Bloomberg News

Greek Crisis Spurs War on Health Fraud Rooted in Gifts

April 01, 2012

A pedestrian passes a pharmacy store in Athens. Photographer: Simon Dawson/Bloomberg

A pedestrian passes a pharmacy store in Athens. Photographer: Simon Dawson/Bloomberg

Greece’s financial crisis is forcing the country to stamp out health-care corruption that began decades ago with gifts of cheese and chickens from farmers grateful for the care they received.

The urgency to fix the Greek health-care system has grown as the country’s finances have teetered on the brink of insolvency. Corruption, including prescription fraud and bribery for surgeries, has run rampant, costing the government hundreds of millions of dollars. The crisis has become so widespread that hospitals are considered the most corrupt public sector in the country, ahead of tax offices and town planning authorities, according to a recent nationwide survey.

“It is certain that wherever there is honey, somebody will dip their finger in it,” George Patoulis, chairman of the Medical Association of Athens, said in an interview.

The honey, though, is no longer flowing so freely. One of the unexpected consequences of the Greek debt crisis is that austerity measures are forcing the government to tackle once and for all health-care corruption described by doctors, policy officials and patients as endemic.

Exactly how much money Greece loses to health-sector corruption isn’t clear, said Costas Bakouris, chairman of the Greek branch of Transparency International, an anti-corruption organization based in Berlin that conducted a 2010 survey on Greek attitudes toward health-care institutions.

“You’re talking about numbers in the billions” for corruption and mismanagement together, Bakouris said in a telephone interview.

Reducing Waste

To get a handle on the crisis, Greece promised as part of its debt-financing deal with the European Commission, European Central Bank and International Monetary Fund to reduce public spending on medicine to 2.8 billion euros ($3.7 billion) this year from 5.2 billion euros in 2009. Hospitals’ drug costs are supposed to drop to 870 million euros from 1.38 billion euros, according to the Health Ministry.

It won’t be easy for a small country with a reeling economy to hit those numbers. To get there, Greece needs to pare its drug bills by 1 billion euros this year, on top of the 1 billion euros it has already cut in outpatient drug spending since 2009. To achieve the next round of cuts, the government is pinning its hopes on a massive reorganization to reduce mismanagement, including stamping out health-care fraud and abuse, according to a report by the three agencies, known as the troika.

To that end, Greece promised to reorganize its health system to increase use of cheaper generic drugs and reduce waste. Some of those measures will also help curb corruption, including an electronic system to prevent fake prescriptions, eliminating under-the-counter payments in hospitals and making it easier to sanction doctors who don’t follow the rules.

Outright Bribery

Doctors traditionally have gotten a bonus, a practice that in the last 30 years has deteriorated into outright bribery, Bakouris said. Payments to doctors to schedule treatments ranged from 150 euros to 7,500 euros in his group’s survey. Envelopes of cash passed to doctors, known as fakelaki, ranged from 50 euros to 1,500 euros.

Ending the practice of fakelaki will not solve Greece’s health-care money woes. But reining it in, officials hope, will help change the cultural forces that have encouraged corruption to thrive.

Private Hospitals

Thirty-five percent of the public-sector cases in 2010 in which ordinary Greeks were asked to pay a bribe to speed service were in hospitals, according to the survey of 6,114 people. Hospitals, in addition to being seen as the most corrupt public sector, also led in the private sector, with 19 percent of reported cases of corruption, ahead of lawyers and private doctors.

“For the last five years that we’ve done the research, health is number one in terms of cases of corruption,” Bakouris said.

The day after Greek lawmakers approved austerity cuts in medical care in a midnight vote, Health Ministry general secretary Antonis Dimopoulos said Greece’s runaway spending problem is grounded in three factors: a poorly organized public health system, too many doctors and corruption. Between sips of frappe in his sparsely furnished office, where a secretary gave visitors their own toilet paper for the unheated bathroom, the official sketched out the numbers on a piece of paper.

Glut of Doctors

Public-sector drug spending doubled in the five years leading up to 2009, Dimopoulos said. Greece has a glut of doctors -- 6.1 doctors per 1,000 residents in 2009, the most of any country tracked by the Organization for Economic Co- operation and Development. Physicians looking for profit were susceptible to pressure from drugmakers to prescribe the newest, most expensive medicines, even when cheaper drugs would have been just as good, the health ministry’s Dimopoulos said.

