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European Market Entry Strategies: Impact of Regulations, Pricing, Reimbursement, Parallel Trade and Generics Post-AccessionPublished by: Datamonitor Published: Dec. 22, 2003 - 213 Pages Table of ContentsTABLE OF CONTENTS EXECUTIVE SUMMARY 3 Introduction 3 Action points 3 Parallel trade is expected to escalate post-EU accession. Companies have to maximize the use of price corridor strategies 4 Growth of the EU generics market is favored by widespread government-endorsed generic substitution. Companies are under pressure to capitalize on patent protection strategies and develop innovative therapies 5 Economic disparities between current and new EU member states will affect pan-European drug pricing and reimbursement decisions. Companies have to decipher the maze of regulations to negotiate formulary listing 7 Successful integration of accession countries is dependent on harmonization with the current EU policies. Companies need to be cautious about launching products prior to complete harmonization. 8 CHAPTER 1 WHY INVEST IN EUROPE? 31 Europe remains an attractive market for future growth 32 The industry’s attraction to the European market 32 Tool used to gauge the industry’s opinion about the value of Europe and the impact of EU expansion after May 2004 32 The industry’s view on Europe 32 Common regulatory issues: creating expansive market potential 33 Single currency: easing market access 33 EU enlargement: increasing investment opportunities 33 Benefits of the single market 34 Current and future composition of the EU 36 Drivers for entering an expanded Europe 36 Increasing R&D opportunities 37 Domination of disease markets within the CEE region 37 Increasing market accessibility 38 Greater treatment population 39 Resistors against entering an expanded Europe 39 Delays in regulatory harmonization 40 Concerns about the pricing of drugs 40 Intellectual property protection 41 Potential delays in drug authorization 41 Conclusion 42 Current trends in the European pharmaceutical industry 42 Major players within the EU arena 42 Domination of multinationals 42 Top tier presence 42 Middle tier presence 45 Lower tier presence 46 The major markets: UK, Germany, France, Spain and Italy 48 Key issues affecting the pharmaceutical industry 50 Rising R&D costs 51 Increasing focus on biotherapies to boost R&D productivity 53 The effect of cost containment in healthcare provision 54 Threats to drug pricing from parallel trade 57 Impact of generics 57 Increasing competition from the US and Japan 58 What Europe has been doing to increase its competitive edge in the pharmaceutical playing field 58 Conclusion: invest in Europe or not? 59 CHAPTER 2 EU15: IMPACT OF REGULATORY, PRICING AND REIMBURSEMENT POLICIES 60 Introduction 61 Overview of EU pharmaceutical regulation: two routes for market authorization 61 Role of the EMEA and the centralized procedure 61 Key functionalities of the centralized procedure 63 Role of CPMP 64 Role of COMP 65 MRP runs in parallel with the centralized procedure 65 Key functionalities of the MRP process 67 EMEA approval process - advantages and disadvantages 68 Centralized procedure versus MRP 69 MRP versus centralized procedure 69 National competent authorities - additional regulatory bodies 69 Proposed changes to European medicines regulations - implications for the industry 70 Changes to pharmaceutical data protection rules - not popular among member states 70 Overview of European pricing and reimbursement policies: the implications and challenges for the industry 71 European criteria for pricing and reimbursement 72 Summary of pricing policies within the EU 73 Governmental cost containment initiatives 73 Legislation to encourage drug price reduction: Germany, France and Spain 73 Devolution of centralized healthcare control 74 Case studies: Spain and Sweden 75 Generic substitution 75 Exploitation of EU pricing policies 77 Commanding premium prices: seeking orphan drug status 77 Premium pricing in a niche market 78 Seeking orphan drug status for licensed products that have the ability to dominate a disease market 78 Manipulating pricing differentials: parallel trade within the EU 79 EU’s encouragement of parallel trade 79 Unsuccessful challenges made to parallel trade by the pharmaceutical industry 79 Case study: Kohlpharma in Germany 80 Case study: Aventis and Kohlpharma in Germany 80 Case study: Ferring and Eurim-Pharm in Germany 80 Pricing and reimbursement issues within the EU15 81 UK 81 Current pricing regulations 82 Key changes in drug pricing 83 Impact of changes 83 Current reimbursement regulations 84 Changes in reimbursement policies 84 Impact of changes 85 Conclusion: what companies need to know about market entry strategies into the UK 85 In terms of pricing 85 In terms of reimbursement 86 France 86 Current pricing regulations 87 Key changes in drug pricing 88 Impact of changes 88 Current reimbursement regulations 89 Changes in reimbursement policies 89 Impact of changes 89 Conclusions: what companies need to know about market entry strategies into France 90 In terms of pricing 90 In terms of reimbursement 