Italian Pharmaceutical Market Grows 2% Y/Y in 2007 as SSN Spending Falls 6.8%

P&R Measures Continue to Bite

In 2007, the Italian pharmaceutical market grew 2% year-on-year (y/y) to 24.9 billion euro, reports German newswire Nachrichten für Aussenhandel. Drug exports amounted to 12.4 billion and imports stood at 14.3 billion euro.

Market growth was driven primarily by the sale of generic medicines, up 40% from 2005 to 500million euro in 2007. Vaccines also exhibited double-digit growth rates, and the sale of over-the-counter (OTC) drugs in 2007 was up 1.8%.

During the first ten months of 2007 (January-October) a decrease in drug sales (in value terms) was evident across all therapeutic areas, with the exception of anti-parasitic drugs (up 4% y/y), hospital solutions (up 3.7%), and drugs for the treatment of the respiratory system, based on recently published data by IMS Health. Sales by volume, however, increased y/y for all therapeutic areas concerned, with the exception of antineoplastic and immunological drugs.

A contraction in pharmaceutical expenditure by the national health system (SSN) was felt across the regions, decreasing 6.8% y/y in total in 2007 (see table below).

The modest growth of the pharmaceutical market and contracted expenditure by the SSN are a result of selective drug price cuts introduced by the Italian government in July 2006 as well as generalised 5% drug-price reductions from October 2006 (see Italy: 14 March 2007: Growth in Pharmaceutical Expenditure by Italian National Health Service Falls to 4% in 2006).

According to a new law approved in December 2007, P&R (pricing and reimbursement) decisions will now be based on the price-volume relation of each drug during the previous 12 months. This new regulation will be accompanied by a number of favourable measures for the pharmaceutical industry, such as an increase in the drug-spending budget by 1% (from 13% to 14% of national healthcare budget); a 2.5% allocation of the healthcare budget to hospital drugs; tax cuts; and incentives to encourage R&D activities in the country (see Italy: 5 December 2007: New Drug-Pricing, Tax Cuts, R&D Incentives Approved in Italy). Indeed, R&D incentives have encouraged Swiss giant Novartis to invest 600 million euro in a new vaccine plant in Siena. German Bayer is also considering moving production from Russia to Garbagnate by 2009.

Outlook and Implications

A similar 2% growth figure for the overall pharmaceutical market in Italy is expected for 2008 as the pharmaceutical sector gets to grips with the new P&R regulations. Generics manufacturers are going to be hit this time, as the new regulations will take into account the price/volume relationship as a base for new pricing. OTC-sector growth is expected to continue with around 2% y/y growth expected in 2008 (see Italy: 11 July 2007: Italian OTC Market Garners US$1 billion in Q1, Up 3.4% Y/Y).

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