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Slovakia Pharmaceuticals and Healthcare Report Q1 2011
Business Monitor International, Jan 2011, Pages: 87
The Slovakia 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 Slovakia's pharmaceuticals and healthcare industry.
Slovakia’s pharmaceutical market reached a value of EUR1.61bn (US$2.25bn) in 2009, making it the ninth-largest market in CEE. Throughout 2009 and 2010, the Slovakian pharmaceutical market faced considerable challenges in the form of government-imposed drug price controls and weakening domestic demand. Nevertheless, as a percentage of GDP, drug expenditure was 2.46% in 2009, making Slovakia the sixth-highest spender in Central and Eastern Europe (CEE) and well above the regional average. For2010, BMI forecasts a 4.7% local currency growth (below the 5.3% calculated for 2009), affected by the price cuts, although their negative impact has been partially offset by a modestly improving macroeconomic outlook. However, euro weakness will result in negative growth in US dollars (of -0.6%), with the market reaching a value of EUR1.68bn (US$2.23bn). Continued, albeit slower, growth in fiscal spending, despite the downturn, should mean that prescription spending only takes a small hit.
Over the 2009-2014 period, BMI expects pharmaceutical sales to increase by a compound annual growth rate (CAGR) of 5.19% in local currency terms. Spending as a percentage of GDP is likely to fall, albeit marginally, over part of this period, with the effects of the economic slowdown are felt through 2011, as they were in 2009 and 2010. By 2014, the market is projected to be worth EUR2.07bn (US$2.58bn). Over the subsequent five years, growth is projected to accelerate, as effects of patent expirations wear off and as economic growth allows for more public expenditure to cover novel treatments.
Over a 10-year period to 2019, BMI projects a CAGR of 6.10%, as measured in local currency, or of 4.90% in US dollars. However, the recently elected coalition government has proposed further price erosion mechanisms and caps on out-of-pocket spending on prescription medicines for pensioners and disabled persons. If the proposals are enforced, we shall change our forecasts accordingly. Moreover, BMI believes current structural reforms to reference pricing systems in other EU member states will lead to price reductions in those markets, consequently transferring some price erosion back to Slovakia.
As a result, BMI expects continual downward pricing pressure through to 2012. Furthermore, BMI notes that prices in Slovakia are already relatively low compared with many European countries and, as a result, companies face limited margins – especially relative to Western European countries. This is especially true in the light of there cent introduction of digressive margins on supplies of medicines to hospitals in the country, which are also expected to have a negative impact on the performance of the local pharmaceutical industry.
In terms of the wider economic environments, risks are also on the downside. For example, we expect the onset of fiscal austerity across the euro zone to begin to weigh more heavily on export growth. We also see Slovakia's current account deficit beginning to expand again in 2011, on the back of improving domestic demand, lack lustre euro zone demand and increasing profits sent abroad by foreign companies operating in Slovakia, as the country's economic recovery continues to gather pace. While Slovakia's robust economic recovery continued unfettered in Q210, we hold to our view for a slowdown in headline growth heading into 2011,
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