Croatia Pharmaceuticals and Healthcare Report Q2 2008

The Croatian pharmaceutical market has developed strongly in the past decade, but remains small in regional terms, given the limitations posed by the small population size. Generics, mostly of the relatively expensive branded variety, account for over 70% of the total prescription market by value. The use of novel and more expensive pharmaceuticals is hampered by healthcare debts, cost-containment initiatives and the support for the strong domestic generics industry in the face of distinct intellectual property (IP) deficiencies. In the coming years, however, regulatory and healthcare service improvements, as well as the increasing number of prescriptions, are set to gradually facilitate market entry for such products, especially as Croatian European Union (EU) membership talks reach later stages.

Generally speaking, the forecast period will witness a continued dominance of prescription medicines, although over-the-counter (OTC) drugs are rapidly gaining prominence, boosted by marketing and information campaigns. Value growth of the sector will, however, remain influenced by the fact that Croatian consumers are extremely price-conscious, although vitamins and dietary products in particular are likely to beat the trend, supported by lifestyle changes.

Similarly, the demand for medical devices is expected to increase in coming years, in line with healthcare system modernisation, economic development and the entering of further stages of integration into the EU and the wider European community. While the price of devices is still a crucial factor in terms of their placement on the market, the rising prominence of the private diagnostic sector will also stimulate the growth of the medical equipment sector in Croatia.

In BMI's new Q208 Business Environment Rankings for the major 15 Central and Eastern Europe (CEE) markets, Croatia's position remains unchanged. The country, which shares twelfth place with Lithuania, is placed higher than only Ukraine and Serbia, indicating that the Croatian pharmaceutical market is one of the least desirable investment destinations in the region due to its small size and spending per capita, among other limiting factors. However, the pending accession of Croatia into the EU is already improving market conditions for novel drugs, thus in particular benefiting multinationals.

In the meantime, the dominant local player, Pliva, is undergoing extensive strategy realignment following its acquisition by US Barr Laboratories, divesting of its operations in non-key markets, such as Italy and Spain, as well as of its animal business in the past year. Having purchased a German oncology specialist O.R.C.A.pharm, Pliva can be expected to make similar purchases in its main European markets.