Croatia Pharmaceuticals and Healthcare Report Q3 2008

Summary

In BMI's new Q308 Business Environment Rankings for the 17 major Central and Eastern Europe (CEE) markets, Croatia is in joint 13th position, again sharing this place with Lithuania. Despite being relatively well-developed, the Croatian pharmaceutical market remains judged as one of the least desirable investment destinations in the region due to its small size and spending per capita, being placed above only Ukraine, Kazakhstan and Serbia. However, European Union (EU) accession negotiations have the potential to improve operating conditions in the country and reduce the protection enjoyed by the local industry.

In the meantime, generics, mostly of the relatively expensive branded variety, remain responsible for over half 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 Generally speaking, the forecast period will witness a continued dominance of prescription medicines, although over-the-counter (OTC) drugs are rapidly gaining in 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.

In terms of the domestic industry, difficult operating conditions at home have prompted companies to change their strategies. To this end, in February 2008, Belupo - the second-largest Croatian player - merged with Bosnia's wholesaler Farmavita, as part of its strategy to strengthen its regional position.

The merger will allow Belupo to improve its export capacity, with the company aiming to export around 30% of its output by 2010. Similarly, dominant local player Pliva, which was recently acquired by US Barr Laboratories, is already divesting its operations in non-key markets, instead focusing on core activities in established markets.

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