Drop in the consumption of antibiotics,
Still has got their treatment. We have seen some changes in the consumption of different drugs as a result of the COVID 19 measures because we have seen a drop in the consumption of the antibiotics due to the social distancing and the increased hygienic measures that we’ve seen very much few cases of the flu and of the pneumonia and of general code and viruses in general. Because what keeps the COVID-19 or what keeps the coronavirus away also keeps all other biases away. So we have a smaller consumption of different drugs that are usually connected with viruses and also bacterial infections because some of the infections caused by bacteria are also held away by the same measure sets, keeps coronavirus away.
So we’ve seen, as I mentioned, a drop in the consumption of antibiotics, also seen a drop in the consumption of some of the OTC drugs used against the cold, headache, et cetera sore throat, et cetera. So the painkillers and sore throat treatment and the fever reduction, drugs, et cetera. We’ve seen a reduction of them coinciding with the lockdown, especially in the spring, but still staying at a somewhat lower level even under the gradual opening up of the society again.
So Denmark retail sector or the outpatient sector, so there are no major changes. I mean, how do you predict that the complete 2020 retail sector will go if you compare it with 2019 or 2018?
Well, as I mentioned earlier, I think that for the years as a whole, we would probably see an increased turnover of maybe 2% or 3% consisting of an increase of the volumes expressed as a defined daily doses of around probably 3% to 4% and a decrease in the average prices of the round 1% to 2%. That would be our estimate at the present. So it’s slight volume increase, and then even slighter price decrease implies a very slight increase in the total turnover.
And any idea how coming to yours welfare?
Well, we haven’t any solid landmarks for that to rely on. I’d say that as I mentioned earlier, the price level, the latest figures we solve for the price level, is the lowest we’ve ever seen. So that in itself implies that even if we were to see completely constant prices from now on and the next two years, then next year we would see an average price decrease of around, I think, one to one and a half percent. So, that’s a minimum, and we will probably see. If we do not see any sharp price increases as result of new shortage problems, then we’ll probably see a slightly further price decrease. So probably we will see a price decrease of around 1% to 2% next year on average, and the volumes, I think we would believe they would probably increase what they usually do by 2% or 3%.
So, that, again, for the next year, it would probably imply an increase in turnover of around 1% or between zero and 1%, consisting of a 2% to 3% volume increase and 1% to 2% price decrease.
So this price is per at actual level of pharmacy price.
It’s a pharmacy price level.
Yeah, fine.
That’s because we have a fixed price structure so that it’s a pharmacy purchasing prices. There’s a constant relation between pharmacy purchasing prices and pharmacy selling prices. You will have the same percentage changes in those because it’s a fixed price rule.
So moving on to our next topic regarding the margins and discounts, so do you expect any amendment in equalization scheme of margins? So last amendment was done in 2019. So do we expect any, I mean, mentioned that?
I don’t know what you said in 2019 in the equalization scheme. I don’t recall part of it. It was if you say, the equalization scheme.
So pharmacies have annual turnover exceeding a certain Crohn’s. They have to pay a tax of 3.6% on all turnover, above the mentioned threshold to the Danish Medicine Authority.
Yes. And that threshold is pricing index. So that’s the only change that has been seen since 2016. Then we have had the same 3.6% tax clause. And we have seen the same threshold except for a price indexing clause. So the same threshold is just every year, it’s price indexed by… I don’t recall the specific price index that it is, but it’s a price and wage indexing. The same price and wage indexing that is used for while the public budget in Denmark is used on this threshold as well. So that would probably increase… That threshold would probably increase by 1% or something like that. I don’t recall the exact amount, but in 2019, we had an indexing. 2020, we had an indexing. Next year we’ll have an indexing that’s just fixed by law that that threshold follows the price and wage indexing, the public price, and wage indexing.
So there’s been no explicit change to that. No specific change to that. It is just following the price and wage index.
Okay, fine.
And we don’t have any… At the moment, we don’t have any expectations to any changes in that this April, we concluded the negotiations with the health ministry on the regulation of the pharmacy economies so that the pharmacy cross value-added as we negotiate every two years, it should have been negotiated before the 1st of January, but we didn’t reach an agreement. So we postponed, or we prolonged the negotiations. And we reached an agreement in April for a new two year period covering 2020 and 2021.
And it was partly on changed, the only… We had a small change that implied that the fee for per pack of medicine that the individual pharmacy receives, which today amounts to five Krona and 46. Or 5.46 Krona. That is fixed, so it cannot drop below that amount. If it did not make a specific agreement about that, then it would automatically be reduced year by year due to the fact that the pharmacies as a sector, as a whole, they exceed the negotiated to cross value frame that is allowed for the pharmacies. And they do that by selling more non-pharmaceuticals. Because since 2015, where we had some sort of liberalization of the establishment of pharmacies, since then, we have seen more than 60% new pharmacies established, but they still need to stay within exactly the same economic frame. Of course, that’s not possible.
