Italy Pharmaceuticals and Healthcare Report Q2 2009

Italian economy is one of the most vulnerable economies in an already shaky eurozone. High public debt, poor infrastructure, and a lack of competitiveness are the basis for the likelihood that the country will remain on the region's laggards over our forecast period. Additionally, low levels of growth of the Italian pharmaceutical market, which have come about largely as a result of widespread price cuts, mean that Italy now sits third from the bottom of our Business Environment Rankings for Western Europe in Q209.

Despite this, the sheer size of Italy's drug market (at US$30.7bn in 2008) and the recently announced improvements to its regulatory agency mean that Italy is the 14th most attractive pharmaceutical market in global terms. By 2013, however, its compound annual growth rate (CAGR) will be negative in US dollar terms (with the market value at consumer prices falling to US$29.9bn), as the government continues its cost-containment drive.

In addition, manufacturers have raised the issue of limited access to innovation - with regional variations a key problem. Research-based companies have complained that incessant price cuts are resulting in fewer funds available for research and development (R&D) activities. Pfizer, the leading global pharmaceutical company, sold its Italian manufacturing plant in Nerviano to Icelandic generics company Actavis at the start of 2008, only to announce a major cut in the number of its sales jobs in Italy a year later. Both developments are clear indications of the difficult operating conditions in the country's pharmaceutical market, with Pfizer additionally facing a major European patent expiration in 2011.

Nevertheless, pharmaceutical manufacturers are certain to welcome some of the recent regulatory developments. For example, in January 2009, the Italian parliament began considering a revision of the economic stimulus bill. The changes would reserve US$23.73mn per annum for the provision of financial assistance to families that have new-born children suffering from any one of 6,000 rare diseases. Around the same time, Spanish pharmaceutical company PharmaMar announced that its designated orphan drug for the treatment of soft tissue sarcomas and ovarian cancer - Yondelis (trabectedin) - had received approval for price and reimbursement from Italian authorities.

In what can be seen as a welcome development for the pharmacy retail sector, the European Commission recently appealed to the Italian government to modify legislation that limits the ownership of multiple retail pharmacies. The commission stated that if the Italian restrictions are not changed within two months, the next step would be the involvement of the European Court of Justice (ECJ). According to existing provisions, a pharmacy chain can have a maximum of four outlets within the country's 108 provinces, which is in conflict with free trading in Article 43 of the European Community Treaty.