Good growth prospects, but also constraints due to lower public healthcare spend
In Spain, demand for pharmaceuticals will continue to grow in 2022, in particular for vaccinations. At the same time, non-Covid related medical treatments and spending on drugs have rebounded since 2021, and will increase further this year.
In 2021, profit margins of Spanish pharmaceuticals producers increased. Those of wholesalers and distributors remained stable, but were also thin. Smaller pharmacies (usually run by self-employed business owners) recorded a slight decrease. We expect that profit margins will remain stable across all segments in 2022.
As in many other European countries, the ageing Spanish population will support growth of pharmaceuticals demand in the mid- and long-term, in particular for special products. However, in the short-term high public debt will have an adverse impact on government spending, also putting constraints on expenditures made by the national health system. Public health authorities are known as tough negotiators with the pharmaceuticals industry, trying to reach large and comprehensive agreements in order to reduce total costs.
Most pharmaceutical wholesalers are concentrated in large cooperatives, and mainly financed by their own cooperative partners (pharmacies), while producers and laboratories are more dependent on bank loans. The average payment duration of 75 days is shorter than in most other Spanish industries. The payment behaviour is generally good, due to the sector´s low dependence on the economic cycle, a high export share and good access to external financing. We expect the number of payment delays and insolvencies to remain low in 2022.
Due to that, and the financial strength of most businesses, our underwriting stance is open across all segments. However, there are potential challenges ahead that need to be monitored, in particular any supply chain constraints in the future. As revenues of pharmaceutical businesses are highly dependent on public health budgets, we closely monitor related political developments and regulatory changes in the health system.