Romanian Pharmaceutical Market
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Martie 2008 |
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IOANA FILIPESCU - Managing Director
RAIFFEISEN INVESTMENT ROMANIA |
Adresa
Bulevardul Carol I, Nr. 26
020921 Bucureşti, Sector 2
Telefon
+40-21-312.03.10
Fax
+40-21-312.03.08
Website
www.raiffeisen-investment.com
Romanian Pharmaceutical Industry developments
Key market drivers for 2007
The general landscape of the Romanian pharmaceutical market at the beginning of 2007 offered considerable opportunities for the domestic and foreign players: the simplification of drug registration procedures due to EU membership, a rising GDP per capita doubled by an increase healthcare budget, a rapid expansion over the previous years and positive forecasts regarding drugs consumptions throughout the next years.
As a result, new drugs entered the market and a series of multinational companies intensified their battle for market share through aggressive discounts policies and marketing campaign. The year is characterized by an increase in competition, a series of mergers and production transfers and expansion of the retail sector. Despite the manufactures struggle for a strong annual growth and the improvement in operating conditions in retail and wholesale, the industry experienced a slow down of the growth rhythm.
The market developments were mostly impacted by the Ministry of Health’s stated intention to decrease existing mark-ups and to reduce even more prices by changing the calculation methodology for prescription drugs’ prices, as to align the price policy to those in the strongly competitive states. Thus after a weak performance in the third quarter, the analysts’ estimations for 2007 market growth had to be lowered.
At the end of the first year after entering the EU market, Romanian pharmaceutical market is estimated to reach RON 5.41 bn MSP (manufacturing selling prices), respectively EUR 1.62 bn, which translates into an annual increase in local currency of 15% y/y and 21% in EUR.
It is the first time in the last three years, when the market did not surpass the expected growth rate, but rather negatively surprised through a series of Ministry of Health populist proposals of price-reductions measures and alteration of the distribution margins which led to a market pressure that restraint the growth rhythm. All in all, the industry did not performed at the expected level hindered by pre-electoral announced intentions which in the end did not come true.
In Q3 2007, the pharmaceutical market increase by only 6.5% y/y to RON 1.28 bn (EUR 395 mn) in MSP, dropping severely from a 24.5% y/y increase in Q1 and 13% y/y in Q2. The deceleration is mainly caused by retailers refusing to increase inventory due to expected price cuts announced by the Health Ministry for November. The slowing down of the growth rate in Q3 was also attributed by some market players to the extreme weather temperatures which kept patients out of the pharmacies. The slow performance of the sector is reflected also in the total drugs market volume which posted an encouraging 14% y/y increase in Q1, followed by only a 3% y/y increase in Q2 and surprisingly going down by 4% y/y in Q3, after five quarters of positive results.
Q4 is estimated to revamp the drug sales, mainly because of the Ministry announcement that the prices will remain unchanged until the end of January 2008. Thus, a 17% y/y increase in RON currency and around 10% y/y in the number of total units of drugs are seen as achievable targets for this quarter.
