Country Report: Italy, Part 2

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A TRADITION OF RESILIENCE: PART II

"Life expectancy has steadily increased in Italy for many years, and as the birthplace of the Mediterranean diet, it has long been known as a country where people live long lives... this makes Italy one of the oldest populations in the world, which brings with it a significant burden of chronic disease," says Stefano Folli, CEO of Philips in Italy. A country which has long prided the universality and quality of public healthcare, Italy faces significant healthcare sustainability concerns, and significant steps have been taken to contain costs. Such steps have not been without downsides, as Giorgio Milesi, VP for Southern Europe at J&J Medical, highlights that "in 2015, the life expectancy of Italians decreased for the first time since WWII.... In fact, this may be one of very first signals of how changes made during and following the 2008 financial crisis have impacted the health of the Italian population." Looking forward, how can Italy protect the universal healthcare system, maintaining its high quality standards and ensuring its survival for the next generation? Folli's response is simple; "to meet Italy's healthcare needs, the Italian healthcare system will have to learn to do more with less." Certainly, innovative healthcare and life science solutions can play a role in achieving this ambitious feat.

RETHINKING PROVISION MODELS

With pharmaceuticals accounting for under 15 percent of healthcare spending in Italy, and medical devices between five and six percent, there is far more opportunity for savings within the healthcare system itself than through negotiations with the life science industry. KPMG partner Alberto de Negri explains that "we have so many areas we can do better with less," for instance, by bringing all Italian hospitals owned by independent trusts into compliance with certain minimum efficiency parameters, we believe as much as EUR 2 billion worth of savings could be generated."

Health Minister Beatrice Lorenzin also identifies significant slack in the system. "There is ample scope to reverse costs by bringing patients to hospital only when necessary, or for acute moments of the disease and by rationalizing spending on defensive medicine in which physicians prescribe excessive treatment and which alone costs the country as much as EUR 13 billion per annum," she affirms.

Beatrice Lorenzin, minister of health

Significant gains in efficiency can further be achieved through reducing the spread of healthcare procedures across many small facilities, and promoting their concentration within centers of excellence. J&J Medical's Milesi explains that "at present, we have hundreds of hospitals carrying out just a handful of procedures of a given type per year," while "studies have shown that there are significant improvements in efficacy and safety of such procedures when carried out at a specialist facility where at least 60 of said procedures are carried out per year." As such, he argues that it is "statistically safer and more efficient when expertise and healthcare services are concentrated in centers of excellence. For patients there are benefits in terms of recovery time, less adverse consequences, and shorter hospital stays, which are naturally also better for healthcare budgets."

Walter Ricciardi, president, ISS

Philips' Folli believes that technology can play a significant role in improving the efficiency of the healthcare system and organizes such opportunities "around two trends: the continuing industrialization of care in healthcare facilities, and separately of the consumerization of healthcare into people's homes via mobile health and home care solutions." Within the context of healthcare facilities, Folli contends that "to make smart decisions in resource allocation, you need good information; this means good quality data that is well analyzed to extract actionable information." While, "a lot of data is already collected and available in Italy, the collection of this data is very fragmented" and "as such the inputs for data analytics techniques are not of great quality." Most importantly, information is not yet shared across devices and platforms in real time. Predictably, Folli concludes by saying that "Philips can help to collate, leverage, and analyze this data in a more rational fashion through our HealthSuite Digital Platform, and help actors to extract reliable and actionable information to drive smart healthcare management decisions."

Investing in improving data collection and management within the Italian healthcare system could have significant impacts on the medical device industry as well. According to Luigi Boggio, president of Assobiomedica and managing director for B Braun, this is because at present Italy does "not have any central way of measuring the cost and effectiveness of our technology. We are missing a national system to evaluate the benefits of our products, which is quite frankly a nightmare, because regions are free to decide whether any given medical device is beneficial for their citizens." While the Italian medicines agency AIFA exists to study the impact of innovative medicines, Italy lacks no such authority to oversee valuing medical devices and technologies, and Boggio says "the tendency is to assess innovation as an additional cost." The association has made some progress, as Boggio explains they have "had long discussions with the Minister of Health, a roundtable with medical professionals, pharmacists, institutions and the industry to find procedures with which we can measure and evaluate the benefit of new technologies, which will ultimately influence reimbursement decisions."

