Russia - How will the Russian pharmaceutical market be affected by recent price freezes?

Recent price freezes are expected to result in lower availability of cheaper drugs.

The government has forbidden drug companies from raising the prices of drugs which are included on the MoH’s list of vitally essential medicines in 2010. As new prices must take into account the average prices for the previous six months, this could result in falling prices. Wholesalers may revise prices once a year but the increases must not exceed inflation and price hikes related to the rising costs of production, substances and rent will not be permitted.

Russian pharmaceutical companies have warned of the possible consequences of new legislation. They claim that the pricing policy will make the production of some medicines loss-making and ultimately lead to certain medicines disappearing from the shelves. Producers will consequently focus on expensive drugs which bring the biggest profit and abandon cheaper drugs which are unprofitable to produce and distribute. The prices of other items may be increased in order to cover any losses resulting from the price freezes. Critical drugs will not vanish from the market, but fewer cheaper drugs are expected to be available in the drugstores.

Smaller companies are expected to suffer, as they tend not to make profitable drugs and distributors may lose interest in products with smaller margins. It is therefore possible that smaller producers and distributors may be swept out of the market. Some manufacturers have considered scaling down production or moving part of it to other CIS countries. However, the market is expected to become more civilised and benefit from consolidation. The largest distributor, Protek, is to improve its distribution and logistics models in order to help it through the changing environment.

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

Switzerland - How will the government’s cost-containment plans affect the generics market?

The generics market will benefit from upcoming patent expiries, but further price controls may hinder growth in money terms.

The Swiss government is keen to contain costs in the healthcare sector, and a number of specific measures have been taken to rein in costs. The promotion of generics has been at the forefront, with spectacular success since 2001, when generic substitution was introduced.

The first price control on generic drugs was implemented in 2005; new generics had to be priced at least 30% below the level of the corresponding original drug in order to qualify for reimbursement. In 2008, this was reduced further to 40%. This is likely to boost generic use by volume, but will serve to hinder growth in value terms. The major companies in the market have been able to cope with previous price cuts by increasing volume sales, although the decreasing amount of ‘slack’ in the market may make growth harder to maintain in 2010. Patent expiries will become a far more significant source of growth.

By international standards the Swiss generics market remains uncompetitive. Over 70% of generic sales are made by two companies; Mepha, acquired by Cephalon in April 2010, and Sandoz. A more competitive environment would almost certainly lead to lower price levels. However, the government’s policy of period price reductions may prove counterproductive in this regard, by making the market less attractive for new players and further solidifying the position of the existing manufacturers. A few other companies, notably Teva, Actavis and sanofi-aventis (through Winthrop), are active in the market, but to date have not gained much market share. It is noticeable that, in stark contrast to the other leading markets of Western Europe, no Indian or central European companies have yet shown much interest in Switzerland.

Further reading - An in-depth analysis of the Swiss pharmaceutical market is available from Espicom: The Pharmaceutical Market: Switzerland (published May 2010)

Morocco - Why is the Moroccan Ministry of Health keen to cut drug prices and encourage drug promotion?

Moroccan drug prices are too high and cost-containment measures are needed following the extension of the compulsory health system.

Following the publication of a Parliamentary report in November 2009, which found that drug prices were too high in Morocco, even in comparison to Tunisia, the government has launched a new regulation to bring pharmaceutical prices down and encourage generics consumption. The new system limits the number of generic medicaments to 14, by International Common Denomination (ICD) and only one generic per manufacturer. One of the main measures is that the new pricing system introduces international benchmarking criteria. Another measure is the regular review of pharmaceutical prices. Contrary to the actual system, pharmaceutical prices will no longer be fixed.

The national health insurance scheme is expected to provide substantial additional funding for the health sector. Initially aimed at salaried workers, the scheme has been expanded to cover the self-employed. The CNSS, which operates the scheme in the private sector, has announced that it will be extending cover to ambulatory care in addition to hospital treatment from February 2010 onwards. A health insurance scheme for those on very low incomes is still in the early stages of implementation and is expected to be rolled out on a national basis in 2010. Full implementation of the national health insurance will require cost-containment measures due to increasing reimbursement levels.

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

Philippines - Why have the Cheaper Medicine Act’s drug price reductions ensured volatility in the pharmaceutical market?

The Filipino government is battling with the international pharmaceutical industry for ground in the market, which up until recently experienced a free-market policy with no price regulations in place.

The Philippines paradoxically has one of the highest drug prices in the world, especially considering the majority of the population cannot afford them. Changes brought about by the controversial Cheaper Medicine Act have impacted the Philippines pharmaceutical market in a number of areas, including IP laws, competition and drug price control mechanisms.

Under the Act, 200 drugs have seen price reductions by up to 50% since August 2009. This represents 12-15% of the total market for essential drugs. The majority of drugs involved are new products in the market, whose prices are disproportionately higher in the Philippines in comparison to the Asia-Pacific region. They also tend to be drugs which are top sellers, the most expensive, and have limited generic competition.

Further reading - A detailed report on the pharmaceutical market in the Philippines is available from Espicom: The Pharmaceutical Market: Philippines (published April 2010)