Croatia Pharmaceuticals & Healthcare Report Q1 2014 - New Market Report

The imposition of across-the-board price cuts in late 2013 and into 2014 will weigh heavily on the pharmaceutical market. We forecast weak pharmaceutical market growth over the next decade, as we believe Croatia will observe strict budgetary vigilance under pressure from the EU Commission. However, in exchange for a stagnant market, we believe that the EU pressure will also stabilise the supply chain and force liquidity into the market. Healthcare spending is projected to rise over the next 10 years in line with a rapidly ageing population, although there is a significant risk that the state will apply restrictions to blunt its growth.

Headline Expenditure Projections

* Pharmaceuticals: HRK7.50bn (US$1.28bn) in 2012 to HRK6.95bn (US$1.19bn) in 2013; -7.3% in local currency and -7.4% in US dollar terms. Forecast changed from Q313, due to announced price cuts by the Health Ministry.
* Healthcare: HRK25.71bn (US$4.40bn) in 2012 to HRK27.78bn (US$4.75bn) in 2013; 8.1% in local currency and 8.0% in US dollar terms. Forecast revised slightly upward from Q413.

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Risk/Reward Rating

Croatia's Risk/Reward Rating is unchanged from Q413. Despite the country's accession to the EU, market dynamics remain subdued, with moderate growth over the long term. Croatia scores 45.8 out of 100 in our Risk/Reward Ratings, making it the 18th most attractive pharmaceutical market in Central and Eastern Europe.

Key Trends And Developments:

* In July 2013 Croatian healthcare workers lost their collective bargaining rights, paving the way for potential cuts to the number of doctors and health workers, or across-the-board wage cuts for medical staff employed by public hospitals.
* In June 2013 the Croatian government decided to terminate all agreements for services from private hospitals. Previously, the HZZO paid almost HRK500mn (US$87mn) to private providers for services provided, but these will now migrate over to public polyclinics, which are expected to come under stress from an influx of new patients.
* In March 2013 Health minister, Rajko Ostojic, announced an across-the-board price cut of 15-20% for medicines on the Croatian positive reimbursement list. The minister also announced unified public procurement would enable cost savings of HRK600mn (US$103mn). The HZZO announced its 2013 budget for prescription drugs would be reduced from HRK3.1bn (US$530mn) to HRK2.8bn (US $480mn), combined with price controls introduced on expensive medicines in November 2012. The burden of these price cuts will fall on reimbursed drugs, which are primarily generics. The price cuts appear to disproportionately impact local drugmakers, whose branded generics are not as cheap as imports.

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