Despite facing serious challenges in some markets – as governments rein in spending by their national healthcare systems as part of their fiscal strategy – pharmaceuticals companies are profiting from growing demand from emerging markets. This is particularly clear in the so-called ‘BRIC' countries of Brazil, Russia, India and China. In contrast to Western Europe and the USA, these burgeoning economic powers are increasing their public spending on healthcare.

In a number of countries – including Germany, Sweden and Mexico – where market deregulation or competition from ‘over the counter' (OTC) and generic products are challenging the ‘big name' brands. The leading players in these countries, mainly well capitalised members of major international groups, are coping well. Smaller wholesalers who, characteristically, have low equity investment and poorer cash flow, are more vulnerable to the impact of reduced margins. They are being closely monitored by Atradius underwriters.

Despite that, Atradius' experience is that companies operating in this sector generally have a lower default and insolvency rate than those in other industries. However, in France, while pharmaceutical producers are maintaining their margins and equity, the future looks far less optimistic for pharmacies and wholesalers, which have so far been cushioned by the state, but who will in the future face more competition from abroad.

Andreas Tesch is the Director of Atradius Global, Oceania and New Markets for  Atradius Credit Insurance.
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