Is all sunny in Spanish pharma?

Oct 01, 2009
Volume 21, Issue 10

Ranking amid the top 10 global pharmaceutical markets, Spain has recently been described as the fastest growing EU country of Europe's 'big five'.1 The country's physical location enables access to both European and Mediterranean countries, as well as EU member states where the circulation of goods is free. This has helped secure growth of its pharma market, which is currently estimated to value €15.3 billion, and is set to rise to €18.5 billion by 2013 at a predicted CAGR of 4%,2 which is not unrespectable given that the expected forecast growth for European developed markets is between 1–4% because of the unstable economic climate.3

Despite the uncertain global financial environment, Spain's industry is still moving forward thanks to government initiatives. Gerardo Gonzalez of Spain's Reig Jofre Group explained: "The industry is very dynamic and adopts new technologies quickly. This is encouraged by the government by plans to support investment in new technology; a government department has been created to assist and manage this."

The industry has also continued to invest heavily in R&D. According to a recent report, the Spanish pharma industry invested more than €1 billion in R&D in 2008; an increase of 9.6% compared with the previous year. Of this, €453 million was injected into clinical trials.4 The Spanish government has also introduced initiatives to promote public investment into R&D, such as the Ingenio 2010 programme and the 2008–2011 Nacional de Investigacion Cientifica, Desarrollo e Innovacion Technologica (National Plan for Scientific Research, Development and Technological Innovation).

Government initiative threatens the industry

In general, the market for pharmaceuticals in Spain is very similar to that of other developed European countries; there is a relatively effective public healthcare system and strong demand for new medicines as the population ages. The country's pharma industry also faces similar problems to those witnessed by its European siblings, such as competition from emerging economies (primarily China and India) that offer lower R&D and manufacturing costs and, more critically, looming patent expiries. Half of Spain's protected market faces patent expiry between 2010 and 2015, representing $4 billion of 2008 sales.1 According to IMS Health, some companies have 20–30% of their portfolios exposed and will need to alter their strategy in order to mitigate the risk and survive.

Furthermore, Spain has not escaped the global economic crisis unscathed; although the country's public healthcare system, Servicio Nacional de Salud, is largely funded by taxes, making it less exposed to changes in the economic environment, the consumer health market declined by 5.3% in Q1 2009 after growing at almost double digits at the end of 2007. The sharpest decline was in sales of overthecounter medicines, which dropped 5.6%, with consumer purchasing behaviour showing a tendency towards cheaper products.1

Perhaps at the forefront of pharmaceutical companies' woes, however, is the Spanish government's initiative to introduce more stringent drug pricing measures, which have resulted in an average decrease in drug prices by 40%.5 Although the system provides Spain's consumers with lower cost medicines than in other European countries by preventing pharmaceutical companies from freely controlling prices, it is, unsurprisingly, not favoured by pharma manufacturers.

While each of these factors poses a threat for branded pharma, generics manufacturers have reason to be optimistic as the need for cost containment is expected to lead to greater uptake of generic medicines. In 2008, generics sales reached €1.14 billion, comprising 9% of the country's health services' prescription expenditure. By 2013, this figure is expected to reach €2.3 billion and represent 12% of the total drug market.2

The generics market will also be affected by the government's cost containment system, however, and it is the belief of Spain's National Pharmacists' Association that this initiative is compromising the role of generics, and provides little incentive for manufacturers to register new generic medicines in Spain.5 The reference price scheme that came into effect in March 2009 affects approximately 160 groups of medications, including 2847 generic medicines.5,6 Savings are expected to be almost three times the savings estimated for 20087 and although this is good news for consumers, the industry will inevitably suffer a drop in profits.

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