Israel Pharmaceuticals and Healthcare Report Q4 2009

In BMI's Business Environment Rankings (BER) for Q409, Israel once again slipped down the table of the 17 Middle East and African (MEA) markets surveyed, now ranking 11th. Despite the country's wealthy and urbanised population, its regulatory environment, falling state contribution to healthcare and political isolation combine to make its pharmaceutical market a risky proposition. Israel's intellectual provisions (IP) provisions are of particular concern, although the strength of the local generics industry makes drastic improvements unlikely. In fact, Israel again features on the 'Priority Watch List' in the Special 301 Submission of countries with deficient IP regimes, as judged by the Pharmaceutical Research and Manufacturers of America (PhRMA).

The above factors will conspire to produce the forecast minimal growth of Israel's pharmaceutical market.

From being worth ILS5.48bn (US$1.53bn) at consumer prices in 2008, the market is expected to reach just ILS5.58bn (US$1.47bn), which implies a compound annual growth rate (CAGR) of just 0.37% in local currency terms. While cost-containment pressures will result in higher usage of generics, the patented sector will suffer, despite the proposed improvements of registration processes for drugs already registered in the US and other advanced markets, which would allow considerably faster access. The dominance of institutions (sick funds) and their restrictive reimbursement policies in the prescription market are among other factors stifling foreign companies' presence. In fact, the number and value of drugs purchased through insurance funds are rising at the expense of medicines sourced through private pharmacies.

Similarly, the variety of constraints facing companies operating in Israel's pharmaceutical market are increasingly resulting in domestic players looking abroad for revenue. In fact, local press reported that the volume of pharmaceutical exports from the country rose in Q109 compared with the same period last year. BMI notes that Israel's largest drugmaker, Teva Pharmaceutical Industries, reported positive growth in sales during Q109 and Q209 ??