Slovenia Pharmaceuticals and Healthcare Report Q3 2009

In BMI's Business Environment Ranking table adjusted for Q309, Slovenia continued to improve its position in the Central and Eastern European (CEE) matrix and ranks 9th, up from 11th and 12th in the previous two quarters respectively. However, the country's improvement was due more to a decline in other countries' relative scores, rather than a major change in Slovenia's business environment, though the country still ranks 37th globally, out of the total of 71 markets surveyed by BMI. Slovenia's attractiveness suffers from a saturated and small market size and low forecast growth, which will hamper any major foreign investments in the company, as well as dominance of just two players - namely Krka and Lek - although the latter is foreign owned.

Additionally, registration delays in Slovenia are longer than in many other CEE countries, which - coupled with strong encouragement of generics - has already led to some multinationals to sideline Slovenia, despite at one point having chosen the country as a platform to launch their innovative pharmaceuticals. While the issue is being addressed, following the publication of a report by the country's court of audit, any changes to the registration environment will take time. Nevertheless, in the medium- to longer-term, the endeavour to ensure adequate availability of medicines - including improvements in authorisation procedures, pricing policies, reimbursement classifications and the optimisation of international referencing - should work to improve access to market for pharmaceutical companies.

In addition to highlighting regulatory shortcomings, the March 2009 report by the Audit Court also raised concerns that funds for medicines were not being spent effectively, highlighting the fact that data on the use of medicines, particularly in hospitals, was in need of improvement. Addition, the review of price calculations for around 50 medicines found some discrepancies, which are likely to be targeted by public healthcare system authorities. Reimbursement system is already strict, with many foreign companies critical of the bias towards domestic drugmakers.

On an economic front, in line with downward revisions to our eurozone economic growth forecast, we now expect the Slovene economy to contract by a real 1.7% in 2009 - its first recession in 17 years.

While we expect a recovery back into positive territory by 2010, we caution that trend growth is likely to settle below 3.5%, well below the 2002-2007 average of 4.7%. Moreover, we caution that despite our revision, the risks remain firmly to the downside. As Slovenia's consolidated budget fell back into deficit in 2009, posting a shortfall of EUR0.09bn (0.3% of GDP) for the full year, the authorities are likely to become more frugal with their healthcare and pharmaceutical funding.