Global Insight Perspective | |
Significance | Romanian pharmaceutical sales at end-user prices increased by 13% year-on-year (y/y) in the first quarter (Q1). |
Implications | The double-digit growth in Romanian pharmaceuticals sales achieved in Q1 indicates that the underlying growth factors that boosted the market in 2005 remain in effect. |
Outlook | Strong market growth in Romania will continue to drive interest in local company acquisitions by foreign generic -medicines producers during the coming months. |
Romanian Growth Remains Strong
Romanian pharma-market growth remains strong, according to Cegedim data, as reported by ACT Media News Agency, based on Ziarul financiar reports. At 13% y/y in the first quarter (Q1), the rate of pharmaceutical sales growth rivals the 18.1% rate reported for the full year 2005.
Total pharmaceutical sales in Romania at end-user prices reached 350 million euro (US$448.7 million) in Q1. The growth rate can be slightly misleading since it is quoted in euro, while the 18.1% 2005 sales growth was based on change in the market size measured in Romanian lei. However, there have been no major changes in the exchange rate over the past few months that might skew the results.
Total pharma-market sales in 2005 were 4.594 billion lei, as reported previously by Global Insight. Hospital sales were believed to have grown at a slower rate than the overall pharma market. Confirmation for that judgment has now been provided by the more detailed Cegedim data available in the report: hospital sales for the full year 2005 actually declined by 0.2%, while retail sales increased by 25.3% to 3.473 billion lei.
Outlook and Implications
Romanian sales have driven the exports growth of most Central and Eastern European drug makers over the past few months. Romania has been surpassed only by Russia and the CIS states as a source of sales growth in 2005 and the first quarter of 2006 on average. While Russian sales growth has been accounted for by the introduction of a reimbursement system for some groups of the population, the reasons for growth in Romania remain more complicated. The removal of VAT for medicines is one of the main causes, but there are other reasons as well, including the growing purchasing power of the population, which has boosted retail sales. While drugs for most life-threatening diseases are covered under the reimbursement system, Romanians have to pay for many other prescription drugs out of pocket. In some cases even fully-reimbursable medicines can be obtained only if the patient is able and willing to pay at least part of the drug’s cost – either in the pharmacy or by an informal payment to the doctor. The latter practice will no doubt decline as part of the government’s crackdown on bribery and corruption. In the meantime, growth in disposable incomes and the availability of new treatments will continue to drive pharma-market sales in Romania.
Interest in the acquisition of Romanian companies has peaked during recent months – at least in part due to the fast growth of the country’s pharma market and its encouraging prospects after European Union accession. Romanian company Sindan is in the process of acquisition by Actavis (Iceland), while Ranbaxy (India) agreed to take over Terapia (see Romania: 29 March 2006: Actavis Takes Over Romania's Sindan). The acquisition of Sycomed by Zentiva (Czech Republic), initiated last year, is now complete. The last remaining state-owned drug maker, Antibiotice, will be offered for sale by September 2006 and several companies are already lined up to participate in the tender.