Dariusz Nowicki, Director, Polfarmed, Poland
“The swelling influence of wholesalers in the market frightens me.” With three wholesalers in Poland holding 80 percent of the market and establishing their own brands in a changing environment, local producers—especially small and medium ones—are being challenged.
What is your perspective on the Reimbursement Act?
My perspective is that the Reimbursement Act requires significant change. Although not its original intention, one of the side effects of the act has been the unexpected creation of several negative circumstances, not only for the reimbursed sector of the market, but for the entire pharmaceutical market. As producers, we notice the increasing dominance of wholesalers that we expect will soon control market supply. The risks and dangers of the current environment will make producers more dependent on wholesalers, which is an unfavorable position for producers.
Poland has a developed generics market and potential for growth. What are your perspectives on how generics companies are adapting to the Reimbursement Act?
Unfortunately, the prescription drugs market is diminishing; companies recognize this trend and are shifting towards over the counter (OTC) products. Pharmaceutical companies are implementing plans to produce nutritional supplements and cosmetics as a means to hedge their product portfolio between OTC and prescription drugs. Given the new market, wholesalers are trying to establish their own drug brands, which will admit new competition into the market.
The average price of generic medicine in Poland is 40 percent lower than in the European Union. Innovative companies are also lowering their prices. How strong is the level of competition between generic and innovative companies?
It depends on what part of the pharmaceutical market you are talking about. Foreign companies control the Polish medical device segment.
In terms of drug production, competition between innovative companies and generic producers is rather minor compared to the competition between generic branches of multinational corporations (MNCs) and local generic producers.
The main problem for innovative companies is to increase sales value and volume and their efforts are focused on this task. Alternatively, the Polish market is dominated by generics in terms of volume. This puts Poland as the European leaders in generic production—a position that will not change in the near future.
How can companies rebound from the initial struggle of the Reimbursement Act and be a dynamic player in 2014?
Again, I must reiterate the problem of the swelling influence of wholesalers. We could speak about how producers are adapting but wholesalers are becoming more important. In fact, three companies (Neuca, PGF Group, Farmacol) control more than 80 percent of the Polish market.
What is the current competitive climate for small and medium companies in Poland?
They are still competing efficiently because more than 50 percent of drugs sold in pharmacies are made in Poland. The value of prices is much smaller because the value is no more than 30 percent of the market. The conditions in Poland make competition sharp and intense.
Local producers are more vulnerable to local conditions than MNCs.
MNCs can easily continue operations even if the Polish market struggles; however the costs for local producers are more severe since Poland is their only market.
This challenging adaption period has seen companies seek the assistance of associations such as Polfarmed to comprehend today’s detailed administrative issues. What are Polfarmed’s mains tasks and how have you been helping your members?
Our priority is to have ongoing conversations to point out the consequences of laws that go unnoticed by lawmakers. I mentioned how companies are shifting to OTC and cosmetics, but there is a lack of interest in prescription drugs. Our goal is to question the Ministry of Health as to whether this policy is best for all parties involved, and to illustrate the damage local producers are suffering. If we can persuade the authorities to shift their political attitudes then we will be successful.
We are focused on the long-term effects of the Reimbursement Act on local producers. Drugs are cheap in Poland compared to other European nations. We know that the strength of local producers plays the most significant role in keeping the price of drugs low. If the role of the local producer weakens, Poles should expect to begin paying higher prices for drugs. Therefore, we think our place in highlighting this potential effect is a crucial. Poland is prime real estate for drug production as we can sell high quality drugs at low prices.
How can you help your member companies to adjust to EU requirements?
Our members are all involved with European associations so Polfarmed is not involved with any European association. However, this does not reduce our responsibility to ensure our members’ adherence to EU regulations. We all have the same interest, which encourages us to participate in interviews and consultations regarding pharmacovigilance.
How successful have you been during these times of the Reimbursement Act in building a bridge between the government and your members?
We hope that we will achieve a higher level of success than we currently enjoy. I think people understand that the Reimbursement Act needs to be changed. However, our opinions clash with the government’s opinions on what should be changed. We do agree on some issues but there are impending consequences that should now be discussed. Hopefully, we can mutually agree upon resolutions to address our problems.
In this period of new challenges, local companies are looking for more international opportunities. How do you think Polish manufacturers can compete efficiently against very aggressive players such as India and Turkey and what challenges do they face?
We are an association of medium and small companies so it’s not typical for them to compete in an open way against India and China. Rather, our companies are creating more international connections. Decision makers at these companies will tell you that Western Europe has become a difficult market to succeed in and that growth opportunities are in the east. Modern factories in Poland that maintain high standards of quality are attractive partners for business. Some of our companies already have good connections in Eastern Europe and are producing drugs for them. Furthermore, our geographical location as a connection point between Eastern and Western Europe puts Polish companies in an opportune position to maximize the benefits of these international connections.
If we were to look ahead, how would you assess the pharmaceutical landscape in the next five years?
The swelling influence of wholesalers in the market frightens me. Recent IMS research shows that pharmacies will begin to stock less medicine in upcoming years.
There is no ease of the current market conditions expected and that means difficult times are ahead.
Small and medium sized companies who are not prepared for the difficult times ahead might not survive. It is up to us to raise awareness of the harmful effects of this policy to local companies.
I will acknowledge that the Reimbursement Act is creating more transparency and order in the Polish pharmaceutical marketplace. These are measures to be applauded. However, I remain pessimistic because in my opinion, if we do not change this domestic policy, local producers will suffer. I must reiterate that local companies are more vulnerable to these difficult conditions than MNCs. So when we consider and discuss the long-term consequences of this policy, the prospects are worrying. It also creates a problem for Polish society. Again, strong local producers keep the prices of drugs low. I hope we will not lose this battle. We have good factories and a competitive business structure with ambitious people. This is truly a treasure and I hope we can use it properly to achieve the highest level of success possible.
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