Boston, MA -- (SBWIRE) -- 04/14/2014 -- While Portugal's economy is expected to register growth in FY14, we expect that IMF-imposed austerity measures and household deleveraging will continue to be a drag on consumer spending. The healthcare budget will continue to be slashed in 2014; the authorities have to make further cuts in reimbursement; and reference prices are continually pushed downwards. The few opportunities for growth are being taken by manufactures of generic drugs - which are gaining market share - and some nonprescription medicines. New regulations will affect distributors' ability to export innovative drugs, despite moves to boost exports, through initiatives such as Health Cluster Portugal and Pharma Portugal. We forecast that Portugal's healthcare market will return to growth in 2015, while pharmaceuticals will only return to growth in 2019.

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Headline Expenditure Projections

- Pharmaceuticals: EUR3.4bn (US$4.75bn) in 2012 to EUR3.48bn (US$4.62bn) in 2013; -7.0% in local currency and -2.6% in US dollar terms. Forecast broadly unchanged from Q114.
- Healthcare: EUR16.82bn (US$21.36bn) in 2012 to EUR16.23bn (US$21.58bn) in 2013; -3.5% in local currency and +1.0% in US dollar terms. Forecast broadly unchanged from Q114.

Risk/Rewards Rating: In Q114, Portugal sat at the bottom of our Pharmaceutical Risk/Reward Rating (RRR) for Western Europe, with a score of 59 out of 100. Portugal posts below regional average scores for all indicators.

Key Trends & Developments

- In order to reduce parallel exports and shortages of innovative medicines, Infarmed launched a pilot legislation in November 2013 that requires distributors or drugmakers to obtain permission before exporting certain medicines. The pilot was in place until end-December 2013.
- While Portugal's pharmaceutical market is contracting overall, the latest data from Infarmed show that sales of non-prescription drugs in mass market outlets are increasing. Sales climbed by 5.5% in value in H113 compared to H112, to EUR16.4mn.
- The 2014 budget for healthcare will be approximately 9.4% lower than in 2012. One of the areas pinpointed for as an opportunity for savings is in drug reimbursement: Infarmed aims to cut EUR30mn from the drugs bill.

BMI Economic View: After a strong third quarter growth in 2013, we have revised our growth forecasts to 0.2% in 2014, from -0.5% previously, and to 1.1% in 2015, from 0.9% previously. However, the economy will continue to struggle. As households are weighed down by deleveraging and businesses are impeded by prohibitive labour costs, bureaucratic red tape and poor access to credit, Portugal will struggle to achieve even its subdued pre-2009 growth levels for the foreseeable future.

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