Stefano Folli, CEO, Philips Italy, Israel & Greece

DIGITAL DISRUPTION

Many private sector stakeholders see mobile health and telemedicine technologies as a great tool to cut costs through promoting community and homecare solutions and reducing patient visits to medical facilities. Folli highlights one study from the UK and Netherlands where "they have successfully reduced the percentage of readmissions for patients with certain chronic diseases by roughly 70 percent," by enabling "doctors to check on patients remotely with data collected in the home, relayed via mobile health technologies to their physician at the hospital who could then give feedback." Yet, according to ResMed's commercial director Nadia Cortesi, thus far "telemedicine, a key differentiator in tender processes, is not yet used widely in Italy due to the expense." She explains that while "hospitals and patients are very interested in getting access to telemedicine, and conceptually people know it will likely reduce costs holistically in the long run," unfortunately "payers are not very open to making the necessary investments today." Indeed, KPMG's de Negri concurs that "institutions are often reluctant or anyways slow to take innovation as an opportunity to change the way diseases are treated," however he also argues that life science companies can do more to "adjust their 'global' value propositions to the local situations and to become an actor in national/regional discussion about the improvement of the whole "value chain" of the treatment of diseases."

Luigi Boggio, president, Assobiomedica, & managing director, B Braun

ResMed, who produce innovative devices to treat respiratory pathologies such as sleep apnea and COPD, is doing just that. Cortesi underscores that her primary goal is to "help the public administration to understand that they need to think for the long-term, which they are not doing at the moment." First, ResMed has more than validated their value proposition by conducting "long term clinical trials and health economics studies that demonstrated that patients treated with high performance devices exhibit lower rates of re-hospitalization and less prevalence of correlated diseases," and is currently "conducting studies in conjunction with our headquarters to demonstrate conclusively and precisely the benefit our telemedicine solutions can bring to healthcare providers, hospitals and patients."

However, the firm is also striving to have an impact on how sleep apnea is handled in Italy in general. Cortesi explains that her main task is "to increase awareness, but we cannot do it as ResMed alone; it requires a cooperative effort involving all stakeholders," and ResMed is "leading this effort [to coordinate different stakeholders], and has started interacting with select companies, sharing a plan of awareness with support of the scientific societies." Second, she is arguing for stakeholders "to change and simplify the way tests are administered giving access through for example mobile solutions," because at present "patients seeking a diagnostic test, a polysomnography, they have to wait in some cases even eight months," which is certainly a contributing factor behind the fact that "70 to 80 percent of people [with sleep apnea] are not diagnosed."

Nadia Cortesi, commercial director, ResMed

Some headway is being made, as Cortesi asserts that while "the Ministry of Health has not seen sleep apnea as a priority, as companies in this segment have been able to increasingly demonstrate the cost resulting from not treating sleep-disorders effectively, they starting to consider it a much higher priority." So far it has been "somewhat easier to convince the authorities to invest in our products for chronic patients who depend on our products in their day-to-day life," according to Cortesi. However, it seems that convincing the authorities to go with innovative respiration products is a barrier that Resmed must overcome before investing significant resources in persuading institutions to subscribe to telemedicine monitoring services.

Dario Guidi, head of healthcare and medical equipment division, Samsung

For hospital IT solutions and digitalization in general, Dario Guidi, head of Samsung Italy's healthcare and medical equipment division, explains that "Samsung is working to drive digital transformations in healthcare everywhere, especially in countries facing significant health spending sustainability challenges," as such technologies can drive significant gains in operational efficiency. However, Guidi sees a barrier in Italy which "is that most stakeholders have only a general understanding, not specific knowledge of how implementation [of integrated digital solutions] would proceed, and what tangibly it would change." As such, he explains that Samsung has "a collaboration with the Humanitas Group, the most important private health group in Italy, to digitize a hospital that will serve as a model and showpiece going forward." This showpiece facility will provide a much needed tangible example of how innovative medical technologies can revolutionize the way medical facilities and the professionals within them can function.