“You bring a brand new drug and you push the doctor to write it because it’s more expensive than the other one,” he said. “That’s the main problem.”

Some doctors wrote prescriptions for patients who didn’t exist, or who weren’t sick at all. A portion of those drugs are then shipped out of the country and resold in markets where they garner higher prices than in Greece. Exports of fraudulently prescribed treatments may amount to as little as 50 million euros or as much as 200 million euros a year, Dimopoulos said.

Reimbursement Fraud

Drugmakers say that in the murky market for Greek medicines, that figure could be much bigger. Reimbursement fraud in Greece, including but not limited to exports that are resold, amounts to as much as 500 million euros a year, Richard Bergstrom, director-general of the European Federation of Pharmaceutical Industries and Associations, said in an interview.

“I don’t think anyone really knows what it is,” Bergstrom said. “The figures aren’t reliable. It’s a nightmare to figure out what’s going on.”

Drugmakers have been making allegations of fraud for years, said Manolis Katsaris, chairman of the Panhellenic Association of Drug Wholesalers. That’s mostly because they don’t like being undersold in expensive markets through parallel trade, a legal practice in the European Union, he said.

As Katsaris spoke, about a dozen workers in his Athens warehouse were organizing the inventory after a move to a new headquarters. Boxes labeled with the names of drugmakers Novartis AG (NOVN), AstraZeneca Plc (AZN) and Baxter International Inc. (BAX:US) were stacked next to racks of personal-care products. One man made printouts on a machine filled with pastel paper.

Tracking Medicines

If the troika and the Greek government have their way, such paper forms may soon give way to a computerized prescription system for all doctors -- another way to track medicines and prevent duplicates and fraud. The government has begun a bidding process to expand a temporary system first designed two years ago, said Dimitris Tasias, sales manager for the public sector in southeast Europe, at Intracom Holdings SA (INTRK) unit Intrasoft International. Intracom is one of the companies bidding for the new system.

An e-prescription system would link scrips with specific doctors and patients. Less than half the doctors in Greece use the temporary system, Tasias said. Once the new program is up and running, though, Greece would be ahead of most of Europe, he said. Only Denmark, Estonia, Iceland and Sweden already have comprehensive e-prescription.

Medical devices are another part of Greece’s corruption problem.

A Greek doctor in private practice, who declined to be named because of fear of retribution from other doctors, explained how bribes from device manufacturers work. Companies would ask doctors to order specific materials at prices that could vary as much as several hundred euros from hospital to hospital, then give doctors a cut of the revenue, he said in an interview in Athens.

Bribery Settlement

Smith & Nephew Plc (SN/), a London-based maker of joint replacements, admitted in February that its U.S. and German units bribed Greek doctors from 1997 until June 2008 to win business. Smith & Nephew agreed to a $22.2 million settlement after allegations from the U.S. Justice Department and Securities and Exchange Commission.

Court filings in the Smith & Nephew case show the company wasn’t the only device manufacturer bribing doctors.

In a March 2002 e-mail, a Greek distributor who used shell companies to hide the bribes to a Smith & Nephew vice president complained that the “marketing services” payments weren’t big enough. Competitors were paying 30 percent to 40 percent more, the distributor said in the e-mail.

Cheese and Chickens

The financial crisis may already be slowing the flow of under-the-table money to doctors, research by Transparency International shows. A survey to be released next week by the group shows that this is the second year in a row that corruption has declined, Bakouris said. While corruption in the public sector is still high, it’s decreasing in some areas of the private sector, he said. Fakelaki are also dropping in size, though the practice still persists, he said.

“It’s part of our culture,” said Nikolaos Economopoulos, head of a private optometry clinic in Athens.

Economopoulos, who says he doesn’t accept fakelaki, recalled how his father, a doctor in rural Greece, would be given gifts of cheese or chickens by grateful patients. Over time, such displays of appreciation conditioned many doctors to expect, or even demand, gifts or money, he said.

“It got worse and worse,” he said in an interview in his office. “Now it’s better because nobody has any money.”

A generational shift may also be under way.

Gifts used to help patients feel closer to their doctors, said Mihalis Karatzias, 57, who said he had just tried that day to give some money to a doctor at the hospital.

“They told me off,” he said. “We’ve changed our mentality. I shouldn’t have done it.”

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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