Dr Valters Bolevics, CEO of the Association of International Research-based Pharmaceutical Manufacturers (SIFFA) in Latvia, gives an overview of recent market changes affecting the Latvian pharmaceutical market, regulatory upgrades, and growth projections for 2020.
Following a breakthrough year in 2018, 2019 has also seen numerous positive changes for the innovative pharmaceutical industry in Latvia.
Turnover in the second quarter of 2019 increased by 11.6 percent compared to the corresponding period last year, according to data from the State Agency of Medicines. Increased funding for healthcare, including state-compensated medicines, has helped to improve citizens’ coverage of new, effective state-paid medicines, which significantly lengthen life expectancy and quality. Similarly, with the active support of the pharmaceutical industry, a number of important initiatives to improve the regulatory framework have been launched, which will improve the availability of medicines to the general public.
An excellent achievement is the fact that during the last year, the list of reimbursable medicines has been supplemented by 22 new innovative products. This is nearly half as much as in 2017 and 2018, and makes a very important contribution to improving public health. However, the progress made in accessing medicines in Latvia needs to continue at a significantly faster pace. For the time being, the availability of innovative medicines paid for by the state in Latvia still lags behind not only the European average, but also neighbouring Lithuania and Estonia. As of March 2019, Latvia has included 53 new medicines in reimbursement list, compared to 88 in Lithuania and 84 in Estonia.
In order to move closer to the level of the other Baltic states, Latvia should include at least 30 of the newest generation of medicines annually in the compensation system, which in the short term would generate a long-needed breakthrough and become the number one country in the Baltic states for innovative medicine availability. There is no secret or conflict of interests in stating that only new and more efficient medicines reduce the need for other healthcare services such as hospitalisation and sickness benefits, etc. For example, in the Netherlands, 83 percent of the labour force diagnosed with head and neck cancer mostly return to work within six months following treatment. The average rate of those going back to work after being diagnosed with cancer and treated with innovative pharmaceuticals has increased to 75 percent in Europe.
Positive and even revolutionary changes in the pharmaceutical sector are being considered by the government amendments, in effect as of the 1st of April 2020 and approved by the Cabinet of Ministers this July, for regulation 899, ‘Expenditure on the purchase of medicines and medical devices for ambulatory treatment.’ This regulation will mean that manufacturers will close the price of their medicines to the price of the cheapest drug or corridor narrowing >100 percent vs. reference, combinations included. The list of external reference countries has expanded and now includes: Czech Republic, Denmark, Estonia, Lithuania, Poland, Romania, Slovakia and Hungary, with a notification of second cheapest from the list. The amendments also determine INN prescription for reimbursed drugs (government internal target being 70 percent of the cases). The trade name is allowed only for special medical conditions, assigned by the doctor, and the cheapest generics products dispensing rule selected from what is available at the pharmacy level.
From first glimpse, the amendments do not reflect a bright future development scenario for the industry, but this reform also stipulates that the savings which will occur during this process – which is an initiative from the innovative drug producers association – is intended to be directed only to replenish the list of reimbursable medicinal products with new innovative drugs. This represents a significant step forward and stands to hugely benefit both patients and industry, as such a business model is very much welcomed and follows the life cycle of medicinal products.
The Pharmaceutical Industry in Latvia
The Latvian pharmaceutical industry is also one of the key contributors to the overall growth of the national economy, employment and better public health outcomes. However, objectively, the industry output of Latvia should not be linearly compared to, for example, Germany or France. Nevertheless, Latvia has definitely made its mark. According to data from the Central Statistical Bureau of Latvia, the output of pharmaceutical substances and products increased by EUR 100 million from 2007-2017, rising from EUR 108.7 million in 2007 to EUR 209.9 million in 2017. In addition, such a turnover has been achieved without a significant increase in human resources. The Latvian pharmaceutical sector employed about 2,000 professionals in 2007, which increased to 2,154 people in 2017.
In comparison, the European pharmaceutical industry employs more than 760 thousand people, and the indirect labour market impact of the sector is much greater. The sector was responsible for 2.5 million jobs in 2016. Moreover, the average gross value added per employee of the pharmaceutical industry is significantly higher than in other key industries at EUR 156,000. In comparison, the automotive industry generates EUR 85,000 in added value per employee and the aviation industry EUR 102,000. In 2016, thanks to various pharmaceutical sector initiatives, the economy of the EU generated an additional EUR 100 billion.
The global demand for modern pharmaceutical products is constantly growing. The EFPIA estimates show that the global growth of the pharmaceutical industry will reach 160 percent from 2017 to 2030. Peak growth of 232 percent will be achieved in India, while European countries will grow between 110 and 130 percent. Latvia is also going through a similar trend. Sales of pharmaceutical products increased by EUR 87.82 million, or 28 percent, from 2014 to 2018. As the State Agency of Medicines (SAM) reported in its 2018 Pharmaceutical product consumption report, industry turnover reached EUR 403.74 million in 2018.
The forecast for 2020 is positive. According to IQVIA estimates, in total the market in Latvia will grow at a pace of 4.4 percent (minimum) and 7.9 percent (maximum). Most of the growth will be seen in RX speciality, at a maximum of 12.4 percent and the lowest growth will be seen in RX traditional, at 3.2 percent maximum. The introduction of specialty products to the market keeps the entire RX segment on a growth path and covers the stagnation of the traditional segment. The OTC segment is benefiting from new product launches and is forecasted to grow at a positive maximum 7.5 percent rate.
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