So the individual pharmacy, they try to finance their new established pharmacies by selling more non-pharmaceuticals skincare, et cetera, and nowadays even a hand disinfection and mouth coverings, et cetera. And that turnover, or rather, the value-added from selling more non-pharmaceuticals, every amount of extra value-added from non-pharmaceuticals are deducted from what the pharmacies are allowed to keep as a value-added on the pharmaceuticals.
So if we did not make this flow under the remuneration that the 5.46 cannot drop any further below 45, 46, if we had not made that agreement, then we would be at a level of 3.46 today because the pharmacies are exceeding the agreed level of value-added non-pharmaceuticals and pharmaceuticals together.
So, we still have a problem with the economic regulation. But we do not have a solution. We only have a temporary solution where we say that the normal regulation, which would be to lower the 5.46 in order to stop the excess value-added. We have stopped that, but that just implies that the pharmacies are increasing their debt to the authorities. Because every year, we have to calculate the difference between what we actually got as a sector, as the total value added for the sector, what we got in fact, and minus what we agreed that we were allowed to keep. And whenever we have an access as we have today and the last year and last year, and last year, then it amounts to a debt that we sooner or later has to pay back to the authorities.
So that was a large problem that we’re still seeking a solution for, but that we haven’t found a solution for which we had hoped that we could find a solution in the negotiations with the health ministry that was concluded this April, but we didn’t. So we postponed the problem once again. So now we have agreed that we make an analysis once again, as we also agreed two years ago, that we had to make a common analysis between the ministries and ourselves on what are the problems, what are the facts? What are the problems, what are the solutions, possible solutions? And then it’s up to the politicians to choose between possible solutions. We agreed upon that two years ago, but we didn’t succeed in making that common analysis. Now we agreed that we need to make that analysis again.
And we are in the middle of that process meeting with the ministries in order to describe the current situation, describe the problems in the current situation, and describe a number of possible ways to solve these problems. But we’re in the middle of the process. If we should succeed in fulfilling what we agreed upon in April, then we should conclude our work in this working group within this year. So that by December, we should have an internal working document that we should agree upon. That should be the basis for the negotiations for the next two year negotiations between us and the health ministry. But we still have to see if we can reach a common ground on this analysis in this working group.
So do you expect any significant change or any significant reform that can impact the retail or outpatient sector in coming two to three years?
We very much hope, but I don’t know if we can say we expect, but we very much hope that we will find a feasible solution that can stop the increase in the pharmacy sector building up debt to the ministries. And on the one hand… And on the other hand that could make a feasible fixed fee for the health work being carried out by the pharmacist, so that we could… So that every pharmacy could be certain on a fixed amount for handing out prescription medicine and for giving advice, et cetera, concerning these medicines, and that what each new individual pharmacy does as this key operator of the pharmacy’s, a key health operation that should not depend upon what other pharmacies sell of hand disinfection, mouth coverings, or skincare.
So that’s our hope, but it’s very difficult to get the ministries to accept that fact, because until now, every time that a pharmacy sells more skincare, pharmaceuticals get cheaper for the patient and for the finance ministry. So they find it’s a very fine mechanism, forcing every pharmacy to open up more pharmacies, to sell more skincare in order to get a bigger share of the fixed amount available for all pharmacists together, but implying that more and more pharmacies should be financed out of the same fixed amount, meaning that more and more focused is diverted from the key health task concerning pharmaceuticals and towards selling skincare, mouth coverings and hand disinfection. And that’s unhealthy… What do you call it? Incentives. Unhealthy incentives. So we are seeking solutions that implies healthy incentives for the individual pharmacy to pursue their key task, which is, health and not selling non-pharmaceuticals.
So that’s basically the task for this working group, which should pave the way for a common platform for understanding how to find a solution that gives more focus on a more sustainable economic regulation for pharmacists, giving more incentives and more focused on the key health task. So that’s what we’re hoping for. But we’ve been hoping for that for the last four years, the last two negotiation rounds, but we haven’t succeeded in persuading the ministries to see that it is not a feasible way to go forward, where if we follow the present regulation, then we would soon have a negative fee for handing out medicine. And that gives no meaning whatsoever.
So that’s what we are hoping, but it’s difficult to say whether we expect it. At least for the next year, we don’t expect any substantial changes of anything because next year is still covered by the deal we made at the negotiations in April covering 2020 and 2029, 2021, sorry. So this year, next year, we have an agreement that will not imply any substantial changes. We are hoping that we, at the end of next year, could make an agreement paving the way for a better regulation from 2022. But that’s still to see whether we can reach an agreement or we cannot.
