Italy’s pharma market slump: revenue decline to continue, warns GlobalData

Italian pharmaceutical market value will continue to fall in the foreseeable future, due to government support of generics and a stringent drug pricing policy, states the latest report from research and consulting firm GlobalData.

The London-based company’s new analysis* expects revenue for the Italian pharmaceutical market to drop from $25.1 billion in 2012 to $23.5 billion in 2020 – a decrease of $1.6 billion in just eight years.

GlobalData’s negative growth forecast is driven by the government’s plans to maintain its hardline approach to healthcare spending. The Italian Medicines Agency (AIFA) negotiates drug prices through internal and external referencing, and if the drug manufacturer does not agree with the AIFA’s suggested price, the product becomes non-reimbursable – substantially restricting market potential.

“Like its European neighbours, Italy is struggling to cope with high levels of national debt. Budgetary constraints are impacting the country’s healthcare spend, and costly pharmaceuticals appear early on the list of things to be affected,” says Joshua Owide, Head of GlobalData’s Industry Dynamics team.

“Although many branded pharmaceuticals are sold and distributed through domestic players, providing relative insulation compared with other struggling European markets, outstanding trade receivables continue to grow as hospitals and other healthcare services are unable to settle their accounts on time. As in Greece, established pharmaceutical companies might be forced into receding from the Italian market on the basis of commercial viability.”

The growth of the generics sector in Italy will also prove damaging to pharmaceutical industry revenue. An austerity package introduced in 2010, which made the reimbursement of the lowest priced generic alternative mandatory, has provided a boost to Italy’s burgeoning generics market but will ultimately prove detrimental to the overall value of the country’s drugs market.

Owide says: “Although Italy’s generics market is significantly less developed than those in other major EU countries, recent government reforms could result in a dramatically altered landscape and see the volume of generic prescribing increase from their current low levels towards to those seen in the UK and Germany, where generic prescribing is much higher.

“This shift would help reduce the growing healthcare budget deficit, while hurting branded pharmaceutical companies operating in Italy – both domestic like Menarini and Recordati, as well as major multinationals. It is clear that Italy’s historical prescribing model is unsustainable given the country’s recent economic difficulties.”

*CountryFocus: Healthcare, Regulatory and Reimbursement Landscape – Italy