New Market Study Published: South Africa Pharmaceuticals & Healthcare Report Q2 2010

April 19, 2010 - PRLog -- In  BMI's Business Environment Ratings for Q209, South Africa's position continued to worsen, with the country slipping from sixth to seventh position of the 17 Middle East and Africa (MEA) markets surveyed. Key reasons behind this slide include the strict pricing and reimbursement regime, as well as the uncertainty regarding the financial viability of the public healthcare system, given the massive number of HIV/AIDS sufferers, who are supposed to be receiving free treatment. Nevertheless, South Africa will remain one of the key pharmaceutical markets in the region, posting a compound annual growth rate (CAGR) of 8.97% in local currency terms through to 2013. By that time,  BMI expects that the market will be worth around US$3.9bn, up on the estimated 2008 figure of US$2.5bn. The recent formation of a new, streamlined regulatory body should support the faster processing of drug applications, although generics are expected to continue gaining a market share at the expense of patented products. However, the forecasts are at risk of a fluctuating exchange rate. During Q408, the rand depreciated by 18.6% to ZAR9.53/US$, with a lower value against the euro at ZAR13.28/EUR, a decrease of 14.8% since September 2008.  BMI's Country Risk team forecasts that local tender will further depreciate in the course of 2009, not returning to pre-2008 levels before 2013. In January 2009, to address the impact of this trend and prevent medicines shortages, the South African government authorised up to 13.2% price increases for the country's generic pharmaceutical firms.  BMI believes that the agreed rise in generic pharmaceutical charges will be a temporary measure until the exchange rate against the dollar improves, when the government is likely to go ahead with the planned 40% pricing benchmark for generic medicines against their patented counterparts. Around the same time, South African doctors began a discussion with the Department of Health (DoH) to address the ongoing issues concerning prescription fee charges, which are capped at 16% on all prescription drugs costing above US$10. Doctors consider the fee too low, given that it is meant to cover storing expenses, which are considerable in remote areas. While the demanded 30-40% cap is unlikely to be achieved, the government will probably seek to meet part of the doctors' request, judging by previous cases pertaining to dispensing fees. In the meantime, while it is not currently our core scenario that South Africa will slip into a full-blown recession over the course of 2009, the country's open, export-oriented economy and financial markets could be more heavily exposed to the downturn in external conditions than anticipated, especially given the current political uncertainty. While leading indicators suggest that private consumption remains under immense pressure, the deceleration in inflationary pressures and expectations of further decreases have given a (short-term) boost to consumer sentiment, which should have a positive development on medical consumption, as drugs remain regarded as some of the most essential items.

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