Alexander Zehnder, president & managing director, Sanofi

There are other approaches to encouraging investment in medical technologies, namely public-private partnerships, and innovative outcome-based or risk-sharing agreements as seen with increasing frequency in the pharmaceutical sector. Marco Campione, president and CEO of GE Healthcare Italy, explains that "the healthcare system in Italy is asking for help, being squeezed by growing demand, finite resources, poor quality and the worst economy for 50 years. That is why we developed the outcome-based approach to help the national healthcare system with very particular issues, entering risk- and profit-sharing agreements." He argues that "companies like GE, that have a sound financial background can afford to enter these kinds of agreements to help the country's health system effectively," and are an effective mechanism to help improve patient access to innovative diagnostics and therapeutic devices.

Luca Pani, director, AIFA

Nor is digital disruption just about the big ideas with lots of bells and whistles. Even comparatively simplistic digital interventions can trigger a high impact. "Wastage [in conventional healthcare systems] stemming from a lack of transparency, mismanagement and technological deficiency can be starkly contrasted with the efficiency digital healthcare models," affirms Health Minister Lorenzin. "As much as EUR 2.2 billion can be saved just through the digitalization of health records, the roll out of the electronic health card and the dematerialization of prescriptions" she asserts.

Thibaud Eckenschwiller, vice president & managing director, Ipsen

REDISCOVERING JUSTICE

Addition through subtraction is a theme that can be seen throughout the sector, and indeed, across all of Europe. Cost containment measures have put downward pressure on prices for pharmaceuticals and medical devices, which has in turn "placed strong pressure on our industry to change," according to J&J Medical VP Giorgio Milesi, motivating the adoption of new models, strategies, and even research methodologies. Perhaps more significantly, as both the public and private sectors adapt and evolve to better face the realities of tomorrow, relationships between stakeholders are changing significantly.

Rodrigue Schübelin, partner and pharma lead, PwC Italy

"In Italy there is a never-ending conflict between regional and central governments. The central government is progressively trying to decrease the independency of the regions but resistance is very high," says Luigi Boggio, president of Assobiomedica and managing director for B Braun. Both national and regional institutions are constantly negotiating with the private sector, and until a few years ago dialogue between industry and government was at times nonexistent. This is to say that Italy's healthcare sector is slightly behind of the rest of Europe in terms of cooperation and collaboration between different parts of the industry. According to Rodrigue Schübelin, partner and pharma and life science lead for PwC in Italy, "Italy is behind its peers. This is reflected within PwC's organization as well; in countries like France we have established integrated healthcare and pharmaceutical practices, whereas in Italy we have separate teams, reflecting the sectors' structure."

Alberto de Negri, partner, KPMG

A key feature of the Italian healthcare sector is its highly fragmented structure, administered under 21 regional authorities. This fragmentation has significant consequences in terms of coordination, standardization, and efficiency as "in terms of funding, the central state is providing the regions with their budgets, but the regions decide to a large extent how that is allocated, and that introduces an uncertainty to the market," according to Thibaud Eckenschwiller, VP and MD for Ipsen Italy. He continues saying that "as a consequence, it is inevitable, and to a certain extent this is already visible today, that you have differing levels of care available to you depending on where in the country you live. Clearly this is contrary to what a national healthcare system should be about."

Ermanno Buratti, former general manager, Astellas

Mario Marazitti, member of the chamber of deputies and president of the XII Social Affairs Commission, affirms Eckenschwiller's comments, saying that "the fragmentation inherent to such a regionalized set-up tends to adversely impact the equality of treatment received." He cites data which "demonstrates that there is a 10 percent chance of receiving inappropriate treatment in the Aosta Valley and 20 percent chance in Lombardy and South Tyrol, but then the probability rises as high as 30 percent for regions like Lazio, Molise, Abruzzo, Sardinia, and Calabria." As such, he believes that "rationalizing public health partly entails making the system more just. It is important that we rediscover the values of 'universality' and 'justice' and enshrine them in any reforms that we enact."

Wheels are in motion that are likely to drive some degree of convergence between regions over the coming years. Compared to a few years ago, KPMG partner Alberto de Negri claims that "today, the central government has more control over financing and is setting a common methodology for the regions, which can be applied even at a sub-regional level, which ensures hospitals (as a starting point) can have a balance between cost and revenues and a good level of clinical outcomes." Moreover, potential constitutional reforms which will be going to referendum in October 2016 may significantly impact the balance of power between the central government and regions, and consequently, the likelihood of a recentralization of healthcare administration.

