Third Report prepared by IMS Health Data for period 2007 to Third Quarter 2009 For The World Health Organization January 14th 2010

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1 Tracking the Effect of the Economic Crisis on Pharmaceutical Consumption, Expenditures and Unit Prices Third Report prepared by IMS Health Data for period 2007 to Third Quarter 2009 For The World Health Organization January 14th 2010 Report prepared by Peter Stephens IMS Health ) With graphics produced by Iris Buysse (University of Utrecht For further information contact Richard Laing MIE/EMP (laingr@who.int)

2 Q Update Tracking the Effect of the Economic Crisis on Pharmaceutical Consumption, Expenditures and Unit Prices Executive Summary The WHO, in collaboration with IMS, has put in place a programme to track the impact of the global economic crisis on the consumption of medicines globally. This is the third quarterly report. Indicators track volume and price changes, enabling consumption to be monitored over time while taking into account seasonal changes. Many of the signs first seen in Q1 continue through Q Growth or decline are not related to income category or geographical region but tend to reflect wider issues in the economy of particular countries. Eastern Europe shows signs of vulnerability but it is not yet clear whether the declines seen in the Baltic States will spread to other countries in the area. Background The WHO, in collaboration with IMS, has put in place a programme to track the impact of the global economic crisis on the consumption of medicines globally. This is the third quarterly report. It contains pharmaceutical consumption information from 82 countries worldwide. The results, when presented at a regional level, reflect only the data from these 82 countries. In high-income and upper middle-income countries, the data represent consumption or sales in both the public and private sectors (where they exist), while in lower income countries, the majority of the information relates to the private sector exclusively. Four broad areas have been examined total volume, consumption of acute or chronic medicines, use of branded or non-branded medicines, total sales and average price per unit of volume. More detail on the methodology can be found at Objective The objective is to generate indices that track consumption, expenditure and the price of pharmaceuticals country by country on a global basis each quarter. The indices track the latest available time periods and compare that with data from previous quarters and with 2

3 Q Q is designated as the last quarter before the global recession began to impact economies. Results 2007 Q Global Volume Consumption Index Highlights 2007 Q Volume growth remains strong in China, the Philippines and in the Eastern Mediterranean region although in the latter case growth is at least in part the result of seasonal declines at the same time last year. Outside of this region, however, growth in high income countries is relatively flat. The Baltic States continue to show signs of vulnerability. Estonia shows 6 consecutive quarters of decline, Latvia, Lithuania and the Ukraine, 3 consecutive quarters. Only Malaysia with 4 consecutive quarters of volume decline shows a similar pattern. In Malaysia and Estonia, the declines seen in the private retail segments may be being compensated by growth elsewhere in other distribution channels not measured by IMS but in Latvia and Lithuania data are collected from both public and private and retail and hospital sectors. In both Mexico and potentially South Africa, gradual declines in the private sector appear to be being compensated by growth in the public sector although similar patterns are not detected in Brazil or Russia where in volume terms at least the public sector is faring worse. NB Where data presented by WHO Region, the data represent only those countries and channels where information is collected by IMS. Regional trend calculated as weighted average. 3

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5 Global Volume Consumption Index: Acute and Chronic Medicines Strong volume growth tends to be associated with growth in both acute and chronic medicines and this is certainly the case in China, the Philippines and in the Eastern Mediterranean Region. The declines seen in the Baltic States are also the product of a reduction in both acute and chronic medicines. In the public sector in Brazil, the decline appears to be driven by changes in the consumption of acute medicines with chronic medicines remaining relatively flat. This is also true in Malaysia where acute medicine decline is more severe than that seen for chronic medicines, and also in Romania where in volume terms there have been substantial declines for 4 consecutive quarters. Romania has of course suffered from a long period of liquidity problems within the distribution system causing medicine shortages in hospitals and pushing many pharmacies towards bankruptcy. 1 NB Where data presented by WHO Region, the data represent only those countries and channels where information is collected by IMS. Regional trend calculated as weighted average th October 2009: 5

