October 2009 Update on Tracking the Effect of the Economic Crisis on Pharmaceutical Consumption, Expenditures

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1 October 2009 Update on Tracking the Effect of the Economic Crisis on Pharmaceutical Consumption, Expenditures and Unit Prices Executive Summary The WHO, in collaboration with IMS, has put in place a programme to track the impact of the global economic crisis on the consumption of medicines globally. This is the second quarterly report. Indicators track volume and price changes, enabling consumption to be monitored over time while taking into account seasonal changes. Many of the signs first seen in Q1 were confirmed in Q High-income countries have experienced little impact from the economic crisis. Low- and middle-income countries continue to show growth both in terms of volume and pharmaceutical expenditure. Some countries are showing signs of lower consumption, most notably in Eastern Europe, although examples also appear to exist in both the Americas and Western Pacific regions. Additional work is now being conducted to refine the indicators and determine the types of medicines most affected in these countries. Background The WHO, in collaboration with IMS, has put in place a programme to track the impact of the global economic crisis on the consumption of medicines globally. This is the second quarterly report. It contains pharmaceutical consumption information from 82 countries worldwide. In high-income and upper middle-income countries, the data represent consumption or sales in both the public and private sectors (where they exist), while in lower income countries, the majority of the information relates to the private sector exclusively. Four broad areas have been examined total volume, consumption of acute or chronic medicines, use of branded or non-branded medicines, total sales and average price per unit of volume. More detail on the methodology can be found at

2 Objective The objective is to generate indices that track consumption, expenditure and the price of pharmaceuticals country by country on a global basis each quarter. The indices track the latest available time periods and compare that with data from previous quarters and with Q Q is designated as the last quarter before the global recession began to impact economies. Results 2007, 2008, Q1, Q Global Volume Consumption Index Highlights 2007 Q Q confirms many of the signs first seen in Q In the Europe region, Estonia, Latvia and Lithuania continue to show substantial decline in total volume of medicines, and the Ukraine appears to show the first signs of a similar downturn. Russia remains a country very much in flux; in the private sector, volume continues to decline, possibly as pharmacies optimize the stock they carry. In the Western Pacific Region, Malaysia now has experienced three consecutive quarters of moderate volume decline, and the Central American countries 1 and Peru also experienced a decrease, but only 5% and 3%, respectively, over Q In Mexico during Q2 2009, volume continued to move from the private to public sector. This is due in part to the extension of certain programmes providing free medicines for low-income citizens not affiliated with a social security organisation in certain parts of the country, along with measures taken to end supply shortages in the public sector. 2 In contrast, growth in China, Kuwait and Tunisia is particularly notable. However, the Americas, Eastern Mediterranean, SE Asia and Western Pacific regions also had moderate growth, with Algeria, Argentina, Venezuela, Ecuador, UAE, Kuwait and Australia the primary contributors. In Europe, outside of the Baltic region, growth in high-income countries remains flat. In French West Africa 3, total volume usage appears to be unaffected by the economic crisis. 1 Information from the combination of Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and Panama 2 El Universal, Prometen gratuidad de alimentos y medicinas, 6th January Cited in IMS PharmaQuery 2009 and El Universal, Farmacias podrán surtir las recetas del ISSSTE, 19th June 2009, cited in IMS PharmaQuery Information from the combination of Ivory Coast, Cameroon, Gabon, Senegal, Congo, Benin, Guinea, Togo, Mali, Burkina 2

