UK - How will the aftermath of the economic recession affect the UK pharmaceutical market?

Reductions in health spending and industry job cuts could have an impact on the market, but an ageing population and a health service under pressure will guarantee an increasing demand for pharmaceuticals.

The UK pharmaceutical market is set to experience moderate growth over the coming years, tempered slightly by the effects of the economic recession. Public spending cuts are inevitable, as public debt continues to increase, and health expenditure is set to suffer as a result. In 2010 the NHS budget is £102.3 billion, but this could fall by 2.5 to 3.0 per cent per annum from 2011/12. According to the Budget 2010, the NHS and the Department of Health will be required to make savings of £4.35 billion (US$6.81 billion) by 2012/13. This follows a period of huge growth in health spending under the Labour government, which has seen the NHS budget almost triple. Despite budget constraints, increased pressure on the NHS to cope with the health needs of an ageing population will lead to a rise in demand for pharmaceuticals, and a willingness to invest in new therapies to ensure effective treatments.

Many pharmaceutical companies based in the UK have announced job cuts and site closures in recent months, in an effort to reduce costs. AstraZeneca announced the closure of a number of its R&D sites in March 2010 leading to 3,500 job cuts worldwide, including a site in Charnwood and another in Cambridge. This follows a further 8,000 job cuts within the company worldwide, which were reported in January 2010. In February 2010, GlaxoSmithKline announced in 380 jobs cuts at its R&D site in Essex, following a shift in the company’s research focus. Furthermore, Eli Lilly, Pfizer, GlaxoSmithKline and AstraZeneca all announced job losses worldwide during 2009, affecting positions in the UK. These cuts are to be expected considering the economic climate, as well as upcoming challenges for these companies, including patent expiries, increased generic competition and slowing innovation.

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

Turkey - What are the future prospects for the Turkish pharmaceutical market?

The Turkish pharmaceutical market continues to exhibit strong growth.

Turkey is a key emerging market which is continuing to grow strongly, despite the government’s ongoing healthcare reforms and recent economic crisis. Due to its large population and GDP, Turkey accounts for around 40% the total Middle Eastern pharmaceutical market. The Turkish pharmaceutical market is expected to grow by a relatively high CAGR between 2010 and 2015, driven by import growth; the value of imports grew by 23.7% in 2008. Turkey carries out most of its trade with the EU and USA.

Around a third of the pharmaceutical market is represented by generic drugs, in value terms. As Turkey recovers from the economic downturn, generics may become a more popular alternative to expensive branded pharmaceuticals. This will be helped by the fact that generic substitution is legal in Turkey; the pharmacist is obliged to inform the patient of the substitution, but this may be declined. The ageing population and associated increase in health spending may also force the government to look into the possibility of using generics to cut costs.

Further reading - A detailed review of the Turkish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Turkey (published May 2010)

Greece - How will the current economic environment in Greece affect the market?

Strict austerity measures have been introduced to reduce the government deficit, which will lead to reductions in public healthcare spending.

The Greek Prime Minister, George Papandreou, has announced strict austerity measures to reduce the government deficit, facing considerable pressure from international markets and the European Commission. These will lead to a reduction in public spending, which could affect healthcare expenditure. Coupled with an increase in the use of cost containment measures, healthcare spending is likely to remain at relatively the same level over the coming years.

This is despite the fact that large investments have been put into healthcare in recent years, although the sustainability of these was always questionable, with public hospitals running at ever-greater levels of debt and late payments to suppliers becoming more of a problem. For example, hospital debt towards pharmaceutical companies has become a major problem for the industry. It is estimated that the Greek authorities owe nearly 7.0 billion euros (US$10.0 billion) in outstanding hospital debts, and a number of pharmaceutical companies have begun legal action against Greek hospitals that have failed to meet payments on debts on drugs and medical products. The pharmaceutical industry has also sought to persuade the European Commission to pursue a legal ruling that Greece has violated a European Union directive and broken late payment rules by not reimbursing pharmaceutical debts.

However, the ageing population will ensure a need for pharmaceuticals, and there will be a continuing demand for new therapies so that patients can be treated more effectively. A reduction in funding from the public sector could also be counterbalanced by an increase in the involvement of the private sector.

Further reading - A detailed analysis of the Greek pharmaceutical market is available from Espicom: The Pharmaceutical Market: Greece (published April 2010)

Canada - What does the future look like for the Canadian pharmaceutical market?

Demand for pharmaceuticals is set to increase, but the economic downturn could have an impact on future healthcare expenditure.

The Canadian pharmaceutical market is projected to grow at a relatively fast rate in the coming years, strengthened by an increasing demand for pharmaceuticals, due to an ageing population and a commitment to a high standard of healthcare provision. However, due to the economic recession, public finances are set to deteriorate for the first time in a decade, and spending constraints could affect future expenditure on healthcare. In addition, since Canadians’ private health insurance tends to be through their employment, redundancies caused by the global economic downturn may mean a reduction in private healthcare insurance.

