Romania Pharmaceuticals and Healthcare Report Q1 2007

Despite its sizeable population and EU membership from the start of 2007, Romania's pharmaceuticals market is still one of the least developed in the region. However, high growth and increasing levels of foreign direct investment (FDI) ahead of EU accession have made the country a very attractive mediumterm proposition as has the rise in prices following the accession. Consequently, the share of generics (presently at around 38% of the market by value) is likely to slip as the operating conditions in the country improve for foreign players and branded drugs. The underdeveloped over-the-counter (OTC) market, which presently accounts for a 20% share of the total, will ultimately benefit from the changes, including the lowering of public sector financing of medicines. In 2006, Romania's pharmaceutical market was valued at just less than US$2bn at retail prices. Strong annual growth (of high single digit figures) is predicted in the next five years, making investment in the country more attractive. By 2011, the value of the pharmaceuticals industry is forecast to reach nearly US$2.96bn, with branded medicines in particular benefiting from the improved intellectual property (IP) and regulatory conditions.

BMI's adjusted Business Environment Rankings for Central & Eastern Europe place Romania first out of the 14 markets in the survey, which is a notable improvement compared to previous quarters. The primary reason for the rise is the country's reassessed market growth potential, which is higher than most of its neighbours, and significantly ahead of Bulgaria, the fellow 2007 EU entrant. Romania, like other CEE countries, is also demonstrating improved political and economic risk as the region embraces EU membership. Having been traditionally supplied by locally produced drugs, the Romanian pharmaceutical market demand is increasingly met by foreign firms. The market share of imported drugs rose from 45% in the mid-1990s to 75% at present in value terms, although these products accounted for only a fifth of the sales by volume. Recent high-profile acquisitions by Czech firm Zentiva and India's Ranbaxy, coupled with the exit of many smaller firms over the last couple of years, have transformed the domestic landscape, and will further boost the market. The pending privatisation of Antibiotice has received much attention from a number of prominent European and overseas companies, including German Phoenix and Canadian Acic Pharmaceuticals, as well as Icelandic generics producer Actavis, which has already made a number of purchases in other Central and East European (CEE) countries.