Serbia Pharmaceuticals and Healthcare Report Q2 2008

The Serbian pharmaceutical market, which technically contracted following the June 2006 dissolution of the State of Union of Serbia and Montenegro, remains the least developed in Central and Eastern Europe (CEE). However, the country's desire to join the European Union (EU) will in the longer term boost opportunities for both foreign and domestic stakeholders. In the shorter term, a difficult pricing, reimbursement and intellectual property (IP) environment will continue to conspire to hamper market access and development.

In the meantime, the medical devices market in Serbia will be improved by planned reforms of healthcare provision. While the financing of public-sector modernisation remains questionable, the growing number of private laboratories and the public dissatisfaction with national healthcare services will stimulate the demand for new and modern medical equipment. Foreign companies will reap the benefits of this trend, given that over 90% of the demand is met by imports.

Generics account for around a quarter of the total market by value, but significantly more by volume.

However, high out-of-pocket expenditure, required by the fact that state reimbursed medicines are often out of stock and public funds suffer from chronic financial shortages, has resulted in dominance of patented medicines, despite limited spending power of the average consumer. In the longer term, patented medicines will benefit from the involvement of foreign players in the domestic industry (through acquisitions and investment), as well as from the country's need to align its regulatory environment with that of the EU.

In regional terms, BMI's new Business Environment Rankings table for Q108 once again finds Serbia last out of the 16 Central and Eastern European (CEE) states surveyed. The operating environment is considered deficient from the point of view of regulatory infrastructure, preferential treatment for the domestic industry and the existence of a sizeable counterfeit industry. In addition, the unstable political climate and widespread corruption also hamper multinational activities.

Given the above factors, local producers - led by three key companies - will continue to meet around 60% of the country's demand for pharmaceuticals, with consolidation in the sector expected to continue, under pressure to meet the 2009 Good Manufacturing Practice (GMP) deadline. One of the local leaders, Zdravlje Actavis, opened a new distribution centre in late 2007 in a bid to meet the growing domestic demand for medicines as well as to accommodate the pending registration of over 50 of its products.

Multinationals will, on the other hand, remain present in the market through acquisition of local firms as well as imports.