Drugmakers Highlight European Pressures in Latest Financial Results

 By Matthew DennisFriday, July 27, 2012For the latest pharmaceutical news andPharmaceutical companies have reported declining sales in Europe in their most recent financial results as government austerity measures reduce drug prices and threaten the timely payment of bills. "Europe is very much the biggest problem that these companies face," noted Gustav Ando of IHS Global Insight, adding that "some of these countries might be looking at new price cuts on individual, high-cost or high-volume products."AstraZeneca's sales in Western Europe dropped 26 percent in the second quarter, while Sanofi's revenue from the region slipped 11 percent. GlaxoSmithKline also posted an 8-percent fall in second quarter European sales and Roche reported a 7-percent drop in first-half drug sales in the sector. "I don't think they're out of the woods at all," Ando remarked.Sanofi CEO Chris Viehbacher echoed these sentiments, noting that Western Europe "is clearly the most difficult region today in the world." He said that "Europe is the region of the world where government reimbursement is the highest and unfortunately the pharmaceutical industry is sometimes seen as an easier target, especially compared to more structural reforms which are going to be needed."According to Roche CEO Severin Schwan, the company is experiencing price pressure of about 2 percent on sales in Europe, which he suggested is probably about twice as high for the industry as a whole. "This really confirms what we have been saying for quite some time," Schwan said, adding that "when the environment gets tougher, it is not the expensive and innovative drugs that suffer first; it is the less differentiated drugs that suffer first." Schwan indicated that Roche expects "very moderate growth" in the near future in Europe.GlaxoSmithKline's medicine prices fell by about 7 percent in the second quarter, CEO Andrew Witty said, adding that if no further price cuts are implemented and trends such as parallel trading don't increase, the pricing impact may improve to 6-percent and 5-percent declines in the next two quarters. "We're trying very hard as an industry to get the European authorities to take particularly the reference pricing issue seriously, but so far nothing has really changed," Witty noted. "We think to some degree that may be the worst it gets, but that all depends on government policy," he added.Schwan noted that the company's "biggest concern has always been our outstanding bills." He remarked that the drugmaker has been able to cut unpaid bills by 24 percent in Europe in the first half, assisted by a Spanish government plan to repay money owed by regional governments to suppliers. At the beginning of the year, public and private customers owed Roche about 2 billion euros ($2.5 billion) in Europe, but that figure has now been reduced to 1.5 billion euros ($1.8 billion), Schwan said.Meanwhile, Novartis CEO Joe Jimenez said he was "still relatively optimistic, despite the fact that there is increasing austerity" in Europe. According to the company's head of pharmaceuticals, David Epstein, the drugmaker has experienced European price cuts of between 5 percent and 6 percent. "I think it's going to take a while for the economies of Europe, in particular some of the more troubled economies, to begin to grow again," Jimenez remarked, suggesting that drugmakers need to adapt and become more aggressive about pursuing business to keep sales growing.