Greece Pharmaceuticals and Healthcare Report Q1 2012
BMI View: It is beyond doubt that drugmakers in Greece – particularly domestic producers primarily exposed to their home market – are faced with the most challenging operating environment in Europe. Our view that Greece’s pharmaceutical market is set for a decade of decline remains firmly in play. Further worsening of Greece’s economic outlook for 2012 has led to an additional downward revision in our growth expectations for the drug market.
Headline Expenditure Projections:
?? Pharmaceuticals: EUR7.20bn (US$9.55bn) in 2010 to EUR6.48bn (US$9.26bn) in 2011; -10.1% in local currency terms and -3.0% in US dollar terms. Forecast unchanged from Q411.
?? Healthcare: EUR22.87bn (US$30.34bn) in 2010 to EUR21.64bn (US$30.95bn) in 2011; -5.4% in local currency terms and +2.0% in US dollar terms. Forecast lowered from Q411 due do worsening macroeconomic indicators.
?? Medical devices: EUR959mn (US$1.27bn) in 2010 to EUR886mn (US$1.27bn) in 2011; -7.6% in local currency terms and -0.4% in US dollar terms. Forecast unchanged since Q411 Business Environment Rating: While our outlook for Greece’s pharmaceutical sector remains very pessimistic, for now the market continues to benefit from high per capita expenditure on medicines, which benefits the overall industry rewards criteria. For Q112, we have downgraded our view on Greece’s drug approval process but moderately reassessed our view on the role of public funds in the purchase of medicines. Greece’s overall Business Environment Rating is 59.6 for Q112, ranking it fourth in the region and well below its historical leading position.
Key Trends And Developments
?? In early October 2011, a highly charged meeting on pharmaceutical policy was held in parliament. After what was described as a seven-hour fight with the government, it seems further drug reforms, which were expected to come into force at the start of September 2011, will be delayed until January 2012, including delays to the new pricing and reimbursement system.
?? In addition to measures imposed by the authorities, drugmakers in Greece are facing problems with the payment process. The level of hospital debt, which is historically high and compounded by budget cuts, has meant public hospitals are unable to pay their drug bills.
?? In September 2011, Roche said it had to stop delivering drugs for cancer and other diseases to some state-funded hospitals due to non-payment. It also said it may need to adopt similar measures in Spain, while some state-funded hospitals in Portugal and Italy have also fallen far behind on payments.
?? While the government is trying to tackle public healthcare expenditure, the country’s wider economic crisis is having an unexpected and damaging impact on public health. According to research published in The Lancet medical journal in October 2011, Greece is facing an increase in the number of suicides, homicides and HIV infections, along with alarming numbers of people becoming involved in illegal drugs and prostitution. The report found the reduction in healthcare services and hospital budgets has meant fewer people are seeking help or treatment. People are also becoming severely depressed due to rising unemployment and extreme budget cuts.
BMI Economic View: Greece’s economic depression is likely to have deepened in Q411 and potentially in Q112 on the back of an outright collapse in confidence and heightened uncertainty over the beleaguered economy’s future in the eurozone. While we expect the pace of contraction to ease in 2012, we stress that a return to sustainable growth is predicated not just on successful economic reforms but also on targeting policies at future growth industries and restoring confidence.
BMI Political View: In a bid to suppress the political crisis and restore some semblance of faith in Greece’s commitment to fiscal reforms and the euro, Athens has installed a national unity government, allying the opposition New Democracy party with the PASOK administration. While this may provide some relief in the short term, the prospect of fresh elections in early 2012 indicate further instability and uncertainty ahead.
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