Generics will continue their domination on the pharmaceutical market in CEE until 2011

2009-11-25

The pharmaceutical market in Central and Eastern Europe (CEE) is dominated by generic drugs. This subdivision was worth €17.2bn in 2008 and is expected to develop by around 14% per annum between 2009 and 2011. The growth rate of the innovative drug market, which was worth €12.4bn in 2008, will be slower, according to PMR latest report entitled Generic and innovative drug market in Central and Eastern Europe 2009. Comparative analysis, reimbursement policies and development forecasts for 2009-2011.


Generics to account for 60% of the market in 2009
According to PMR estimates, the generic drug market (including non-branded generics, traditional products and other products which have never enjoyed patent protection) in Central and Eastern Europe[1] was worth €17.2bn in 2008, in contrast to a market value figure of €12.4bn for innovative drugs. Generic drugs therefore accounted for around 58% of the pharmaceutical market in the region in terms of value (taking into account both pharmacy and hospital sales).
PMR forecasts that CAGR for generics will reach as much as 14% between 2009 and 2011, whereas that of innovative drugs will be much lower. As a result, the share of generic drugs will constantly increase and in 2009 generics will account for around 60% of the pharmaceutical market in CEE.
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Although the innovative drug market in Central and Eastern Europe will develop at a slower rate than that of generic drugs between 2009 and 2011, the growth rate of original medicines for the whole region will be positive. It has, for the time being, been compromised by the cost-containment policies of the CEE countries, which have been stepped up during the global financial crisis. However, in the medium term we expect an improvement in health awareness and the modernisation of healthcare systems, including the development of private health insurance and the establishment of health insurance and drug reimbursement systems, similar to those in other European countries, in Russia and Ukraine, to be drivers of the innovative drug market in CEE. An additional driver will be the aging of the population in the region.

Local companies are generic-oriented…
There are few innovative pharmaceutical companies of local origin in Central and Eastern Europe. Most companies based in the region are generic drug manufacturers. The largest players of this kind include Gedeon Richer, Krka, Egis and Zentiva. These companies have a presence in most CEE countries and they are well-established there.For such companies, the region of Central and Eastern Europe is usually the main area of their activities.
The second group of companies consists of global generic players. Their presence differs from one CEE country to the next. For example, Dr. Reddy’s, an Indian generic manufacturer, concentrates on Russia, which is one of the company’s key markets. Actavis, an Iceland-based manufacturer, is at its strongest in Bulgaria and Russia. Ranbaxy’s key markets in the region are Romania and the Commonwealth of Independent States countries (Russia and Ukraine in particular). Stada has a strong presence in Russia, particularly after the acquisition of two Russian companies (Nizhpharm and Makiz-Pharma); and at the beginning of 2009 the company entered Poland and Bulgaria by establishing subsidiaries there.
A number of consolidation processes recently took place in the generic arena, which were of great importance for Central and Eastern Europe. For example, Teva gained a strong presence in the region through the acquisition of Barr in July 2008, which included one of the largest local generic drug producers − the Croatian company Pliva. In June 2008, Mylan, a US generic manufacturer, acquired the CEE generics businesses of Merck KGaA, the prominent German drug manufacturer. The deal includes Merck’s operations in Poland, Hungary, Slovakia, Slovenia and the Czech Republic. In March 2009 Zentiva, one of the leading generic players in the region, was bought by Sanofi-Aventis. In May 2009 Novartis acquired the generic cancer drug production division of the Austria-based EBEWE Pharma.

…whereas innovation is the domain of global concerns
The innovative drug market in the region is dominated by multinational pharmaceutical concerns. Such companies have representative offices in most of the Central and Eastern European countries, but, as they are active all over the world, the region is not, in most cases, their main market. However, innovative drug producers often choose CEE as a place in which to locate clinical trials, because of the low costs, high population and limited access to innovative therapies in such countries.
Today innovative companies face a crisis associated with the loss of patent rights pertaining to their most important products, which is expected to affect their sales performance in Central and Eastern Europe also, as many players of domestic origin may launch the generic equivalents of their drugs on the market.
For example, in Poland, in 2004, the local producer Polpharma launched Maxigra, the generic version of Pfizer’s Viagra, based on the fact that, prior to European Union accession, there was a three-year data exclusivity period in Poland. Zentiva, another important generic manufacturer in the region, announced in 2008 that it was developing an equivalent to Viagra, which it intended to launch in the Czech Republic and a number of other CEE countries once the patent has expired, i.e., no sooner than 2011.

Methodological notes:
The forecasts for the years 2009-2011 were prepared taking into account the average 2008 exchange rate of the euro against the local currencies.


Agnieszka Stawarska
Pharmaceutical Market Analyst
PMR Publications
agnieszka.stawarska@pmrpublications.com

[1] The following countries were analysed: Russia, Poland, the Czech Republic, Romania, Hungary, Ukraine, Slovakia and Bulgaria.