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Greece Pharmaceuticals and Healthcare Report Q1 2011
Business Monitor International, Jan 2011, Pages: 81
The Greece Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Greece's pharmaceuticals and healthcare industry.
Greece’s pharmaceutical market remains a challenging environment for both local and international drug makers. The implementation of pharmaceutical price erosion mechanisms, tighter public healthcare spending and a poor economic environment result in a weak outlook for the industry. Greece’s weak drug market outlook is reflected in BMI’s Q111 Pharmaceutical & Healthcare Business Environment Ratings (BERs). The country’s overall BE rating is 57.3, ranking it seventh in the region and well below its historically high position.
Supported by the latest market data, BMI believes 2010 will see an outright contraction in total pharmaceutical sales (with a forecast of -8.13% year-on-year (y-o-y) in local currency terms) toEUR6.04bn (US$8.03bn) – a contraction from EUR6.57bn (US$9.20bn) in 2009.
According to the latest inflation figures from Eurostat, pharmaceutical prices contracted by an average of16.20% between June and October 2010, compared with drug prices in 2009. BMI expects y-o-y price contractions to last until June 2011. As a result, we project limited drug market growth of just 1.38% in2011 to EUR6.11bn (US$7.45bn).
More encouragingly, in October 2010, the Health Ministry’s General Secretary Nikos Polyzos announced that Greece will clear all hospital debts to medical suppliers from 2005 till September 2010 by the end of the year. As of October 2010, debts from 2005, 2006 and the first half of 2007 had ‘almost been paid off’ at a cost of EUR1.5bn (US$2.0bn). However, BMI notes that there is a significant discrepancy between official hospital debt and the amount claimed by Greek pharmaceutical associations. Amid a broad range of structural reforms relating to the pharmaceutical industry, the government is planning to axe the state-guaranteed profit of around 35% on the goods pharmacists sell. The changes to legislation are intended to restrict the number of pharmacies in the country. Additionally, it has been proposed that the VAT rate on drugs will rise from 11% to 23%. BMI notes that while the cuts to the state-guaranteed profit margins for pharmacists may lead to a reduction in consumer prices, the expected rise in VAT on drugs will more than compensate for any price reductions as a consequence of increased price competition.
BMI’s Country Risk team believes that Greece’s international credit conditions are unlikely to return topre-2008 levels in the foreseeable future, we expect both consumer and investment spending to be more subdued over the longer term, anchoring the Greek economy on to a lower growth path than that leading up to the global credit crisis. Although Greece will continue to post real convergence gains with the EU, we stress that a significant degree of integration has already occurred, with income per capita settling at a level similar to that of Spain. Moreover, we believe that broad political and economic stability will remain in place, which will continue to accentuate Greece's attractive investment climate going forward.
A further decline in port throughput is on the cards at Greece's ports in 2011 as macro factors affect the forecasts, with total trade predicted to decline by 1.6%.
The up tick in 2010 will therefore be cancelled out, meaning that recovery to historical highs has been pushed further into the future, past out mid-term forecast period.
The report notes that past few years have been tough on Greece's ports, with throughput buffeted by industrial action and the downturn.
While the negative macro outlook for Greece affects projected port throughput, BMI is buoyed by developments at the ports that suggest the facilities could diversify their client base away from the muted domestic market into areas that could offer more profit and increase throughput by using ports as transshipment hubs or gateways.
Headline Industry Data:
- 2011 port of Thessaloniki tonnage throughput forecast -0.10%, following projected growth of 2.75% in 2010.
- 2011 port of Piraeus container throughput forecast -0.90% following projected growth of 10.21% in 2010
- 2011 total trade y-o-y change forecast at -1.61%.
Key Industry Trends:
China Increases Exposure To Greek Maritime Sector - China continues to cement its role in Greece's maritime sector following the China's main terminal operator COSCO taking over operations at one of the container terminals at the port of Piraeus. The terminal operator is seeking to expand its role in the country's logistics network further, with a plan to own and operate the Thriassio transshipment hub. Chinese banks have also opened their doors to Greek shipping firms seeking finance in order to expand, in another example of Sino-Greek relations on the shipping front increasing.
Thessaloniki Seeks Gateway Role - Thessaloniki is seeking its niche as its bigger container port sister, Piraeus, expands with the help of Greek investment. Thessaloniki is well placed to develop into amaritime gateway for the Balkans.
Risks To Outlook
Unemployment is rising, negatively affecting import demand, and together with a weak export sector this spells disaster for Greece's ports. While we forecast muted throughput growth over the mid term, we donote some developments which could have an upside impact on our current forecasts, namely COSCO Pacific's role at the port of Piraeus and the port of Port of Thessaloniki's plan to develop into a maritime gateway for the Balkans.
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