Q2 2009: effects of crisis visible on Romanian pharmaceutical market

2009-10-28

The Romanian pharmaceutical market grew quite dramatically between 2005 and 2008. During the period analysed, the average CAGR (Compound Annual Growth Rate) in RON and euro reached approximately 12% in terms of value. However, in Q2 2009, sales in all areas of the market were at their worst for a long time.

Deterioration for foreign companies in Q2 2009
In 2008 and 2009, when comparing growth on the market in RON and in euro, the gap has been becoming increasingly wider as a result of the depreciation of the local currency. In 2008 the total value of the market therefore reached RON 7.15bn, or €1.94, reflecting year-on-year increases of 16% and 5% respectively.
In the 12 months which ended in Q2 2009 the market grew by approximately 18% in RON, to RON 7.6bn, and by 5% in euro, to €1.93bn.



Not until Q2 2009 was real deterioration in the situation seen on the Romanian market. At the time in question, sales declined in almost all market areas in terms of value and of volume, in retail and in hospital services, taking values in euro and in RON into account. The reductions were more substantial in euro than in the domestic currency. This means that the situation on the market has been becoming increasingly difficult, particularly for foreign companies, for which accounts in euro are more important than those in RON.
The areas which suffered the most were the hospital subdivision and OTC drugs. For example, sales of OTCs declined by one-fifth in terms of volume and by almost 16% in terms of value in euro in comparison with Q2 2008. With regard to Rx sales, these maintained a positive growth rate in the local currency, chiefly because of the fact that patients who could not afford to buy drugs benefited more from the reimbursement system.
The declines in pharmaceutical sales were prompted by the financial crisis – the weakening of currencies and the deterioration in the purchasing power of society. In addition, the Health Ministry has taken a number of steps to limit its spending on drugs. For example, the prices of imported drugs in Romania fell on average by 10% from 1 April onwards as a result of a new price calculation methodology introduced by the government (Decree 75/2009). In accordance with the new methodology, the CIP price (the base price to which wholesale and retail markups are added) is set in RON instead of euro. In addition, the CIP price is set at the level of the lowest price of the same product in 12 European countries in which the product is inexpensive.
Furthermore, in April 2009 the Health Ministry again adopted the practice of prescribing drugs in accordance with their INNs (International Non-proprietary Names) rather than by brand. This will also contribute to sales of cheaper generics rather than expensive innovative therapies in subsequent months.





Antineoplastic agents on rise
During the 12 months which ended in Q2 2009 all main categories recorded double-figure growth in terms of value in RON. However, the only category whose performance significantly outpaced the overall market was that of antineoplastic and immunomodulating agents. Sales in this category doubled in comparison with Q3 2007-Q2 2008. As a result its share as a proportion of the market increased from 8.5% in 2007 to 12.3% during the period analysed. This was a result of, among other things, the implementation of new health programmes focusing on cancer treatment in 2008 which stimulated the growth of antineoplastics. As a result sales of anti-cancer drugs were worth almost €120m, whereas in 2004 the figure was less than €40m.
The company which benefited the most from the favourable situation pertaining to antinaeoplastic and immunomodulating medicines was Roche, an innovative concern which focuses on cancer drugs. As a result, it established a dominant position on the market, and its share increased from 6.8% in 2007 to 8.1% between Q3 2008 and Q2 2009. In H1 2009 alone the company achieved a 50% increase in sales turnover, to RON 350m (€83m) based on the healthy sales of drugs such as Pegasys and Xeloda.
It is worthy of note, however, that the sales of Actavis, the second company in the area in question, declined. In our opinion, this is, in part, because the period in question was particularly advantageous for innovative, rather than generic, producers: between April 2008 and April 2009 Romanian doctors were ordered to prescribe drugs by brand.



Short-lived prosperity of foreign manufacturers
The good times for foreign manufacturers were only temporary. This pertains, in particular, to innovative companies with the most expensive products, which were more severely affected than others by price cuts at the beginning of the year. Some manufacturers are even considering putting an end to the import of a number of their products on the Romanian market.
In addition, this is not the end of the cost-containment decisions of the Romanian government – as part of its policy it is also planning to introduce a tax on the sale of reimbursed medicines, a move which is expected to bring an extra RON 100m (€23m) to the budget.



* without Sindan Pharma
** including Europharm
*** including Sandoz
**** including Egis
Source: Cegedim, 2009

All data presented in the article are sourced from Cegedim, a market research company.

Monika Stefanczyk
Head Pharmaceutical Market Analyst
monika.stefanczyk@pmrpublications.com