Giorgio Milesi, area VP, developed markets south, J&J medical devices, EMEA

TO ENGAGE, OR NOT TO ENGAGE?

Regional fragmentation is perhaps the most significant factor that defines how the industry engages with public sector stakeholders in Italy. As president of Farmindustria Massimo Scaccabarozzi explains "the problem is not the lack of a national system," as Italy has robust and capable national healthcare institutions, but rather that it is that even "after receiving approval from the national government, we cannot start selling" in the regions; a clear example of a lack of coordination. In the long run, "the only way to improve this is to centralize the regulation of pharmaceuticals."

However, other factors influence companies' go-to-market and stakeholder engagement models, including significant downward pressure on prices, increasing demands for real world data and robust pharmacoeconomic studies, and of course global trends around patient-centricity, digitalization, and global health. Significant changes have already been made to adapt to market conditions, and Alexander Zehnder, president and MD of Sanofi, explains that "the future is going to be about deploying much smaller, specialized, and medically prepared sales forces, while enlarging the internal expertise in market access and governmental affairs. Within Sanofi we are already well underway reconfiguring our teams to reflect emerging realities. In the past couple of years, we have more than doubled our market access and government affairs departments by bringing in capabilities." In a similar vein, J&J Medical has reconfigured their organization and "created a new regionalized market access structure, such that we have a market access director for each region, or group of smaller regions, who coordinate all of our activities with institutional stakeholders in the political and healthcare administration sphere," according to J&J Medical's VP for southern Europe Giorgio Milesi. These activities range from public and professional educational programs, to initiatives to eliminate the need for hospitals to maintain significant inventories, and a variety of campaigns to help reduce holistic treatment costs of targeted pathologies, alongside pricing and reimbursement discussions.

Fabrizio Chines, executive chairman, Sifi

On another front, under pressure to accommodate price reductions Milesi has "implemented a new go to market model here in Italy," which has helped J&J Medical "improving efficiency and facilitating a cut in prices." This new model brings the concept of patient-centricity into surgical equipment portfolios, as Milesi explains that "previously, all medical device companies organized their marketing and sales forces around product based business units. As such, multiple product specialists would visit a given surgeon, each promoting a different product line that they might use in their procedures... To reduce the duplication of efforts and transfer the focus of our strategy from our products to the needs of the surgeon, and by extension patient, we reorganized our teams around specialty areas." Aside from improving efficiency by reducing the number of visits made to a given surgeon, representatives specialized in a given therapeutic area rather than around a product line are able to develop specific knowledge regarding common procedures in that specialty, and thus better "engage with surgeons on certain insights of how a particular product could impact a given procedure." This model, first developed in Italy, "has been exported to and adopted in many other J&J affiliates – and is starting to become the industry norm," according to Milesi.

Marco Ruini, VP CFO & LATAM, Bomi Group

Still, the blunt reality is that, as Astellas's former general manager Ermano Buratti puts it, "our system in Italy does not, in many respects, afford us the same possibilities other European affiliates have. He provides the example that "two of our most important products concerning functional urology, which are reimbursed in Europe's other main countries, are not reimbursed in Italy," saying that "this immediately puts us on a different scale in terms of possibilities for growth." However, Buratti does highlight certain positive aspects to the situation, based on the fact that the Italian affiliate has "had to develop very different methods of managing the pricing and reimbursement processes for the approval of new drugs." He explains that "I had never previously heard of a pay-by-use system for the reimbursement of a drug," yet it seems "that in the future, these processes which the country has developed will be adopted on a more global scale; so despite the fact that we, as an affiliate, are suffering right now due to not being able to obtain the best price for our products, our experience with the system in Italy can make our group aware, at a global level, of possible future approaches to pricing and reimbursement."

For their part, the national government is aware that there is much they can do improve relations with the life sciences industry, one of the best performing sectors throughout the recession, and already significant efforts have been made in this regard. Walter Ricciardi, president of the Italian National Institute of Health (ISS), admits that Italy has "had difficulties in the past in creating the right eco-system for attracting investment, and one of the issues standing in the way of that is our bureaucracy." Ricciardi says that "we are aware that our bureaucracy is one of the worst," and that while such bureaucracy has helped to control Italy's spending, he contents that "we want to create an environment in which investors can come and be certain that their investments will be evaluated in a timely and sensible manner."

