In July 2018, Italy officially overtook Germany as Europe鈥檚 leading pharmaceutical producer. It had generated 鈧�31.2bn in pharmaceutical value, compared to 鈧�30.5bn for Germany, over the course of 2017. (Switzerland, which turned over more but is not part of the European Union, was not included in the rankings.)
This was just the latest milestone in what had already been an impressive run of growth. In recent years, domestic demand has been consistently strong, despite constraints on healthcare budgets.
The real growth story, however, has been foreign sales. Between 2010 and 2017, Italy鈥檚 pharmaceutical exports grew at a rate of 26% a year, compared to a European Union (EU) average of 1%. As of 2017, they comprised 79% of the country鈥檚 total manufacturing value.
鈥淚taly鈥檚 success is due to the increase in exports, which nowadays are estimated to be around 鈧�25bn,鈥� explains Alessio Brunello, a healthcare analyst at GlobalData. 鈥淭he significant growth of the market in the past ten years has been determined completely by exports, which grew fifteenfold between 1991 and 2017.鈥�
He adds that, in recent years, Italy鈥檚 pharmaceutical industry has benefited from excellent academic and industrial research, on top of the actual technologies and products developed.
A virtuous circle
So why is the sector growing so quickly, and what is it about the country that appeals to foreign trading partners?
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By GlobalDataThe first thing to bear in mind is how exceptional this growth really is. As of 2017, Italy鈥檚 pharma industry was the only manufacturing industry to have risen above pre-crisis levels. It had jumped 13.2% since 2007, despite a 5.5% dip in GDP. With most other industries still flatlining, pharma has been an important driver of economic regeneration.
On one hand, Italy鈥檚 pharma sector has never received huge amounts of government backing. This may explain why the country doesn鈥檛 play host to any pharma behemoths to rival the likes of , Merck and Boehringer-Ingelheim in Germany.
What it does have, however, is an impressive confluence of small and medium sized companies, both Italian and foreign-owned. This has led to something of a virtuous circle 鈥� startups have attracted investment, meaning the country has boosted its reputation as a pharmaceutical hub. This in turn has encouraged more investment.
According to Massimo Scaccabarozzi, president of the trade body Farmindustria, the growth over the past few years highlights the 鈥榪uality of the Italian system鈥�.
鈥淚t has had many positive effects 鈥� greater employment for young people, more investment, and the development of clinical studies that has improved the quality of medicines and brought important resources to the national health system,鈥� he said at the Public Pharmaceutical Assembly last July.
Brunello adds that the country plays host to a highly qualified and productive pharmaceutical workforce. As of 2017, Italy鈥檚 pharma industry employed some 65,400 people, 90% of whom were graduates.
鈥淭hat is why one in five clinical trials in the EU are conducted in Italy,鈥� he says. 鈥淥ver the next few years, investment in R&D and new partnerships between public and private companies will increase. This will be beneficial for the companies that have the best human resources, and will also be beneficial for the economic growth of the country.鈥�
Harnessing technology and automation innovation
Many of Italy鈥檚 most successful startups work within biotech, with an emphasis on personalised therapies, advanced therapies, vaccines and orphan drugs.
Italy is also the European leader in contract development and manufacturing organisations (CDMOs) 鈥� a particularly important accolade at a time when the pharma industry is undergoing immense structural change.
As Brunello explains, the sector has benefited from recent advances in information technology and automation. Because Italian pharma companies are generally small and agile, they are well placed to harness innovations of this kind.
鈥淥ver the past five years, thanks to the digital revolution and Big Data, there has been a change in the way therapies are seen,鈥� he says. 鈥淭herapies are seen not as just products, but as part of a more complex process of treatment that is linked with precision diagnostic, medical devices and support services.鈥�
According to Farmindustria, more than 7,000 medicines under development globally have benefited from research conducted in Italy.
Trade with the US
Many foreign markets are catching on to Italy鈥檚 innovative potential. This applies above all to the United States. According to Ken Roberts, a trade expert writing in Forbes, the US has come to see Italy as a powerhouse for disruptive startups.
鈥淭hree of the top five US exports to Italy this year are related to health,鈥� he wrote. 鈥淭wo of the top ten imports are. That means high value. It means innovation. That means it is a gold mine for the rest of us, too, who will benefit from incredible solutions to the world’s most-pressing health problems.鈥�
As of 2017, the US was Italy鈥檚 third biggest trading partner, just behind Germany and France. With overall exports to the US standing at $45.8bn, pharmaceutical and medicinal products constituted the largest category of exports.
鈥淭he export of pharmaceutical products to the US has increased over 20%,鈥� says Brunello. 鈥淭his is due to the highly specialised nature of Italian SMEs and their capacity to attract more US investment.鈥�
As an example, he cites the Human Technopole project, which began life in 2015.
鈥淎t the closure of the 2015 Milan Expo, Italy launched a project for building a new national cross-disciplinary research institute focused on life sciences, called Human Technopole,鈥� he says. 鈥淭his offers strong opportunities for both US and Italian companies. Its mission is to contribute to the development of personalised medicine in the treatment of cancer and neurodegenerative diseases.鈥�
Challenges ahead for Italian pharma
Moving forward, Brunello says the Italian pharma industry is likely to face a few challenges. In particular, the country鈥檚 ongoing political and economic turbulence may have implications for the life sciences.
鈥淎nother challenge is the Italian system known as payback, which enables the National Health Service to curb overspending and reduce budget overruns,鈥� he says. 鈥淚t requires all the players in the supply chain to pay back a certain amount if national ceilings on drug expenditure are not respected. This has created much litigation between the Italian government and the pharmaceutical companies that had to pay for the excessive use of therapies in public health.鈥�
All this said, he is optimistic about the industry鈥檚 continued potential for success. With international trade booming, and innovation at an all-time high, the Italian pharma sector will continue to play a strategic role in the country鈥檚 economic growth.
