United Kingdom Pharmaceuticals and Healthcare Report Q4 2010

United Kingdom Pharmaceuticals and Healthcare Report Q4 2010

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In BMI's Q410 Pharmaceuticals & Healthcare Business Environment Ratings, the Western Europe region scored an average total of 64.5 out of 100. The attractiveness of the region to pharmaceutical firms stems from the fact that its countries are key revenue sources for big pharma', particularly for companies selling high-end products, as per capita spending is substantially higher than in emerging markets. However, it is BMI's view that drug companies will face many challenges in Western Europe over the next decade, including the need to reduce fiscal deficits, the patent cliff, added regulatory hurdles and increasingly scrupulous cost effectiveness assessments of new drugs - all factors that will influence the risk and reward scores assigned to markets in the region.

New fiscal austerity measures in the eurozone in an attempt to calm the bond markets have reinforced our weak growth outlook, adding to existing problems of overleverage, unfavourable demographics and rising unemployment. Wide fiscal deficits will come into increasing focus going forward, especially as a busy election cycle and a weak macroeconomic recovery are likely to continue adding pressure on budgetary dynamics through 2010 and 2011.

The Chancellor of the Exchequer George Osborne presented an emergency budget to parliament on June 22 2010, outlining how the government will cut the largest fiscal deficit in peacetime history. BMI notes that while the National Health Service (NHS) has been ring fenced, it is not a cuts-free zone. The government aims to cut the NHS' administration costs by about a third in order to create cost savings of GBP20bn (US$31bn) by 2014. As a result, more than 20,000 jobs in strategic health authorities and primary care trusts are at risk.

Furthermore, the NHS is to undergo the largest structural change in its history. GPs are to be given control of GBP70bn (US$107bn) of NHS expenditure, taking over the commissioning of the majority of care, including of the running of a collection of hospital, mental health and community services. The Secretary for Health, Andrew Lansley, said it is GPs who spend the money in the NHS through their prescribing and referral decisions and as a result they will be more likely to control the demand for NHS care if they are also managing the finances.

In BMI's Business Environment Ratings for Q410, the UK has maintained its fifth place out of the 10 Western European markets surveyed. The ratings criteria serve to reinforce our estimation of the country's potential due to a stronger emphasis on the regulatory environment, which we see as a major factor affecting the business environment for drugmakers. Globally, the UK is in 10th place. However, while the UK is one of the most developed pharmaceutical markets in the world, emerging and pressing economic and political issues, as well as its strict pricing and reimbursement regimes, have formed major clouds on the pharmaceutical market's horizon. Still, given the high price of medicines and the high per capita drug expenditure levels, medicines will continue to bring in substantial income for companies operating in the country.

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