Japan’s Hisamitsu Pharmaceutical Co will buy the USA’s Noven Pharmaceuticals for US$428 million in cash, in a deal announced on 14th July 2009.
Hisamitsu, which already has a 4.9% stake in Noven, will pay US$16.50 per share to expand its presence in the USA. Noven, which specialises in hormone therapies for women, will become a wholly owned subsidiary of Hisamitsu but will remain a standalone business unit with its current workforce.
The deal is expected to be completed in August 2009.
Further reading - Detailed reviews of the pharmaceutical markets in Japan and the USA are available from Espicom: The Pharmaceutical Market: Japan (published June 2009) and The Pharmaceutical Market: USA (published June 2009)
Wednesday, 5 August 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)
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)
Tuesday, 4 August 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
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
Monday, 3 August 2009
South Africa - National Health Insurance, Can Zuma Deliver?
The long term growth prospects of the South African pharmaceutical market will be strongly influenced by the ANC government’s policies in regards to the new National Health Insurance (NHI) scheme, the promotion of public-private partnerships to develop and upgrade hospitals, the serious shortage of healthcare personnel and an urgent need to effectively address the AIDS crisis in the country.
The AIDS situation is dire in South Africa. According to projections from the EIU, the population of South Africa will start to decline from 2011, not normal for a country which has a relatively low elderly demographic (estimated 5.7% of the total population in 2011) and one of the highest birth rates in the world (25 live births per thousand population).
In 2008, there were a total 34,687 doctors or medical practitioners registered with the Health Professions Council of South Africa (HPCSA), equal to less than one doctor (0.7) per thousand population. This rate is very low by world standards. The majority of these doctors worked in the private sector, with only 30.7% or 10,653 working in the public sector in 2008. This means the provision rate for doctors in the public sector is just 0.2 per thousand population.
Private hospitals and doctors were unhappy with the government’s proposed National Health Amendment Bill in June 2008, which would have resulted in private hospitals and medical scheme providers having to “negotiate” private healthcare fees. At time of writing, nothing had been finalised.
A key driver of growth is expected to be the public-private partnerships to develop hospitals in South Africa but this could be tempered slightly, by a depreciating rand against the US dollar and the general state of the South African economy.
Further reading - An in-depth analysis of the South African pharmaceutical market, including some background information on the healthcare system, is available from Espicom: The Pharmaceutical Market: South Africa (published June 2009)
The AIDS situation is dire in South Africa. According to projections from the EIU, the population of South Africa will start to decline from 2011, not normal for a country which has a relatively low elderly demographic (estimated 5.7% of the total population in 2011) and one of the highest birth rates in the world (25 live births per thousand population).
In 2008, there were a total 34,687 doctors or medical practitioners registered with the Health Professions Council of South Africa (HPCSA), equal to less than one doctor (0.7) per thousand population. This rate is very low by world standards. The majority of these doctors worked in the private sector, with only 30.7% or 10,653 working in the public sector in 2008. This means the provision rate for doctors in the public sector is just 0.2 per thousand population.
Private hospitals and doctors were unhappy with the government’s proposed National Health Amendment Bill in June 2008, which would have resulted in private hospitals and medical scheme providers having to “negotiate” private healthcare fees. At time of writing, nothing had been finalised.
A key driver of growth is expected to be the public-private partnerships to develop hospitals in South Africa but this could be tempered slightly, by a depreciating rand against the US dollar and the general state of the South African economy.
Further reading - An in-depth analysis of the South African pharmaceutical market, including some background information on the healthcare system, is available from Espicom: The Pharmaceutical Market: South Africa (published June 2009)
Mexico - A New Pharmaceutical Landscape
A changing regulatory environment …
The shape of the Mexican pharmaceutical market is changing rapidly, due to increasing regulatory measures and the economic downturn. Producers are renewing their drug registrations, as the deadline is coming closer. By February 2010, there will only be patented and bioequivalent generics in the market. Further regulatory changes affecting the market include the regulation of biologic and biosimilar drugs and the elimination of pharmaceutical manufacturing requirements in the country. The economic downturn has also encouraged generic sales in both the private pharmacy and public sectors to the detriment of branded sales which are falling.
Increasing generic sales …
Opportunities, particularly for generic sales, have increased in Mexico, but these need to be measured carefully. The generic market is going to increase in both the private pharmacy and public sectors, but threats do exist. Most of the generic market is still in the public sector. However, the public sector wants to fix drug prices for the 2010 period, as it did in 2009. This measure has proven very unpopular for the industry, because the exchange rate fixed in 2008 is no longer unrealistic for a peso which has lost about half of its value against the dollar. Even if it is able to fix drug prices for 2010, how is the public sector going to quantify the effects of the changing regulation?
