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Czech Republic Pharmaceuticals and Healthcare Report Q2 2011
Business Monitor International, April 2011, Pages: 97
The Czech Republic 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 Czech Republic's pharmaceuticals and healthcare industry.
BMI View: Despite risks to the Czech Pharmaceutical market posed by upcoming healthcare reforms and unfavourable changes to pricing and reimbursement regimes, the market remains one of the most attractive in Central and Eastern Europe (CEE). While lower growth is expected in the Czech market compared with its larger regional neighbour Poland, the industry has escaped large-scale cuts to reimbursement spending like those set to be introduced in Hungary. BMI maintains that high per-capita drug market expenditure and a relatively high penetration of patented drugs continue to make this market attractive to international drugmakers.
Headline Expenditure Projections
Pharmaceuticals: CZK80.30bn (US$4.23bn) in 2010 to CZK84.13bn (US$4.67bn) in 2011; +4.8% in local currency terms and +10.5% in US dollar terms. Forecast down significantly from Q111 due to analyst modification.
Healthcare: CZK269.21bn (US$14.17bn) in 2010 to CZK278.18bn (US$15.44bn) in 2011; +3.3% in local currency terms and +8.9% in US dollar terms. Forecast unchanged from Q111.
Medical devices: CZK26.56bn (US$1.40bn) in 2010 to CZK28.27bn (US$1.57bn) in 2011; +6.4% in local currency terms and +12.2% in US dollar terms. Forecast down marginally from Q111 due to macroeconomic factors.
Business Environment Rating (BER): The Czech Republic has lost the top spot in the Q211 BER matrix, with a score of 63.4 down 4.1% from 66.1 in Q111 and has been replaced by Poland. The prospect of major drug market reforms, combined with weaker than expected pharmaceutical sales in Q210 and Q310 have resulted in amendments to our longer-term industry outlook which has led to a downward revision in the country’s BER score.
Key Trends & Developments
Disputes between pharmaceutical industry associations and the Czech government have created uncertainty for BMI's pharmaceutical expenditure forecast scenario. By extension, this has added to the level of risk associated with the Czech market due to uncertainty surrounding the continuation or addition of further drug pricing reforms. While we maintain our already pessimistic growth figure for 2011, we note that the outlook will remain unclear until the Czech government passes or delays its latest pricing reforms, we note the new measures seem to have encountered further delays as announcements expected in early March 2011 have yet to be made at the time of publication.
In late January 2011, the Czech Association of Innovative Pharmaceutical Industry (AIFP) met with the government to discuss the latest bill on further pharmaceutical price reductions and reimbursements. The new bill has now been submitted for government approval, but faces extensive industry opposition which may delay its adoption. The AIFP has said the current proposals are contrary to the Czech constitution as well as European Union legislation. The industry association stated that the bill's adoption would further aggravate the already volatile and unpredictable drug pricing and reimbursement environment.
The Czech Republic’s coalition government has agreed on the unification of VAT rates at 20% from 2012. The VAT unification will lead to a growth in prices of pharmaceutical products in the country, which currently fall in the lower VAT category. Presently, the country's lower VAT rate is 10% and the basic VAT rate is 20%.
BMI Economic View: We maintain our forecast for the Czech Republic's real GDP to expand by 2.4% in 2011, after having grown by 2.2% in 2010 according to data released by the Czech Statistical Office. Exports will be the key driver of growth in 2011 as private consumption remains constrained by fiscal austerity, rising inflation and high unemployment.
BMI Political View: We expect the Czech Republic's centre-right coalition government to remain in power until 2012 parliamentary elections despite ongoing ructions within the coalition over proposed pension reform and mounting public dissatisfaction over austerity measures. We therefore maintain that the administration is well poised to rein in the fiscal deficit from an estimated 5.1% of GDP in 2010 to our forecast of 4.4% in 2011.
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