The future of parallel trade between Canada and the USA is uncertain. As patented drug prices in Canada are controlled by the government, they tend to be considerably lower than in the USA, which has led to a burgeoning parallel trade between the two countries. The US has taken no clear position on the issue, but in 2005 the Canadian government indicated that it would legislate to severely restrict parallel trade. As yet, this has not happened, however.

Further reading - A in-depth review of the Canadian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Canada (published January 2010)

Japan - How will Japan’s ageing population affect the pharmaceutical market?

The Japanese government is actively pursuing generic promotion, along with changes in the OTC market, in order to cope with its ageing population.

With 26% of the Japanese population projected to be aged over 65 in 2015, the government has a number of obstacles to overcome in order to keep health expenditure to a minimum, and the pharmaceutical market will play a part in this. Although the generic market is currently small and fragmented, it has opened up recently to foreign companies such as Teva, indeed this company could well be the national leader in the near future. Recent JV’s in the generic market, such as Teva-Kowa, have highlighted that the key to success is for foreign companies to have a local partner. Despite all this, the MHLW’s target for generics to make up 30% of the market by 2012 appears unattainable at present.

Another cost-containment measure is biennially price cuts for pharmaceutical products, although these can sometimes take place annually. Annual price cuts will likely increase in the future. In view of this, a number of Japanese companies are seeking to acquire rights to foreign companies R&D lines, in order to guarantee sales outside of the Japanese market. An example of this is Takeda’s recent acquisition of Amylin’s anti-obesity pipeline, in a deal which could eventually reach US$1 billion.

Further reading - An in-depth review of the Japanese pharmaceutical market is available from Espicom: The Pharmaceutical Market: Japan (published January 2010)

Poland - To what extent will the economic crisis affect the Polish pharmaceutical market?

The effects of the crisis are expected to be minimal given the country’s economic structure.

Whilst many countries have entered recession as a result of the economic crises, Poland’s economy did not shrink in 2009. In fact, it was the only economy in the EU that avoided contraction. There are a number of reasons for this: Polish businesses tend to rely on their own resources rather than loans and have therefore been less affected by the constraints on lending since the crisis broke out; exports account for only 30% of GDP, compared with 66% in the Czech Republic and 69% in Hungary; and consumer spending has remained high.

Consequently, the impact on the Polish pharmaceutical market will be far less than in other countries of similar development in Central & Eastern Europe, such as Hungary. There will be less of a need to reduce spending on healthcare and the disposable income available for purchasing pharmaceuticals should remain steady, although unemployment is predicted to rise marginally in 2010, which may be detrimental to retail sales. The market will continue to be driven by high import growth and the increased demands on healthcare that are associated with the ageing population.

Further reading - A detailed review of the Polish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Poland (published January 2010)

Turkey - Will generics claim a larger share of the Turkish pharmaceutical market in the future?

Generics represent a third of the Turkish market but there is room for expansion.

Turkey has a strong generics industry; according to the Pharmaceutical Manufacturers Association of Turkey, almost three quarters of locally produced pharmaceuticals were generics in 2008. Generics account for around a third of the market in value terms and over 50% in volume terms; however, physicians are not actively encouraged to prescribe generic drugs and there are no incentives for pharmacists to dispense them, so there is potential for this to increase.

The economy contracted by 5.6% in 2009, but is expected to grow by 3.0% in 2010. As Turkey recovers from the economic downturn, generics may become a more popular alternative to expensive branded pharmaceuticals. This will be helped by the fact that generic substitution is legal in Turkey; the pharmacist is obliged to inform the patient of the substitution, but this may be declined. The ageing population and associated increase in health spending may also force the government to look into the possibility of using generics to cut costs.

Further reading - A detailed review of the Turkish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Turkey (published January 2010)

UK - How will the economic recession affect the UK pharmaceutical market?

Reductions in health spending and industry job cuts could have an impact on the market, but an ageing population and a health service under pressure will guarantee an increasing demand for pharmaceuticals.

The UK pharmaceutical market is set to experience moderate growth over the coming years, tempered slightly by the effects of the economic recession. Public spending cuts are likely, as public debt continues to increase, and health expenditure is set to suffer as a result. In 2010 the NHS budget is £102.3 billion, but this could fall by 2.5 to 3.0 per cent per annum from 2011/12. This follows a period of huge growth in health spending under the Labour government, which has seen the NHS budget almost triple. However, the NHS is well equipped to deal with the financial shortage, as it has seen marked improvements in recent years.

Many pharmaceutical companies have announced job cuts worldwide in recent months, in an effort to reduce costs, and many staff based in the UK are likely to be affected. These companies include Eli Lilly, GlaxoSmithKline, AstraZeneca and Pfizer. Job cuts are to be expected considering the economic climate, as well as upcoming challenges for these companies, including patent expiries, increased generic competition and slowing innovation.

A number of key pharmaceutical and biologic products are going off patent in the coming years, which will strengthen the generics market. Despite budget constraints, increased pressure on the NHS to cope with the health needs of an ageing population will lead to a rise in demand for pharmaceuticals, and a willingness to invest in new therapies to ensure effective treatments.

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