BMI View: Spain's non-transparent and unpredictable government medicine pricing system and the implementation of numerous emergency measures to contain pharmaceutical spending will highly disrupt multinational drugmakers ' strategy and revenue streams. Despite the Spanish economy exiting crisis mode, we believe that the Spanish government will continue to target the healthcare sector - a large recipient of government funds. As a result, we uphold our bearish outlook for the Spanish pharmaceutical market over the next five years.
Headline Expenditure Projections
Pharmaceuticals: EUR23.02bn (USD30.85bn) in 2014 to EUR22.36bn (USD24.60bn) in 2015; -2.9% in local currency terms and -20.3% in US dollar terms. Forecast in line with last quarter.
Healthcare: EUR89.16bn (USD119.47bn) in 2014 to EUR89.51bn (USD98.46bn) in 2015; +0.4% in local currency terms and -17.6% in US dollar terms. Forecast revised downwards from last quarter.
In BMI's Pharmaceutical Risk/Reward Index for Q315, Spain scored 64.2 and ranked 12th out of the 15 countries surveyed in Western Europe - just below the Netherlands (64.7). While Spain offers investors positive features, such as its large drug market, it also has problems, such as the government's focus on cost containment, low population growth, cumbersome bureaucracy and provincial differences regarding drug regulations and reimbursement.
Key Trends And Developments
The Spanish government has the capacity to, and should, fund new medicines for treating hepatitis C, even though doing so will produce excessive costs in the short-term, according to Farma Industria's general director Humberto Harness. The cost of the new drugs may place fiscal stress on the country in the short-term but Harness asserted that high savings will be experienced in the medium- and long-term, Harness noted. The comments came during a roundtable discussion, which was attended by members of the Platform of People Affected by hepatitis C (Plafh), health professionals and the pharmaceutical industry. According to Martin Selles, president of the Janssen-run laboratories that manufacture one of the new drugs to treat hepatitis C, the new medicine will allow thousands of patients to get cured and avoid developing cirrhosis, cancer or needing transplants which will help the health system save in the long-term.
Spain-based pharmaceutical company Almirall has started a reorganisation process in its Spanish research and development (R&D) team that will result in the cutting of 68 jobs, reports Reuters. The reorganisation in the R&D division forms part of the company's strategic decision to focus its operations on the dermatological field. However, the development is not expected to affect the overall company vision and mission for 2015, according to the company.
The latest PhRMA submission to the 2015 Special 301 report by the US Trade Representative (USTR) has included Spain on the Watch List as a result of the presence of market access barriers in the country - primarily a non-transparent and unpredictable government pricing system. PhRMA's submission outlines the industry's concerns about the countries' intellectual property (IP) regime deficiencies, including adherence to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), measures in place to deal with counterfeit medicines, the speed at which IP disputes are resolved and general market access barriers.
BMI Economic View
Spain's economy has exited crisis mode, with the country set to become a eurozone outperformer in 2015 and 2016. However, this will mainly reflect improving external factors rather than significant structural improvements to the economy. An overreliance on private consumption for growth and uncertainty surrounding the country's 2015 general election will pose risks to economic recovery.
BMI Political View
The rise of the centrist Citizens party adds further weight to our view that no party will win a majority at the 2015 parliamentary election. Uncertainty surrounding the election and the possible composition of the next government poses one of the biggest risks to Spain's economic recovery, by curtailing consumer spending and investment.