Novo pulls drugs from Greece over price cuts

Novo Nordisk A/S (NOVOb.CO) pulled some of its insulin drugs off the Greek market after an Athens order for drugmakers to slash prices, saying it fears such cuts could spread to larger markets.

Lars Rebien, chief executive of the world’s biggest diabetes care firm, said on Monday the Greek government’s order that it should cut some prices by 25 percent was “unacceptable”.

Drug prices are in the firing line as European governments seek to tackle budget deficits and Greece has ordered the steepest cuts, leading drugmakers to worry they could be forced into making similar reductions in other markets.

Denmark-based Novo is the first drugmaker to pull drugs off the Greek market due to pricing in the debt crisis, but was followed by dermatology and critical care drugmaker LEO Pharma which said it would also withdraw some products from Greece.

Sorensen said he is in talks with the Greek government, which has ordered a 25 percent cut in the price of the Danish firm’s insulins.

“What they propose right now is not acceptable ... It will have a rub-off effect on the European price level and it has an effect on other markets outside Europe where the Greek prices are used as a reference price in negotiations with governments,” Sorensen told Reuters.

The company told the Greek government it will not lower the prices of its most recent insulin products, so-called modern insulins, and insulin products for use with pen injection systems. As a result wholesalers have stopped ordering these products as they would have to sell them at a loss, Novo said.

Sorensen said Novo’s modern insulins would run short in Greece within a few weeks.

The new Greek regulations will result in a weighted average price reduction of 21.5 percent, with bands of cuts ranging from 3 percent for products with a wholesale value of 1 to 5 euros, to up to 27 percent for drugs priced above 100 euros.

SHORTAGE OF MEDICINES

Legal counsel for the Hellenic Association of Pharmaceutical Companies, which represents local and international manufacturers, had warned that Greece’s drastic price cuts could lead to a shortage of medicines. [ID:nLDE6440D5]

Europe’s largest drugmaker GlaxoSmithKline Plc (GSK.L) said it would continue to supply its medicines to Greece, while AstraZeneca Plc (AZN.L) said it had no plans to withdraw medicines from the Greek market.

But AstraZeneca said it was concerned about the cuts, which it said appeared to contravene Greek law, and was working through industry bodies “to engage with the Greek government in an effort to reverse this latest policy”.

Novo spokesman Mike Rulis said in an e-mail statement a 25 percent price cut did not allow Novo to run a sustainable business in Greece, a relatively small market for the company.

Such a cut also would bring prices in Greece “way below what other European countries are paying”, Rulis added.

Novo will continue supplying human insulin products at the reduced prices set by the Greek government to ensure people with diabetes are not without access to insulin treatment.

Shares in Novo were down 0.4 percent at 465.70 Danish crowns at 1408 GMT, while the STOXX Europe 600 healthcare index .SXDP was up 0.6 percent.

“As prices in Greece are used as reference prices by other countries both inside and outside Europe, this reduction in Greece would trigger similar reductions in these countries, which would have serious financial consequences,” Rulis said.

This view was echoed by privately-held LEO Pharma, which said the planned price cuts would have severe consequences for its business, including investment in research and development.

“We risk that prices in for example Spain, Portugal, Italy, Romania, Turkey, Czech, Hungary ... will also be subject to severe reductions if we do not act,” Leo said in a statement.

Germany and Spain have also announced plans to reduce drug prices and cuts are expected in Portugal and Italy. [ID:nLDE6440D5] [ID:nLDE62P0XP]

Sorensen said Greece is the only market from which Novo has decided to withdraw its modern insulins due to the price cuts but did not rule out similar moves in other countries.

He said he did not expect a significant earnings effect for Novo this year from price reforms in Europe, echoing Chief Financial Officer Jesper Brandgaard who said last week he was more concerned by longer-term implications for the overall price levels in Europe. [ID:nLDE64P12F] (Additional reporting by John Acher, with Kate Kelland and Ben Hirschler in London; Editing by Hans Peters and David Holmes)

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COPENHAGEN, May 31 (Reuters)