With new EU countries expected to make significant, long-term investments in their healthcare systems and match EU regulatory standards, growth prospects in the region are expected to be considerable
In contrast to subdued growth in the pharmaceutical markets of the former 15-state European Union (EU), pharmaceutical markets in the new EU accession markets are expanding vibrantly.
While the former has been increasing at eight per cent annually, the latter has been growing at the rate of 16.5% over the past five years, offering exciting growth opportunities to pharmaceutical and biotechnology companies.
Globally, the EU healthcare industry is the second largest after North America.
Estimated at nearly US$7 billion, the pharmaceutical market in the new EU countries - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia - represents about 8% of the EU 15 market.
Both Poland and Hungary, which contribute 45% and 23% of the accession countries' total pharmaceutical market value respectively, have been growing by almost 20% since 1998.
With new EU countries expected to make significant, long-term investments in order to achieve sustainable systematic changes to their healthcare systems and match EU regulatory standards, growth prospects in the region are expected to be considerable.
Propelled by the twin advantages of low costs and easy patient recruitment, the new EU also offers tremendous scope for conducting clinical trials.
Already, large multi-national pharmaceutical and biotechnology companies from western Europe and the USA are carrying out clinical trials on rare diseases and diseases relevant to large worldwide markets.
Coordination and swift completion of clinical trials in the new EU have been facilitated by easily accessible, large and relatively under medicated patient populations as well as more structured healthcare systems.
An additional advantage has been the availability of highly qualified investigators with lower pay scales than their western counterparts.
Moreover, with hourly wages in the new EU countries pegged at a quarter that of western countries, pharmaceutical companies have been able to avoid their single largest cost: the opportunity cost of a delay in getting a drug to the market.
This is particularly pertinent since delays in getting a drug to the market often work out to a daily loss of $1 million.
Identifying potential growth segments in the new EU markets, Raju Adhikari, Frost and Sullivan pharmaceutical-biotechnology analyst, says: "Mirroring the changing disease burden of the west, the anti-infectives market share has declined, whereas cardiovascular, central nervous system (CNS) and metabolic disease categories have taken over.
"Huge growth opportunities in asthma and oncology also exist and companies with products in these diverse areas are likely to be more successful in the new EU markets.
"However, even as the new EU countries offer exciting prospects for biopharmaceutical and biotechnology companies, parallel trade is expected to remain the key concern.
"Typically, parallel trade activity occurs in inverse proportion to drug prices with the EU, encouraging parallel importers in the belief that parallel trade promotes competition, thereby lowering prices.
"With new EU countries having lower average drug prices than Europe's western markets, parallel imports principally follow an east-west channel (with south-north channel to a lesser extent).
"The east-west parallel trade axis originates from the Czech Republic, Hungary and Poland, whose domestic producers meet EU standards and criteria.
"Parallel trade is currently estimated at $3.8 billion and is projected to last for a minimum of another five years.
"This practice is expected to wane when there is a single EU25 market - when price differences narrow sufficiently.
"Several international drug companies have attempted to tackle parallel trade by applying restrictions to wholesalers, seeking to prevent export using legal loopholes, or removing or reducing the ex-manufacture price differentials of their products across the various EU states.
"Others, such as Schering, have attempted to limit parallel trade through a consistent European pricing policy and setting prices within a narrow band.
"Companies need to present compelling health economic data justifying a product's price and retain premium pricing in friendlier markets," adds Dr Adhikari.
"Further, companies need to upgrade existing approval dossiers in the candidate countries in order to comply with the EU laws.
"Several market entry issues also confront pharmaceutical and biotechnology companies keen to maximise on the economic benefits offered by the new EU.
"For instance, with big pharma not dominating the new EU market as it does the EU15 and the USA - the top position in four new EU countries is still occupied by a local participant - acquiring a local company offers a means to gaining a foothold".
