Czech Republic Pharmaceuticals and Healthcare Report Q2 2009

BMI forecasts that the Czech drug market will grow at a compound annual growth rate (CAGR) of 4.8% over the 2008-2013 period. Although this represents a fall on the 8.1% growth and 13.9% growth witnessed in 2008 and 2007 respectively, it is indeed encouraging in light of the economic turmoil in which many Eastern European countries now find themselves. In addition, growth levels at the end of 2007 were distorted by patients stockpiling medicines ahead of the introduction of co-payments at the beginning of 2008. While future healthcare reforms remain a key risk to our forecast scenario, an overall demand for more effective and modern treatments should continue to cause increased sales and prices.

However, we believe the days of double-digit growth are over, in light of the Czech markets maturing status and increasingly negative pricing and reimbursement environment.

The biggest development of the quarter has seen French pharmaceutical Sanofi-Aventis receiving European Commission (EC) approval for its US$2.3bn acquisition of Czech generics firm Zentiva. EU antitrust regulators have ordered Sanofi-Aventis to divest 15 drugs in various countries due to their concerns over the level of risk associated with the deal. Regulators were particularly concerned that the deal could mean reduced choice and higher prices for hospitals, patients and governments in Central and Eastern Europe,. Sanofi has stressed that the sales will have only a limited impact on revenues, as the divested products collectively generated annual sales of approximately EUR18.0mn (US$23mn) in 2007.

Meanwhile, in January 2009, The Czech State Institute for Drug Control (SUKL) introduced a new system for prescribing medicines, allowing patients to obtain repeat prescriptions without needing to see a doctor. The system, which will allow doctors to send prescriptions via mobile phone using SMS, or email, means that patients will need only to be informed of the prescription's short identification code, following from which a patient will be able to collect their medicine from the pharmacy. Retailers are currently awaiting installation of connection with SUKL servers, which will allow them to verify prescriptions. Completion for most outlets is expected by the end of March 2009.

The Czech Republic has fallen to third place in Business Environment Rankings for the Central & Eastern European region. However, this has been largely due to faster improvement in scores for its regional neighbours, Greece and Slovakia. The Czech Republic is still let down by its sub-standard patent regime, which could harm the development of its biotech sector.