Pharmaceutical market in 2010: large companies with financial resources will stand to gain

Headcount reductions in drug distribution, falling revenues for drugstores, temporary production halts by domestic producers and price hikes for OTC drugs are the main estimates drug industry players are making for 2010.
In terms of dynamics, the pharmaceutical market will most likely follow this year’s trend in 2010, namely it will post a slight increase of as much as 10% in RON, a one-digit decline in value in euros and in the number of units, and is set to return to growth both in RON and euros starting 2011, companies say.
“It seems impossible that the pharmaceutical market should see any further growth in euros, but it will be a great achievement if it goes up in RON. The main factors due to influence the market in 2010 are on the one hand the general shortage of funds, and on the other one, the healthcare system’s arrears deepened by delayed payment terms for drugs. These will have a deep impact on the market dynamics in the following year,” said Dan Ivan, country head of Sanofi-Aventis and chairman of Zentiva’s board of directors.
In the first nine months of this year, drug sales rose by 12.8% in RON, but fell by 3% in euros and by 10.5% in terms of the number of units, according to Cegedim Romania data. This trend may maintain by yearend. Cegedim expects the pharmaceutical market to slide by 5-10% next year.
One of the upbeat managers is Dan Zamonea, general manager of Roche Romania, who sees “modest” growth next year.
Despite the divergent opinions on market growth, all players agree that 2010 will be a difficult year.
“I expect system financing problems that emerged in 2009 to have an impact in 2010 as well, which will push industry operators to use their resources at the maximum to cover their floating capital needs and will obviously hurt investment budgets,” believes Dragos Dinu, a partner with Link Resource consultancy. He adds that market will see a slight change in terms of retail and distribution because of the resource gap among players, with an “obvious” advantage for large players and vertically integrated ones.
Personnel cuts will be visible in drug distribution, while producers are likely to temporarily halt production and importers could raise prices for OTC drugs. Drugstores will also suffer, after producers and distributors have significantly modified their commercial strategy.
“Next year will certainly be a grey year and a year when companies start resetting their growth strategies (…),” Dragos Dinu says.