In BMI's Business Environment Ranking (BER) matrix for Q309, which assesses nine key Western European markets, Italy slipped from its previous position of seventh to the bottom of the table. The key reasons behind this poor showing are the low levels of pharmaceutical market growth recorded in recent years, brought about by a strong focus on across-the-board price cuts, an increase in generic penetration and the introduction of new reference pricing system. In addition, Italian economy remains one of the eurozone laggards, which will also have an impact on the development of the pharmaceutical market in the coming years, especially as the patient out-of-pocket contribution to their own healthcare is on the rise.
In fact, with Italy already in the grips of a recession, we see little hope of an economic recovery in 2009 or 2010, with unemployment levels already rising and consumer confidence falling. Indeed, recent economic data suggests that the worst is yet to come, and without its own monetary policy tools to limit the effects of the economic downturn, and exorbitant levels of public debt limiting the government's ability to spend its way out of a crisis, we hold to our view that Italy's economy will suffer a prolonged recession, even after most of its G20 peers have started to recover.
Consequently, the government's commitment to cost-containment will also result in virtually non-existent growth through to 2013, with the Italian pharmaceutical market values forecast to post a compound annual growth rate (CAGR) of just 0.11% in local currency terms, as well as a negative CAGR in US dollar terms. At consumer prices, from some EUR20.98bn (US$29.14bn) in 2008, the market is expected to increase only marginally, to some EUR21.10bn (US$26.71bn) in 2013.
Indeed, the sheer size of the market still represents a considerable attraction for drugmakers, although even the leading domestic firms are increasingly reliant on revenues generated abroad. The above forecasts are largely based on the falling levels of drug spending by the country's public healthcare service. For the whole of 2008, the expenditure fell by 1% year-on-year (y-o-y), which followed a reduction of 1.4% in H108. In contrast, the number of prescriptions written during the year increased by 5.5%, illustrating the strength of downward pressures on prices. In fact, the average price of a prescription fell from EUR13.12 (US$16.68) in 2007 to EUR12.58 (US$15.99) in 2008, as pharmacies alone - which have to pass a graduated discount onto the state - providing savings of around EUR600mn (US$763mn).