Romanian pharmaceutical market

Mai 2011

MIHNEA RADULESCU - Senior Project Manager ROLAND BERGER STRATEGY CONSULTANTS S.R.L.

 

Overview and recent developments

Following six years of sustained growth, the Romanian pharmaceutical market entered a quasistagnation phase in mid-2007. Relative to 2002, the market had seen a double-digit compound annual growth rate (24.5% CAGR 2002-2007), mainly as a result of the increasing real disposable income of the population. In addition, there is an untapped growth potential, indicated by the low drug consumption levels (at approximately 40% of the average  European drug consumption level per capita). However, a series of endogenous factors, such as the deterioration of the legal pharmaceutical/ healthcare framework, coupled with negative exogenous ones, such as the economic downturn, resulted in a market slowdown that started in H2 2007.

2008 saw a lower sales growth (6.7% in EUR value) compared to the increase of 17.4% registered in 2007. An inflection point was reached in 2009  when, although the market was forecasted to increase in RON, it suffered a decrease of approximately 2.0% in EUR due to a strong depreciation of the national currency.

In 2010, the pharmaceutical market recorded a rebound and grew by 19.6% against 2009, amounting to around EUR 2.3 bn. This positive evolution occurred in spite of the slight decrease (-0.2%) in volumes sold. The main reasons for the declining volumes could be the diminished public support for the acquisition of prescription drugs, coupled with the negative margins registered for domestic sales that encourage parallel exports [1].

According to UNCTSD [2], the pharmaceutical imports in Romania amount to more than USD 2.5 bn, with Germany, France and Switzerland as main trading partners. Exports account for only USD 0.5 bn with main destination markets being Germany, UK and Russia. Given the imports-intensive nature of the local pharmaceutical market, the exposure to variations in exchange rates is very high. The depreciation of the local currency as of summer 2007 has put significant pressure on distributors and importers that led to an erosion of profit margins for both pharmaceutical wholesalers and retailers, ultimately resulting in the temporary suspension of drug deliveries by distributors. The erosion in margins, particularly in EUR terms, has also raised Romania’s profile as a parallel export source. According to ARPIM [3], the number of drugs approved for parallel exports increased by 93% to a number of 83 drugs in 2008. Concerns have been raised that increased exports could result in a significant shortage in medicines for domestic use.

 

Market structure

The two distribution channels in the pharmaceutical market, hospital and retail, account for disproportionate fractions of the market. The retail  channel covers 90% of the market in terms of valueand almost 95% in terms of volumes.

Retail was the main driver for the overall market growth over the last years, with 2010 increases in value of 21.7% and in volume of 0.8%. This development could be attributed to a price surge in the prescription drug segment. Additionally, retail sales fully benefitted from the complete or partial transfer of drugs pertaining to several National Health Programs from hospital pharmacies to retail pharmacies, as was the case for oral anti-diabetics and insulines, oncology, post-transplant or HIV/ AIDS drugs.

On the other hand, hospital pharmacies were severely affected by deficient management and financial blockages in the system, as reflected by the massive 14.1% decrease in volume and by the slight 4.3% increase in value. In 2010, hospital sales accounted for around 10.5% of the total market value, a share that is expected to decrease in the context of the announced MoH efforts to improve the primary care network and thus lower hospital pharmaceutical costs.

Rx drugs [5] currently hold a market share of around 84% of retail sales in value terms, corresponding to EUR 1.72 bn in 2010. Prescription sales are led by antibiotics and alimentary tract remedies. Family doctors deal with limitations in issuing prescriptions, which could lead to lower market values for Rx drugs in the coming years.

In contrast, OTC (over-the-counter) drugs [6] lost market share to Rx drugs and reached a level of EUR 0.32 bn in 2010. Product groups generating the highest sales are the drugs for treating cold and flu with 14% market share, analgesics with 13% of the market, and vitamins and minerals adding up to 11% of the OTC market.

