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Romania Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Sep 2011, Pages: 114
Business Monitor International's (BMI) Romania Pharmaceuticals and Healthcare Report (Q4 2011) provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's pharmaceuticals and healthcare industry.
BMI continues to expect Romania's pharmaceutical market to return to high single-digit growth in 2011 and 2012. However, weaker than expected drug price inflation in Q211 has resulted in a downward revision of BMI's projections. The authors continue to highlight risks in this market, especially in the delay of payments to pharmacists from the National Health Insurance House (Casa Nationala de Asigurari de Sanatate - CNAS), which is a major concern for retail pharmacies and drug producers.
Comments made by the Romanian president in July 2011 further indicated that the problem is far from being resolved and will weigh on growth in the quarters to come.
Headline Expenditure Projections:
- Pharmaceuticals: RON11.93bn (US$3.76bn) in 2010 to RON12.82bn (US$4.41bn) in 2011; +7.5% in local currency terms and +17.3% in US dollar terms. Forecast down moderately in local currency terms from Q311 due to analyst modification.
- Healthcare: RON27.24bn (US$8.58bn) in 2010 to RON28.07bn (US$9.65bn) in 2011; +3.1% in local currency terms and +12.5% in US dollar terms. New historic data added, growth forecast in local currency terms broadly unchanged from Q311.
- Medical devices: RON1.35bn (US$426mn) in 2010 to RON1.45bn (US$498mn) in 2011; +7.3% in local currency terms and +17.1% in US dollar terms. Forecast unchanged from Q311.
Business Environment Rating: The continuation of Romania's strong growth potential tempered by significant market challenges, such as lengthy payment delays, has been maintained in the Q411 BER analysis and BMI's outlook for the Romanian market remains stable. Of the 20 key markets in the region, Romania is now third with a score of 59.8 out of 100.
Key Trends & Developments
BMI has revised down projections for Romania's pharmaceutical market in 2011 to year-on-year (y-o-y) growth of +7.5% (previously +9.3%) in local currency terms, with the market worth RON12.82bn (US$4.41bn) at consumer prices. The revision is principally due to weaker than expected drug price inflation in Q211, which BMI now expects to moderate in H211.
On August 04 2011, Romania's Minister of Public Heath Attila Czeke resigned due to what has been described as opposition to the constant underfunding of the public healthcare system and a lack of communication between the government and the Ministry of Health. Czeke had argued that the RON300mn (US$100mn) received in the recent budget revision was insufficient, although the government has pledged a further RON150mn (US$50mn) on the basis that reforms are implemented. The minister also highlighted the issues of fund management, as two institutions receive funds from the government at disproportionate ratios. The Ministry of Health manages 15% of the healthcare budget, while the National Health Insurance House (Casa Nationala de Asigurari de Sanatate - CNAS) is responsible for the majority.
In an interview with local news providers in August 2011, Jeffrey Franks, head of the International Monetary Fund's (IMF) agreement evaluation mission in Romania, reportedly said that the government should replace the claw back tax in the healthcare system and implement the proposal for co-payments as soon as possible. The claw back system was introduced in Q309 and requires all drug producers in the Romanian market to contribute 5-11% of their revenues from the sale of reimbursed medicines to the public healthcare system.
The Romanian president has now indicated that the settlement of outstanding debts for pharmaceuticals will not be forthcoming. In a speech on July 20 2011, Romanian President Traian Basescu urged the resolution of the difficulties inherent in sourcing drugs for hospitals and pharmacies. He added that procurement difficulties should be resolved prior to the settlement of outstanding debts for drug reimbursement with the Romanian National Health Insurance House (CNAS). He suggested that the large amount of debt has in fact been caused by drug supplier lobbying. The president demanded that this issue take priority in light of a six-monthly technical report by the European Commission under the Cooperation and Verification Mechanism, which covers improvements to judicial reform and the battle against corruption.
BMI Economic View: The author's belief that Romania's macroeconomic trajectory will improve in 2011 and beyond after experiencing a particularly harsh double-dip recession remains firmly in play. The return of positive real GDP growth in Q111, alongside a concomitant improvement in the country's balance of payments and fiscal positions means that Romania is well placed to enjoy solid economic expansion in the years ahead. Nonetheless, BMI stresses that this improvement will continue to be gradual, as nascent risks to growth remain.
BMI Political View: The strength and quality of Romania's political institutions falls short relative to much of Europe, with significant challenges ahead despite the progress made in the two decades since the fall of communism. However, BMI believes that Romania's membership of the European Union will spur gradual political development over the years ahead and is very supportive of long-term political stability.
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