Saturday, September 22, 2012

A Growth Model for Greece - Generic Pharmaceuticals

"Greece 10 years ahead" (GTYA) is the title of a study published by the Athens Office of McKinsey in mid-2011. It outlines a National Growth Model which, the study predicts, would create over 500.000 new jobs and add roughly 50 BEUR to Greece's GDP within a decade. The study consists of 72 pages. I have already explained in a previous post that I will make short posts about each major point of the study for those who prefer not to read 72 pages.

The study focuses on growth opportunities in 5 major 'production sectors' which are already of prime importance to the Greek economy and on 8 'rising stars", i. e. new sectors where present activity is still small but where significant potential can be expected. In this post, I will focus on the "rising star" of generic pharmaceuticals (page 61 in the GTYA-report).

Rising Star --- Generic Pharmaceuticals
Generic drugs are being produced in Greece and they add about 1,2 BEUR to GDP at present. That is the good news. Also, the industry is dominated by Greek players. The not-so-good news (or rather: the tremendous future potential) lies in the fact that generic drug penetration is only 32% in Greece. The comparable figures in Central European countries range between 60-80%. The growth potential in Greece is obvious (internationally, the industry is expected to grow 5-9% annually).

One impediment for growth is that, by law, Greek generic drugs are priced at 90% of regular drugs while, internationally, they are priced at 30-80% of regular drugs. It would appear that a simple new law would make that industry more competitive. Such a new law should be conditioned on the industry's increasing its efficiency.

Presently, the industry is very fragmented with the 10 largest companies comprising only 35% of the market. Consequently, the cost base is relatively high and the industry requires significant consolidation to attain scale and efficiency. Furthermore, while the industry has high potential, there is a need for focusing on product niches and on targeted R&D.

Finally, and importantly, the industry already exports quite a bit and should have good further export potential both in neighboring countries as well is in the North. Greece's focus should always be on niches.

GTYA recommends that the Greek state should develop a comprehensive generics strategy involving all stakeholders in the industry. Government support for R&D and for raising financing should be considered as part of that strategy.

All in all, the consultants project that the generics pharmaceutical industry could double from 1,2 BEUR to 2,4 BEUR (or even more) within a decade. It would make Greece a player in an international growth industry and it would contribute to an opening of the Greek economy.

Previous posts in this series: P1.

1 comment:

  1. I suspect Greece also needs to reform the way pharmaceuticals are priced, subsidised etc I believe they've made some changes but I wonder how far reaching they are.

    Below is a proposal on restructuring the Pharmaceutical Pricing and Reimbursement system.

    I don't have the knowledge to judge the efficacy of the proposal or who the major winners & losers would be. It appears to be a very detailed analysis, however its from someone in Farmaserve-Lilly (joint venture with Eli Lilly a US Big Pharma) so my inclination is to be sceptical - but it does address another piece of the jigsaw, and it can't be all bad. I wonder if this proposal has had any media attention in Greece.

    Pharmaceutical Pricing and Reimbursement-in Greece


    Sorry forgot to make it a clickable link