ERNST & YOUNG SRL

 | 

ATENA MITUCA

  |  2014-12-15

Romania vs. Central and South Eastern Europe (CSE) – a comparative view on the pharmaceutical sectors

The local pharmaceutical sector continues its upward trajectory in 2013 in terms of sales, with a 7% year-on-year increase to reach USD 4.2 billion and rank third amongst five of its peers from Central and South Eastern Europe (Poland, Czech Republic, Hungary, Bulgaria, Serbia and Turkey)

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ERNST & YOUNG SRL


ATENA MITUCA

ATENA MITUCA

CONSULTANT – TRANSACTION ADVISORY at ERNST & YOUNG SRL

2013 Pharmaceutical outlook

The promising perspectives that are envisaged for the Romanian economy (i.e. real GDP growth of over 3% estimated by BMI in the following five years and lowering unemployment) could translate into a sound future for the pharmaceutical market, with forecasted annual sales of over USD 4 billion until 2018 that keep the domestic sector the second runner-up of the below CSE cluster.

 

In spite of the positive growth story that is to be written over the long-term, the local pharmaceutical sector still struggles with punitive taxes, pricing controls and a lack of funding by the state for reimbursing patients, in line with other Pharmaceutical industries that face similar challenges.

 

Namely, Hungary is confronting downward pricing pressures and cuts in reimbursement levels, whilst the Czech Republic’s main risks comprise pricing pressure, poor access to the market and increasing generic substitution. Bulgaria’s Pharma sector deals with downward pressure on the prices of drugs and political uncertainty, whereas Serbia’s pharmaceutical market, as one of the least developed in Europe, poses serious problems, such as limited financial resources, price cuts, inconsistent and inefficient pricing mechanism and reimbursement regime leading to frequent drug shortages.

 

 

Despite being the seven-country cluster’s stars, Poland and Turkey have their own Achilles’ heel, meaning a heavily regulated market, fixed retail and wholesale margins, weak patent and registration laws (Poland) and relatively low per capita drug spending, patenting law below international standards and low healthcare expenditure (Turkey).

 

Market structure – Prescription vs. OTC / Patented vs. Generic

With regards to drug market structure, in 2013, Romania has maintained the tendency that has been observed over the past three years, with around 82% pertaining to prescription drug sales and the rest to the OTC (over-the-counter) market. Prescription medicines still capture most of the total sales of pharmaceuticals, with lifestyle and chronic diseases emerging as key causes of mortality and therefore influencing the therapeutic distribution. Whilst over the long-term, in a context of proper financial support, sales of prescribed drugs are set to enhance, as access to higher-value innovative products generates growth, on the short term OTC market may be on an upward slope due to non-exposure to claw-back tax. Similar structure is describing the markets in the Czech Republic, Hungary and Bulgaria, explained by factors such as:


✱ Increased availability of innovative therapies and improved patient knowledge of available medicines (in Czech Republic);


✱ Low prescription drug prices, driven by government encouragement of generic medicine and price pressures, mingled with patent expirations (Hungary);


✱ The country’s demography and epidemiology that determine a great demand for prescription drugs (Bulgaria).


Both Turkey and Serbia are slightly different from Romania, the Czech Republic, Hungary and Bulgaria in pharmaceutical market structure, with main discrepancies being generated by: i) economic pressures on patients’ expenses and expected healthcare modernisation (Serbia) and ii) improvements in healthcare insurance coverage levels (Turkey).

 

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