Pharmaceutical market in turmoil

April sees the introduction of a new drug prescription method on the pharmaceutical market at a time when the industry is in full turmoil after the Health Ministry refused to adjust prices in line with the exchange rate.
Distributors, as well as producers and retailers, will be forced to alter their strategies, gradually change teams, and review growth targets.
Last week, the main domestic drug distributors again discussed the issue of drug price modification. The debate is an old one and centred on the possibility that the Health Ministry will modify its prices.
The price at which drugs are sold in drugstores is set in RON by the Ministry and negotiated with industry producers. However, along the chain, there are also distributors for which the same Ministry implemented maximum mark-ups of up to 16%.
Distributors buy drugs from producers and contracts are negotiated in foreign currencies used by producers, but sold to drugstores in RON. Distributors receive their money from drugstores and the Ministry in RON, while payments to producers are made in foreign currencies. As a result, RON decline that started last year has seriously harmed distributors’ business.
RON decline has overshot the set maximum mark-ups, say distributors’ representatives, who add that these mark-ups are among the smallest in Europe and are anyway applied against a base that is not comparable to the rest of European states.
The situation on the distribution market has pushed some players to close warehouses, which has also entailed layoffs. Distribution companies are the biggest employers in the industry. On the other hand, RON decline is also hurting companies in terms of the lines of credit they contracted.
RON decline also came amid a legislative change that this time is hurting producers more than anybody else, be they Romanian or foreign.
Starting April, the way drugs are prescribed is different, i.e. doctors will also have to state the name of the drug maker on the prescription.
The first effect will be felt at the level of commercial teams of players in the domain. As doctors will play the central role, all companies will now invest to expand promotional teams that target doctors.