91 Germany 91 Current pricing regulations 92 Key changes in drug pricing 93 Impact of changes 93 Current reimbursement regulations 94 Changes in reimbursement policies 94 Impact of changes 94 Conclusion: what companies need to know about market entry strategies into Germany 95 In terms of pricing 95 In terms of reimbursement 95 Spain 96 Current pricing regulations 96 Key changes in drug pricing 97 Impact of changes 97 Current reimbursement regulations 98 Changes in reimbursement policies 98 Impact of changes 99 Conclusion: what companies need to know about market entry strategies into Spain 99 In terms of pricing 99 In terms of reimbursement 99 Italy 100 Current regulations in drug pricing 100 Key changes in drug pricing 101 Impact of changes 101 Current reimbursement regulations 101 Changes in reimbursement policies 102 Impact of changes 102 Conclusion: what companies need to know about market entry strategies into Italy 103 In terms of pricing 103 In terms of reimbursement 103 Austria 103 Current regulations and associated changes to pricing and reimbursement 104 Changes to pricing and reimbursment 105 Impact of changes 105 Conclusions: what companies need to know about market entry strategies into Austria 106 Belgium 106 Current regulations and associated changes to pricing and reimbursement 106 Changes to pricing and reimbursment 107 Impact of changes 107 Conclusion: what companies need to know about market entry strategies into Belgium 107 Denmark 108 Current regulations and associated changes to pricing and reimbursement 108 Changes to pricing and reimbursment 108 Impact of changes 109 Conclusion: what companies need to know about market entry strategies into Denmark 109 Finland 110 Current regulations and associated changes to pricing and reimbursement 110 Changes to pricing and reimbursement 111 Impact of changes 111 Conclusion: what companies need to know about market entry strategies into Finland 112 Greece 112 Current regulations and associated changes to pricing and reimbursement 112 Changes to pricing and reimbursment 113 Impact of changes 113 Conclusion: what companies need to know about market entry strategies into Greece 113 Ireland 113 Current regulations and associated changes to pricing and reimbursement 114 Changes to pricing and reimbursment 114 Impact of changes 114 Conclusion: what companies need to know about market entry strategies into Ireland 115 Luxembourg 115 Current regulations and associated changes to pricing and reimbursement 115 Changes to pricing and reimbursement 116 Impact of changes 116 Conclusion: what companies need to know about market entry strategies into Luxembourg 116 The Netherlands 116 Current regulations and associated changes to pricing and reimbursement 116 Changes to pricing and reimbursement 117 Impact of changes 118 Conclusion: what companies need to know about market entry strategies into the Netherlands 118 Portugal 118 Current regulations and associated changes to pricing and reimbursement 119 Changes to pricing and reimbursement 119 Impact of changes 120 Conclusion: what companies need to know about market entry strategies into Portugal 120 Sweden 121 Current regulations and associated changes to pricing and reimbursement 121 Changes to pricing and reimbursement 122 Impact of changes 122 Conclusion: what companies need to know about market entry strategies into Sweden 123 Framework for market entry: regulatory, pricing and reimbursement strategies 123 Entry into Europe: go-it-alone, partner or acquire? 124 Go-it-alone 125 Building the required infrastructure 126 Partnering 127 Acquiring 128 Optimal sequence for market launch in the EU 129 First choice countries: an attractive environment to launch into 130 Second choice countries: addressing the need for innovation and drug cost containment 130 Third choice countries: heavily influenced by healthcare payers’ stipulations 130 Fourth choice countries: undergoing change that affects the industry 131 CHAPTER 3 EU ENLARGEMENT: IMPLICATIONS AND CHALLENGES TO THE INDUSTRY 133 The impact of EU enlargement 134 The Central and Eastern European markets: a high growth opportunity? 134 Challenges to EU integration 135 Integration with the current EU pharmaceutical regulations 135 The pan-European regulatory forum (PERF) initiative 136 Updating pharmaceutical dossiers too late for accession 137 A solution to updating dossiers 137 The CEE industry has to become more competitive 138 Key players in the industry 138 Pliva 140 Lek 141 Gedeon Richter 142 Krka 143 Leciva and Slovakopharma 143 Polpharma 144 What some CEE companies have done to drive growth 144 Gedeon Richter 145 Lek 146 Pliva 146 Zentiva 147 Accession countries achieving policy objectives in line with the EU 147 Variation in government healthcare expenditure 147 Healthcare system reform 150 Current EU15 practice 150 Where CEE healthcare systems are progressing towards 151 Challenges facing accession countries 151 Transformation of the East German healthcare system: an example for the future? 