by Pavel Gramatikov
When Southeast Europe was hit by the economic turmoil, costwary governments began to implement various spending cuts and healthcare was one of the first sectors to see its financing slashed. Generic drugs came as a breath of fresh air to strained government budgets, replacing some of their more expensive counterparts.
Greece making headlines again
Greece, which accounts for less than 1% of the world’s drugs market, has made headlines as the European Union and major drug manufacturers commenced talks on keeping the supply of medicines flowing to Greek hospitals in case the country, which is reeling on the brink of default, exits the eurozone. Many of the pharmaceutical companies are still struggling to collect their payments from Greek hospitals. Greek pharmacies too have been affected and awaiting 762 million euro in overdue state subsidies. As the debt-laden country seeks to cut government spending, its healthcare system is poised to adopt more and more generic alternatives to make ends meet. The International Monetary Fund (IMF) together with the European Union are demanding fresh cuts resisted by medical unions and lobbies.
Generic drugs currently account for 17% of Greece’s pharmaceutical market, an increase from 9.7% in 2003 and yet far behind the market share of 80% of these medicines in Germany. The untapped market may have been one of the reasons for the 2011 acquisition by US generic drug major Watson of its Greek peer Specifar Pharmaceuticals for 400 million euro.
Neighbours next door
Watson also agreed to acquire Switzerland-based Actavis for about four billion euro. Actavis has a strong presence in Bulgaria with two facilities and a portfolio of about 280 generic medicines. Healthcare industry specialist IMS health has recently said that the prices of generic drugs in Bulgaria on average are equal to just a quarter of the prices of brand medicines. The Bulgarian Generic Pharmaceuticals Association (BGPharmA) also issued a similar ratio figure in March when it said that the Bulgarian government had paid one billion levs, or half a million euro, for 200 million packs of generic medines and the same amount of money for 50 million packs of branded drugs.
Yet, the Bulgarian government is not encouraging the purchase of cheaper drug copies, Rossen Kazakov, executive director of BGPharmA, said in an interview with local news provider Investor.bg in April. In a bid to promote wider use of generic medicines in Bulgaria, Actavis CEO Claudio Albrecht met with Prime Minister Boyko Borisov in March, saying at the meeting that generic drugs may play a significant role in helping the government provide medical treatment for more people and simultaneously spare the state budget. Albrecht, who said that Actavis was the biggest pharmaceutical company in Bulgaria at the moment with its two manufacturing plants, might have had a good reason for trying to assert the company’s market position after its Israeli rival Teva said earlier it will aim to become the number one generic company in the Balkan country. Тo accomplish this, Teva will have to dethrone Actavis, Bulgaria’s Sopharma, Sandoz, wich is part of Swiss Novartis, and Zentiva, a company of French Sanofi.
Sopharma, a large Bulgarian-owned generic drug maker, increased its sales revenue by 2.0% year-on-year in the first half of 2012. Its exports increased by an annual 7.0% in the six months through June, whereas revenue from domestic sales dropped by 12%. In June, Sopharma became member of the executive body of the European Generic medicines Association (EGA).
In Serbia, the major pharmaceutical producers are state-owned Galenika AD and Hemofarm AD, controlled by German generic drugs maker Stada Arzneimittel. Stada said its sales in Serbia fell by 31% on the year to 16.5 million euro in the first quarter of 2012. The company attributed the “expected” decline, to some extent, to a change in its domestic distribution model aimed at improving control over its cash flows. Hemofarm began direct sales to pharmacies, thus avoiding some wholesalers which had failed to pay for deliveries. Stada’s sales revenue in the Serbian market generated by generics dropped to 12.1 million euro in the first quarter of 2012 from 20.4 million euro a year earlier. Generics thus contributed 73% of the firm’s Serbian sales in euro terms compared with 86% a year earlier. However, the company has said it continued to expect its sales to rise in dinar terms in 2012 and beyond.
Tax woes in Romania
The Romanian Association of Generic Drug Manufacturers (APMGR) warned in June that many cheap drugs may disappear from the local market and some drug manufacturers may go bankrupt as negotiations with the government over clawback tax had failed. APMGR president Dragos Damian said that the tax almost doubled in the first quarter of 2012 from the previous quarter.
Romanian drug maker Antibiotice, however, plans to boost its revenue by 90% by 2016. In 2011, the company registered a 16% growth in its net turnover to about 281 million lei (60.8 million euro). Its net profit rose to 20 million lei last year from 12.5 million lei in 2010. In order to achieve growth, Antibiotice intends to improve its position on the international market, renew its product portfolio by assimilating, through its own research and partnerships, more than 30 products, and develop new drugs with the help of its newly set up research and development centre.
Exports are key
In 2011, Slovenian drug maker Krka, which makes most of its sales revenue abroad, sold some 146 million euro of products in Southeast Europe, or 14% of its total sales. Romania, the region’s biggest market, generated 49 million euro of Krka’s sales revenue, an increase of 21%. Croatia contributed some 36 million euro and in Serbia the company booked a 40% growth in sales to more than 10 million euro. Krka also registered a rise in its sales in Macedonia, Bosnia and Herzegovina, Kosovo and Bulgaria, while its sales in Albania fell. At home, Krka sold about 102 million euro worth of products last year which represented 9.0% of its total sales. The company stated in its 2011 annual report that it expects the pharmaceutical market in Slovenia to shrink by 2.0% to 500 million euro in 2012 and that the Croatian market will decline by 3.0% to 700 million euro. The company was more upbeat about Romania, projecting the country’s 2012 pharmaceuticals market at about 2.6 billion euro, up by 5.0%. The company’s latest results also were positive, with sales rising 7.0% on the year to 565.2 million euro in the first half of 2012.
Macedonian generic drugs maker Alkaloid AD Skopje also closed 2011 in positive territory with its net profit rising to 605 million denars (10 million euro) from 581 million denars in 2010. Late last year the company set up a second subsidiary in Serbia in a bid to boost exports. A couple of months later Alkaloid injected 405,000 euro into its Serbian units to further strengthen their financial standing.
Bosnia’s Bosnalijek booked a 42% increase in its net profit to 5.9 million marka (3.0 million euro) in 2011. The company expects to post a revenue growth rate of 12% per year by 2014. Reuters quoted the company’s chief executive officer Edin Arslanagic as saying in January that the firm will earmark some 30 million marka to accelerate its exports and for investment. In July, Bosnalijek’s shareholders gave the go-ahead to the incorporation of a company unit in Russia in a bid to facilitate direct exports to the lucrative market.