Strong growth of pharmacy market in November

The earlier-than-usual onset of the flu season and the associated rise in infections observed in October proved to be but a prelude to things to come. According to data from the National Institute of Hygiene (PZH), in November 2009 there were more than 290,000 confirmed and suspected flu cases in Poland, a more than nine-fold increase in relation to October and more than 20 times higher than in the corresponding period of 2008. The dramatic spike in reported morbidity, driven mainly by the widely feared swine flu (A/H1N1) virus, led to stronger-than-usual patient traffic at pharmacies. Although as a rule patient numbers tend to fall in November relative to October, in 2009 the number of patients visiting the average pharmacy remained unchanged from the month before and, at 3,940, was a hefty 14.5% higher than a year earlier.

This led to higher retail pharmacy sales, which amounted to PLN 2.34bn (€560m) in November, up by 1.4% on the previous month. In annual terms sales surged by 19.5%, a sharp acceleration of market growth compared with October and the highest annual increase since April 2008. Although the upsurge in seasonal infections was a major contributor, it should be noted that the steep rise in sales was partly a statistical effect, helped by a low reference base (in November 2008 the pharma market grew by 1.7% y-o-y) and a higher number of working days compared with a year earlier. Cumulatively in the first 11 months of 2009 the Polish pharmaceutical market rose by 8.9% y-o-y and amounted to PLN 23.7bn (€5.5bn).

According to preliminary figures from PharmaExpert, in December retail pharmacy sales were worth PLN 2.36bn (€570m), an increase of 1.1% in relation to November and of 2.8% on the same period of the previous year. In our view, the slowing of market growth in December was due to a gradual fall in the number of flu cases (which peaked in the last week of November) and statistical factors (a high reference base and fewer working days than a year earlier), which in contrast to November had a negative effect on sales. Consequently, in 2009 as a whole the Polish pharma market grew by 8.3% to PLN 26.1bn (€6bn)[1]. We expect the strong level of activity to continue in the months ahead. We forecast that in 2010 retail pharmacy sales will rise by about 7%.

The robust growth of retail pharmacy sales observed in November was mainly the consequence of a surge in demand for non-prescription medicines. In the month under analysis, OTC sales rose by 6.2% compared with October and exceeded PLN 880m (€211m). In annual terms the increase was a staggering 34.5%.

Another driver of sales growth were fully-paid prescription sales, which topped PLN 440m (€105m) in November, up by 2.6% in relation to October and by 15.4% on the same period of the previous year. Meanwhile, reimbursed sales were down by 2.6% in monthly terms to PLN 1.01bn (€241m), but the figure represented an increase of 10.4% y-o-y. Total sales of prescription medicines reached almost PLN 1.45bn (€347m), down by 1.1% compared with October but an increase of 11.9% on the same period of 2008.

In terms of therapeutic class, the highest increase (up by 26.7% m-o-m) was noted in anti-inflammatory drugs. On the other hand, sales of haemopoietic drugs were down by 9.8% in comparison with October.

With the outbreak of the flu season, the share of dietary supplements (the category also includes dietetic food products) in retail pharmacy sales rose significantly in November (from 6.91% to 7.21%). At the same time, the share of medicinal products and other products fell from 79.74% to 79.58% and from 13.35% to 13.21%, respectively.

 

 

 

Following a symbolic drop (by 0.1%) in October, the average price of a medicine sold in a Polish pharmacy fell by 1.1% m-o-m in November. Given that the average price of a reimbursed medicine was only marginally lower (down by 0.1% m-o-m) while the average price of an OTC drug, the fastest-growing category, actually rose 1% compared with October, we may surmise that the result was due to a marked decline in the average price of fully-paid prescription medicines (for which data are not available).

The rate of annual price growth slowed considerably in November but remained well ahead of inflation, which amounted to 3.3% y-o-y that month. In the period under analysis, the average price of a medicine sold in a Polish pharmacy was PLN 15.19 (€3.6), up 4.6% y-o-y (compared with a growth of 6.7% y-o-y in October), while the price of a reimbursed drug reached PLN 27.39 (€6.6), up by 5.1% y-o-y (against 6.6% y-o-y in the previous month). At the same time, the average price of an OTC product was PLN 9.35 (€2.2), an increase of as much as 11.4% y-o-y (in October growth amounted to 11.9% y-o-y).

Meanwhile, the value of reimbursement reached just under PLN 720m (€173m) in November, down by 1.7% from October but an increase of 14.5% compared with a year earlier (against a growth of 5.7% y-o-y in the previous month). In the period under analysis, the share of reimbursement in total pharmacy sales amounted to 30.8%, a drop of 1 p.p. on October and of 1.3 p.p. on a year earlier. At the same time, the share of reimbursement in reimbursed sales was 70.8%, i.e. 0.8 p.p. higher than in October and a full 2.5 p.p. higher than in November 2008.

The continued strength of demand for medicines, and in particular the rapidly growing share of OTC products in total pharmacy sales, are benefiting margins. The average pharmacy margin has exhibited a strong upward trend for more than a year, and in November reached 27.5%, up by 0.7 p.p. compared with October and by 2.6 p.p. on a year earlier, and the highest level since 1999. Over the 12 months to November, the reimbursed medicines margin increased by 1.7 p.p. to 21.1%, whereas the margin on remaining products was up by 2.8 p.p. to 32.4%.

 

 

 

Paweł Sionko

Economist

PMR Publications