Boston, MA -- (SBWIRE) -- 03/06/2013 -- BMI View: The move towards increased out-of-pocket drug expenditure (via the de-reimbursement of medicines and increased medicine co-payments) will put more pressure on the finances of the Spanish population. Double-digit unemployment, deflating asset prices (particularly real estate) and rising inflation (which is eating into real wages) have already significantly weakened final demand and in addition to the drug price erosion mechanisms employed by the government, will significantly restrict drug companies' revenue-earning opportunities.

Headline Expenditure Projections

- Pharmaceuticals: EUR20.15bn (US$28.01bn) in 2011 to EUR18.34bn (US$23.30bn) in 2012; -9.0% in local currency terms and -16.8% in US dollar terms.
- Healthcare: EUR104.99bn (US$145.93bn) in 2011 to EUR105.43bn (US$133.91bn) in 2012; +0.4% in local currency terms and -8.2% in US dollar terms.
- Medical Devices: EUR4.32bn (US$6.01bn) in 2011 to EUR4.35bn (US$5.52bn) in 2011; +0.7% in local currency terms and -8.0% in US dollar terms.

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Risk/Reward Ratings: In BMI's Pharmaceutical Risk/Reward Ratings (RRRs) for Q113, Spain is ranked eighth out of the 10 countries surveyed in Western Europe. While Spain offers investors positive factors, such as its large drug market, it also has problems, such as the government's focus on cost containment, low population growth, cumbersome bureaucracy and provincial differences regarding drug regulations and reimbursement.

Key Trends And Developments

- In the first nine months of 2012 (9M12), government spending on prescription medicines reached EUR7.6bn (US$9.8bn), a 10.6% drop from the EUR8.5bn (US$11.0bn) spent in 9M11 and an 18.4% drop from the EUR9.3bn (US$12.0bn) spent in 9M10.
- Between January and September 2012 outstanding public hospital debts to drug companies stood at EUR2.57bn (US$3.26bn). The average delay for payments was more than 242 days, well above the 40- day invoice period.

BMI Economic View: The Spanish economy is in the midst of a major economic depression, with a return to the 2008 peak unlikely before 2019. Although it is increasingly likely that the government will seek a financial bailout, we stress that this will provide short-term relief rather than a long-term cure. Overcoming double-digit unemployment and a 'brain drain', restructuring the banking sector and restoring international competitiveness will be a long and arduous task with significant risks to economic growth and financial stability in the meantime.

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