After the world pharmaceutical market, assessed to a global value of 1,300bn USD, came through its latest patent cliff three years ago, it has resumed its sustained growth path, with the global prescription drug market up +5.2% at USD830bn in 2018 compared to 2017, reads a Euler Hermes study of the pharmaceutical sector.
This growth was fueled by the upswing of +9% in the number of new medicines launched last year in the US market, especially in the innovative therapeutic field of oncology. As the most innovative medicines are also the most expensive ones, physicians often prescribe the latter for their patients. This helps boost the pharmaceutical market’s value, the study argues.
The pharma sector in Romania posted an annual growth of 19 pc in September this year, mounting to almost EUR 4 billion.
“With an annual volume of almost EUR 4 billion and an annual growth of around 19% in September 2019, keeping the proportions of the Romanian market seems to fold quite well on the trends manifested globally. We notice a similar inclination towards the over-regulation of prices for compensated drugs, the pressure exerted on the reduction of prices to the final consumer, adding to the high level of the claw-back tax (over 25%) at the producers. The obvious effect as a measure of response from the supply is already manifested by the constant decrease of the availability of cheaper drugs (especially from the compensated ones, but not only),” says Mihai Alexandru Chipirliu, CFA, Head of Risk Analysis, Risk Department, Euler Hermes.
He said that the market consolidation trend continued and is visible at the level of the entire producer-distributor-pharmacy chain by taking over existing players. “If at the level of producers the absorption of other companies did not necessarily have as mobile the increase of the share of the local market, but especially the capture of export opportunities, the motivations differ at the level of the subsectors downstream. The top of the main distributors becomes more compact either through the acquisition of top players by European notorious pharmaceutical groups (such as the acquisition of Mediplus leader and the related pharmacy chain Sensiblu-Punkt by the Czech Penta conglomerate or the acquisition of Farmexim distributor and the affiliated pharmacy chain HelpNet by the German group Phoenix), either by taking over smaller pharmacy chains or becoming in a poor financial position. Thus, if we include the distributor of the group with the densest network of pharmacies – Chain, the first 4 distributors concentrate significantly over two thirds of the distribution market,” Chipirliu explained.
The Euler Hermes CFA added that they expect the trend of market consolidation at least at the level of distribution and retail to continue in the coming period.
“Returning to the steady double-digit growth of the market in recent years, we must not neglect the substantial contribution that they have had in increasing volumes mainly during the period 2016-2018 the cost-volume programs such as Interferon subsidized by producers on the one hand, and the state on the other hand, which has some insignificant profit margins. Without the contribution of these programs, the increases would have been much lower and sometimes even close to zero.
Also, although the level and evolution of insolvencies in the sector has slowed down in the last two years, and the Ministry of Health’s budget is building on a double-digit increase, we must not neglect that the takeovers of pharmacies and distribution businesses in recent years have masked in some cases or prevented the recurrence of major insolvencies.
Last but not least, shrinking margins and widening collection terms lead to additional risks for business sustainability along the entire pharmaceutical chain”, says Mihai Alexandru Chipirliu.