We anticipate further restrictions to medicine prices in 2014 under the Medicines Prices Act, which will subdue the outlook for both patented and generic drugmakers in the country. This comes despite expectations for a return to positive economic growth in 2014, as the Dutch government will persist with austerity measures to comply with EU budgetary requirements. While our short-term outlook for healthcare expenditure is steady, spending growth has levelled off since 2011, with the proportion of GDP allocated to healthcare projected to gradually shrink over our forecast period to 2023.
Headline Expenditure Projections
- Pharmaceuticals: EUR6.87bn (US$9.07bn) in 2013 to EUR6.74bn (US$8.56bn) in 2014; -1.9% in local currency terms and -5.6% in US dollar terms.
- Healthcare: EUR76.07bn (US$100.41bn) in 2013 to EUR77.56bn (US$98.50bn) in 2013; 2.0% in local currency terms and -1.9% in US dollar terms.
The Netherlands continues to rank in the lower half of BMI's Pharmaceutical Risk/Reward Ratings (RRRs) for the 14 key Western European markets, and remains 10th in our ratings for Q214. The country fell from eighth in Q413. At an unchanged 66, its overall RRR score remains only slightly below the regional average of 67. This was the result of the rise of Finland and the incorporation of Denmark in our ratings system, both of which overtook the Netherlands. While the country offers drugmakers a relatively low-risk operating environment, poor market prospects - due to pressures on pricing and reimbursement and the market's maturity - will continue to weigh down the country's overall standing.
Key Trends And Developments
- In December 2013, the European Commission (EC) imposed fines of EUR10.80bn (US$14.62bn) and EUR5.49bn (US$7.44bn) on the Dutch subsidiaries of Johnson & Johnson and Novartis respectively. According to the EC, in July 2005 the subsidiaries concluded an anticompetitive agreement to delay the market entry of cheaper generic versions of the analgesic fentanyl in the Netherlands. This was in breach of EU antitrust rules.
- In November 2013, Dutch chemicals and nutrition company DSM agreed to spin off its pharmaceutical manufacturing business, DSM Pharmaceutical Products, as a US$2.6bn joint venture with US-based private equity firm JLL Partners. DSM Pharmaceutical will be merged with Canada-based specialtypharmaceuticals manufacturer Patheon, which is controlled by JJL. The new entity, which will be 51% owned by JLL and 49% by DSM, is estimated to have annual sales of about US$2bn. The still-unnamed company will develop and manufacture active pharmaceutical ingredients, finished dosages and drug products.
- In October 2013, the country's Foundation for Pharmaceutical Statistics (SFK) asserted that drug prices fell by almost 2% as a result of the Medicinal Product Prices Act, or Wet Geneesmiddelen Prijzen (WGP). Combining this with the price cuts on medicines enforced in April 2013, prescription medicine prices fell by 2.4% in 2013 - in line with the annual 3-4% decline in medicine prices observed in recent years. The prices of originator medicines fell by 1.7%.
BMI Economic View: The Dutch economy finally appeared to break out of recession during Q313, just as the eurozone recovery was showing signs of faltering. With domestic demand hit by falling house prices and a lack of appetite for fixed investment, the strength of global demand will be key to safeguarding the domestic recovery given the Netherlands' substantial current account surplus. We stress, however, that a continued deterioration in eurozone demand or insufficient monetary easing from the ECB pose key risks to our forecasts heading into 2014.
BMI Political View: The Dutch government remains firmly committed to fiscal reform, despite losing its triple-A credit rating and suffering at the hands of a flatlining economy. Providing some respite for voters (and by extension support for the government), the coalition has been clamping down hard on excesses in the banking industry, with planned curbs on bonuses and a potential rebate to taxpayers from the sale of US mortgage bonds acquired through the previous bailout of ING going some way to soften the blow of austerity.