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PHARMARANK

Pharmaceutical company ranking 

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PharmaRank is a pilot project created by DELab UW in cooperation with PZPPF, which enables economic rankings for companies in the pharmaceutical sector. 

The PharmaRank tool allows comparing Polish pharmaceutical manufacturers according to their importance to the national economy through the use of a ranking algorithm. 

FUNCTIONS OF PHARMARANK 

Phar­ma­Rank ope­ra­tes as an inte­rac­ti­ve appli­ca­tion that allows:

  • run­ning real-time simu­la­tions for vario­us indicators
  • adju­sting weight valu­es for par­ti­cu­lar indicators
  • making fle­xi­ble com­pa­ri­sons betwe­en indi­vi­du­al companies

Phar­ma­Rank has featu­res that allow to:

  • gene­ra­ting tables based on selec­ted cri­te­ria and user-defi­ned sor­ting – e.g. com­pa­ri­son of top com­pa­nies accor­ding to the­ir impor­tan­ce to the Polish labor mar­ket, or gene­ra­ting tables sho­wing com­pa­nies most simi­lar in terms of net export
  • clas­si­fi­ca­tion of phar­ma­ceu­ti­cal com­pa­nies accor­ding to adop­ted indi­ca­tors – the result is divi­sion of com­pa­nies into five seg­ments (A‑E) accor­ding to the pro­po­sal put for­ward by the govern­ment administration
  • cre­ation of inte­rac­ti­ve charts of chan­ges over time of par­ti­cu­lar indicators
  • ini­tial visu­ali­za­tion of the algo­ri­thm divi­ding com­pa­nies into segments
Wykres objaśniający

CATEGORIES IN PHARMARANK 

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The cate­go­ries were selec­ted based on DELab UW macro­eco­no­mic ana­ly­ses of the impact of the phar­ma­ceu­ti­cal sec­tor on the eco­no­my. In addi­tion, the results of the stu­dy were juxta­po­sed with a micro­eco­no­mic ana­ly­sis of com­pa­nies belon­ging to the sec­tor. The selec­tion of cate­go­ries was based on the stu­dy of the impact of the phar­ma­ceu­ti­cal sec­tor on the economy.

The selec­tion of impact cate­go­ries is sub­ject to chan­ge and depends on the ava­ila­bi­li­ty of the firm-level data itself. The appli­ca­tion allows to enter a bro­ader or dif­fe­rent set of cate­go­ries. This chan­ges both the ran­king results and the assi­gn­ment of com­pa­nies to cate­go­ries (A thro­ugh E). By default, the tool con­si­ders five impact cate­go­ries (sales, inve­st­ment, taxes, wages, net exports).

To meet the cri­te­rion of basic com­pa­ra­bi­li­ty, the data are deri­ved pri­ma­ri­ly from cor­po­ra­te balan­ce she­ets. The­ir sour­ce is the com­bi­ned data­ba­ses of busi­ness intel­li­gen­ce firms Bizno­de and Info­Cre­dit. In the case of mis­sing data, PZPPF mem­ber firms had the oppor­tu­ni­ty to com­ple­te the data­ba­se to impro­ve com­pa­ra­bi­li­ty across cate­go­ries. The data upda­te pro­cess can con­ti­nue as needed.

  • Cate­go­ry selec­tion addi­tio­nal­ly meets the fol­lo­wing conditions:

    • sim­ple defi­ni­tion – the cate­go­ry sho­uld be sim­ple and quan­ti­fia­ble by com­pa­nies for pur­po­ses such as avo­id addi­tio­nal trans­ac­tion costs,
    • under­stan­da­bi­li­ty – the cate­go­ry sho­uld be under­stan­da­ble to both busi­nesses and public administration,
    • audi­ta­bi­li­ty – the cate­go­ry sho­uld be easi­ly verifiable.
METHODOLOGY FOR SELECTING CATEGORIES AND WEIGHTS 
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ADJUSTING WEIGHTS FOR SELECTED CATEGORIES

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A bro­ader set of cate­go­ries is ava­ila­ble in the app, which can be selec­ted using the „Select cate­go­ries for ana­ly­sis” button.

For exam­ple: if we assign weights e.g. 1, 2, 1, 3, 4 then the result will indi­ca­te the rela­ti­ve impor­tan­ce of each cate­go­ry. The second cate­go­ry is twi­ce as impor­tant as the first, and the fourth is 3 times as impor­tant as the first, whi­le the first and third are equ­al­ly important.

The results are nor­ma­li­zed by rela­ting the valu­es found in each firm to the maxi­mum value in the sec­tor and rooting, with nega­ti­ve valu­es (or no data) chan­ging to zero.

