Drug sales collapse after health care reform

Consolidation on the non-prescription market to accelerate

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24. Dezember 2004 By Kristina Merkner

Patients are not the only ones who have noticed a dent in their wallets from the health care reform. A recent study shows that non-prescription drug sales have collapsed since the reform took effect on Jan. 1, 2004.
Market researchers at IMS Health said that over-the-counter (OTC) drug sales declined by 13 percent to €5.34 billion between January and November 2004 compared to the year-earlier period. The reason: a new regulation stipulating that in most cases non-prescription drugs are no longer covered by Germany's socialized health care system, which insures about 90 percent of all Germans.
“The market is currently being redefined,“ OTC expert Jürgen Petersen of IMS Health said at a conference earlier this month where he presented the study. According to the company's research, public health insurers' spending on non-prescription medication will decline by 69 percent or €1.5 billion in 2004, even though the government's declared goal was to save only €1 billion with the measure.
Petersen said consumers were not buying non-prescription drugs themselves, causing OTC sales to slump by 13 percent in 2004.
In the first three quarters of 2004, 80 percent of non-prescription drug producers recorded a sales decline; for some of them, turnover fell by over 30 percent. “Apart from patients, drug producers carry the main burden of the rehabilitation of public insurers because of massive sales losses,“ said Bernd Wegener, chairman of the German Pharmaceutical Industry Association (BPI). Many companies, says BPI, will be forced to reduce their product portfolio and build up stronger brands.
Since most OTC drugs will now be sold from pharmacies directly to the end user and no longer be prescribed by doctors, experts from the BPI and from IMS Health expect that especially small and medium-sized companies, where marketing budgets and know-how are less available than in large companies, will not survive.
The IMS study revealed that when it comes to drugs which customers chose themselves without a prescription, the top 10 OTC providers account for over 42 percent of sales in pharmacies. Consolidation is greatest in the anti-smoking aids segment, where the three market leaders command 98 percent of the market. More than 80 percent of sales of drugs supporting the immune system are generated by the top three producers. The same holds true for 69 percent of cold and flu medicine and 66 percent of blood circulation products.
“The health care reform is accelerating a market consolidation among pharmacies and OTC producers,“ said Petersen, “The big ones will swallow the small ones and only market leaders will continue to grow.“
About 55 percent of prescription drug makers have also watched their sales shrink this year. Public health funds have spent 46.5 percent less on prescription drugs since the health care reform forced pharmaceuticals companies to give them a 16 percent rebate.

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