2013-02-03 08:24:10 - New Healthcare research report from Business Monitor International is now available from Fast Market Research

BMI View: The sharp drop in public pharmaceutical expenditure in Italy in the first four months of 2012 serves as a warning for the continuation of a fall in spending on medicines during the remainder of the year. BMI notes that this does not bode well for drugmakers selling their products in Italy as the success of the implemented policies may encourage the enforcement of further cost-containment measures, which, together with the ongoing public hospital debt situation, seriously hampers the country's attractiveness as a location in which to sell drugs, despite its favourable demographic characteristics.


Full Report Details at
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Headline Expenditure Projections

* Pharmaceuticals: EUR24.90bn (US$34.63bn) in 2011 to EUR23.54bn (US$29.89bn) in 2012; -5.5% in local currency terms (-13.7%

in US dollar terms).
* Healthcare: EUR152.17bn (US$211.63bn) in 2011 to EUR155. 52bn (US$197.51bn) in 2012; +2.2% growth in local currency terms (-6.7% in US dollar terms).
* Medical devices: EUR6.42bn (US$8.93bn) in 2011 to EUR6.61bn (US$8.40bn) in 2012; +3.0% growth in local currency terms (-5.9% in US dollar terms).

Risk/Reward Rating: In our Pharmaceuticals and Healthcare Risk/Reward Ratings (RRRs) for Q113, Italy is ninth out of the 10 markets surveyed in Western Europe. Despite being a large market, Italy is characterised by low levels of annual growth, largely because of widespread price cuts. Additionally, the Italian economy is one of the most vulnerable economies in an already shaky eurozone. High levels of public debt, poor infrastructure and a lack of competitiveness indicate that the country will remain one of the region's laggards over the forecast period.

Key Trends And Developments

* The decline in spending by Italy's national healthcare service, Servizio Sanitario Nazionale (SSN), continued in the first four months of 2012, with pharmaceutical expenditure falling to EUR3.24bn (US$4.19bn). The drop was an 11.5% decline in spending compared with 2011, despite a 0.2% increase in the number of prescriptions, according to Federfarma. Highlighting the effects of cost-containment measures, spending by the SSN fell by 9.5% in January and 9.9% in February and by double-digits in March (-13.1%) and April (-13.7%).
* The council of ministers in Italy has approved a decree presented in early September by Minister of Health Renato Balduzzi, which put forward a wide range of measures, including important ones relating to the pharmaceutical industry. Regions and provinces are now required to update hospital formularies at least every six months to include new or innovative medicines that the Italian Medicines Agency (AIFA) decides are reimbursed on the SSN. Additionally, by June 30 2013, AIFA is to revise the Pharmaceutical Benefits Scheme Handbook with a view to withdrawing reimbursement for products that are therapeutically outdated or seen as having an unjustifiably high price in proportion to their therapeutic benefits.

BMI Economic View: We do not believe that Italy's fundamentals imply an imminent bailout. However, the country's large public debt load makes it vulnerable to a loss of confidence. Although the Italian sovereign can survive extended periods of high borrowing costs, the knock-on effects on the real economy lead us to believe that the government would opt for a bailout relatively quickly if yields spiked again.

BMI Political View: Italy faces a sink or swim situation that will determine the political and economic agenda for the coming decade. Policymakers face two enormous challenges: reviving economic growth through a competitive adjustment; and preventing a crippling debt crisis from unfolding. Notwithstanding the end of Silvio Berlusconi's time in frontline politics, we highlight the risk that relations between political parties will remain tense. Furthermore, poverty is set to increase, with the north-south socioeconomic divide widening. Finally, we see populist and xenophobic parties gaining momentum over the coming years.

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