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Electronics Production | March 23, 2010

700 days payment terms for medical firms in Europe

Brazil and Mexico are putting many European countries to shame by paying their suppliers within 55 days.
Some half a million people are employed in the European medical technology sector. Its livelihood depends to a large extent on contracts with public authorities - most often public hospitals. Yet these authorities have failed to pay 10% of the total turnover of the medical technology sector and over €11 billion is owed to medical technology firms by three EU Member States alone.

“Small medical technology firms are waiting for up to 700 days to be paid by public bodies. The situation has become so severe that some companies are facing bankruptcy or may consider to exit the market” said John Wilkinson, Chief Executive of Eucomed. “Unfortunately, patients will also suffer when companies withdraw from the market and the range of products and treatments available will be restricted. This will have the effect to adding to health inequalities across Europe.”

Suppliers to the private sector can try to manage the problem by refusing to deliver goods until bills are paid or by seeking cash upfront. But when public local and national authorities are your principal customers, as is the case in the healthcare sector, this becomes more difficult. Healthcare companies not only have an ethical duty to deliver life-saving goods to patients but they would also risk their business relationships with the authorities that they serve. Public bodies in northern Europe generally accept that they have a duty to honour the terms of contracts. Elsewhere, national and local governments feel under no such obligation. In some cases, they clearly exploit their dominant position as near monopoly buyers.

In Spain and Italy, the average payment time is approximately 250 days. However, in some of their regions, this figure exceeds 600 days. In order to alleviate the situation in Spain, the country’s Parliament will vote on 23 March 2010 on a law which foresees a 30 days payment target for public authorities as well as accelerated procedures for claiming interest. Meanwhile, the situation is much the same in Turkey with public authorities taking on average 256 days to pay suppliers. However, it is not all doom and gloom in Europe.

For example, the British Government has committed central Departments and agencies like the National Health Service to pay within 10 days. This measure is part of a package to help in particular small and medium-sized businesses through the economic downturn and has resulted in nine out of ten invoices now being paid within that timescale. Ireland is another country where the Government is helping industry to recover from the crisis. Central government departments have committed to pay within 15 days with state bodies such as the Health Services Executive (HSE) promising to pay within 30 days.

“The situation across Europe varies dramatically and it is extremely surprising that countries such as Brazil and Mexico are paying suppliers quicker than many European countries,” said Mr Wilkinson. “To bring Europe up to speed, the Late Payments Directive should eliminate loopholes and encourage early payment by imposing penalties.”

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