United Kingdom Pharmaceuticals and Healthcare Report Q4
SummaryBMI View: We retain our broadly pessimistic outlook for the UK's pharmaceutical market over the five years to 2016, although the emphasis on cost containment will serve to boost the performance of the generic drug sector. A difficult economic situation will also prioritise economically priced items in the over-the-counter (OTC) arena, thus boosting the sale of 'private label' painkillers and similar medicines available for sale through non-pharmacy channels.
BMI View: We retain our broadly pessimistic outlook for the UK's pharmaceutical market over the five years to 2016, although the emphasis on cost containment will serve to boost the performance of the generic drug sector. A difficult economic situation will also prioritise economically priced items in the over-the-counter (OTC) arena, thus boosting the sale of 'private label' painkillers and similar medicines available for sale through non-pharmacy channels. In the meantime, the government will push ahead with its controversial National Health Service (NHS) Health and Social Care Bill, which has been criticised as signalling a start of NHS privatisation. Headline Expenditure Projections
- Pharmaceuticals: GBP23.81bn (US$38.33bn) in 2011 to GBP23.74bn (US$37.27bn) in 2012;
-0.3% in local currency terms and -2.8% in US dollar terms. Local currency forecast broadly unchanged.
- Healthcare: GBP144.79bn (US$232.99bn) in 2011 to GBP149.35bn (US$234.48bn) in 2012;
+3.2% in local currency terms and -0.6% in US dollar terms. Local forecast unchanged from Q312, despite the use of new historical data.
- Medical devices: GBP5.89bn (US$9.48nn) in 2011 to GBP5.93bn (US$9.30bn) in 2012; +0.6% in local currency terms and -1.9% in US dollar terms. Forecast down from Q312, on account of new historical data. Risk/Reward Rating: The UK is again ranked second out of the 10 Western European markets surveyed. While the country's risk profile is among the best globally, cost containment and patent expirations will hamper faster growth in pharmaceutical market values. Nevertheless, the market is well developed and regulated and the government is making efforts to boost the healthcare and life sciences sectors - meaning the UK will continue to be one of the most important targets for multinationals. Key Trends And Developments
- In August 2012, the House of Lords Science and Technology Committee in the UK launched an inquiry to investigate potential barriers to innovation in the field of regenerative medicine. The inquiry, under the chairmanship of Lord Krebs, will address the nation's expertise in regenerative medicine, applications of regenerative science to medical treatments, the regulatory and financial barriers to translation and commercialisation of the findings of this research and international comparisons. Regenerative medicine, which comprises methods and techniques to replace or regenerate human cells, tissues or organs to restore or establish their normal function, has been dubbed as a potential growth driver in the pharmaceutical industry. UK Pharmaceuticals & Healthcare Report Q4 2012
- National Institute for Health and Clinical Excellence (NICE) will assume the work of the Advisory Group for National Specialised Services (AGNSS) that reviews very high-cost drugs used in the treatment of rare and very rare diseases. NICE will assume this responsibility from the AGNSS, which is the currently undertaking this work from April 2013, as part of the reforms being established through the Health and Social Care Act 2012, which also puts in place the NHS Commissioning Board. Subsequent to the implementation of the reforms, ministers will not require formal advice on the manner in which highly specialised services should be commissioned, as this will be within the purview of the board.
- The UK customer base of private health insurer Bupa fell by 5% year-on-year (y-o-y) to 2.5mn in H112 due to rising inflation, according to CEO Stuart Fletcher, who noted that the cost of health premiums increased three times the wages of people in UK. The rise in insurance costs has forced those insured to opt for lesser coverage or to drop their coverage altogether, thereby leading to an affordability crunch in the country. BMI Economic View: Having slumped by 0.4% quarter-on-quarter (q-o-q) and 0.3% in Q411 and Q112 respectively, the UK economy contracted by a more sizeable 0.7% in Q212, compared with the first quarter. While the economy was previously treading water, it now appears to be sinking. Our full-year growth forecast is currently 0.6%, which will clearly be undershot by a significant margin. That said, much of the weakness in Q212 stems from temporary factors and we still expect to see activity pick up towards the end of the year, helped by further stimulus from the Bank of England. BMI Political View: While the UK's coalition government has not enjoyed the overwhelming mandate that New Labour secured back in 1997, it has hitherto been able to rely on support for fiscal austerity and the public backlash against the previous incumbent. However, the government has recently suffered a number of embarrassing post-budget U-turns and could be losing the debate on austerity versus growth. This has propelled the opposition Labour party back into the lead in the polls and has raised the hurdle for the governing parties ahead of the 2015 election.
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