By Swetha Shantikumar, Research Analyst, Pharmaceuticals & Biotechnology, Healthcare (EIA)
The European market is highly fragmented with each country leading their own approaches to the pricing and reimbursement process. While the UK and Germany's focus are on limiting demand, Italy, Spain and France regulate the prices of the drugs sold. The UK is unique as it is one of the only markets in the world which allow pharmaceutical companies to set prices for the drugs sold. Europe is the second largest pharmaceutical market after the United States.
Several European countries have adopted the "reference pricing" system where each country uses other countries' prices as benchmarks. Hence there is a constant rat race to have the lowest drug prices and this has an impact on pharmaceutical companies' profitability. In addition, research has found that Europe allows "parallel trade" whereby countries are allowed to buy drugs in bulk quantities at a cheaper price from foreign markets and sell them in domestic markets.
Key issues that have a strong impact on pharmaceutical pricing and reimbursement in Europe include parallel trade, Biosimilars and generics, reference pricing, decentralization of health care financing and provision and the economic recession. The past couple of months have witnessed new stringent pricing cuts and discounts on drugs that are being sold in most of the European countries.
In a recent turn of events, the Greek government decided to reduce the prices of the drugs sold by 21.5 percent creating a big problem for the big pharmaceutical companies. Leo Pharma and Novo Nordisk have refused to sell their drugs at the lowered prices as they believe they will face sustainability issues resulting from a potential domino effect in other countries as a result of this new pricing regime. Following this the Greek government issued a market decree in April cutting pharmaceutical drug prices by 3% to 27%.