Right. So we are almost close to one hour now. So I have a couple of more questions. We can quickly go through them. But I would really like to, again, some insights from you regarding the generics market. So previously, because the price of generics. So then Denmark has lowest price among the Nordics countries for generics. Do you expect any change in coming two to three years in generics market?
No. If you had asked me one year ago, I would hesitate because one year ago, we saw these increases in prices on generics in Denmark, on a number of the generics. So, we were worried about that one year ago, but now we have seen a normalization as we talked about, and we have seen price decreases, very large price decreases throughout 2020. And we are now at this level that is lower. August it was 5% lower than all this last year, and it was 1% lower than the lowest ever experienced, which was November of 18. So, for the time being, we are quite confident that we can back on track with the good low generics in Denmark. And we are hoping that we won’t see the same shortages and the same price increases as we saw at the end of 2019.
But of course, there are no guarantees because we still see shortages. As I mentioned earlier, we’re still at a somewhat higher level of shortages than three or four years ago, but we don’t see any substantial price consequences of it for the time being. We think that normalization has come to us in the generics market so that we probably can cope with some shortages without very large price increases.
So, therefore, we believe that actually, I think that if you would… I haven’t seen another the equal, I think it’s the Cambridge unit that usually once a year make a generic price comparison on seven large selected therapy areas, exposed to genetics within that used usually is the lowest or the second-lowest price in Europe. I think that if you see that for the first quarter of 2020, it’s usually made in the first quarter. If you find that for the first quarter 2020, we’re probably not at the bottom, but if you see it for the first quarter of 2021, I think we will be back to square one at the bottom with one of the lowest generic prices.
We just had a problem around the end of 2019 and the beginning of 2020.
Okay. So the report you’re talking about is that freely available?
Which? Sorry.
Cambridge report on generic market.
The price comparison?
Yeah.
Well, that’s actually, I don’t know how widespread it is, but usually, I get it from one of your colleagues who asks one of his colleagues in the Cambridge unit if he can provide me with those status because I help… I don’t know what the specific part of the equation this, but I also help with supplying some data on the Danish pharmaceutical market and the Danish pharmacy system, and it’s called ER Ingenix Jennings. I think maybe he’s based in Britain. I don’t know if he is in Ireland, London, or whereof. But usually, I had the essay when I help him by giving him information. Usually, he helps me by getting access to this yearly price comparison made by the Cambridge unit… It’s a part of your IQVIA company, just your Cambridge branch that’s making it.
Okay, I’ll get on that.
Usually tries to help make it access to that. I haven’t got access to that for 2020 yet. I’m still hoping to get it, but I think maybe the COVID-19 situation also has made an impact on your company’s branches so that I haven’t been able to get that data for 2020.
Sure. So before we wrap up Goldberg, so can you please let us down to two, three positive and negative events that can impact the Pharmaceutical Market in Denmark?
Well, it’s difficult to say. I think much would probably on a negative side. Much could depend on the COVID-19 situation. If the COVID-19 situation would imply more widespread supply chain problems saves a lot the world, and if that would make more serious shortages that would a very negative impact for the patients and for the pharmacies and for the pharmaceutical industry, I believe. But of course, we have managed to go through the first couple of waves probably without substantial impact in Denmark. So we’re still crossing our fingers for that. We can keep on doing that, but we know that, and we’ve also heard from the medicines agency that we cannot say that we are home and safe from all shortage problems due to COVID-19 because there is a timeline.
So we still might in the coming months’ risk to see some shortages due to problems that happened under the knockdown in the late spring, perhaps, or under the summer months. So, we’re still vulnerable. So that’s one of the main negative risks, I would say. And alongside with that, you could say a negative risk would be if shortages would lead again to excessive price increases by some generic countries that might press the politicians in Denmark to make a make regulations by law interfering with the very free Danish price setting on pharmaceuticals on the Danish outpatient market. So that would also be a negative risk, I would say.
I don’t know what to say on the positive side. I would say that positive impact would be seen from pharmacy view. The most positive impact would be if we reach an understanding and an agreement with the ministries paving the way or better economic regulations of the pharmacies, making better incentives at most certainties for focusing on… That pharmacists could focus on their key task, their key hold task, that would be the hope and the possible positive impact for pharmacies possibly impact in general for the pharmaceutical market on the positive side. Well, that could be no more negative impacts from COVID-19. It could be a rapid introduction of an effective COVID-19 vaccine that would eradicate the Coronavirus, and that could lead to more stability and continued decrease in average generics prices in Denmark as we still are hoping for.
Yeah. Great. Well, thanks, Paul. I think we have over shooting over time by five minutes, but I really appreciate your help. I mean, I got really good points here.
Appreciated.
So thank you, Paul. So thank you so much for taking out time. And as you know, as a thank you note, we always send the key findings of 49 market prognosis reports.
inaidible.
Yeah. So we will send that by April of 2021.
Okay. Perfect.
Yeah. Thank you so much. Bye.
Bye-bye.