Croatia's Ministry of Health increased drugs budget of HRK3.1bn should provide a boost to prescription sales, reinforcing the view that the prescription market will remain resilient to the economic downturn. Of the 20 markets measured in the Q309 Pharmaceuticals & Healthcare Business Environment Rankings for Central and Eastern Europe (CEE), Croatia is placed 10th, reflecting the country's middle ranking attractiveness for multinational companies. While the Croatian market is making great efforts to align regulations with EU guidelines, the market still holds certain drawbacks for companies looking to enter. The Croatian pharmaceutical market is in itself not overly high in value compared with many of its CEE counterparts, with per capita spending calculated to have reached a mere US$178 in 2008. Through to 2013 the report forecasts compound growth rate (CAGR) for drug expenditure in Croatia will be 5.76% in local currency terms, reflecting a stable level of expansion, albeit below many of the emerging CEE markets.
Legislative improvements and future EU accession should prove a great attraction to pharmaceutical companies in future; however, there are still some potential drawbacks for the Croatian system, particularly in terms of a preference for local generics manufacturers. While budget restraints have limited widespread access to modern treatments, a steady stream of patented pharmaceuticals has been made available for reimbursement. The most recent additions to this list include GlaxoSmithKline (GSK)'s non-small lung cancer treatment Tarceva (erlotinib) and Pfizer's kidney cancer drug Sutent (sunitinib). Nevertheless, as a result of the implementation of tendering systems for medicines, as part of recent procurements the HZZO has saved close to US$67mn. Drugmakers have been forced to cut prices by an average of 12% in order to remain providers for drugs on the reimbursement list, with patented drugmakers having to make the largest concessions.
For 2009 the Ministry of Health has increased its budget for drugs to HRK3.1bn, which should provide a boost to prescription sales, reinforcing our view that the prescription market will remain resilient to the economic downturn. However, we are slightly less optimistic for the over-the-counter (OTC) market, which is likely to witness some downturn as a result of a contraction in spending, which may further result in reductions in spending on less essential medicines.
Over the longer term, however, it is our view that OTCs will continue to prosper at the expense of the prescription market share. The expansion of the number of outlets where OTC medicines are available, combined with a general increase in self-medication should continue to drive growth in the sector.
Meanwhile advertising - which is permitted in all major forms for OTCs - should help create brand value for high potential products.