Massimo Scaccabarozzi, president, Farmindustria

This bureaucracy is particularly problematic for innovators considering running clinical trials in Italy. Stefano Marini, president of the European CRO federation (EUCROF) and international representative for Association of Italian CROs (AICRO), explains that "we currently have around 100 ethics committees but, considering that we used to have around 300 ethics committees two years ago, there has been some advancement on this regard." According to Marini, the repetition and cumulative fees across these 100 ethics committees mean that "Italy has one of the highest activation costs in the European region" for starting a new clinical trial, and Ipsen's Eckenschwiller explains that "when we have centers in Italy which we want to enroll in a clinical trial, we are competing with other countries," and compared to Germany for instance where Ipsen gets "approval or refusal for a trial in three months ... in Italy it can take up to a year." Thus, while progress has been made, greater bureaucratic streamlining will be needed if Italy is to remain an attractive R&D investment destination; Farmindustria's Scaccabarozzi believes that "the government can play a large role in allowing R&D to thrive over the next couple of years by streamlining the bureaucracy." With respect to clinical trials, such progress is likely as Marini explains that new "EU Clinical Trial Regulation will come into effect by October 2018, thus helping to homogenize clinical trial regulations across all EU," which should help to improve Italy's relative competitiveness.

More generally, the overall relationship between industry and government has improved dramatically over the last few years. Fabrizio Chines, executive chairman of Italian ophthalmology specialist SIFI explains that "there has been a significant shift in the government's legislative stance towards the pharmaceutical industry recently. Under previous governments our sector was seen largely as a target for cost-containment during spending reviews, whereas now we are seeing some efforts to support innovation." This shift can be seen in a number of recent policies, and Chines highlights that "the national government has introduced a specific fund for highly innovative drugs, has promised to reduce applicable corporate tax rates, and has passed legislation to introduce a 'patent box' to reduce the tax rate applied to income sourced from intellectual property."

Gaetano Colabucci, general manager Southern Europe, Beiersdorf

SHOW ME THE MONEY!

"It is important to recognize that the backbone of the Italian pharma industry is composed of private, family owned companies," says PwC partner Rodrigue Schübelin. "This is actually a significant competitive advantage in many regards, as these companies do not have to answer to shareholders every quarter and can act much more flexibly and decisively than their public counterparts." However, he highlights that "the risk is that without that pressure, some companies may not challenge themselves to grow enough, or have a clear idea of where they should invest."

Hubert Puech d'Alissac, managing director, Teva

SIFI's executive chairman Fabrizio Chines argues that "first of all, when family companies are growing in size, bringing in outside management capabilities is a must." Italy is already in a good position in this regard, as "it has become increasingly common for family owned companies to be run by non-family CEOs," according to Chines. Instead, he argues that "the more relevant issue at present is not that of management, but of investment capacity; some family companies like Menarini and Angelini may have the critical mass necessary to compete effectively, but for others it is critical to consider equity financing to support innovative product development or M&A strategies." SIFI is one such company that has "taken this step by securing equity funding from a leading Italian PE firm, 21 Investimenti," and Chines argues that there are other "Italian companies [that] should look at opportunities to raise capital from PE or VC firms."

CDMO Doppel is another example of a private company, if not one that has been passed down down the generations within a family, that has opened equity holding up to a private equity firm. CEO Giuseppe Cassisi, explains that "Doppel has played a critical role in developing the [CDMO] industry's culture, as for many years it was the leading Italian-owned CDMO in the country. In fact, our President Mr. Paolo Lanfranchi," one of the company's three founders and CEO for many years, "actually founded the CDMO group within Farmindustria and served as president for the first two terms." Lanfranchi remains a shareholder in Doppel, now holding 10 percent of the firm's equity, while PE firm Trilantic Capital Partners now has a 90 percent interest and, with access to further capital, has ambitious plans for expansion.

