Malta's pharmaceutical importers have not received a payment for essential medicines imported for the government health service since the beginning of October, industry sources say. This is threatening the viability of these companies - and putting essential supplies at risk.
"We have been told that the budget for the purchase of medicines in 2008 was exhausted in September, and that we will have to wait until it is topped up in January 2009," the sources continued.
This is the worst this particular problem has ever been, according to one leading pharmaceutical importer. It is not a new problem, but one which had until recently improved. The sums are considerable: none of the pharmaceutical importers spoken to was were willing to put a definite figure on the value of the overdue invoices. Some of the larger importers, however, put the value owed in the millions of Euroeuro.
As a standard, the government pays its medicine and medical supplies bills after 150 days, close to five months after invoicing, sources report. This means that the last invoices paid up to the end of September this year were issued in May. And all invoices since then will not be paid until the end of January, eight to nine months late.
"Despite this, we are still receiving purchase orders for more medicines and supplies, even as up to four or five previous invoices for orders delivered remain unpaid," another importer said. "And some of these new orders are for high value items!"
Suppliers give Malta's pharmaceutical importers a maximum of 60 to 90 days to settle their accounts, and in the current financial crisis it is believed that they are seeking to tighten credit terms as much as possible. This puts enormous pressure on the local importers.
"So far, the pharmaceutical manufacturers are cutting us some slack. We try to pay them within 60 days, but we do not always manage. How long will these multinationals continue to give us some leeway?" one importer asked.
"We all face high costs and slim margins, especially for essential products," another pharmaceutical importer said. To start off with, there are very stringent regulations imposed by the EU around the import and distribution of medicines.
"These regulations add to our costs - they do not come cheap. Don't get me wrong - we believe they are important controls but if we do not get paid for medicines we have supplied within a reasonable timeframe, then it becomes very hard to manage." This view is shared across the Maltese pharmaceutical import business.
To add to the woes, the actual process of importing and supplying the drugs can be very expensive in itself. A substantial number of these products need to be kept within a very narrow temperature range, typically between 2°C and 8°C. Each consignment of this type is monitored continuously during delivery from the suppliers to the importers' stores - and the logged recordings must be verified by an authority outside Malta before they can be distributed to the people who need them.
Once in storage here, the medicines still need to kept within that very narrow and constantly monitored temperature band. This
in itself is a substantial expense, both in terms of the monitoring equipment required and of the energy required for cooling.
Distributing and selling highly complex products like medicines also means that staff costs are high: importers need highly trained, well educated staff, who can understand the products they supply. This does not come cheap.
Financing the operation also becomes a problem. Very late payment creates cash flow problems for the importers, driving them to seek overdrafts and advances from banks to provide the liquidity they require to continue to operate. The longer payments are delayed, the greater the interest costs involved. It also appears that the government has been refusing to accept to pay interest on the overdue payments, as required by the EU Directive on late payments, thus placing the entire burden of this cost squarely on the shoulders of the private sector.
"Only the larger companies will be able to survive in these circumstances," an importer said. "The smaller companies which do not have the capital or the resources needed to raise the cash they need may not be able to continue with their business."
There is also the risk that the suppliers will refuse to continue to fill orders when payment is delayed, adding a further layer of risk for Malta''s medicine importers - and especially for the smaller, more vulnerable ones.
"The government keeps on about how important competition is, and how damaging monopolies can be," an industry source said." Yet if it continues down this path, it will be reducing competition in the sector or even creating new monopolies!"
More seriously, the current situation carries the risk that essential medicines, drugs that people rely upon will no longer be imported, either because the eventual foreign supplier is no longer willing to continue to make its product available when payment is consistently delayed by up to eight months, or if the local agent is forced to close its doors.
"We have been told that the budget for the purchase of medicines in 2008 was exhausted in September, and that we will have to wait until it is topped up in January 2009," the sources continued.
This is the worst this particular problem has ever been, according to one leading pharmaceutical importer. It is not a new problem, but one which had until recently improved. The sums are considerable: none of the pharmaceutical importers spoken to was were willing to put a definite figure on the value of the overdue invoices. Some of the larger importers, however, put the value owed in the millions of Euroeuro.
As a standard, the government pays its medicine and medical supplies bills after 150 days, close to five months after invoicing, sources report. This means that the last invoices paid up to the end of September this year were issued in May. And all invoices since then will not be paid until the end of January, eight to nine months late.
"Despite this, we are still receiving purchase orders for more medicines and supplies, even as up to four or five previous invoices for orders delivered remain unpaid," another importer said. "And some of these new orders are for high value items!"
Suppliers give Malta's pharmaceutical importers a maximum of 60 to 90 days to settle their accounts, and in the current financial crisis it is believed that they are seeking to tighten credit terms as much as possible. This puts enormous pressure on the local importers.
"So far, the pharmaceutical manufacturers are cutting us some slack. We try to pay them within 60 days, but we do not always manage. How long will these multinationals continue to give us some leeway?" one importer asked.
"We all face high costs and slim margins, especially for essential products," another pharmaceutical importer said. To start off with, there are very stringent regulations imposed by the EU around the import and distribution of medicines.
"These regulations add to our costs - they do not come cheap. Don't get me wrong - we believe they are important controls but if we do not get paid for medicines we have supplied within a reasonable timeframe, then it becomes very hard to manage." This view is shared across the Maltese pharmaceutical import business.
To add to the woes, the actual process of importing and supplying the drugs can be very expensive in itself. A substantial number of these products need to be kept within a very narrow temperature range, typically between 2°C and 8°C. Each consignment of this type is monitored continuously during delivery from the suppliers to the importers' stores - and the logged recordings must be verified by an authority outside Malta before they can be distributed to the people who need them.
Once in storage here, the medicines still need to kept within that very narrow and constantly monitored temperature band. This
in itself is a substantial expense, both in terms of the monitoring equipment required and of the energy required for cooling.
Distributing and selling highly complex products like medicines also means that staff costs are high: importers need highly trained, well educated staff, who can understand the products they supply. This does not come cheap.
Financing the operation also becomes a problem. Very late payment creates cash flow problems for the importers, driving them to seek overdrafts and advances from banks to provide the liquidity they require to continue to operate. The longer payments are delayed, the greater the interest costs involved. It also appears that the government has been refusing to accept to pay interest on the overdue payments, as required by the EU Directive on late payments, thus placing the entire burden of this cost squarely on the shoulders of the private sector.
"Only the larger companies will be able to survive in these circumstances," an importer said. "The smaller companies which do not have the capital or the resources needed to raise the cash they need may not be able to continue with their business."
There is also the risk that the suppliers will refuse to continue to fill orders when payment is delayed, adding a further layer of risk for Malta''s medicine importers - and especially for the smaller, more vulnerable ones.
"The government keeps on about how important competition is, and how damaging monopolies can be," an industry source said." Yet if it continues down this path, it will be reducing competition in the sector or even creating new monopolies!"
More seriously, the current situation carries the risk that essential medicines, drugs that people rely upon will no longer be imported, either because the eventual foreign supplier is no longer willing to continue to make its product available when payment is consistently delayed by up to eight months, or if the local agent is forced to close its doors.