Austerity measures beginning to bite in Europe
pharmafile | August 5, 2010 | News story | Sales and Marketing | Europe, economic climate, global pricing, price cuts
Major pharmaceutical companies are beginning to feel the direct effects of the austerity measures being introduced across Europe’s healthcare systems.
Second quarter financial results show some companies are already suffering from the squeeze on drug prices in Europe – but pharma leaders say the worst is yet to come.
Despite the sluggish growth in the region’s pharma market in recent years, Europe is still important for the industry, accounting for more than 30% of the sector’s global revenues in 2009.
The dire economic situation in Greece led the country to slash its medicines prices by up to 27% in May, and since then a number of countries have followed with similar, if not as drastic, cuts.
Spain is to introduce a 7% cut in the price of branded medicines, and a 25% cut in the price of generics.
France plans to reduce drug costs by €100 million after a report found that its 2010 health spending has gone €600 million over budget. Italy is to cut €24 billion from its healthcare spending, €1.35 billion of which will come from reduced pharmaceutical spending.
The country will cut generic drug prices by 12.5% until the end of 2010 and will limit reimbursement of prescription drugs to the cheapest versions only next year.
Medium-sized pharma companies which rely on Europe for a larger part of their incomes, such as Bayer and Merck KGaA, Almirall and UCB are seen as most at risk, but industry’s biggest companies also face lower sales.
Johnson & Johnson says it expects Europe’s cost containment drive in 2010 to result in a $200 million drop in its revenues this year. The company’s chief financial officer Dominic Caruso said pricing pressure in Europe was “not an unusual phenomenon” but said the pressure was now growing, and would have a “mid-single digits impact” on European revenues.Novartis reported that European drug price cuts dented pharmaceutical revenues by 3.1% in the first half of the year.
David Epstein, Novartis’ head of pharma, said: “While I can’t give you an exact number for the second half, I can tell you we’ll see the full-on effects of the cuts in Greece and in Spain. In addition, we will see the introduction of the rebates in Germany and some downward pricing pressure in France. It would not be unreasonable to estimate that the impact could be as much as twice what we saw in the first half in Europe.”
GSK’s chief executive Andrew Witty predicts that his company’s European revenues will shrink by at least 3% for the next year or two, and could worsen. Witty commented during the company’s Q2 results: “We’ve seen some price pressure in the first half. It will accelerate as we move through the second half and actually I think it will be more of a 2011 phenomenon, in terms of how it ramps up.
”Germany is set to introduce its price cuts in the next few weeks, having been brought forward from 2011. Price cuts of up to 16% will be enforced and will include a ban on branded drug price increases.
Andrew McConaghie
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