3 Global Volume Consumption Index: Acute and Chronic Medicines Analysis of the 1997 Asian financial crisis suggests that changes in the economic environment would lead to a decline in volume of those medicines used to treat chronic diseases. Medicines used to treat acute diseases also were affected, but the trends were more volatile. This pattern does not seem to be reflected in the current crisis. In Peru, the Central American countries, Estonia, Latvia, Lithuania, Russia and Malaysia, the decline in growth in acute medicine volume is as great or greater than the chronic medicines sector. In the Ukraine, chronic medicines appear to be more affected, but additional data from future periods will be needed to confirm that trend. In Mexico, the decline in acute medicines in the private sector is matched by substantial growth in the public sector. In Romania, the three consecutive quarters of decline in acute medicine consumption may be of concern if acute medicine consumption is an early indicator of impact. Growth in chronic medicine consumption is notable in the high-income countries in the Eastern Mediterranean region (Kuwait, UAE and Saudi Arabia), as well as in Tunisia. China continues to demonstrate strong growth in chronic medicine consumption, with South Korea exhibiting year-over-year growth for two consecutive quarters. Global Volume Consumption Index: Original and Licensed Brands Versus Other Brands and Unbranded Pharmaceuticals There appears to be minimal correlation between usage of branded or unbranded medicines and volume declines, although comparisons are difficult due to the fact that this categorisation is not available in IMS s data for most of the Eastern Europe countries apparently affected by the economic crisis. In Mexico, the substantial growth in original and licensed brands in the public sector has more to do with overall growth than with increased usage of one type of medicine over another. This is the case even though local generic manufacturers indicated that they would restrict delivery of medicines to the public sector following the March announcement that medicine prices would not be raised. 4 In other countries, decline in total consumption in the private sector appears to be reflected in both branded and unbranded medicines. 4 El Financiero, En abril, primer desabasto de medicamentos, 10th March 2009, Cited in IMS PharmaQuery

4 Global Pharmaceutical Expenditure Index Volume declines combined with increased total expenditures is perhaps the worst scenario in an economic crisis. This is the case in the private sector in Russia, the Ukraine and Malaysia. Other countries that show volume declines appear to be maintaining total expenditure levels, including Mexico (private), and Central American countries. Peru, Estonia, Latvia and Lithuania are experiencing declines in both volume and expenditures. Not surprisingly, those countries showing significant volume growth also experienced significant expenditure growth (China, Kuwait and Tunisia), and this also is true of several other countries where upward volume growth, particularly in chronic medicines, has occurred. Argentina, U.A.E. and Egypt, for example, have seen significant expenditure growth for six consecutive quarters and Turkey for five consecutive quarters. In Turkey, growth is being driven by the implementation of legislation in October 2008 establishing a universal coverage health scheme 5, and an 8% increase in medicine prices brought on by the devaluation of the local currency against the Euro. High-income countries in Europe, with the exception of those countries cited above where expenditures declined substantially, have shown little or no growth in expenditures. In the Eastern Mediterranean region, growth is common to all countries audited by IMS with Pakistan showing a particularly strong upward trend in Q In the Americas region, the high-income countries again show little change, with lowerincome countries experiencing moderate or significant growth in expenditures. Global Price per Standard Unit Index In the Americas, those countries with volume decreases have not experienced an increase in the average price per unit of volume. In the public sector in Mexico, the average price is essentially flat, reflecting the announcement in March by the Ministry of Health that prices of products sold to the Mexican Social Security Institute will not be raised to reflect the impact of the devaluation of the peso against the U.S. dollar. In Europe, volume decreases again are not always matched with an increase in average price, although there is a consistent upward trend in average price per standard unit in Estonia, Latvia and Lithuania. Ukraine holds the distinction of having the highest unit price increase for the second consecutive quarter. In the Western Pacific, Malaysia also has experienced medicine price increases for the past three quarters

5 Few countries have seen a decline in average prices over the past six quarters. The Netherlands, Kuwait and New Zealand are examples. The ongoing decline in The Netherlands is attributable to the introduction and extension of preference policies by major health insurers. Conclusion In most countries, particularly high-income countries, the economic crisis appears to have had little or no impact. Where it can be seen, the impact is specific to particular countries rather than regions. Estonia, Latvia and Lithuania are clearly feeling the impact of the economic crisis, and to a lesser extent the Ukraine, Malaysia, Peru and the Central American group of countries. Mexico and Russia also show changing patterns in consumption that may indicate decreasing access to medicines, but both countries are undergoing significant healthcare reform that makes comparative analysis difficult. The next report for Q will be issued before the end of the year. Additional work is underway to further characterise the mix of medicines most affected in countries where there is evidence of impact. IMS Health is the gold standard in pharmaceutical and healthcare market intelligence, relied on by virtually all of the world s largest pharmaceutical companies along with government agencies, policymakers, researchers and financial analysts around the globe. IMS tracks more than 1.5 billion healthcare transactions each month, from more than 130,000 suppliers worldwide. This data, integrated with leading analytical expertise, plays a central role in supporting high-quality, cost-effective healthcare. 5