Gianluigi Frozzi, CEO, Angelini

Third party healthcare logistic provider Bomi Group, which already has a strong international footprint, has taken a different route to raising equity capital by going public via an IPO in June 2015. CFO and VP Latin America Marco Ruini explains that "the plan behind the IPO was to establish a more substantial global footprint over two or three years" via M&A activity, and "for the most part we plan to target our investments to strengthen our position in markets we are already in." Beyond the capital made available through the IPO, Ruini explains that "going public has also added a lot of value to our company, as we now have a larger and more diverse board of directors who bring a lot of experience from different industries. The visibility we gained through the IPO is also a significant asset." Identifying potential targets is "one area where the IPO has brought us a lot of valuable experience," according to Ruini, who says "finding a potential partner or target for acquisition is difficult... the experienced voices that now sit on our board have helped BOMI management to keep our heads cool, and to know that it's important to take our time before rushing into a commitment."

Johnson & Johnson, Pomezia Facility

As Ruini says, finding the right acquisition target, or investment opportunity in general, can be very difficult given current market conditions. PwC's Schübelin observes that there is "a lot of liquidity in the market, including amongst the family businesses, some of who are quite large and have as much as a billion EUR on the balance sheet. This concentration of liquidity in the industry, which we see at the global level as well, has driven up prices of potential targets and now there are a lot of companies looking for M&A opportunities not being able find attractive targets." Indeed it does seem that nearly everyone is 'looking for M&A opportunities' alongside Bomi, including PE funds, big pharma, and even mid-cap players like Ipsen; Ipsen's Eckenschwiller explains that his company is "considering acquisitions in the primary care segment in the country," saying that "making investments here is not always straight-forward, so the fact that we are pushing ahead in such a strong way clearly shows the potential we see for the country in this regard." As such, it's no surprise that as an advisor to the industry, Schübelin is increasingly "seeing companies looking for help how to handle their liquidity, avoiding how to have too much cash on hand, not being able to invest effectively due to the low interest rate environment and assistance in identifying potential targets for acquisition." This, he points out, "has been more of an issue in recent years, and firms have increasingly struggled to find the right investment opportunities."

However, just because there are a few examples of family companies opening up to outside shareholders, the family business model is not on the way out. Italian flagships like Menarini, Chiesi and Zambon are still led by family members alongside professional management. One such firm is Angelini, currently led by CEO Gianluigi Frozzi who explains that "the family is very much involved in the strategic direction of the business and always looks out for the overall well-being of the company," and says "the heritage of the Angelini family is always present." In fact, on the topic of the firm's internationalization, he declares "we aim to have a strong international presence, but we still want to be perceived as a family business that meets the health-related needs of families around the globe."

THE CONSUMER CARE TARANTELLA

"Angelini is not only a pharmaceutical company. Pharmaceutical is one of our activities, which comprises 50 percent of our operations, but we have capabilities in other sectors as well," states CEO Frozzi. Indeed, Angelini is far from the only pharmaceutical company seeking growth in areas beyond traditional retail RX pharma and has built a broad portfolio ranging from "prescription medications to hospital products to mass market... with products such as deodorants and feminine hygiene products... [as well as] food supplements, which we market both directly to consumers." However, Frozzi makes it clear that with "two joint ventures with Procter & Gamble to market personal care products, mainly diapers," and "activities in perfumery and wine," Angelini is significantly more diversified than the average pharmaceutical player.

Although representing only a small part of Angelini's EUR 1.5 (USD 1.7) billion global business, mass-market healthcare products spanning categories such as consumer care, cosmeceuticals, nutraceuticals, food supplements, and of course traditional OTC pharmaceuticals represent a significant growth opportunity for pharma companies in Italy. Sanofi's Zehnder notes that while "Italy is Sanofi's third most strategic market after France and Germany, with an income of around EUR 1.6 (USD 2.1) billion in 2014," this affiliate in fact has "the second biggest consumer health business after France." Enrico Allievi, director of consumer healthcare association Assosalute, explains that "in Italy, the non-prescription medicines market represents 14 percent of the overall pharmaceutical sales, amounting to EUR 2.5 (USD 3.25) billion, and roughly 16 percent of the national pharmaceutical market in terms of units." Moreover, "As a result of the [2015] influenza season, the market registered an increase both in sales and above all, in volumes," which marked the first year of growth for the OTC market in Italy since 2007.

