!9# Israel Pharmaceuticals and Healthcare Report Q2 2009

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Post Date : Oct 08, 2011 18:15:51
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In BMI’s updated Business Environment Rankings for Q209, Israel slipped down from fourth position tosixth, out of 17 Middle East and African (MEA) markets surveyed. The country draws include high percapita drug market expenditure, ageing population and sophisticated demand for patented drugs amongsections of the population, although a risky regulatory environment serves to limit Israel’s overall score.In fact, although Israel’s largest regulatory failing comes in terms of its intellectual property (IP) laws,Israel is in no rush to improve its IP environment, despite international pressure from its ally, the US,Consequently, despite its advanced status, Israel’s pharmaceutical market is unlikely to majorly improveits position in BMI’s regional matrix in the coming months.

In the meantime, strict pricing and reimbursement environment will result in a subdued growth of theIsraeli drug expenditure in the coming five years. The value of the market, estimated at US.53bn in2008, is forecast to increase at a compound annual growth rate (CAGR) of 3.75% in local currency termsthrough 2013, to reach the value of US.87bn at consumer prices. Population ageing and the increasednumber of drugs added to the government’s subsidised medicine basket will be the main drivers of thisupward trend, although the threat of a possible price reduction of 35% continues to loom large.

Additionally, as Israel’s GDP growth is expected to slow dramatically in 2009 - due to falling demand forIsraeli exports, sluggish consumer spending and negative investor sentiment - the government is likely toincrease its healthcare cost-containment focus. However, proposals such as the one to charge housewivesand other non-salaried people for access to healthcare are certain to cause public discontent.

In other developments, local press reported in February 2009 that all sick funds were fined by theMinistry of Health for overspending their advertising budgets for 2007. Consequently, the healthcarefunds - which effectively impose their own pharmaceutical prices on drugmakers, due to theirconsiderable bargaining power - will receive much lower advertising budgets for 2009. While theminimum ‘basket’ of healthcare services is guaranteed by law, lower marketing revenues for the sickfunds may translate into falling membership, which could increase their attempt to secure the lowestprices for pharmaceutical products as well as other medical services.

Difficulties in its home market are resulting in local drugmakers, led by stalwart Teva, to continue theirexpansion abroad. Following the December 2008 completion of its acquisition of US generics specialistBarr, Teva recently formed a partnership with Switzerland's Lonza to produce biosimilars. The dealsignals the expanding drugmakers’ interest into entering the biopharmaceutical sector to increaserevenues. Teva is clearly preparing for its own mini patent cliff in 2014, following the announcement thatits US-based generics rival Mylan is planning to develop a generic version of its innovative multiplesclerosis (MS) branded generics blockbuster Copaxone (glatiramer).

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