Germany - How will the German government deal with large deficits seen within the health insurance sector?

The government has proposed a package of reforms aimed at easing the financial problems of statutory health insurers.

In March 2010, the coalition parties agreed on a package of reforms which the government hopes to bring into force by 2011. The proposals includes an increase of the mandatory discount for patented drugs sold to the statutory health system from the current 6% to 16%, which could potentially save 1.1 billion euros (US$1.4 billion). In addition, prices will be frozen at August 2009 levels until the end of 2013, and the current fixed price system for some patented drugs, as well as the discount price contract system for generic, or copied drugs, will be retained.

The government is focusing primarily on a new system to set prices for new, innovative drugs, which the Health Minister claims entirely accounted for the increase in drug spending in 2009. Manufacturers will have the freedom to set prices themselves for the first year of a drug being on the market, but it will need to compile a dossier on its costs and benefits, which will be assessed by the authorities. If the drug does not offer additional benefit to medications already available, it will immediately be put under the fixed price system. The prices of drugs which do offer additional benefit will be subject to central negotiation on prices for the statutory system.

The proposals have angered industry associations which had been promised deregulation for the drug sector when the coalition government was formed, and noted that the system would jeopardise investment prospects. The plans were welcomed by the GKV, however.

Further reading - An in-depth review of the German pharmaceutical market is available from Espicom: The Pharmaceutical Market: Germany (published May 2010)

Key Developments in Latin America and Europe

Regulatory developments in Latin America

There have been several pharmaceutical regulatory developments in Latin America this week. In Mexico, the renewal registration process is affecting smaller pharmaceutical producers, while in Peru, the new regulation for pharmaceuticals is expected to increase the quality of drugs approved in the country. In Colombia, Abbott has finally decided to comply with the national pricing commission and reduce the price of one of its antiretrovirals sold in the country.

Manufacturing developments in Europe

There have also been interesting developments in Europe. In Germany, the race to acquire ratiopharm is coming closer to an end, with two leading generic producers, Teva and Actavis, interested in the acquisition. In Ireland, Taro Pharmaceuticals has announced that it is to close its manufacturing facility by the end of March. Meanwhile, Medis International has opened a new packaging plant in Czech Republic and a local biologic producer, Philogen, has acquired a manufacturing site from Bayer in Italy.

Further reading - Detailed reports on these pharmaceutical markets are available from Espicom: Mexico, Peru, Colombia, Germany, Ireland, Czech Republic and Italy.

Cost-containment measures restricting pharmaceutical market growth

Cost-containment policies continue to affect underdeveloped, emerging and mature pharmaceutical markets. In Asia Pacific, for example, the Philippines is expected to announce a second drug-price list in mid February. This would be the second time it has happened in less than one year. Hospital drug price negotiations in Taiwan are increasing drug access but, as a result, some problems have arisen in the pharmaceutical supply chain.

Eastern European pharmaceutical markets are not immune to cost-containment policies. Drug companies in Russia have been forbidden from raising the prices of essential medicines. There are concerns whether this move could make the production of some medicines loss-making. Meanwhile, pharmaceutical producers have delayed their rebates in Romania, a small but growing pharmaceutical market.

In the more mature Western European pharmaceutical markets, pricing & reimbursement policies are generalised, with recent cuts seen in Ireland and Germany. Hospital drug debt levels, particularly common in more Southern European pharmaceutical markets, can also impact pharmaceutical producers. Following the pledge by the European Union to support Greece economically, it remains to be seen how Greek authorities plan to pay off their outstanding hospital drug debts.

Further reading - In-depth reports on the pharmaceutical markets in these countries, including detailed information on pricing & reimbursement, are available from Espicom: Philippines, Taiwan, Russia, Romania, Ireland, Germany and Greece.

Germany - How is the German generic market set to perform in the future?

The generic market has become increasingly competitive in recent years and will gradually increase its market share.

Reforms instigated in 2004, which entailed greater use of substitution, have placed a lot of pressure on older branded drugs, and prescribers and patients have been given financial incentives to switch to generics. However, reforms have not been especially ‘pro-generic’, so whilst generics will continue to be increasingly widely prescribed, their value share of the overall market will alter less rapidly. In 2007, generic drugs accounted for 36.5% of the prescription market by value; around 81% of this was covered under the GKV. In volume terms, the generic market has continued to grow each year. This was particularly impressive in 2007, when it reached 65.4% of the total market, compared with 60.0% in 2006.

Overall, Germany is the largest pharmaceutical market in Western Europe, twice the size of Italy. Growth in recent years has tended to be uneven, as government reforms take effect on pricing and/or reimbursement. While overall expenditure is still growing, GKV expenditure, which accounts for around 80% of the market, is characterised by price reductions. These are due to tighter reimbursement rules, greater use of generics and downward pressure on generic prices due to the rebate system.

Further reading - An in-depth analysis of the German pharmaceutical market is available from Espicom: The Pharmaceutical Market: Germany (published January 2010)

USA and UK - Warner Chilcott to Acquire Procter & Gamble’s Drug Unit

Warner Chilcott is to acquire Procter & Gamble’s prescription drug business in a deal worth US$3.1 billion, it was announced in August 2009.

Warner Chilcott is a specialist in women’s health, and the deal will expand its focus to musculoskeletal disorders and gastrointestinal problems too.

