BMI View: Uptake of generic drugs following patent expiry will become swifter. This trend will reduce costs for governments, out-of-pocket payers and insurance companies, which is increasingly important as developed states reform their healthcare systems over the medium term. Key obstacles include prescribers' brand loyalty, pay-to-delay deals, the near-universal unpopularity of commodity generics and a lack of perfect competition in the pharmaceutical sector.
Data published by LIF (Läkemedelsindustriföreningen), the trade association for the research-based pharmaceutical industry in Sweden, shows that Swedish pharmaceuticals spending (through retail and hospital channels - referring to final consumer prices) declined by 2.0% in 2012, to SEK36.14bn (US$5.34bn), down from SEK36.86bn (US$5.68bn) in 2011. BMI notes that this compares poorly to historical growth rates of 5.1% in 2008, 2.8% in 2009, 0.3% in 2010 and 1.6% in 2011. BMI's outlook for the Swedish drug market is therefore not very optimistic for the next five years. Between 2012 and 2017, a CAGR of -2.2% is projected in local currency terms (-3.3% in US dollars).
|A Decline In 2012|
|Sweden: Pharmaceutical Expenditure|
The association attributed the decline in pharmaceutical spending in 2012, to patent expiries and the availability of lower-value generic medicines, in addition to the low consumption of new medicines. Generic medicines account for a large proportion of the pharmaceutical market - approximately 57% of the market in defined daily dose (DDD) terms but because of low Swedish generic drug prices account for approximately 16% of the total pharmaceutical market by value. Old medicines (introduced before the year 2000) stand for 75 % of the market.
Furthermore, in 2012, reimbursement costs diminished by SEK1.2bn (US$181mn) to just below SEK18bn (US$2.73bn). Half of this decline is the result of the raised level of out of pocket payments for patients that were introduced on January 1, 2012.Over the years, the average out of pocket part of the total sum for prescribed medicines has been 26 %. But as a result of the raised ceiling for maximal out of pocket payment in January 2012, from SEK1800 (US$272) to SEK2200 (US$334), the level has grown to 29%. In 2012, patients paid SEK7.3bn (US$1.12bn), up by SEK513mn (US$77mn) from 2011. In 2012, SEK5.3bn (US$803mn) was paid for medicines within the reimbursement system, and SEK2bn for pharmaceuticals outside the system. In addition, patients pay the full price of over-the-counter medicines, which sums up to a total patient payment for medicines of SEK10.5bn (US$1.59bn).
Nevertheless, BMI believes Sweden's high public expenditure on health (US$4,158 per capita in 2012), accounting for 80% of total expenditure on health, is a major factor in making it an attractive place to sell medicines. Given the country's high per capita drug expenditure levels (US$561 in 2012),medicines are expected to continue to bring in substantial income for companies operating in the country.
As in many Western European nations, the long-term impact of the post-World War II baby boom has seen the development of a sizeable and growing pensionable population proportion in Sweden and as a result, the demand for healthcare and pharmaceuticals remains high. The population is expected to grow further, while the percentage of the population aged over 80 is forecast to increase to 11.5% by 2030.
Attractions for drugmakers looking to market their medicines in Sweden also include a stringent regulatory climate (recognised by the US and the EU), large demand for patented products and a stable and transparent business environment. Sweden has a favourable corporate tax environment compared with many of its neighbours. Manufacturers retain high shares of prescription drug retail prices, due to 0% tax and low distributor margins.