The basic indi­ca­tor takes the value for each cate­go­ry from 0 to 100%. If the maxi­mum value in a given cate­go­ry is 10 tho­usand and the sco­re of the com­pa­ny of inte­rest is 2.5 tho­usand, we get a sco­re of 50% (the root of 2.5 tho­usand divi­ded by the root of 10 thousand).

HOW DO WE GET THE END RESULT? 

To get the final result, the valu­es of each cate­go­ry are mul­ti­plied by the weight for that indi­ca­tor and then divi­ded by the sum of the indi­ca­tor weights (in our exam­ple: 11). As a result, the maxi­mum sco­re can be 100%.

The clas­si­fi­ca­tion of com­pa­nies is based on a formula:

Wzór objaśniający

whe­re: w_n: weight of the n‑th indi­ca­tor, k – num­ber of indi­ca­tors, i_n – indi­ca­tor value of the n‑th com­pa­ny, i_n max – maxi­mum indi­ca­tor value achie­ved in the sec­tor (in all years).

Assi­gn­ment to the cate­go­ry is based on the weights ente­red by the user – by default it is a mini­mum of 40% for cate­go­ry A, 20% for B, 10% for C, 5% for D. Com­pa­nies below 5% rece­ive cate­go­ry E. In the appli­ca­tion you can select data for the years 2012–2016, as well as – in a sepa­ra­te tab – the 5‑year and 3‑year (2014–2016) ave­ra­ge for indi­vi­du­al companies.

METHODOLOGY FOR SELECTING CATEGORIES AND WEIGHTS 

Macroeconomic background

Con­si­de­ring direct, indi­rect and reve­nue effects toge­ther, the phar­ma­ceu­ti­cal sec­tor con­tri­bu­ted in 2013 in Poland to the gene­ra­tion of GDP worth more than PLN 15 bil­lion (c. 1% of GDP), main­te­nan­ce of more than 100 tho­usand jobs (with direct employ­ment of 22 tho­usand people) and pro­vi­sion of bud­get reve­nu­es of c. PLN 2.4 bil­lion. The phar­ma­ceu­ti­cals sec­tor also has a signi­fi­cant impact on the inno­va­ti­ve­ness of the Polish eco­no­my, gene­ra­ting 7% of total R&D spending.

Impact of the phar­ma­ceu­ti­cal sec­tor on GDP

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Sour­ce: Own ana­ly­sis based on data from PZPPF and busi­ness intel­li­gen­ce agen­cies: Bisno­de and Infocredit.

The phar­ma­ceu­ti­cal sec­tor, com­pa­red to the Polish eco­no­my, is cha­rac­te­ri­zed by high spen­ding on R&D acti­vi­ties. Total intan­gi­ble assets and pro­per­ty, plant and equ­ip­ment incre­ased in all periods ana­ly­zed. By amo­unt, R&D and capi­tal expen­di­tu­res are domi­na­ted by lar­ge com­pa­nies. As a per­cen­ta­ge of reve­nue, lar­ge com­pa­nies with Polish capi­tal stand out, as they also incre­ased the value of tan­gi­ble and intan­gi­ble assets the most.

The sec­tor affects GDP thro­ugh inve­st­ment, exports and con­sump­tion. The magni­tu­de of this respon­se is shown in the table.

Inter­pre­ta­tion: An incre­ase in inve­st­ment expen­di­tu­res (total at pur­cha­se­r’s pri­ces) by 1 PLN will incre­ase GDP by 0.6117 PLN. Of which, pro­duct taxes will incre­ase by 0.017, labor costs will incre­ase by 0.2065, etc. An incre­ase in capi­tal expen­di­tu­res by PLN 1 mil­lion will result in an incre­ase in the num­ber of employ­ees by 4.83 persons.

Macro­eco­no­mic mul­ti­pliers – columns pre­sent the impul­se (with an incre­ase by 1 PLN), rows – the value of the respon­se of indi­vi­du­al categories

Tabela objaśniająca

Key channels of influence 

Asses­sing eco­no­mic impact at the firm level requ­ires a dif­fe­rent metho­do­lo­gy than that used by the macro­eco­no­mic appro­ach. Using cur­rent equ­ity com­pa­ny repor­ting, it is possi­ble to more accu­ra­te­ly ana­ly­ze only direct effects, as the stu­dy of indi­rect and inco­me effects is feasi­ble within a network ana­ly­sis of the enti­re eco­no­mic ecosystem.

For the pur­po­se of Phar­ma­Rank, pro-growth cate­go­ries were selec­ted: export, inve­st­ment, sales (simu­la­ted by con­su­mer spen­ding). In addi­tion, rela­ted out­put cate­go­ries of employ­ment costs and busi­ness taxes are included.