152 Intellectual property protection 153 Standardization of intellectual property issues 153 Introduction of supplementary protection certificates (SPCs) 154 Conflicts with the Bolar provision 155 Opposition to removing the Bolar provision 155 Regulatory data protection 156 EC’s provisions to increase data protection 156 Role of EU market authorization: facilitating the phasing-in process 156 Pre-accession harmonization initiative: the EU centralized procedure 158 Pre-accession harmonization initiative: the EU mutual recognition procedure 158 Conflict of drug pricing policies and reimbursement post-accession 159 Lower healthcare expenditure in accession countries 160 Price differences between accession countries and member states 161 International price comparisons 162 Slovenia: moving towards a regulated reference pricing system 162 Threats to the local generics market 163 Impact of other accession countries 164 Paralle trade concerns - an increasing threat or not? 164 Addressing industry concerns 164 Lessions from the Spanish accession: a case study for parallel trade concerns? 165 Government-endorsed incentives for parallel trade? 166 Factors determining the extent of parallel trade 167 Price corridor strategies to prevent price erosion 168 Growth of the generics industry - an increasing threat to branded products? 168 Government-endorsed initiatives for generics 169 Generic subsitution policies affecting the local pharmaceutical industry: Finland’s concerns about Estonia’s EU accession 169 Challenges to the generic manufacturers in the accession countries 170 Factors driving the generics market growth post-accession 170 Conclusion 171 Parallel trade after EU enlargement 173 Generics after EU enlargement 173 Pricing and reimbursement after EU enlargement 174 Integration of 10 accession states 175 CHAPTER 4 BEST PRACTICES FOR MARKET ENTRY STRATEGIES: A CASE STUDY ANALYSIS 176 Key findings 176 Impact of EU15 becoming EU25: partnering becomes the most popular market entry route 177 Benchmarking current market entry practices into Europe 177 Niche market versus crowded disease market = go-it-alone versus partnering route 179 Less crowded disease market: understanding the market conditions 179 Go-it-alone strategies: when partnering does not work 180 Case study: Gilead Sciences’ Viread 180 Differentiaing Viread as an adjunctive therapy 180 Launching Viread as a global brand 181 Generating efficacy data from ongoing clinical trials 181 Case study: Transkaryotic Therapies’ Replagal 182 Targeting a niche therapy area 182 Entering a competitive niche market 183 Utilizing orphan drug status to enter Europe 184 Case study: Pharmion in Europe 184 Building a specific product pipeline through in-licensing 184 Positioning itself as a ‘partner of choice’ to enter Europe 185 Partnering strategies: adapting a business practice according to local market conditions 186 Case study: Sankyo’s Olmetec 186 Targeting the ARB drug class 186 Comparative studies to provide a competitive advantage 187 Co-promotion with Menarini Group to boost sale force presence in Europe 188 Case study: Bristol-Myers Squibb Plavix/Iscover (clopidogrel) 189 Parterning on complementary strengths to achieve blockbuster potential 189 Success built on ongoing clinical trials 189 Conclusion 190 Niche market 192 Less crowded market 192 Crowded market 193 APPENDIX 194 Research methodology 194 Participants to Datamonitor’s European Market Entry Strategies 2003 Survey 194 Supplementary data 195 Products approved by the EMEA centralized procedure 195 National competent authorities 196 Additional information relating to EU pricing and reimbursement policies 197 Reference pricing system in the EU 197 Other criteria for reimbursement in the EU 198 UK 198 France 199 Spain 200 Italy 200 Definitions 201 Glossary 202 References 206 Datamonitor reports 208 Datamonitor Healthcare’s pharmaceutical strategy capabilities 208 About 21st Century Insight 208 About eHealthInsight 209 Datamonitor’s strategic consulting expertise 209 Key strategy team members 210 Linda McNamara, Managing Analyst - Strategy 210 Andrew Jones, Analyst—Strategy 211 Johannes Inama, Strategy Lead Consultant 211 How to contact experts in your industry 213 LIST OF TABLES Table 1: Top tier pharmaceutical companies in Europe, 2002 44 Table 2: Middle tier pharmaceutical companies in Europe, 2002 46 Table 3: Lower tier pharmaceutical companies in Europe, 2002 48 Table 4: Metrics of the EU pharmaceutical market, 2002 50 Table 5: The European pharmaceutical industry, 1990-2002 52 Table 6: Total health spending in Europe as a proportion of GDP at market prices, 1970-2002 55 Table 7: Comparison of total health expenditure per capita and as a proportion of GDP in the current EU15 countries, 2002 56 Table 8: CPMP and COMP activity, 1995-2002 65 Table 9: The current EU countries opting for generic substitution 76 Table 10: Status of regulatory issues in CEE accession countries, 2002 136 Table 11: Major players in the CEE pharmaceutical industry, 2002 140 Table 12: Comparison of health expenditure between accession countries and EU15, 2002 149 Table 13: Status of intellectual property issues in CEE accession countries, 2002 154 Table 14: Drug expenditure differences between Western and Eastern Europe, 2002 