A recent wave of acquisitions …
Due to an unfavourable exchange, production and operational costs have increased by 40% in 2009. Also, producers have had to absorb high costs associated with the renewals of their drug registrations in the last two years. However, the process has not been easy and has been more difficult for small producers. Therefore, some of them are on sale. Foreign producers are actually increasing their participation in the Mexican pharmaceutical market: Valeant announced the acquisition of Tecnofarma in July 2009, whilst sanofi-aventis purchased Kendrick early in 2009. The industry still expects more acquisitions in the short-term.
Further reading - An in-depth analysis of the Mexican pharmaceutical market is available from Espicom: The Pharmaceutical Market: Mexico (published June 2009)
The shape of the Mexican pharmaceutical market is changing rapidly, due to increasing regulatory measures and the economic downturn. Producers are renewing their drug registrations, as the deadline is coming closer. By February 2010, there will only be patented and bioequivalent generics in the market. Further regulatory changes affecting the market include the regulation of biologic and biosimilar drugs and the elimination of pharmaceutical manufacturing requirements in the country. The economic downturn has also encouraged generic sales in both the private pharmacy and public sectors to the detriment of branded sales which are falling.
Increasing generic sales …
Opportunities, particularly for generic sales, have increased in Mexico, but these need to be measured carefully. The generic market is going to increase in both the private pharmacy and public sectors, but threats do exist. Most of the generic market is still in the public sector. However, the public sector wants to fix drug prices for the 2010 period, as it did in 2009. This measure has proven very unpopular for the industry, because the exchange rate fixed in 2008 is no longer unrealistic for a peso which has lost about half of its value against the dollar. Even if it is able to fix drug prices for 2010, how is the public sector going to quantify the effects of the changing regulation?
A recent wave of acquisitions …
Due to an unfavourable exchange, production and operational costs have increased by 40% in 2009. Also, producers have had to absorb high costs associated with the renewals of their drug registrations in the last two years. However, the process has not been easy and has been more difficult for small producers. Therefore, some of them are on sale. Foreign producers are actually increasing their participation in the Mexican pharmaceutical market: Valeant announced the acquisition of Tecnofarma in July 2009, whilst sanofi-aventis purchased Kendrick early in 2009. The industry still expects more acquisitions in the short-term.
Further reading - An in-depth analysis of the Mexican pharmaceutical market is available from Espicom: The Pharmaceutical Market: Mexico (published June 2009)
South Africa - Battle Intensifies for Lucrative HIV/AIDS Drug Market
South Africa has one of the highest rates of HIV/AIDS infections in the world; according to latest government estimates, around 5.4 million people were infected by HIV, just over 10% of the entire population. The true picture could be even more widespread, as these estimates were derived using mathematical models based on surveys done on pregnant women.
The market for antiretroviral (ARV) drugs looks set to grow; after years of not addressing the severity of the problem, the government has now started to look at ways to increase the supply of these drugs via the public system.
In June 2009, president Jacob Zuma, in his first State to the Nation Address endorsed the establishment of a National Health Insurance (NHI) scheme. Zuma said the scheme, which aims to provide universal health for all South Africans, will be implemented in phases. There is little detailed information, at this stage, on how the scheme is to be implemented.
International tendering exists, but as Aurobindo, one of the world’s largest producers of generic ARV drugs found out, does not always work in favour international companies. The Indian drugmaker, in June 2009, announced that it plans to sue the government, on claims that it had lost out to local manufacturers in a R400 million (US$38.1 million) contract for ARVs, although its price was 30% cheaper on the tender.
The government increased prices by 5% in 2006, and 6% across 2007 and 2008, but the industry complained these increases were below the rate of inflation. In January 2009, prices were increased by 13.2% by the DOH, a move that was welcomed by the Pharmaceutical Industry Association of South Africa (PIASA), which said the increase helped combat increasing margin pressures experienced in 2008 due to mainly imported raw materials against a weakening local currency.
The government, although wanting to back the local industry with protectionist measures, could be tempted to procure more drugs from countries like India and China, who can provide a higher volume of drugs for the same tender price compared to local companies.
Further reading - An in-depth analysis of the South African pharmaceutical market, including some background information on HIV/AIDS infections in the country, is available from Espicom: The Pharmaceutical Market: South Africa (published June 2009)
The market for antiretroviral (ARV) drugs looks set to grow; after years of not addressing the severity of the problem, the government has now started to look at ways to increase the supply of these drugs via the public system.
In June 2009, president Jacob Zuma, in his first State to the Nation Address endorsed the establishment of a National Health Insurance (NHI) scheme. Zuma said the scheme, which aims to provide universal health for all South Africans, will be implemented in phases. There is little detailed information, at this stage, on how the scheme is to be implemented.
International tendering exists, but as Aurobindo, one of the world’s largest producers of generic ARV drugs found out, does not always work in favour international companies. The Indian drugmaker, in June 2009, announced that it plans to sue the government, on claims that it had lost out to local manufacturers in a R400 million (US$38.1 million) contract for ARVs, although its price was 30% cheaper on the tender.
