Domestic drug makers getting gov't boost

The planned Polski Holding Farmaceutyczny would be successful only if the government manages to significantly increase Polish drugmakers' market share, Treasury Minister Wiesław Kaczmarek told the WBJ last week. The pharmaceuticals holding company is part of the government's plan to consolidate the sector prior to flotation on the stock market. The plan calls for increasing domestic drugmakers' market share to 50% from 35% of national sales. But efforts to promote Polish producers against foreign makers have a slim chance of success, undermining Kaczmarek's vision for the consolidation, industry sources and analysts said. "We want to achieve 50-50 market proportions so that we then have room for the consolidated group to operate," Kaczmarek said. "I am now expecting the effects of actions undertaken by the health minister to this end." The Democratic Left Alliance (SLD) government has initiated several plans for industry-wide consolidation among state-controlled firms, including the steel sector, telecommunications and chemicals. The SLD has also promoted efforts to protect local manufacturers from foreign competition in agriculture, retail, apparel and other sectors.

Shot in the arm In pharmaceuticals, the Health Ministry gave Polish firms their first boost in April when it reduced or stopped reimbursing foreign makers for dozens of drugs and forced many others to substantially lower their prices in return for maintaining government subsidies. With the government financing 40% of Poland's drug market, drugmakers watch any changes in subsidies very carefully. And the Health Ministry is planning to add new drugs to its reimbursement lists this fall, according to Renata Furman, spokeswoman for the Health Ministry. "We want to fix attention on Polish drugs," Furman said. The Health Ministry will make regular changes to the reimbursement list on a quarterly basis, she said. "We will focus on introducing as many generic drugs as possible to the list," Furman said. Generic drugs are cheaper imitations of original drugs, made after the latter's patents expire. Most Polish pharmaceuticals are generic, while new, original drugs are imported. The government's plans incensed foreign makers' representatives in Poland. "If aiming at a 50-50 market split should mean leveling the playing field at somebody's expense, then it's the wrong way if Polish makers keep their sales at the same level while the patients' access to foreign-made drugs is limited," said Jerzy Garlicki, vice president of the Association of (International) Pharmaceutical Companies Representatives in Poland.

"And assuming a 50-50 market split contradicts the government's intention to join the European Union, because the market should not be shaped according to where something is produced, but according to what's best for patients," he said. Despite the government's efforts to promote Polish drugs, the domestically made pills are unlikely to muscle imports out of the Polish market, analysts and market watchers said. The foreign drugs' market share in May was 65%, about the average level of 2001, despite the government's substantial reimbursement reduction in April, according to AzyX Polska research firm. Although it constituted a slight drop from 66% in May 2001, analysts said the change had little to do with the government's pro-Polish campaign. The foreign makers' share may fall a little bit by the end of 2002, but only due to Polish patients' dire finances in the current economic malaise - Poles tend to choose cheaper Polish generics when buying simple remedies, according to Arkadiusz Chojnacki, analyst at the COK Banku Handlowego brokerage. But the government's power to affect the market is limited because it cannot afford to continue removing foreign pharmaceuticals from reimbursement lists, Chojnacki said. "For many diseases, there are no Polish drugs," Chojnacki said. "It's impossible to suppress the sale of foreign drugs administratively, because the popular pressure against it will be too strong."