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A glance at the evolution of the pharmaceutical clawback in Greece

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Russia has introduced a range of significant international and domestic tax policies since March.

Julia Pournara of EY Law Greece explores the growth of the concept of pharmaceutical clawbacks and considers its impact on the economy.

At the onset of the economic crisis in Greece during 2009, total health expenditure was among the highest in the EU in terms of the gross domestic product (GDP) share (i.e. around 9.5%), of which, 68.5% was mainly financed through public schemes. Under the enormous pressure to achieve significant cost-cutting and reforms in 2012, Greece introduced closed healthcare budgets and a clawback mechanism, with the aim of reducing pharmaceutical expenditure. Essentially, when public spending on medicines exceeds the thresholds of the respective closed budgets, any surplus is ‘repaid’ by all pharmaceutical companies, on the basis of a specific formula. 

Clawbacks are calculated every six months, per the marketing authorisation holder (MAH), taking into account the market share and growth rate, a drug’s ex-factory price and other data, and may be offset with the state’s debts towards insurance institutions. This mechanism has resulted in a decrease in public spending, a significant increase in private spending and, arguably, a decline in pharmaceutical companies’ growth rates. 

The mechanism was fiercely challenged before the Council of the State, which, however, validated its legality on the ground that it was a temporary measure, both necessary and proportionate, in order to defend the financial challenges that the country was facing during the economic crisis. However, clawback enforcement was not limited to the initial three-year period but was instead extended by subsequent laws, until 2022. 

In Greece, the pharmaceutical industry’s clawback equalled 27.3% of public pharmaceutical expenditure in 2019, although the European average was only 8.6%. In tandem, the rate of the private sector’s contributions to the public pharmaceutical spending is ever-increasing, transforming clawback into a ‘slow-burning time-bomb’ for pharmaceutical companies. 

Despite several reforms and streamlining of public health spending during the crisis, clawback and rebates value increased by approximately 420%, between 2012 and 2019. The private sector’s contributions (clawback and rebates), which amounted to 7% of the pharmaceutical industry’s annual turnover in 2012 (about €79 million), rose up to 32.5% by 2017, and 45% in 2019, while clawback exceeds €1.2 billion; the corresponding EU average is 15%. As a result of the COVID-19-related increases in health spending, the clawback of the first trimester of 2020 is estimated to exceed 46% of last year’s corresponding amounts. 

Due to the industry’s continuous efforts to rationalise clawback figures, a rectifying measure was implemented by the government in 2020, whereby pharmaceutical companies are able to offset part of their outstanding clawback, with amounts they invest in research and development (R&D) and business development plans. For the second half of the financial year of 2019 (FY19), such offset may reach the amount of €50 million in total, at maximum, for all interested pharmaceutical companies. For the entirety of 2020, it is expected to be set at the maximum amount of €100 million. 

Though this was indeed a first, relieving step for the industry, it was, in fact, just a small drop in the ocean, as it reduces the €1.2 billion clawback of 2019 by €50 million (i.e. by 5%), and was sought and used by a very limited number of pharmaceutical companies.

With the deadline for submissions by pharmaceutical companies wishing to benefit from the above measure having being short, 36 applications to a total of €100 million worth of investments in R&D and business development plans for FY19, were ultimately submitted to the relevant authority. According to relevant data, 80% of these submissions were filed by Greek pharmaceutical companies. The above shows that, if the clawback ‘over-taxation’ problem is rectified, a surge of investments by both Greek and foreign pharmaceutical companies is likely to follow. Based on the review of those submissions, the €25 million available to offset clawback amounts with R&D expenditure were fully ‘utilised’, whereas only half of the remaining €25 million available to offset clawback with amounts invested in development plans was ‘utilised’.

A positive turn towards clawback rationalisation can also be seen in the Council of State’s September 2019 decision, which annulled the imposition of clawback on orphan drugs. This was decided on the ground that the enforcement of this mechanism on products treating a small, unchanging number of strictly identified patients suffering from rare diseases, is against the constitutional principles of equality and proportionality. 

As clawback has inevitably become the industry’s top concern, the associations of both multinational (SFEE) and national pharmaceutical companies (PEF) are putting forward specific elaborated proposals to rationalise the whole mechanism, such as the exemption of vaccines-related expenditure and spending for uninsured patients, from the related closed budgets. So far, there are positive indications that the Ministry of Health will consider not imposing clawback on vaccines-related spending in the future, yet nothing can be definite until applied. One thing is certain though; the industry’s initial objective for the abolition of the clawback mechanism will probably never be achieved, but a number of small wins are most likely on the way.

Julia Pournara

T: +30 210 2886 915


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