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Latvia Pharmaceuticals and Healthcare Report Q1 2010
Business Monitor International, Nov 2009, Pages: 65
In the Business Environment Rating (BER) matrix for Q110, Latvia is once again found a lowly 17th out of the 20 markets surveyed in the Emerging Europe region, below its two Baltic peers. The country’s overall pharmaceutical rating falls below the quarterly regional average, due to small and falling population numbers that limit its overall size, and an economy that is highly exposed to external risk. In fact, we forecast that the current economic adversity will have a marked negative effect on the value of the Latvian pharmaceutical market in 2009, expecting a negligible 0.75% year-on-year (y-o-y) growth in local currency terms, from LVL256mn (US$510mn) in 2008. This figure stands in stark contrast to the pre-2008 double-digit growth rates, which had been driven by high usage of medical services and high levels of per capita consumption.
Over the next five years, we expect that the market will recover marginally, to post a compound annual growth rate (CAGR) of 3.06% in local currency terms. Generic medicines will remain prioritised under the public healthcare system, which should push their share of the total market to over 30% by 2014, up from 27.4% recorded in 2008. At the same time, patented medicines – where possible – will be sidelined by hospitals as much as patients, who have to foot a considerable proportion of their medicines bill. The over-the-counter (OTC) sector will also face challenging times ahead, despite the government’s attempts to address the overuse of medical services.
BMI believes that 2009 will see significant shortfalls in state-funded healthcare services. Major restructuring of the Ministry of Health is to be realised, with staff numbers set to be slashed by 60% and the Public Health Agency eventually reformed, although reform will be largely dependent on the political regime and its stability. In the meantime, the recently appointed health minister submitted an official request to the government for the allocation of LVL45.0mn (US$90.1mn) to the country’s healthcare sector, the budget for which had been cut in 2008, resulting in the resignation of the previous minister. Extra funding is seen as necessary to prevent some hospitals from declaring bankruptcy or cutting services, with (for example) Vidzeme Hospital in Valmiera already suspending state-paid non-emergency procedures.
Therefore, the operating environment in Latvia, while regarded as widely unsuitable for expansion by multinational companies, has witnessed some interest from other Emerging Europe players. In October 2009, Bulgarian drugmaker Sopharma moved to acquire a 51% stake in Latvian pharmaceutical company Briz. Under the terms of the deal, Briz will gain access to Sopharma’s broad product range and a stable operating cash source, which may assist the former to weather the economic downturn. However, as a result of projected poor local market growth, exports – which continued to grow during 2009 – should remain a key focus for Latvian drugmakers, which have a strong potential export capacity owing to European Union (EU) membership and widespread Good Manufacturing Practice (GMP) certification.
The Latvia Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Latvia's pharmaceuticals and healthcare industry.
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