Doom and gloom for drug sector
The imminent entry of U.S. generic drug maker Ivax onto the market will be the third in a series of investments in the sector since May 1. But it could also be the last if a report by Capgemini, a consulting firm, is anything to go by.
The report, released last week, compares the 25 members of the enlarged EU and three candidate countries, viz. Bulgaria, Romania and Turkey, in terms of their attractiveness for investors in the healthcare sector. Capgemini experts ranked the countries in terms of investment climate in biotechnology, licensed-drug production, generics and medical equipment manufacturing. In all of these categories, the country languished near the bottom of the rankings and, in generics, it was even behind non-member Bulgaria.
Investors surveyed by Capgemini named poor protection of intellectual property rights in pharmaceuticals, the costs of adhering to regulations and bureaucracy as the biggest turn-offs to investing here. Although, when asked, market players also tend to add the lack of legislative transparency and the unpredictability of the business environment to their list of qualms.
Furthermore, the authorities, the report seems to suggest, place large demands on potential investors, while giving back very little in return. And this impression is strengthened by the country's low score in terms of the state of its infrastructure.
Still, the picture is not uniformly grim, says Zbigniew Tytko, a senior consultant at Capgemini. Even relatively minor changes in the legal environment could mean big improvements in the investment climate, the authors say. Relatively low labor costs, a potentially large domestic market and the advanced technological state of the industry do make the country an attractive investment destination, at least by regional standards. Indeed, the country saw 20 investment projects in healthcare over the years 1997-2002.
Despite all the problems identified in the report, investors already operating on the market remain upbeat. And while Andrzej Trzeciakowski, general director of Hexal Polska, concedes that red tape and murky legislative procedures, not to mention the company's battle with the customs office, have all proved hurdles to the German-based firm here, he jokes airily, "That's why they get a native like Andrzej Trzeciakowski to deal with it."
Certainly, Hexal seems unperturbed by the highlighted hassles, having recently invested zł.90 million (?20 million) in the country while currently planning to plow in another zł.67.5 million (?15 million) in new production and storage facilities.
Likewise, Lek Polska, owned by generic world leader Sandoz, itself part of the Novartis group, has also just sunk zł.314.9 million (?70 million) into a new logistics center in Łódź. Akin to Trzeciakowski, Lek's CEO, Marco Dolzan, thinks that the size of Poland's population, stringent containment of government spending on drugs and potential access to Eastern markets are a strong counterbalance to the negatives detailed by Capgemini. Indeed, most believe that Ivax's interest in Polfa Kutno and Jelfa stems from the company's strong sales networks across the CEE.
And while both Hexal and Lek have recently invested in India, Trzeciakowski and Dolzan do not foresee Poland as losing out in the near future as a consequence of increasing generic investments in low-cost Asian countries.
Regarding the lack of patent protection and theft of intellectual property outlined by the report as major turn-offs for potential investments by innovative companies, both consultants and industry insiders alike agree that things should start getting better now that this country is a member of the EU.
And when Corinne Danan, managing director of Eli Lilly Polska, expresses the view that harmonization of local legislation with that of the EU "will have a positive effect for the investment opportunities of R&D companies present on the Polish market," Aldona Zygmunt, spokesperson for GlaxoSmithKline, concurs.
Nevertheless, as R&D is increasingly outsourced, say Capgemini, investment is more and more likely to flow mainly to those countries that offer the most advanced research climates, venture capital funds, and tax compensation. And while in Europe R&D is likely to concentrate in clusters around Nordic research institutions, globally it is the USA, which Zygmunt sees as offering "the best climate in the world for R&D," that all European countries must compete against.
The report, released last week, compares the 25 members of the enlarged EU and three candidate countries, viz. Bulgaria, Romania and Turkey, in terms of their attractiveness for investors in the healthcare sector. Capgemini experts ranked the countries in terms of investment climate in biotechnology, licensed-drug production, generics and medical equipment manufacturing. In all of these categories, the country languished near the bottom of the rankings and, in generics, it was even behind non-member Bulgaria.
Investors surveyed by Capgemini named poor protection of intellectual property rights in pharmaceuticals, the costs of adhering to regulations and bureaucracy as the biggest turn-offs to investing here. Although, when asked, market players also tend to add the lack of legislative transparency and the unpredictability of the business environment to their list of qualms.
Furthermore, the authorities, the report seems to suggest, place large demands on potential investors, while giving back very little in return. And this impression is strengthened by the country's low score in terms of the state of its infrastructure.
Still, the picture is not uniformly grim, says Zbigniew Tytko, a senior consultant at Capgemini. Even relatively minor changes in the legal environment could mean big improvements in the investment climate, the authors say. Relatively low labor costs, a potentially large domestic market and the advanced technological state of the industry do make the country an attractive investment destination, at least by regional standards. Indeed, the country saw 20 investment projects in healthcare over the years 1997-2002.
Despite all the problems identified in the report, investors already operating on the market remain upbeat. And while Andrzej Trzeciakowski, general director of Hexal Polska, concedes that red tape and murky legislative procedures, not to mention the company's battle with the customs office, have all proved hurdles to the German-based firm here, he jokes airily, "That's why they get a native like Andrzej Trzeciakowski to deal with it."
Certainly, Hexal seems unperturbed by the highlighted hassles, having recently invested zł.90 million (?20 million) in the country while currently planning to plow in another zł.67.5 million (?15 million) in new production and storage facilities.
Likewise, Lek Polska, owned by generic world leader Sandoz, itself part of the Novartis group, has also just sunk zł.314.9 million (?70 million) into a new logistics center in Łódź. Akin to Trzeciakowski, Lek's CEO, Marco Dolzan, thinks that the size of Poland's population, stringent containment of government spending on drugs and potential access to Eastern markets are a strong counterbalance to the negatives detailed by Capgemini. Indeed, most believe that Ivax's interest in Polfa Kutno and Jelfa stems from the company's strong sales networks across the CEE.
And while both Hexal and Lek have recently invested in India, Trzeciakowski and Dolzan do not foresee Poland as losing out in the near future as a consequence of increasing generic investments in low-cost Asian countries.
Regarding the lack of patent protection and theft of intellectual property outlined by the report as major turn-offs for potential investments by innovative companies, both consultants and industry insiders alike agree that things should start getting better now that this country is a member of the EU.
And when Corinne Danan, managing director of Eli Lilly Polska, expresses the view that harmonization of local legislation with that of the EU "will have a positive effect for the investment opportunities of R&D companies present on the Polish market," Aldona Zygmunt, spokesperson for GlaxoSmithKline, concurs.
Nevertheless, as R&D is increasingly outsourced, say Capgemini, investment is more and more likely to flow mainly to those countries that offer the most advanced research climates, venture capital funds, and tax compensation. And while in Europe R&D is likely to concentrate in clusters around Nordic research institutions, globally it is the USA, which Zygmunt sees as offering "the best climate in the world for R&D," that all European countries must compete against.
