Growth of the Romanian pharmaceutical market faltered in 2009

2010-02-24

The development of the Romanian drug market was severely affected in 2009 by government measures introduced to control Rx drug price increases. The introduction of a fixed exchange rate for the calculation of the prices of imported drugs and the clawback tax caused a significant slowdown in the growth rate of the Romanian pharmaceutical market in 2009, particularly in euro.

Pharmaceutical market growth falters in 2009

In 2009, the Romanian pharmaceutical market grew in local currency valuation by 18.5% and reached RON 8.7bn (€2.7bn), according to IMS Health Romania. The slowdown in the growth rate of the market continued, in stark contrast to 25.8% in 2007 and 20.0% in 2008. This process was even more manifest in euro as a result of the devaluation of the Romanian lei and the rises in the prices of imported drugs. In these terms the pharmaceutical market grew by 3.1% in 2009, only to €2.07bn, in comparison with the 9.7% growth figure a year earlier and 30.8% in 2007.
This situation was caused by the drug price control mechanisms introduced by the Romanian Health Ministry. On 1 April 2009 a new method of price calculation was brought in. As a result the prices of imported drugs in Romania fell on average by 10%. In accordance with the new methodology, the CIP price (the base price to which wholesale and retail markups are added) was set in lei instead of euro. In addition, the CIP price was set at the level of the lowest price of the same product in the 12 European countries in which the product is inexpensive. For generic drugs, the CIP price consists of 65% of the price of the branded medicine.
Furthermore, in 2009 the fixed lei/euro exchange rate for imported drug price calculations was increased to RON 4.0 from RON 3.8 in 2008. According to Corina Ciolan, the director of IMS Romania, this was the real cause of the growth of the pharmaceutical market in lei, because if the exchange rate had been fixed at the 2008 level, i.e., 3.8 lei/euro, the market would have declined.
In terms of volume, however, there was a 4.5% reduction in the market, which was not counterbalanced by value, as the margins of distributors were reduced and the prices of medicines fell. In addition, the market was affected by the under-financing of the health system and the economic crisis, which led to a reduction in the purchasing power of the Romanian public.

New drug price calculation did not bring about desired results

The intention of the Romanian government in introducing the new price calculation methodology was to increase consumption of generic drugs and to increase the number of pharmaceutical packages sold. The reduction in drug prices – only for the 100 most expensive drugs – was expected to save the Health Ministry €110m.
However, despite the Health Ministry’s expectations, the volume of the pharmaceutical market in 2009 continued to decline, by 4.5% in 2009, in comparison with a 1.2% reduction in 2008 and an 11.7% increase in 2007, according to IMS Romania. The new regulations also did not have a significant effect on the share of generics as a proportion of drug consumption, which increased only by 1% in terms of value in 2009 and reached 41% of the total drug market value.
Furthermore, even if drug prices fell by an average of 8.5%, because of the new regulations, the pharmaceutical companies were trying to restructure their portfolios and focus on those products which could generate higher sales values, i.e., the expensive drugs, which are attractive for both distributors and pharmacies. According to Cegedim, the proof of this is the fact that the share of products costing €50 increased in terms of value last year to 34.2% from 28.5% in 2008, whereas there was a sharp reduction in the share of products costing less than €5.
However, the new regulations affected the drug manufacturers: as a result of the introduction of the fixed exchange rate used for the calculation of the prices of imported drugs, their losses in 2009 reached 5-7% of revenue. Further damage was caused by a 5-11% clawback tax on revenue from reimbursed drugs.

Romanians preferred Rx to OTC drugs

According to IMS, in 2009 sales of OTC drugs in Romania declined by 4.3% to RON 1.08bn, and by 9.3% in euro to €255.9m. The decline of the OTC segment can be explained by the fact that Romanians, deterred by the high prices of OTC drugs, which were not regulated by the government, were asking doctors to put Rx medicines, rather than OTCs, on prescriptions.

Pharmacy sales up by 22.4%, but sales to hospitals down

Slight changes were visible in the share of sales as a proportion of the distribution channels in Romania – drug sales at pharmacies increased as a proportion of total pharmaceutical sales in Romania, whereas there was a reduction in sales to hospitals. Retail pharmacy sales in 2009 increased by 22.4% in Romanian lei, reaching RON 7.69bn, and by 6.5% in euro to €1.8bn. The share of retail pharmacy sales in terms of value increased from 85% in 2008 to 87% in 2009. Hospital sales declined by 2% in Romanian lei to RON 1.1bn and by 14.6% in euro to €277m.












Bleak future for pharmaceutical market in Romania

In 2010 the difficult economic conditions in Romania and excessive market regulation are expected to prompt drug importers to revise product portfolios and market strategies. If conditions remain unchanged, the market is expected to grow by 9-10% in lei and to decline by 1-2% in euro, according to an IMS Health forecast. Similar projections are provided by Cegedim, which expects the pharmaceutical market to continue to decline in euro by about 2-3%.
In 2010 and 2011 Cegedim estimates that the pharmaceutical market will stagnate or even decline slightly, with the change in euro varying from -5% to 2%, and a 7% increase in euro starting from 2012.
In the longer term, 2010-2015, the pharmaceutical market in Romania is expected to record an average annual growth figure of 5.5-6% in euro and 10-15% in Romania lei, according to Cegedim.

Serghey Tkachenko
PMR Romanian Pharmaceutical Market Reporter

Anna Skoczylas-Ligocka
PMR Business Editor, Pharmaceutical Market
anna.skoczylas-ligocka@pmrpublications.com