Venezuela Pharmaceuticals & Healthcare

Summary

Venezuela presents a challenging market for multinational R&D-based drugmakers. The continued existence of price controls on a list of 1,300 'essential' medicines, coupled with very lax enforcement of patent rights, represent clear threats to innovator companies present on the market.

However, value growth in local currency terms in recent years has been strong, and the market is expected to reach a value of US$2.33bn by 2010. Although the local currency continues to depreciate against the US dollar, BMI believes that a significant expansion of the healthcare system could lay the foundations for an expansion of the pharmaceutical market. Under an oil-for-expertise sharing agreement with Cuba, the treatment of low-income citizens has increased significantly, with an estimated 13,000 Cuban doctors now operating in the country. In late 2005, funding for the government's flagship Barrio Adentroscheme was earmarked at US$2.5bn, although there remains the risk that the bulk of medicines used under the programme will be low-cost generics sourced from Asia or Cuba. Additionally, the Venezuelan government is channelling resources into the retail and wholesale markets, in an effort to translate windfall oil revenues into a real boost in public access to medicines.

Despite this belated commitment to investing greater resources in public health, there are downside risks for foreign firms active in Venezuela. While multinationals have reported a series of major health ministry tenders, and a consequent improvement in opportunities on the local market, the government's focus on cost containment is likely to limit significant revenue growth. Accordingly, BMI believes that organic market growth represents the best hope for expansion, with the over-the-counter sector identified by leading players including Pfizer as a key growth area. Nevertheless, given the country's erratic economic performance, stable market development cannot be assured in the forecast period.

In terms of the breakdown of the market, the prescription sector is likely to see a slight decline in its share of total sales, as the value of over-the-counter and under-the-counter transactions boosts the overall OTC sector's market share to 30% by the end of the forecast period, equal to US$691mn. At the same time, the 'generic' sector - comprising both legitimate and illegitimate copies - is set to boost market share to more than 28% of sales, or some US$659mn by 2010. However, due to lax market rules on bioequivalence, quality and intellectual property, illegitimate copy products are likely to remain competitive.

Venezuela's weak position and operational risks are reflected in the country's score within our Business Environment Ranking for Latin America. Accounting for factors including the relatively underdeveloped local manufacturing industry and the market's considerable size, Venezuela is placed equal fifth in our ranking - above only Colombia, Peru and Argentina.

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Scope of Report

An at-a-glance perspective on latest regulatory developments, key forecast indicators and major corporate developments, covering the prescription, OTC and generics markets. The SWOT outlines strategic factors which affect BMI’s forecast analysis, and taken together with BMI’s Economic and Business Environment SWOTS, give a complete overview of market climate.

Outline of market characteristics, growth factors, leading therapeutic segments and a competitivness of the market.

Guide to and analysis of country intellectual property developments and pricing & reimbursement issues, which constitute the regulatory make-up of the market.

Focus on government healthcare reforms, epidemiological trends, company M&As, product launches, market entries, FDI activity, R&D and patent legislation.

5-Year Forecasts to end-2010 for all key industry indicators (see list below), supported by explicit assumptions, plus analysis of key downside risks to the main forecast, including:

• Drug market expenditure (US$bn); drug expenditure per capita (US$); as % of gdp
• Prescription drug market (US$bn)/as % of total market; sales by alimentary tract/metabolism; antibiotics, cardiovascular, central nervous system, oncology, musculoskeletal and respiratory system
• OTC market (US$bn)/as % of total market (sales by analgesic, cough and cold, digestives, skin treatments, vitamins and minerals)
• Generics market (US$bn)/ as % of total market
• Health expenditure (US$bn, % of gdp and per capita); public sector health expenditure as % of total; number of hospitals; beds, hospital admissions, doctors, births and deaths per 000 population

Forecasts based on bespoke BMI economic modelling, using historical data sets of macroeconomic and industry variables to derive rigorous statistical relationships, anchored in advanced linear regression techniques.

BMI forecasts for all headline macroeconomic indicators, including:
Nominal and real GDP, % real GDP growth, % private consumption growth, % industrial output growth, % consumer price index, % GDP price deflator, exports, imports, trade balance, current account balance, foreign direct investment, exchange rate against US$, government expenditure, external debt

Intelligence on the market position of major MNC power houses and indigenous companies. BMI profiles key research-based companies. Company SWOTS are provided for all key strategic players, complete with a company activity overview, its leading products and analysis of business opportunities.

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