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Pharmaceutical Market : "New" EU Countries : Huge Potential

The 'new' EU Countries' pharmaceutical market is estimated to be approximately 8 per cent of the total former 15 state EU market. This is equivalent to approximately $ 7.0 billion.

Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia joined EU in 2004. Bulgaria and Romanian expect to follow a few years later and Turkey is also a candidate country.

The European Union (EU) healthcare industry is the second largest in the world after North America. New EU countries are expected to make high investments in healthcare. These EU countries are trying hard to raise the standard of healthcare to meet EU health regulations. The first few years of accession are likely to result in a rising Gross National Product (GNP) and a sharp increase in risks to public health. The drive now is for new member countries to put into operation long-term sustainable systematic changes to their respective healthcare systems. Present size of the EU accession countries' pharmaceutical markets is approximately $ 7.0 billion. This is equivalent to the size of the Canadian market and represents only 8% of the total EU15 market.

Parallel trade activity is generally inversely proportional to drug prices. Parallel imports  in the EU currently tend to follow a east-west channel (with south-north channel to a lesser extent).

The east-west parallel trade axis originates from the Czech Republic, Hungary and Poland, all of which have domestic producers that meet the EU standards and criteria. Big international pharmaceutical companies have put substantial investment into these countries.

EU rules and regulations. Many "new" EU countries are already offering patent protection. International drug firms have developed strategies to limit parallel trade, for example, by applying restrictions to wholesalers, seeking to prevent export using legal loopholes, or removing or reducing the ex-manufacture price differentials of their products across the various EU states.

One of the key factors that influences pricing is GDP. The average GDP of the 'new' EU countries is less than half that in the West. Extensive reference pricing between EU15 member states has promoted downward convergence. Germany and the United Kingdom are the highest priced markets whereas France and Italy are the lowest priced markets. These are the four most frequently referenced countries.

The new member EU countries offer a huge growth potential. While the EU15 pharmaceutical market is growing at 8 % annually, the EU accession markets have been growing at 16.5 % over the past five years. Poland, which contributes to 45 % of the accession countries' total pharmaceutical market value, and Hungary, which contributes 23 %, have been growing by almost 20% since 1998. EU15 pharmaceutical market has experienced constant low growth because of government cost control initiatives, pricing constraints and restrictions on reimbursements.

The new EU member countries also offer a good opportunity to carry out clinical trials. There are almost 400 million people in the Central and Eastern European (CEE) countries.

Large multi-national pharmaceutical and biotechnologies companies from western Europe and from the US are using the 'new' EU countries for phase I, II and phase III studies. This number is on the increase at the rate of 30% annually. The 'new' EU countries can be used not only to test drugs on rarer diseases but on diseases for large worldwide markets. Conducting clinical trials in under developed countries gives companies an early marketing advantage. Moreover, hourly wages in the 'new' EU countries are about 1/4 those of western countries. This allows pharmaceutical companies to avoid their single largest cost : the opportunity cost of a delay in getting drug to the market.

(Ref : CHRONICLE PHARMABIZ Dated February 03, 2005)