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Polish Pharma Market Outperforms Expectations in 2007

18 Mar 08

Poland's pharmaceutical market growth exceeded expectations in 2007, posting an 8.3% year-on-year increase to 16 billion zloty (US$7.09 billion) in net manufacturer prices. Growth was higher than expected for both pharmacy and hospital-drug sales.

Global Insight Perspective
Significance	In 2007 prescription drugs grew 7.4% year-on-year (y/y) and over-the-counter drugs (OTC) were up 16% y/y to 7 billion zloty. The turnover of the average Polish pharmacy in January 2008 was up 11.6% to 159,000 zloty.
Implications	Increased patient purchasing power and changes to the pharmaceutical law, resulting in pharmaceutical distributors dropping discounts on reimbursed medicines, are behind the market growth in 2007.
Outlook	Increased competition between drug manufacturers and drug distributors is expected in 2008 as the Ministry of Health and the National Health Fund (NFZ) remain at odds regarding drug distributors' discounts to pharmacies. In 2008, stricter control over pharmacy stocking and pricing policies—currently favouring more expensive prescription drugs—is also expected.

Pharmaceutical Market Growth Driven by OTC and Prescription Drugs in 2007

Much to the surprise of market watchers, the Polish pharmaceutical market exceeded forecasts significantly, posting 8.3% y/y growth to 16 billion zloty (US$7.09 billion) at net manufacturer prices, according to Pharma Poland News. Growth was evident in both the pharmacy and hospital segments. Growth drivers in the pharmacy segment were OTC (over-the-counter) and prescription drugs. The OTC segment of the market grew 16% y/y, amounting to 7 billion zloty, while the prescription segment posted 7.4% y/y growth in 2007. Factors contributing to market growth in 2007 were an increase in patients' purchasing power and a change in the pharmaceutical law that saw drug distributors withdrawing discounts from reimbursed pharmacy medicines. As a result, the average price of some medicines in pharmacies increased.

Pharmacies Start 2008 on Positive Note, but Patients Oppose Stocking and Pricing Policies

In January 2008, the average pharmacy turnover was 159,000 zloty, 11.6% higher y/y, according to PharmaExpert. The most significant growth was evident for OTC medicines (up 23.5% in January 2008), followed by fully-paid prescription medicines (up 6.7% y/y). In contrast, the share of reimbursement in the total pharmacy turnover registered a 9.9% y/y drop.

Average Pharmacy Performance, Poland, January 2008
	Value (zloty)	Y/Y Change
Average Pharmacy Turnover	159,000	11.6%
Reimbursed Prescription Medicines	71,7000	5.9%
Fully-Paid Prescription Medicines	30,400	6.7%
OTC Medicines	56,200	23.5%
Value of Reimbursement	45,400	0.9%
Share of Reimbursement in Total Pharmacy Turnover	28.5%	-9.9%
Number of Customers per Average Pharmacy	4,090	+4.1%
Source: PharmaExpert, 2008.

This is hardly surprising, given the fact that the state's share in reimbursement has been continuously decreasing in recent years. In May 2006, the state's share of reimbursement of total pharmacy sales was 34.4%, and in March 2007 it dropped to 29.5%, leaving patients to cover a greater share of the price. Patients have opposed pharmacies' drug-stocking and pricing policies, claiming that some pharmacies do not stock cheaper equivalents of prescribed drugs and are selling prescription drugs at prices higher than the price ceiling imposed by the Ministry of Health, according to daily Super Express. The Polish Ministry of Health is to launch a probe into the drug inflation policies. Artur Falek, head of the drug department at the Ministry of Health, said that patient rights are being violated, because pharmacies are required by law to offer cheaper equivalent drugs upon request.

Ambiguity Clouds Discounts to Pharmacies

At present there is an ambiguity surrounding the interpretation of these-called "anti-corruption clauses" of Poland's law on healthcare services, which apparently outlaws discounts offered to pharmacies for the sale of reimbursed drugs. According to the Ministry of Health, however, such discounts are lawful, given that drug distributors offer identical discounts to all pharmacies and pharmacies are allowed to keep a part of the resultant savings by raising the margin on reimbursed medicines that they have bought at a discount. The National Health Insurance Fund disagrees, saying that pharmacies must pass on all savings to patients. According to the NFZ's Vice-President, Jacek Grabowski raising the reimbursed drugs' retail price and claiming higher reimbursement payments from the NFZ contravenes the law, notes Pharma Poland News.

Outlook and Implications

The Polish pharmaceutical market was largely expected to slow down in 2007 as a result of the governments' reimbursement policy, which has encouraged the sale of cheaper generic medicines (see Poland: 11 September 2007: Polish P&R Regulations See Drug Prices Fall in 2007) . But improved customer purchasing power, coupled with changes in the pricing of reimbursed medicines at pharmacies following the abolition of drug distributors' discounts, have contributed to the 8.3% overall growth of the Polish pharmaceutical market. OTC drugs were growth drivers in 2007 and in January 2008; and this trend is set to continue. Sales of OTC drugs through retail pharmacies are expected to reach 6.9 billion zloty in 2008, which will mark a rise of 10% y/y (see Poland: 11 March 2008: Polish OTC Retail Sales Expected to Garner Up to US$3.0 bil. in 2008). Higher patient contributions have allowed the NFZ to allocate an additional 858 million zloty to healthcare services 2008, of which 69 million zloty will be spent on extra drug reimbursement.

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