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OTC struggles with recession, but
mass market offers bigger future
With a population approaching 40mn, and with
POLAND: market background
accession to the EU expected in 2004, Poland
seems to be one of the most obvious targets for
Population: 38.6mnExchange rate: US$1.00 = PZL 3.95* OTC marketers in Central & Eastern Europe.
Exchange rate: ¤1.00 = PZL 3.52*Pharmacies: 10,000 Boosted by the opening of the mass market,
OTC distribution: pharmacy + some mass market salesOTC market size: US$576mn† (¤647mn / PZL2.3bn) among other developments, the Polish OTC market
is now larger than that of Spain – one of the Big
Five markets of Western Europe. And with the
1998 economic crisis in Russia, Poland also
OTC trends in Poland
succeeded Russia as the largest OTC market in
CEE. But things are not all well. Here, with the
Recession in the Polish economy and availability of help of Agnieszka Buksowicz of APC Instytut, we
prescription alternatives has left the Polish OTC market review progress and current pharma trends.
facing a period of relative stagnation. Poles buy chiefly indispensable medicines prescribed by the doctor and so, Polish OTC facts and figures
in times of economic uncertainty, they tend to limit the consumption of less important OTC preparations. This Besides Russia, Poland has the most potential for OTC in trend is supported by data from AzyX Polska, which shows CEE. Close to 1.4bn packs of drugs were sold in Poland that consumption of OTCs rose by only 1.3% in volume in 2001, with the total Rx+OTC pharma market worth terms in 2001, whereas Rx turnover grew by 5.7% in the US$2.4bn (¤2.7bn / PZL9.5bn) at manufacturer’s selling same period. After dynamic expansion of the OTC sector in prices (MSP), according to AzyX Polska. OTC sales recent years, this growth is much below average. Sales represented almost one-quarter of this figure growth still reached 12.2% in value terms – primarily (see Fig 1); vitamins, minerals & dietary supplements the result of price rises – but it can be expected that the constituted the single largest OTC category (see Fig 2).
foreseeable future development of the OTC sector will be “Poland remains a commodity market –
generics constitute 85% of drug sales”
Fig 1 POLAND: pharmaceuticals
market by sector 2001
Poland has traditionally been, and remains, a commodity market – 85% of the drugs bought in Poland are generics.
Rx retail 66%
Many Polish manufacturers supply the domestic market with cheap products, which appeal to the substantial part of society that exists on low income (especially older people – the heaviest drug consumers). Around half of the drugs available in Poland are produced by 66 Polish Hospitals 10%
companies. Domestic medicines accounted for 69% of turnover in unit terms in 2001. Nevertheless, it is more Total market = US$2.4bn (PZL9.5bn / ¤2.7bn) at MSP expensive, imported drugs which took two-thirds of the total market by value (see Fig 3 overleaf).
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DECEMBER 2002 53
FIG 2 POLAND: OTC market by major
POLAND: recent OTC launches
category 2001
Marketer
Category
Cough & cold 19%
Analgesics 19%
Others 23%
Source: industry estimates; full year sales by volume slower than Rx channels, unless the Polish economy PZL14bn (US$3.6bn / ¤4.0bn) by 2005 – or a ¤100 recovers and thereby improves the material situation of (US$89) per capita spend. Some observers set a figure Polish consumers. According to AzyX Polska, the total pharma market grew by 9.8% to PZL4.8bn (US$1.2bn / ¤1.4bn) MSP in the first seven months of 2002, which represents a 9.3% increase over the same period in 2001.
OTC advertising
But this growth can be seen as a direct effect of the OTC advertising expenditure has been growing year implementation of the new reimbursement list prices on year since 1999 – rising by 50% in 2000 and then in April – when pharmacies stocked up with bulk by another 48% in 2001, according to Expert Monitor.
purchases at the new prices; OTCs are still facing a In the first eight months of 2002, OTC marketers spent PZL355mn (US$90mn / ¤101mn) on A+P, again according to Expert Monitor; while this represents a slowdown Despite the recent recession, pharma market prospects are compared with previous years, it nevertheless constitutes still considered to be promising. Indeed, analysts from the an increase of 7% in comparison to the same period last World Bank foresee that pharmaceuticals will achieve year and demonstrates the growing trend towards using average yearly growth of around 9% over the next few years. This would mean that the total market could pass “OTC advertising expenditure has been
growing consistently, year on year”
FIG 3 POLAND: domestic vs foreign
drug market share by value 2001
In terms of total advertising, OTCs were the second most- Foreign marketers 65.5%
advertised consumer goods, after beverages, in 2001. The most popular medium to advertise OTCs is television (see Fig 4, right), with other media serving mainly to support huge TV ad campaigns. Vitamins & minerals plus cough & cold preparations are the bestselling and most advertised OTCs (Fig 5, top right), benefiting from factors such as the Domestic marketers 34.5%
climate and the hypochondriac disposition typical of many Poles. Two of the three most active OTC advertisers are local firms (see box, right), while the other is GSK, which Source: AzyX Polska, full year data at MSP inherited a large portfolio from Polfa Poznan.