Original drugs [7] represent about 73.2% of the market in terms of value, and approximately 25.0% in terms of volume. The original drugs have a relatively large share of the pharmaceutical market, with eight of the top 10 producer companies by sales being R&Dbased firms. The three best-selling drugs in the country are marketed by Roche: NeoRecormon (epoetin-beta), with sales of EUR 42.2 mn at wholesale prices; Pegasys (peginterferon alfa-2a), at EUR 40.6 mn; and Avastin (bevacizumab), at EUR 25.2 mn. Novartis’s Glivec (imatinib) is the fourthlargest selling original medicine, with sales of EUR 23.7 mn, while another Roche product, Xeloda (capecitabine), completes the top-five original products, with sales of EUR 22.1 mn.

Conversely, the cheaper generic drugs [8] cover only 26.8% of the market in value terms but 75.0% in volume terms. This proportion is projected to increase in the future, as the introduction of co-payments for drugs in Romania’s healthcare system (MoH’s Norm no. 74-76 from 30.01.2009, updated by Norm no. 220 from 12.03.2010) is expected to further favor generic drugs. In 2009, branded generics (generic equivalents with a name given by the particular pharmaceutical  company) grew by 18.6% to EUR 0.46 bn at pharmacy purchase prices, while unbranded generics performed less strongly, although still growing by 7.8% to EUR 0.09 bn.

Almost all therapeutic areas registered double-digit growth during the period June 2009-June 2010, with cardiovascular drugs being the largest segment of drugs on the Romanian pharmaceutical market, followed by antineoplastics and immunomodulating agents, alimentary tract and metabolism, central nervous system, and anti-infective systemic. Some therapeutic groups with the highest growth rates between June 2009-June 2010 were antineoplastics and immunomodulating agents (+57.2%), respiratory system (+25.5%) and muscular-skeletal (+21.9 %). The weakest evolutions during the same interval of time were registered by the therapeutic areas of antiinfective systemic (-2.2%), central nervous system (+13.6%) and cardiovascular (+16.6%).

Local production accounts only for 30% of the value of the Romanian pharmaceutical market, with Zentiva (Sanofi Aventis), Antibiotice, Actavis (Sindan), LaborMed, Ozone Laboratories and Biofarm as the biggest local players. Only four local brands (Algocalmin — analgesic produced by Zentiva, Gemcitabina Sindan for treating pulmonary cancer — Actavis, Ampicilina, Cefort — Antibiotice) have reached the top 50 best selling drugs in value in 2010, a rank that is strongly dominated by the imported products of the multinational pharmaceutical companies present on the local market.

 

Regulatory framework and impact on the market

PRICING AND REINBURSEMENT METHODOLOGY

The Ministry of Health (MoH) is responsible for setting the prices of medicines for human use, as well as authorizing pharmacies, and enforcing the good distribution practices. The level of maximum commercial mark-ups established is:

• Pharmacy commercial mark-up: 12.0%-24.0% (maximum RON 35/ EUR 8);
• Distribution mark-up: 7.5% (maximum RON 30/ EUR 7);
• Mark-up for additional import services: maximum 8.5%.

Theoretically, prices can vary from one pharmacy to another, but without exceeding the maximum price.

Additionally, MoH updated the price setting methodology through Norm no. 220 from 12.03.2010. One of the changes introduced consisted in the redefinition of the calculation method of the maximum admissible prices for drugs: MoH sets the producer price as the average price of the 3 lowest prices that the drug is sold at, among the 12 reference European countries (Czech Republic, Bulgaria, Hungary, Poland, Slovakia, Austria, Belgium, Italy, Lithuania, Spain, Greece and Germany). Furthermore, MoH decided the adjustment of drug prices based on the conversion rate EUR – RON used in the 2011 Government budget calculations, set at 4.21 RON/EUR and in force as of April 2011. The modified norm also addressed the issue of prices for generic prescription drugs. The regulatory update increased the relative price limit for a generic prescription drug from 65% to 70% of the price of the equivalent original drug.

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