Slovakia Pharmaceuticals & Healthcare Report Q2 2014
Slovakia generally offers significant potential as a location for pharmaceutical research. This is thanks to its demographic and epidemiological profile, which is broadly similar to Western Europe; EU membership, which allows for faster regulatory filings and approvals; and relatively cheap production and labour costs. Austerity measures throughout the European Union precipitated a drive to cut pharmaceutical expenditure, with member states introducing price cuts and reference pricing to contain costs. We forecast further generic uptake and higher co-payments by patients, which is in line with an established trend we see across Eastern Europe. We believe pharmaceutical spending growth will be weak, as resources will be focused on long-term care and healthcare services as Slovakia's ageing population increases pressure on the healthcare system.
Headline Expenditure Projections
- Pharmaceuticals: EUR1.67bn (US$2.20bn) in 2013 to EUR1.68bn (US$2.13bn) in 2014; 0.6% in local currency terms and -3.2% in US dollar terms. Figures in line with Q114.
- Healthcare: EUR6.46bn (US$8.53bn) in 2013 to EUR6.55bn (US$8.32bn) in 2014; 1.3% in local currency terms and -2.5% in US dollar terms. Slight revision upward owing to better-than-expected GDP growth figures and rising private healthcare spending.
Slovakia's Risk rating indicates the country has one of the best business environments in the Central and Eastern European region, although its ranking is moderated by its less-than-stellar rewards score. Consequently, Slovakia has a RRR score of 55.2 out of 100, making it the fifth-most attractive pharmaceutical market in Central and Eastern Europe. This means the country has risen by two positions from Q114.
Key Trends And Developments
- In February 2014, CEE reported that Slovakia's health ministry is planning to add two newly registered medicines to the list of over-the-counter (OTC) medicines with limited dispensation in Slovakia, reports CEEPharma. The move will further restrict sales of OTC medicines containing pseudoephedrine in the country, preventing their misuse in the production of narcotic substances, the health ministry stated. Subsequent to the addition of the two new medicines, the list will include a total of 26 types of medicinal products.
- Also in February, the Slovak health ministry introduced a new drug reimbursement list, under which 2,529 drugs from the list (51%) will be offered to patients at no cost or for a symbolic fee of up to EUR1 (US$1.37). Around 1,771 drugs, or one third of the medicines on the list, will require no co-payment from the patient. The new list will also help patients to gain access to three new drugs, two of which are used to treat allergic rhinitis and painful chronic pancreatitis/cystic fibrosis, while the third is a hormone therapy for postmenopausal women.
- In December 2013, the Organization for Economic Cooperation and Development (OECD)'s latest report on healthcare has found that Slovakia spent 0.7% more than the OECD average on drugs in 2013, reports newswire SITA. The report, titled 'Health at a Glance 2013', revealed that the number of Slovak doctors per capita was above the OECD average, with 3.3 doctors per 1,000 inhabitants. However, the number of Slovak nurses was 5.9 nurses per 1,000 inhabitants, while the OECD average is 8.8 nurses per 1,000 inhabitants.
BMI Economic View: We forecast real GDP growth in Slovakia to reach 2.2% and 2.8% in 2014 and 2015, respectively, on the back of improving external demand and a recovery in industrial production and exports. As manufacturing represents the highest share of total GDP and one quarter of total employment in Slovakia, accelerating industrial production will support a rebound in employment, private consumption and fixed investment in 2014. However, in contrast to previous years, the shape of growth will become more weighted towards domestic demand, implying a diminishing contribution of net exports as imports rise which poses the most important downside risk to our real GDP growth forecast. Slovakia's 2014 budget signals a broad continuation of the country's fiscal policy, with falling under the EU's 3.0% deficit target remaining top priority. An improving economic outlook will bolster tax revenues in 2014, and the government's plan to reduce the corporate income tax rate from 23% to 22% (after scrapping a 19% flat tax rate in early 2013) is a sign that the worst is potentially over for big business.
BMI Political View: Slovak Prime Minister Robert Fico's decision to run for president in 2014 could have negative long-term implications for the centre-left Direction-Social Democracy (Smer-SD) party's dominant political position, as Fico's popularity has largely driven its strong electoral showings in recent years. Despite his broad based popularity, Fico is far from guaranteed to win presidential elections scheduled for March. Recent polling suggests that entrepreneur and philanthropist Andrej Kiska would likely defeat Fico in a second round run-off election. However, we expect a high degree of policy continuity until general elections in 2016, with fiscal consolidation remaining a top priority. Under Fico, Slovakia has achieved fiscal consolidation by shifting the burden of austerity to business and high earners, underpinning Smer- SD's support base.
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