Greece Pharmaceuticals and Healthcare Report

It has been a mixed year so far for the Greek pharmaceutical market. Although the sector is outperforming all other domestic manufacturing sectors in 2009, according to data from the National Statistics Service of Greece, there are warning signs ahead. Over the first six months of 2009, both the production and retail indexes of basic pharmaceutical products and pharmaceutical preparations has continued to grow, while most other sectors have been contracting. BMI believes the results highlight both market resilience to economic contraction and strong performances by Greek pharmaceutical companies. We calculate that the Greek drug market reached a value of EUR6.00bn (US$8.83bn) in 2008 and should grow to EUR6.65bn (US$8.53bn) in 2009. However, growth looks set to drop off over the remainder of the forecast period with a compound annual growth rate (CAGR) of 7.49% in local currency through to 2013.

Indeed, pressures on government spending and clampdowns on inefficient prescribing are likely to force domestic companies to become increasingly reliant on foreign markets for growth. Meanwhile, pharmaceutical prices in Greece are set to be lowered considerably, following the parliamentary introduction of amendments to the current reference pricing scheme in July 2009. Under the revised system, prices will be calculated by the average price of the three lowest-priced markets within the EU.

Prior to this, prices were determined by the average lowest price within the 14 older EU member states plus Switzerland, and the two lowest prices within the 10 newer EU countries.

Greek health spending may also be impacted by falling contributions to social security. According to reports in Kathimerini in May 2009, social security funds in the country need an extra EUR1.7bn in order to meet their pension and healthcare obligations. Lower-than-expected contributions coupled with aboveaverage pharmaceutical expenditure have been part of the problem, although the real issue is Greece's struggling economy. BMI expects the current downturn to deepen in the coming quarters, and we target full-year economic growth of -3.5%. A recovery is expected to begin in 2010, though it will be lukewarm, and contained by fiscal and monetary tightening going forward. Unemployment is also on the rise, reaching 9.4% in April 2009, resulting in lower social security contributions, and a greater burden on the state.

Still BMI believes that strong indicators for pharmaceutical production in H109 will be reflected in a continued positive performance by Greece's major pharmaceutical companies, in relation to firms in many other sectors. Financial results for Alapis Group show an increase in consolidated turnover of 13.3% year-on-year (y-o-y) in H109, to EUR526.1mn (US$748.5mn). Buoyed by strong results, in July 2009 Alapis also announced that it is planning to raise EUR451mn (US$649.1mn) through a rights issue in order to fund further growth. Meanwhile, this optimistic outlook is reflected in our Business Environment Rankings for Emerging Europe, where Greece sits comfortably at the top of the table.