SALES

The sim­plest method of measu­ring an enti­ty­’s con­tri­bu­tion to GDP based on finan­cial sta­te­ment data is sales volu­me. It is worth noting that the phar­ma­ceu­ti­cal sec­tor in Poland is signi­fi­can­tly domi­na­ted by the lar­gest play­ers. Man can also look at this chan­nel of influ­en­ce more bro­adly. What is often empha­si­zed is the impor­tan­ce not of the she­er size of GDP for a coun­try, but of the rate of its growth. In many cases, it is not the wealth of the eco­no­my that deter­mi­nes macro­eco­no­mic sta­bi­li­ty, but pre­ci­se­ly chan­ges in the volu­me of out­put. The­re­fo­re, alter­na­ti­ve­ly, the dyna­mics of chan­ge in busi­ness sales volu­me was used as a finan­cial indi­ca­tor to descri­be the impact on the natio­nal economy.

In the case of sales of goods and mate­rials, the mul­ti­plier rela­ti­ve to final demand for dome­stic goods deri­ved from an input-out­put model of the Polish eco­no­my was taken as the refe­ren­ce value of the multiplier.

Ave­ra­ge annu­al sales from 2014 to 2016

NET EXPORTS

Com­pa­nies gene­ra­ting the lar­gest tra­de sur­plu­ses and defi­cits (2014–2016 ave­ra­ge, thousands)

Net exports is one of the major com­po­nents of GDP (in addi­tion to con­sump­tion, govern­ment spen­ding, and inve­st­ment). A cha­rac­te­ri­stic of the phar­ma­ceu­ti­cal sec­tor is that it is high­ly import-inten­si­ve and gene­ra­tes a tra­de deficit.

The Stra­te­gy for Respon­si­ble Deve­lop­ment (SOR) points to fore­ign expan­sion as one of the main stra­te­gic are­as. Cap­tu­ring this area is possi­ble by measu­ring export sales revenue.

At the same time, SOR empha­si­zes the need to sup­port enter­pri­ses that cre­ate high added value. In order to acco­unt for the value added cre­ated in the eco­no­my, it is neces­sa­ry to inc­lu­de the value of impor­ted pur­cha­ses as deduc­ting the value of dome­stic pro­duc­tion. It is also possi­ble to expand the indi­ca­tor to sepa­ra­te­ly track imports of raw mate­rials, mate­rials, semi-fini­shed goods and imports of goods to more accu­ra­te­ly track value added.

This also allows for bet­ter con­si­de­ra­tion of the sec­to­r’s impact on GDP, of which net exports (the value of exports minus the value of imports for the enti­re eco­no­my) is a component.

TAXES

Com­pa­nies of the phar­ma­ceu­ti­cals sec­tor report PLN 244 mil­lion in inco­me tax annu­al­ly. It is worth noting that com­pa­nies with Polish capi­tal have signi­fi­can­tly incre­ased the­ir con­tri­bu­tion to the tax base over the ana­ly­sed years.

We con­si­der the con­tri­bu­tion of phar­ma­ceu­ti­cal com­pa­nies to the tax base on the basis of CIT. PIT paid by com­pa­nies on behalf of employ­ees also con­tri­bu­tes to the tax base, howe­ver, due to its col­li­ne­ari­ty with the wage bill, its inc­lu­sion would result in double bonus for com­pa­nies for the num­ber of employees.

Measu­ring the amo­unt of repor­ted cor­po­ra­te inco­me tax allows taking into acco­unt the spe­ci­fi­ci­ty of com­pa­nies from spe­cial eco­no­mic zones. By set­ting appro­pria­te weights for CIT and inve­st­ment-rela­ted indi­ca­tors, it will be possi­ble to take into acco­unt the effi­cien­cy of the applied tax incen­ti­ve policies.

Com­pa­nies gene­ra­ting the lar­gest tra­de sur­plu­ses and defi­cits (2014–2016 ave­ra­ge, thousands)

Ave­ra­ge annu­al inco­me tax paid by phar­ma­ceu­ti­cal com­pa­nies (2014–2016)

SALARIES

Ave­ra­ge annu­al sala­ry cost (2014–2016)

Com­pa­nies gene­ra­ting the lar­gest tra­de sur­plu­ses and defi­cits (2014–2016 ave­ra­ge, thousands)

The best measu­re of the direct impact of a com­pa­ny­’s acti­vi­ties on the eco­no­my thro­ugh the employ­ment chan­nel is the level of pay­roll-rela­ted costs. Unfor­tu­na­te­ly, the Acco­un­ting Act (AoR) allows the pro­fit and loss acco­unt to be pre­pa­red in two variants: cal­cu­la­tion and com­pa­ra­ti­ve. Only the com­pa­ra­ti­ve variant distin­gu­ishes wages and sala­ries, social secu­ri­ty and other bene­fits in ope­ra­ting expenses.