Procter & Gamble’s portfolio of branded drugs includes Asacol (mesalamine) for ulcerative colitis, and Actonel (risedronate), an osteoporosis drug. Warner Chilcott will also acquire Procter & Gamble’s drug pipeline.

Warner Chilcott will take over manufacturing sites in Puerto Rico and Germany, which will add to its existing sites also in Puerto Rico and in Northern Ireland. It is expected that the 2,300 Procter & Gamble employees will be transferred to the new owner.

The transaction should be completed by the end of 2009.

Further reading - In-depth reviews of the pharmaceutical markets in the USA and the UK are available from Espicom: The Pharmaceutical Market: USA (published June 2009) and The Pharmaceutical Market: United Kingdom (published June 2009)

UK - Study Finds Huge Variations in Funding for Off-Label Cancer Drugs

There are huge variations in the way that NHS trusts are funding drug treatments for patients with rare cancers, according to a new report from the Rarer Cancers Forum, published on 14th August 2009.

Off-label treatments are often used in patients with rare cancers, as there are few licensed products for these specific cancers. Instead, the treatments prescribed are licensed for common cancer areas, but where the cancers have a similar underlying disease process. However, since the treatments necessary are not licensed for this use, patients must apply to their NHS trust to obtain them.

The report, Off limits - an investigation into NHS organisations’ policies and processes for determining requests for the use of off-label treatments for people with cancer, found that the opinion of trusts towards this form of prescribing, known as ‘near-label prescribing’, varies widely. It found that over the past three years, over 3,000 patients have applied to their Primary Care Trust (PCT) for funding for off-label treatments, and more than 1,000 have had their requests rejected. The study also assessed that patients with rare cancers in the UK are less likely to have access to off-label treatments than in France and Germany.

The report makes 25 recommendations for improvements, including:

• Near-label cancer treatments should be funded at the national level;
• Mandatory guidance should be issued to the NHS on the near-label treatments used most frequently; and
• The pharmaceutical industry should contribute to the costs of running the new system, provided that patients with rarer cancers benefit from improved access to medicines.

Further reading - A detailed review of the UK pharmaceutical market is available from Espicom: The Pharmaceutical Market: United Kingdom (published June 2009)

Germany - Hospital Chain Plans to Make Acquisitions

The largest hospital chain in Germany, Rhön Klinikum, is expecting the recession to trigger a number of hospital privatisations and plans to raise 460 million euros (US$644 million) in fresh capital and boost its equity base by one third so it is ready for buying opportunities.

The chain expects the recession to mirror the events of 2002 and 2003, when private operators lifted their share of the market to 13.5%, compared to 7.4% in 2000, as public assets were sold.

According to the chief executive, Wolfgang Pföhler, Rhön spent 960 million euros (US$1,345 million) on 20 hospitals between 2002 and 2006, and it now runs 48 clinics and has control of 3.0% of all hospital beds in Germany.

Mr Pföhler said that he expected the non-profit sector to maintain its market share but suggested the market share of publicly owned institutions could shrink notably. He believes Rhön can more than double its share of beds to 8.0% in the coming years and the chain aims to offer a nationwide service eventually.

In 2005, Rhön became the first private operator in Europe to take over a university hospital and its research department. It has since pledged to invest almost 400 million euros (US$560 million) in the facility in Giessen and Marburg, central Germany.

However, Mr Pföhler conceded that Rhön faces stiff competition from its two main German rivals, Helios Kliniken, owned by Fresenius, and Asklepios Kliniken, which each control around 3.0% of beds.

Further reading - An in-depth analysis of the German pharmaceutical market, including some background information on the hospital sector, is available from Espicom: The Pharmaceutical Market: Germany (published June 2009)

Brazil - The consolidation of the Brazilian pharmaceutical distribution sector continues

Celesio invests in Brazil …

The German Celesio, the largest European wholesaler, acquired a majority stake in the leading Brazilian pharmaceutical wholesaling group Panpharma in July 2009. This is Celesio’s first acquisition outside of Europe, triggered by the company’s lost bid to overturn pharmacy ownership laws in Germany and Italy. The move will also help Celesio to diminish its reliance on the British pharmaceutical market which has been affected by price cuts in generic medicines and the weakness of the British pound against the euro. Founded in 1976, the Panpharma group comprises the Panarello, Sudestefarma and American Farma companies. The group has about 17.0% of the Brazilian retail pharmacy sector and is expected to increase its market share following Celesio’s investments.

Growth opportunities …

Brazil is the largest pharmaceutical market in Latin America and one of the most attractive BRIC markets. Espicom Business Intelligence projects a CAGR of 7.9% over the next few years. Between 1997 and March 2009, annual cumulative pharmaceutical sales more than trebled in local terms, whilst they nearly doubled in dollar terms. Consumption levels by volume have increased particularly since 2004, as the market is becoming more generic-lead. In fact, Brazil has the largest generic market in Latin America. The industry expects to do well in the current economic downturn and generics are expected to represent 20.0% of the retail pharmacy sector by volume in 2010. sanofi-aventis’ acquisition of Medley, announced in April 2009, is going to change the generic market, with increasing foreign participation.

Further reading - An in-depth analysis of the Brazilian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Brazil