Recapitalisation of Slovenia's banks this year will continue to constrain budgets, with significant pressure on public healthcare spending. The country should benefit from an uptick in the regional economic outlook, though country's unemployment rate and deleveraging by government and corporations will continue to put significant strain on the ZZZS, which is primarily dependent on insurance contributions. Spending cuts, pay freezes and price reductions for pharmaceuticals are all measures that could be employed to reduce the deficit. The pharmaceutical sector faces the prospect of price ceilings and further cost-cutting measures. As a result, we continue to believe pharmaceutical and healthcare spending will not show real growth until 2015 at the earliest.
Headline Expenditure Projections
- Pharmaceuticals: EUR720mn (US$950mn) in 2013 to EUR730mn (US$920mn) in 2014; +0.7% in local currency terms and -3.1% in US dollar terms.
- Healthcare: EUR3.22bn (US$4.25bn) in 2013 to EUR3.18bn (US$4.04bn) in 2014; -1.1% in local currency terms and -4.8% in US dollar terms.
Slovenia's Pharmaceutical Risk/Reward Rating score for Q214 stands at 50.9 out of a total of 100, just below the regional average of 51.5. A worsening economic outlook has impacted Slovenia's RRR score.
Key Trends & Developments
- In October 2013, four Slovenian drugmakers were accused of forming a drug cartel to manipulate wholesale drug prices in the country. The Competition Protection Agency (AVK) ruled that Kemofarmacija, Salus, Farmadent and Hopharm had colluded on the tender for the supply of drugs to public institutions and procurement of medicines for public pharmacy institutes. Although the four companies were charged for setting the prices of medicines at the highest permissible level at all times, they insist they did not breach competition laws in the country.
- In October 2013 the Ministry of Health and the Health Institute of Slovenia (ZZZS) rolled out reimbursement limits based on therapeutic groups for proton pump inhibitor drugs. We believe this will be rolled out to other therapeutic groups in the near future.
BMI Economic View: Slovenia continues to face a weak economic as a recapitalisation of the banking sector adds further strains to public finances. Private consumption remains heavily underwater, while fiscal pressures will act as a major brake on government consumption for at least the next two years, leaving exports as the sole driver of growth. Nonetheless, the improving regional outlook suggests that external demand should improve in 2014, providing one area of support for real GDP growth. We expect the recession to continue into 2014 (-0.48%), with only a modest return to growth in 2015 (1.0%).
BMI Political View: Political instability remains elevated as the four-party government coalition attempts to push through harsh austerity measures that will likely prompt parliamentary tensions and social unrest. Though the new government has been able to stave off the immediate threat of a bailout, this remains a real possibility in 2014, if it is unable to implement its ambitious fiscal plan.