The phar­ma­ceu­ti­cal sec­tor employs, on ave­ra­ge, more high­ly quali­fied and bet­ter paid employ­ees. In addi­tion, it sup­ports the cre­ation and deve­lop­ment of human and social capi­tal, an area that affects the achie­ve­ment of SOR goals.

In order to pro­mo­te inve­st­ment in human capi­tal more stron­gly, it is possi­ble to extract an indi­ca­tor limi­ted to employ­ees with higher edu­ca­tion or at least a PhD degree.

The inc­lu­sion of social secu­ri­ty con­tri­bu­tions addi­tio­nal­ly rewards com­pa­nies that do not use so-cal­led „junk con­tracts” in the­ir ope­ra­tions (an addi­tio­nal varia­ble to be selec­ted in PharmaRank).

Selection of weights 

Guided by the­se prin­ci­ples, the fol­lo­wing cate­go­ries were assi­gned to the pri­ma­ry chan­nels of influence:

Tabela objaśniająca

The metho­do­lo­gy for assi­gning weights was deri­ved from the DELab UW stu­dy (2017). The weight valu­es are deri­ved from nor­ma­li­zing the mul­ti­pliers of each influ­en­ce chan­nel. Nor­ma­li­zed value ran­ges were deter­mi­ned for the influ­en­ce chan­nels. The cate­go­ry weight is the pro­por­tion of the sum of the com­part­ment means of each mul­ti­plier mul­ti­plied by 100. The impact chan­nel ana­ly­sis was based on:

  • NBP NECMOD model: a macro-eco­no­me­tric model, a mul­ti-equ­ation model reflec­ting the struc­tu­re of the Polish eco­no­my and its links with the world economy,
  • and macro­eco­no­mic stu­dies of the Natio­nal Bank of Poland (NBP; see recom­men­da­tion sources).

What’s next?

The ran­king pro­vi­des the fle­xi­bi­li­ty to inc­lu­de addi­tio­nal cate­go­ries. Inc­lu­ding the value of che­mi­cal and bio­che­mi­cal pro­duc­tion, taking into acco­unt the direct sales value of drugs com­ply­ing with the Polish ori­gin rules (data cur­ren­tly una­va­ila­ble) and exc­lu­ding from the ran­king com­pa­nies who­se import-to-sales value exce­eds 35% would allow a more accu­ra­te asses­sment of the actu­al impor­tan­ce of a given phar­ma­ceu­ti­cal com­pa­ny for the Polish economy.

If the govern­ment admi­ni­stra­tion is inte­re­sted in the Phar­ma­Rank appli­ca­tion, it will be possi­ble to deve­lop it fur­ther and map the real impact of indi­vi­du­al com­pa­nies on the Polish eco­no­my even more accurately.

Howe­ver, this will requ­ire that all phar­ma­ceu­ti­cal com­pa­nies are sub­ject to repor­ting obli­ga­tions. Indi­ca­tors for a more deta­iled ana­ly­sis of the macro­eco­no­mic impact of indi­vi­du­al phar­ma­ceu­ti­cal com­pa­nies are descri­bed in deta­il in a pre­sen­ta­tion by DELab UW (2017).

Basing the ana­ly­sis on more deta­iled data will allow the use of more advan­ced para­me­te­ri­za­tion methods. Machi­ne Lear­ning tech­ni­qu­es (clu­ste­ring algo­ri­thms) will be used to find simi­lar com­pa­nies and assign them to par­ti­cu­lar segments.

Entry to the application

SOURCES OF RECOMMENDATIONS 

DELab UW (2015). Makro­eko­no­micz­ne aspek­ty zna­cze­nia sek­to­ra far­ma­ceu­tycz­ne­go dla pol­skiej gospodarki. 

DELab UW (2017). Kon­cep­cja pomia­ru zna­cze­nia firm far­ma­ceu­tycz­nych w pol­skiej gospo­dar­ce.

NBP (2009). The new macro­eco­no­me­tric model of the Polish eco­no­my. Wor­king Paper, 62.

NBP (2010a). Reesty­ma­cja kwar­tal­ne­go mode­lu gospo­dar­ki pol­skiej NECMOD. 

NBP (2010b). Mnożnik wydatków państwowych i sza­cun­ki jego wielkości dla Pol­ski. „Mate­ria­ły i Stu­dia”, 246.

NBP (2012a). Reesty­ma­cja kwar­tal­ne­go mode­lu gospo­dar­ki pol­skiej NECMOD.

NBP (2012b). Fiscal mul­ti­pliers and fac­tors of growth in Poland and the Czech Repu­blic in 2009. Wor­king Paper, 117.

NBP (2015). Mnożniki skal­ne w mode­lu z ogra­ni­cze­nia­mi kre­dy­to­wy­mi. „Mate­ria­ły i stu­dia”, 318.

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