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54 DECEMBER 2002
FIG 4 POLAND:
FIG 5 POLAND: adspend by major OTC
OTC adspend by media 2001
category 2001
Cough & cold 27%
Television 79%
Magazines 17%
Analgesics 18%
Circulatory aids 6%
Newspaper 2%
Others 16%
Total OTC adspend = PZL612mn (US$155mn / ¤170mn) Total OTC adspend = PZL612mn (US$155mn / ¤170mn) Since the introduction of the new Medicine Act in October For years, PGF (Polska Grupa Farmaceutyczna) has been 2002, OTC producers have been given a more difficult the largest distributor of medicines. However, Farmacol task to attract potential customers. The new law has has raised its position, from a 9% market share in 1999 implemented several new obstacles for public advertising to 17% in 2001, by buying the big operator, Cefarm (this subject is discussed in Regulatory Brief, pp70-71).
Warszawa, and thus strengthening its position in central Poland. Furthermore, by the end of this year, Cefarm Further consolidation of the
Szczecin will also formally join Farmacol. Meanwhile, PGF is waiting to make a move after the upcoming wholesale market
privatisation of Cefarm Kraków. PGF’s prestige has The Polish distribution system consists of three links grown recently as the company entered the WIG20 – a list – pre-wholesale, wholesale and retail trade. There are four of the biggest 20 companies trading on the Warsaw Stock big players and a lot of mid-sized and small companies Exchange. As reported in this month’s Newsbrief (p73), (see Fig 6). Overall, there are some 400 wholesalers, fourth-placed Prosper has also declared its ambition to serving around 10,000 pharmacies. As a result of recent realise a friendly merger with a major rival.
consolidation, the role of pre-wholesale has been losing its importance. All major distributors – such as PGF, New channels of OTC distribution
Farmacol, Orfe and Prosper – are active in this area, to While mass market sales of some OTCs are permitted, a greater or lesser extent, and so can also provide a link by no means all OTCs can be sold outside pharmacies.
FIG 6 POLAND: pharma distributors
POLAND: leading OTC advertisers
market share 2001
% share-of-voice
Farmacol 17%
Prosper 10%
Others 37%
Total OTC adspend = PZL612mn (US$155mn / ¤170mn) Simpliƒyle 11
DECEMBER 2002 55
Decisions to this effect are made by the Ministry of Health product sector that is developing more rapidly than other on an individual basis for each OTC. Sometimes the decisions are arbitrary, as often one OTC can be sold in supermarkets while another one with exactly the same According to research conducted by CAL Company ingredients cannot. A new list of OTCs permitted to be Assistance, consumers find analgesics to be the most sold outside pharmacies is published every year. A new list important OTCs which they can buy outside pharmacies – comes into effect this month: in total 3,261 OTC products brands such as Apap (US Pharmacia), Panadol (GSK), will be available outside pharmacies – 1,700 in herbal Etopiryna (Polpharma) and Bayer Aspirin. Consumers stores, 1,440 in drugstores and 121 in any shops, such as currently spend 18% of total drug expenditure outside supermarkets, news-stands and petrol stations.
the pharmacy and this figure will only grow in the future.
However, the OTC mass market is seen by most pharma Accession to the EU
companies as the most dynamic and fast-moving sector As discussed earlier, the Polish pharmaceuticals market and a place in which to gain a foothold. At the same time, is concerned mainly with the production of generics.
OTC is also being recognised by mass market retailers as a However, after accession to the EU, Polish producers will be forced to conform to rigorous EU regulations.
The Polish pharmaceutical holding
Inevitably, some Polish drugs will not achieve the In order to create a big Polish pharmaceutical company necessary standards and will no longer be approved for that will be able to compete with foreign firms after sale. In particular, this will cause many older drugs to be joining the EU, the Government has decided to create a removed from the market and some small companies will holding by consolidating up to four of the remaining be forced out of business. On the positive side, industry state-owned companies. This umbrella company would observers expect EU entry to boost OTC sales. At present, include Polfa Tarchomin, Polfa Warszawa, Polfa OTCs account for 24% of total pharma sales in Poland, Pabianice and perhaps also Jelfa – which is still more whereas in the EU this figure reaches as much as 40%.
than 30% owned by the Treasury (this story was also Drug price rises are also anticipated, in order to counter reported in Newsbrief, October 2002, p25). Completion the threat of parallel importing to other EU states – this of the merger is planned for the beginning of 2003, and the new entity could hit the trading floor of the Warsaw Stock Exchange in the first quarter of 2004, raising As throughout the world, the issue of pharmaceuticals is a money for development and investment. According to sensitive subject in Poland. While the new Medicine Act the Treasury Minister, the holding will be worth ¤150- implemented in October (see Regulatory Brief, pp71-72) 220mn (US$130mn-200mn) and will hold up to a 16% is, on the one hand, limiting the scope for public share of the pharmaceuticals market in Poland. Potential advertising of OTCs, it is on the other hand liberalising investors include several US companies, as well as the Polish Ciech – a formerly state-owned import-export access to new distribution channels, allowing more and intermediary for the Polish chemicals industry, which still more OTC drugs to be sold outside pharmacies. Overall, owns the Polfa trademark for exports.
and despite the recent recession – which out of all pharma categories hit OTCs to the greatest extent – The idea is to improve the condition of the domestic many experts foresee that OTCs will be a driving force pharma sector and allow the state budget to save of the Polish pharmaceuticals market in the future.
money on drug subsidies. Currently, more expensive foreign medicines constitute 72% of reimbursement This article was written by APC Instytut.
costs, while only 28% is accounted for by domestic For more information about APC’s services drugs; the treasury wants to change this proportion for pharma companies, see details on p72.
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Source: http://www.apcinstytut.pl/fileadmin/template/main/images/InsightCEE12_02Poland.pdf