Abstract
In 2008, Australia' s pharmaceutical market was worth US$7bn. BMI expects the
pharma industry to post
modest growth over the forecast period, with a
CAGR of 3.2% between 2008-2013, in local currency
terms. Growth will be
largely due to the market' s highly advanced nature, which has resulted in a
mature
growth outlook. In 2009, we forecast that drug expenditure will
contract in US dollar terms, primarily due
to an appreciation of the
Australian dollar against the US dollar. However, growth in real terms will
be
strong in 2009, although it will begin to slow over the medium-term as
austerity measures, such as cuts on
the Pharmaceutical Benefits Scheme
(PBS), make their presence felt.
According to a report by Australian-based
Access Economics, which was commissioned by the Pharmacy
Guild of
Australia, recent reforms enacted by the PBS will save the government a total
of AUD7.4bn
(US$5.32bn) over the next 10 years. This contradicts the
widely accepted view, which states that PBS
spending will become
unmanageable over the coming years. Policies introduced in 2008 included
mandatory price reductions of 25% for drugs, accounting for 50% of PBS
prescriptions. This has been
aimed to combine with the ongoing policy of
establishing a 12.5% reduction in price when a new drug is
listed.
Increased transparency has also helped reduce costs, and drug manufacturers
now have to give
information to the government regarding the market prices
of their products. If there is a significant
difference between the PBS
price and the market price, the PBS price is reduced. According to the
report,
a number of stakeholders will be negatively impacted by the
reforms. For example, price disclosure
guidelines are expected to reduce
pharmacy incomes by AUD1.2bn (US$863mn) in the period up to
2015, working
out at a cost of AUD35,500 (US$25,553) per pharmacy. Pharmacies could find
themselves
in a difficult situation as they cannot raise the prices of
drugs to make up for lost income. Rent and wage
costs are also currently
rising at a rate higher than inflation, so it will be difficult for them to
make
savings in these areas in order to protect the bottom line.
Elsewhere, Australia' s government has set up a multi-million dollar fund to
help cash-poor biotechnology
firms weather the global financial crisis.
Because this follows a similar move by the Indonesian state,
BMI believes
that a regional trend may be emerging. Small biotech firms require regular
injections of
cash to sustain operations. In return, investors receive a
portion of equity and news of products nearing
the market. Given the
nature of the sub-sector, eventual commercialisation of a proprietary agent
results
in significant returns for both the founders and funders of the
company. However, the credit crisis has
meant that free cash for high-risk
investments is in short supply.
Australia has moved up to second place in
BMI' s Business Environment Ranking for the Asia Pacific
region, with the
country benefiting from an advanced drug sector and an excellent regulatory
system.
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