161 Table 15: National competent authorities 197 Table 16: The ASMR classification for rating the medical benefit of new drugs in France 199 Table 17: Three reimbursement categories in France 200 Table 18: Drug reimbursement categories in Italy 200 Table 19: International organization for standardization (ISO) country codes 202 LIST OF FIGURES Figure 1: Main issues affecting the pharmaceutical industry after EU accession 9 Figure 2: SWOT analysis of the revenue opportunities offered by the European single market pre- and post-accession to the pharmaceutical marketer 35 Figure 3: Drivers and resistors for entering an expanded Europe 37 Figure 4: Landscape of top tier pharmaceutical companies in Europe, 2002 43 Figure 5: Landscape of middle tier pharmaceutical companies in Europe, 2002 45 Figure 6: Landscape of lower tier pharmaceutical companies in Europe, 2002 47 Figure 7: Comparison of total market value* and government spend on drugs** in the EU, 2002 49 Figure 8: Production, trade balance and R&D expenditure of the European pharmaceutical industry, 1990-2002 (e) 51 Figure 9: Total health expenditure per capita and as a proportion of GDP in the current EU15 countries, 2002 54 Figure 10: The centralized procedure: allowing single market authorization throughout the EU 62 Figure 11: Organizational structure and roles of the EMEA 64 Figure 12: The Mutual Recognition Procedure: allowing targeted market authorization in the EU 66 Figure 13: UK: key changes and the impact on pricing and reimbursement 82 Figure 14: France: key changes and the impact on pricing and reimbursement 87 Figure 15: Germany: key changes and the impact on pricing and reimbursement 92 Figure 16: Spain: key changes and the impact on pricing and reimbursement 96 Figure 17: Italy: key changes and the impact on pricing and reimbursement 100 Figure 18: Remaining 10 EU countries: key changes and the impact on pricing and reimbursement 104 Figure 19: Decision tree for optimal market authorization and entry into the EU 125 Figure 20: Optimal country-by-country sequence launch for entry into the EU15 states 129 Figure 21: Competitive landscape showing key players within the CEE pharmaceutical market, 2002 139 Figure 22: Strategies that key players within the CEE pharmaceutical industry have engaged in to boost their market share 145 Figure 23: Total health expenditure per capita and as a proportion of GDP in the accession states and current EU15 countries, 2002 148 Figure 24: Pre-accession drug harmonization: the CADREAC initiative 157 Figure 25: Difference in healthcare expenditure between the EU15 and accession countries, 2002 160 Figure 26: Issues affecting the pharmaceutical industry operating in the EU markets post-accession 172 Figure 27: European Market Entry Strategies 2003 Survey: go-it-alone or partnering routes were the most popular industry choices for entry into the EU 178 Figure 28: The popular entry market routes in a niche, less crowded and crowded market 191 Figure 29: Products approved by the EMEA centralized procedure 196 AbstractIntroductionEurope remains an attractive market to launch pharmaceutical products in because centralized regulatory ruling allows for immediate access to 15 member states. Although EU expansion to 25 countries does offer even greater market opportunities, the timely implementation of harmonized regulatory and intellectual property laws within these accession countries remains the limiting factor for success Scope Reviews the impact of EU drug authorization, pricing, reimbursement, parallel trade and generics post-accession Identifies a framework for market entry, including an optimal country-by-country product launch sequence for the EU15 states Evaluates the current issues and changes impacting pricing and reimbursement within each EU15 member state Benchmarks the current market entry practices used across Europe in terms of either the partnering or go-it-alone routes Report Highlights Provides a detailed insight into impacting factors affecting EU drug authorizations, pricing, reimbursement, parallel trade and generics pre- and post-accession. Reviews the current issues impacting pricing and reimbursement within each EU15 member state, thereby, providing an optimal country-by-country product launch sequence framework for successful entry into the EU. Analyzes the results of Datamonitor’s European Market Entry Strategies 2003 Survey covering 35 pharmaceutical companies in the US, Europe and Japan. The data includes opinions and inference relating to best practice from senior business development, regulatory and international affairs, licensing, and sales and marketing executives Reasons to Purchase Allows your organization to be fully aware of factors impacting the pharmaceutical industry before and after accession in the EU Identify which EU member states should be targeted first for a successful market launch with reference to their key pricing and reimbursement policies Benchmark which market entry strategy is best suited for your organization in terms of either the partnering, go-it-alone or acquisition routes. 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