"I am quite optimistic," says Allievi, because "Italian health culture and attitudes are changing for the better. Italian people are continually becoming better informed on health." One factor behind such optimism is that "the Italian market is under the European average, around 15 percent by volume and a bit less by value, so there is room for improvement as we try to narrow the gap with other European countries." However, narrowing that gap will require further driving a cultural change in the attitude towards self-treatment, which may require multiple strategies; "in Italy there are strong cultural, and economic differences between the North and the South and this is reflected in our sales of OTC medication," according to Allievi. He says "in the North we are seeing a rise in self-medication versus prescription drugs and in the South the opposite is true," and as such "last year we conducted a study to understand the reasons for differences in consumption between the North and the South of Italy. We are waiting for its international publication and we are going to use it to reinforce the relationship with the health institutions on a regional level."

On the topic of institutional relationships, OTC manufacturers are well situated to attract institutional support, as promoting self-care alongside solutions like community and homecare may offer a degree of budgetary relief for Italy's cash-strapped healthcare institutions. According to Allievi, "a study we conducted in 2010 demonstrates that if self-medication market in Italy were in line with the other EU Countries it would lead to savings of almost eight hundred million euros per year which could be used for reducing public expenditure and for funding more serious pathologies," and at present Assosalute is "conducting a new study to evaluate the overall potential savings considering not only the cost of drugs but also other indirect costs incurred, such as GPs time and labor productivity losses due to minor ailments."

Gaetano Colabucci, past-president of Assosalute and GM for Beiersdorf Southern Europe, believes "there are two main areas that are critical to fostering this evolution in mentality: product accessibility and web support." Beiersdorf has immense traction in the mass-market channel with their Nivea brand, and Colabucci explains that it has been a challenge to gain market share in the pharmacy channel because "in terms of product accessibility, pharmacists tend to be over concerned with the exclusivity of their product portfolio." Contrary to this stance, he argues that "encouraging product accessibility will not necessarily translate into loss of business for the pharmacists; on the contrary, it could encourage a broader awareness and consumer education." As such, Colabucci entreats Italian pharmacists to "adopt a new mentality and embrace the benefits that could come from offering patients and consumers access to a wider selection of better known and better supported brands."

"However, one of the most important trends is how the web is transforming the healthcare system, both in terms of available information and product access," says Colabucci. He argues "the Internet will play a crucial role in the next ten years and it will completely reinvent the market," noting that "we see that more and more information on health related products is disseminated through the Internet, especially on issues related to treatment with OTC products." Recognizing this reality, this is an area that requires attention from regulators because "patient education of OTC products is very complex at the moment due to the excess of the Government controls on this subject," Colabucci argues that "the whole consumer education system would benefit a lot from an acceleration and simplification of the approval process for OTC drugs, and other regulated consumer health products."

Looking at the market, Colabucci identifies a few key areas of growth within the personal care market. "The anti-aging product line is the most important segment within our portfolio. Indeed, it is part of Italian culture; we want to look great and accordingly, our personal budgets for skin care are higher than in other markets." "In addition," he says, "men's care products have experienced an interesting growth trajectory over the last few years, and I believe that is only the beginning... men of the generation of the 21st century will be much more inclined to use personal care products compared to previous generations, and we certainly see a change in consumption patterns." Finally, "natural remedies are another segment that is gaining importance in this scenario; it is a big market trend within both the pharmacy channel and mass-market."

KEEPING THE ITALIAN BRAND ALIVE

"The 'Made in Italy' brand has been identified as one of the most creative, responsive and productive names in the market, which is embedded in its Italian roots," extols Teva's d'Alissac. Angelini CEO Frozzi concurs, saying "quality is definitely inherent in the 'Made in Italy' brand and it is a perception that transcends beyond Italy and Europe. Our partners recognize the power of the Italian production." This reputation has certainly been earned, and reflects Italy's unique strengths and heritage. Bomi's Ruini describes these unique attributes saying "Italy is very well known in areas such as fashion and food, and both of these benefit from Italy's strength in design more generally; this includes the automotive industry as well. Designing solutions is really a part of Italian culture." Certainly strength in design may be a contributing factor to Italian's famed creativity, and be an asset when developing processes to ensure unyielding quality in manufacturing.