The government increased prices by 5% in 2006, and 6% across 2007 and 2008, but the industry complained these increases were below the rate of inflation. In January 2009, prices were increased by 13.2% by the DOH, a move that was welcomed by the Pharmaceutical Industry Association of South Africa (PIASA), which said the increase helped combat increasing margin pressures experienced in 2008 due to mainly imported raw materials against a weakening local currency.
The government, although wanting to back the local industry with protectionist measures, could be tempted to procure more drugs from countries like India and China, who can provide a higher volume of drugs for the same tender price compared to local companies.
Further reading - An in-depth analysis of the South African pharmaceutical market, including some background information on HIV/AIDS infections in the country, is available from Espicom: The Pharmaceutical Market: South Africa (published June 2009)
Philippines - Drug Price Cuts, Pfizer a Prized Scalp in this New Order?
Despite desperate manoeuvring - which included allegations of Pfizer attempting to bribe the Department of Health (DoH) as a delay tactic - the government in July 2009 imposed price controls on pharmaceuticals for the first time since the 1970s.
As it stands, the multinationals, who have long controlled much of the Philippines market, have been dealt a severe blow, and look set to lose more ground, as the government has expressed its intention to cut even more prices in the future.
Philippines president Gloria Arroyo, on 27th July 2009, signed an executive order to slash the prices of five essential medicines by 50% effective 15th August 2009. The prices of other medicines, part of the 22 essential medicines by the government, were voluntarily cut before the deadline by manufacturers.
Pharmaceutical companies were given the opportunity to voluntarily reduce prices for the said drugs prior to that and most did reduce their prices. With the deadline looming, Pfizer instead tried to offer the Health Secretary Francisco Duque five million “discount cards” reportedly worth around P100 million (US$2 million) to delay the enforcement of the Cheaper Medicines Law.
The Department of Health perceived this as a bribe, although Pfizer have denied any wrongdoing, saying it was part of the company’s “continuing commitment to expand access to its high quality, safe medicines nationwide”. In a country with a population around 95 million, mainly poor people, the effectiveness of five million, one-off discount cards was questioned by Senate president Juan Ponce Enrile.
The Cheaper Medicines Law, or the Universally Accessible Cheaper and Quality Medicines Act of 2008, was approved in June 2008, but this is the first time that it has been enforced by the president. Allegations of corruption in the Philippines political landscape is not something new, but Pfizer probably miscalculated in trying to offer the discount cards to Health Secretary Francisco Duque, one of the stronger advocates of the Cheaper Medicines Law.
President Arroyo’s time in office has not been without controversy, notwithstanding allegations of corruption and election rigging, and her popularity has suffered especially with the poor majority of the population. The enforcement of reducing prices of drugs by 50% was part of her early promise to voters, and is only now being implemented. Populist politics some might say, but industry players are gearing up for the challenges and opportunities that lie in this largely untapped market.
Further reading - An in-depth analysis of the pharmaceutical market in the Philippines, including some background information on pricing, is available from Espicom: The Pharmaceutical Market: Philippines (published June 2009)
As it stands, the multinationals, who have long controlled much of the Philippines market, have been dealt a severe blow, and look set to lose more ground, as the government has expressed its intention to cut even more prices in the future.
Philippines president Gloria Arroyo, on 27th July 2009, signed an executive order to slash the prices of five essential medicines by 50% effective 15th August 2009. The prices of other medicines, part of the 22 essential medicines by the government, were voluntarily cut before the deadline by manufacturers.
Pharmaceutical companies were given the opportunity to voluntarily reduce prices for the said drugs prior to that and most did reduce their prices. With the deadline looming, Pfizer instead tried to offer the Health Secretary Francisco Duque five million “discount cards” reportedly worth around P100 million (US$2 million) to delay the enforcement of the Cheaper Medicines Law.
The Department of Health perceived this as a bribe, although Pfizer have denied any wrongdoing, saying it was part of the company’s “continuing commitment to expand access to its high quality, safe medicines nationwide”. In a country with a population around 95 million, mainly poor people, the effectiveness of five million, one-off discount cards was questioned by Senate president Juan Ponce Enrile.
The Cheaper Medicines Law, or the Universally Accessible Cheaper and Quality Medicines Act of 2008, was approved in June 2008, but this is the first time that it has been enforced by the president. Allegations of corruption in the Philippines political landscape is not something new, but Pfizer probably miscalculated in trying to offer the discount cards to Health Secretary Francisco Duque, one of the stronger advocates of the Cheaper Medicines Law.
President Arroyo’s time in office has not been without controversy, notwithstanding allegations of corruption and election rigging, and her popularity has suffered especially with the poor majority of the population. The enforcement of reducing prices of drugs by 50% was part of her early promise to voters, and is only now being implemented. Populist politics some might say, but industry players are gearing up for the challenges and opportunities that lie in this largely untapped market.
Further reading - An in-depth analysis of the pharmaceutical market in the Philippines, including some background information on pricing, is available from Espicom: The Pharmaceutical Market: Philippines (published June 2009)
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