Last year saw the main domestic drug distributors' profit margins fall dramatically, while two top ten players registered their first losses.
The main players in the drug distribution sector derived cumulated turnovers worth over 1.3 billion euros last year, while overall profits exceeded 20 million euros, according to data centralised by ZF. Therefore, the average profit margin on the entire market stood at less than 2% last year, compared with over 5% in 2006.
The decline was anticipated a few years ago, and affected large European distributors, which derive turnovers worth tens of millions of euros, and register 2-3% profit margins.
In 2006, amid an appreciation of the RON, drug distributors generated profit margins as high as 10-12%, however, last year companies' net profits witnessed a downturn.
The market leader, Mediplus, registered net profit worth 7.1 million euros, down 68% on 2006, but A&D Pharma group, of which it is a part, ended last year in the red, while the other member in the group, Sensiblu, witnessed losses worth 7.8 million euros. Relad Pharma, the second largest player on the market, ended the year with losses worth 1.5 million euros, and turnover worth 219.1 million euros. Polisano also reported a significant decline in net profit, after turnover reached 162.7 million euros.
Farmexim's net profit amounted to 1.7 million euros, down 30% on 2006, while turnover climbed to 148.6 million euros. The highest profit, although down from the previous year, was generated by Farmexpert - 7.8 million euros, after turnover reached 148.6 million euros.
ADM Farm recorded a 0.4 million-euro net profit, down 80% against 2006, amid higher turnover - 95.5 million euros. Dita Import-Export, a company that entered the portfolio of the Hungarian group Gedeon Richter at the end of 2006, saw losses worth 3.4 million euros, compared with a 2.1 million-euro profit in 2006. Dita's management was taken over in 2007 by Marcela Samfireag.
The main cause for the fall in the distributors' profits was the exchange rate, more specifically the decision of the Health Ministry not to modify drug prices. The last change occurred at the beginning of last year, when, amid an appreciation of the RON, the ministry decided to reduce these prices.
However, halfway through the year, the trend on the forex market was reversed, but prices remained unchanged. The pharmaceutical market is one of the most heavily regulated markets, both in Romania and worldwide, with the price of a subsidised drug being set by the Health Ministry after negotiation with the manufacturers. However, further down the chain, which ends with the patient, you find the distributors, which benefit from mark-ups that depend on the type of drug. However, the depreciation of the RON in the last few months of 2007 was not compensated by these markups, after distributors sold to drugstores at a loss.
Drug distribution market
The overall profit margin of drug distributors stood at less than 2% in 2007, compared with over 5% in 2006
The top 10 drug distributors posted turnover worth over 1.3 billion euros last year, while profits exceeded 20 million euros
Mediplus, the market leader, reported net profit worth 7.1 million euros, down 68% on 2006
Relad Pharma, the second largest player on the market, ended the year with 1.5 million-euro losses, amid 219.1 million-euro turnover
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