As Italian companies in the healthcare and life science sector continue to strive for success, this 'Made in Italy' brand is certainly an asset to be leveraged. Ruini admits that "our Italian heritage has generally been a strength, and Italy's reputation for quality is a distinctive advantage." However, "Italian politics and media coverage have been a detracting factor over the last few years, as political scandals happening at home don't help you to do business abroad." Similarly, Gnosis's Berna says "we rely on a long tradition in Europe, and also in Italy, of merging tradition with innovation. When you introduce yourself as a European, and more specifically as an Italian manufacturer, you usually find people are interested." He also observes that a "recent trend we have seen is companies coming back from Asia to manufacture in Europe and the US, especially for certain complex products where special capabilities are required," and certainly a strong reputation for quality and innovation has helped Italian manufacturers capture a significant portion of this demand.

However, maintaining the industry's positioning and reputation for quality and innovative manufacturing will certainly take some work in the coming years. Sanofi's Zehnder explains that "the 'Made in Italy' brand may look in good shape right now, but this is based on years of solid investment." Sanofi has certainly been one of these solid investors in the past, and as such has "quite a large footprint in Italy with an in-country workforce of more than 2700 personnel, of which 1300 are engaged on the commercial side and 1400 on the industrial side" according to Zehnder, who adds "we contribute some EUR 850 million every year to Italy's GDP and pay EUR 350 million in taxes," making Sanofi one of Italy's largest pharmaceutical manufacturers. That said, Zehnder makes it clear that "there is a historical legacy that needs to be factored in when analyzing the makeup of Sanofi's Italian manufacturing base," and thus the company's significant presence does not necessarily correspond to the country's current investment competiveness; "Sanofi was built on the back of multiple mergers and acquisitions over the years and that is how we came to have six distinct factories spread across the country. Probably, if we had been starting out afresh we would have structured it differently."

Going forward, Italy will need to attract significant investment to the pharmaceutical, or rather biopharmaceutical, sector to remain a premier manufacturing destination, and to continue associating the 'Made in Italy' brand with high quality innovative products. Zehnder explains that this is primarily because the global pharma "market is decisively shifting over to biologics and that is an area where Italy seems to be left behind, due also to challenges and limits posed by R&D capacity and investments in the country." Already, Sanofi is "in the process of selling the facility in Garessio which is one of the older chemical plants and no longer aligns neatly with recent shifts in our product portfolio," according to Zehnder. The situation is still far from dire, as Zehnder concludes; "the existing portfolio of companies should ensure Italian manufacturing remains resilient over the next decade, but after that the industry risks losing its shine. Blockbusters' patents are expiring. The shift to biologics needs to be made now."

Certainly, things are moving in this direction. Eli Lilly has invested USD 400 million over the last few years to produce biologics in Italy, and many leading Italian companies like Chiesi, Dompé, Recordati, and others have shifted their research focus to biotech. Furthermore, Italy "is well known for its talented chemists and a well reputed chemical industry which has been extremely innovative in their ways of production," according to Teva's Puech d'Alissac, and this innovative spirit will continue to be an asset, even if it is the biochemists and molecular biologists who now must come to the fore. More importantly, with "such a good heritage of sophisticated production," in Italy, and the reliability Italian manufacturers and personnel have demonstrated in the past, it is easy to trust Italy as a stable manufacturing base, and with five production plants in the country, Teva's "activities show profound trust in the country," alongside Sanofi, Eli Lilly, Boehringer Ingelheim, and countless others.

Looking forward, Puech d'Alissac says that "in the next few years, I truly hope that the 'Made in Italy' brand will carry far more gravity than it does today. I do believe we are gaining that momentum in taking pride in the Italian brand." Moreover, as companies pursue their various and ambitious goals, from global expansions fueled by M&A to developing cutting edge biotechnologies in gene and stem cell therapies, it is important that all stakeholders in the Italian healthcare and life science sector come together for the benefit of patients around the world. As a final note, Puech d'Alissac proclaims "we want our patients, the institutions, the government – everyone – to truly resonate in the fact that 'Made in Italy' speaks for value, creativity and innovation and that Italy holds all such resources."