Estonia Pharmaceuticals and Healthcare Report Q2 2008

Poor healthcare has been seen as a weak link in Estonia's 15-year post-Soviet economic 'miracle', although the government has made significant inroads in improving public provision. Similarly, the use of pharmaceuticals has continued to rise, with the market topping US$233mn in 2007, up by 12.5% on the previous year. In the forecast period, increased healthcare spending and strong economic growth forecasts will support further development of the market, which is forecast to reach US$331mn by 2012.

In BMI's revised Business Environment Rankings for the 16 major markets of Central & Eastern Europe (CEE) for Q208, Estonia is once again found in a respectable fifth place. However, in absolute terms, Estonia will remain a marginal market in the CEE region, being significantly smaller than the other two Baltic markets. The main limiting factor is the small and falling population, which is compounded by the strict reimbursement regime. On a positive note, the country will continue to invest in biotechnology and pharmaceutical research and development (R&D), which is strongly supported by the government.

Moreover, the country is facing an increasing burden of AIDS/HIV, which will require expensive treatments. According to the European Centre for Disease Prevention and Control (ECPDC), Estonia had 504 new cases of HIV/AIDS per million inhabitants in 2006, compared to the average rate across Europe of 111 per million. Nevertheless, the country, which has the highest HIV infection rate in the European Union (EU), has already implemented a 2006-2014 programme focusing on surveillance, prevention and treatment of the disease.

In terms of the pharmaceutical industry landscape, imports remain main source of medicines used in the country, especially as exports have tailed off in the aftermath of the recent move of some of the operations of the largest local firm Tallinn Pharmaceutical Plant - part of Latvia's Grindeks - abroad.

Nevertheless, the local industry has some attraction to foreign players, as illustrated by the January 2008 purchase of active pharmaceutical ingredient (API) producer ProSyntest by US healthcare firm Cambrex, through its Swedish subsidiary Cambrex Karlskoga. Low costs of production in the region are seen as the key draw.

However, market expansion is severely limited by strong competition in the supply chain, characterised by a concentrated wholesale market and chain-dominated retail pharmacy landscape. However, in late 2007, the government agreed to lift restrictions on opening new outlets, which is likely to lead to more rapid growth of the number of retail outlets. The move has been made in response to the failure of the present structures to encourage the establishment of new pharmacies in areas of need.