Romanian’s pharmaceutical market measured at distribution prices level expanded by 3.6% year on year (4.3% % year on year in local currency) to EUR 691.9mn (RON 3.1bn) in Q1/2013. Nonetheless, on a quarterly basis, the pharma sales declined in RON terms, indicating that the market is struggling difficulties coming not from weak demand (which is actually on the rise), but from regulatory and legislative constraints. OTC sales actually outperformed visibly the sales on prescription, witnessing robust demand rise.

The sales of OTC drugs increased by 9.5% year on year in Q1, while the prescription-drug segment increased more modestly by 1.7% year on year – both rates expressed in euros. The sales of prescription-based drugs slowed down more visibly when expressed in quarter on quarter terms and recorded the lowest annual dynamics in the past seven quarters, as the sales on prescription were hurt by regulatory restrictiveness, mainly associated with the clawback system.

Prospects for the full-year pharma sales in 2013 remain moderate, since the rise in OTC sales is unlikely to fully offset the shrinking sales of prescription-based medicines. Market projections expect 1.4% year on year advance in local currency, while in EUR and USD terms pharmaceutical sales could even decline, depending on the evolution of the exchange rate.

The pharmaceutical companies have been increasingly cautious regarding their portfolios since the introduction of the controversial clawback tax in 2012 and started to adjust product assortment in order to avoid situations in which they become liable to pay back significant amounts. Some producers chose to remove prescription-based medicines that are no longer profitable under the current taxation system, while at the same time, paying increasing attention to their OTC portfolios. The Romanian market thus follows the same pattern in the CEE region, where the pharmaceutical market growth is concentrated on the OTC segment.

Nonetheless, we note that the good dynamics of the OTC segment has limited impact on the Romanian market- as the bulk of sales is generated by the prescription-based medicines – in Q1/2013, sales of OTC drugs accounted for 15.6% of the total, while Rx retail sales accounted for 71.1% of the total pharmaceutical sales.