6 NB Where data presented by WHO Region, the data represent only those countries and channels where information is collected by IMS. Regional trend calculated as weighted average. Global Volume Consumption Index: Original and Licensed Brands Versus Other Brands and Unbranded Pharmaceuticals Analysis of any correlation between usage of branded or unbranded medicines and volume declines is difficult due to the fact that this categorisation is not available in IMS s data for most of the Eastern Europe countries apparently affected by the economic crisis. In Malaysia the declines are seen to be broadly similar across both categories. The hypothesis that consumption would shift from branded to unbranded medicines in times of economic crisis has not therefore been confirmed. Global Pharmaceutical Expenditure Index Volume growth is matched by expenditure in China and the Eastern Mediterranean with seasonality being very evident in the retail sectors of Kuwait and Saudi Arabia. Malaysia and the Ukraine have shown consistent expenditure growth despite volume declines. In Estonia, expenditure appears to variable on a quarterly basis reflecting perhaps changes in data collection, exchange rates and the economic crisis. Latvia and Lithuania match volume decline to expenditure decline. According to the ITAR-TASS World Service, in October, the Ukraine announced a moratorium on price growth for both domestic and 6

7 imported medicines for the crisis period. 2 Although this moratorium was later rejected 3, it demonstrates the concerns over pharmaceutical price increases in the Ukraine. High income countries generally remain flat in both expenditure and volume terms outside of the Eastern Mediterranean region. Regional trend is arithmetic mean (not weighted average) of growth rates seen in each country, as measured in local currency 2 20 October 2009 ITAR-TASS World Service 3 IMS HEALTH, personal communication 7

8 Global Price per Standard Unit Index Venezuela has the highest combined growth in price per Standard Unit and in total expenditure. In local currency expenditure growth has exceeded 50% since Q1 08 and the price per Standard Unit has increased by 40%. By and large, upper middle income countries in the Americas region show strong expenditure growth matched by an increase in price per standard unit, even in the public sector. In the Eastern Mediterranean region, the pattern is less consistent with the price per Standard Unit pointing in different directions in different countries. In the Baltic States, the price per Standard Unit in IMS audits is flat or declining in Latvia and Lithuania but continues on an upward path in Estonia. In Ukraine, however, the price per Standard Unit has risen by more than 40% over the last 6 quarters. The impression that prices may be held under control in Lithuania may be somewhat misleading however to judge by a survey published by the Association of Ethical Pharmaceutical Manufacturers (AEPM). According to the results of the study in nine out of ten cases, the retail price of the same medicine at Estonian pharmacies was around 15 percent lower than in some Lithuanian pharmacies (not including the value-added tax), although the manufacturer of the medicine sold it to suppliers in both countries for the same price. The percentage difference in prices ranges from a mere three percent to 43 percent. 4 Declines in the Netherlands seem to be flattening out, the result of changes made last year working their way through the system. New Zealand, however, seems able to continue to drive average prices downwards November 2009: Baltic Business Daily (c) 2009 Baltic News Service 8

9 Regional trend is arithmetic mean (not weighted average) of growth rates seen in each country, as measured in local currency Conclusion In most countries, particularly high-income countries, the economic crisis appears to have had little or no impact. Where it can be seen, the impact is specific to particular countries rather than regions. The Baltic States together with the Ukraine and Malaysia appear to be those countries most affected by the economic crisis. IMS Health is the gold standard in pharmaceutical and healthcare market intelligence, relied on by virtually all of the world s largest pharmaceutical companies along with government agencies, policymakers, researchers and financial analysts around the globe. IMS tracks more than 1.5 billion healthcare transactions each month, from more than 130,000 suppliers worldwide. This data, integrated with leading analytical expertise, plays a central role in supporting high-quality, cost-effective healthcare. Acknowledgements: Graphics supplied by Iris Buysse, WHO Collaborating Centre for Pharmacoepidemiology & Pharmaceutical Policy Analysis, Utrecht University, Utrecht, the Netherlands 9