2016 Integrated Report

Market environment

The changing conditions on the Polish and Lithuanian healthcare markets may indirectly or directly affect the financial and non-financial performance of the Pelion family companies.

The Polish market of wholesale to pharmacies gained 5.4% in 2016, while the retail market increased by 6.2%. The pharmaceutical market in Poland is forecast to grow at a similar rate in 2017, i.e. by another 4−6%. The Lithuanian market's growth rate was 7.4% in 2016.

Growth prospects for the pharmaceutical market in Poland are based on solid foundations. For several years now, the awareness of health-related issues and disease prevention methods, as well as of the importance of physical activity and sport, has been growing. The trend towards healthy living fuels growth of the OTC segment which usually offers higher margins than the prescription drug segment. At the same time, demographic changes in Poland, namely ageing of Poland’s population, has been directly translating into growing demand for pharmaceuticals.

In addition to market growth, which offers opportunities for sales increase, also the governmental policy for the pharmaceutical market affects the performance of the Group companies. Changes in the list of reimbursable drugs, changes in regulated prices and margins, as well other regulatory changes, including those relating to restrictions on the grant of licences to run pharmacies and the range of products available at pharmacies, may directly affect Pelion's economic performance and patients' situation. Changes in the list of reimbursable drugs or the list of drugs fully reimbursable for persons aged above 75 translate into changes in the affordability of certain drugs. Changes relating to restrictions on the grant of licences to run pharmacies may affect the retail pharmaceutical market, access to pharmacies, as well as prices in a way adverse to the Patient. An additional problem faced by pharmaceutical market players are regulations giving rise to interpretation uncertainties and ex-post assessment of the impact of introduced changes.

The key factor from the perspective of Pelion's economic performance is the financial position of Pelion’s wholesale customers − pharmacies and hospitals − and thus also the government's policy with respect to, among other issues, restructuring of hospitals and their debts.

Source: In-house analysis on the basis of Barometer PEX PharmaSequence

It should be noted that in 2011 reimbursable prescription drugs represented a major share of the market (45%), with non-reimbursable prescription drugs and the OTC segment accounting for 19% and 36%, respectively. The entry into force of the Reimbursement Act in 2012 marked a permanent change in the market structure – which is unfavourable for patients, as the average patient co-payment rate has increased.

Average drug cost sharing between reimbursement and patient co-payment

Source: In-house analysis on the basis of Barometer PEX PharmaSequence

The size of Poland's pharmaceutical market may the determined at three different levels:

One segment of the market is sales to hospital pharmacies, which buy drugs from wholesalers and directly from manufacturers.

Growth of Polish and Lithuanian pharmaceutical markets

Wholesale to pharmacies in Poland

+ 5.4%
Source: QuintilesIMS (2015 and 2016 yearbooks)

Pharmacy market in Poland

+ 6.2%
Source: PEX PharmaSequence Barometer

Wholesale to hospitals in Poland

+ 1.0%
Source: QuintilesIMS (2015 and 2016 yearbooks)

Wholesale market in Lithuania

+ 7.4%
Source: QuintilesIMS (monthly publications)