a rebate has already been provided by the pharmacists to the benefit of the insurance funds equal to 4.5% on average. In other words, the gross profit margin ranges presently between 18.5% and 20%. This profit margin is further reduced by the unlawful and unreasonable delay in payments by the insurance funds but also because of incessant “extraordinary taxation” (tax clearances, extraordinary contributions, etc)
Please see attached Table 1 specifying the average gross profit margin for pharmacists in the rest of Europe.
  1. The net profit margin (following the subtraction of cost coefficients) now ranges between 8% and 11% depending on the special circumstances of each individual pharmacy. This coefficient has also been accepted by the pertinent tax authorities.
  2. Our professional branch stands out as probably the only one in which tax evasion is non-existent due to the presence of watermarked coupons, electronically processed invoices, transactions with the state and insurance funds.
  3. The drop of the profit margin to a 15% rate abolishes in essence any attainment of profit since it can only cover operation expenses. In many cases it leads to negative turnovers and suspension of any anticipated tax revenue from pharmacies.
  4. The implementation of such a target contradicts a number of European Court Decisions and EU Directives such as Dir 35/05 and Dir 123/06. It also challenges the validity of the Lisbon Accord.
  5. The fact that an administrative decision on the determination of a profit margin may drive out of business more than 12,000 pharmacies should be the object of inquiry as to its legality and fairness. We believe that a reasonable profit margin such as the one in effect at present is necessary not only in terms of the economy and sheer logic but also in the legal sense (protection of entrepreneurship). Driving us out of business should in no case be an option at your disposal.
  6. It is surprising that such a one-sided and inefficient orientation should apply in further reduction of the already minimal profitability of pharmacies when the pharmacy sector reflects a mere 6% to 7% of the total in health care expenses. The fact that the remaining 93% or 94% does not merit the same diligence leads us justifiably to other conclusions (Please consult attached Table 2).
  7. Anyone with even a casual acquaintance with pharmaceutical expenses is well aware that the profit for pharmacies is the last and least factor affecting the rate of increase in pharmaceutical expenses. Even if one were to absolutely nullify any profit to pharmacies, expenses would still go up, as the root of the problem would remain wholly untouched. (The root of the problem being the replacement of cheap medication by expensive ones, the introduction of new and expensive treatments, over-prescription, etc)

Two examples should suffice:
a.      Diabetes Preparation A has a retail price of three euros. Let this preparation be substituted by Diabetes Preparation B costing 60 euros. Is the pharmacist’s profit at fault here?
b.      Medication prices were reduced by 22 % not too long ago. According to your reasoning expenses should have also dropped at a rate of 22%. Expenses, however, have gone up, due to replacement by more expensive preparations). Is the pharmacist’s rate of profit to be blamed again?

  1. Reductions in medication prices have been continuously instituted in recent years resulting in the withering of pharmacy stock and consequently in obvious financial damages. For example, in June 2010 the average reduction exceeded 30 %.
  2. We please ask you to take into account that we have supported all actions involving cost cuts despite the financial losses suffered by us, including price cuts, institution of medication lists, prescription controls, electronic dispensation of prescriptions, etc)
  3. Additionally by means of Law N. 3918/11 you have caused a great increase in the number of pharmacies despite the fact that Greece holds the world record in the pharmacy-to-resident ratio (consult Table 3).
  4. As it arises from the foregoing we believe that you will reconsider the specific point in the Memorandum instituting a gross profit margin of 15%. In any other case you will lead us to our certain death!
We appeal to you to take into consideration the circumstances pertaining to European pharmacies.

We are at your disposal for any clarification.

Respectfully,



……………………………………………………….
THEODOROS AMBATZOGLOU, PFS President




…………………………………………………...…..
DIM. KARAGEORGIOU, PFS Secretary General