Summary
The Serbian pharmaceutical market is extremely underdeveloped in European terms. The market actually contracted in the aftermath of the June 2006 dissolution of the State of Union of Serbia and Montenegro, with prices continuously revised, mostly downwards. However, renewed national confidence after independence is likely to promote economic development. In 2005, prescription medicines accounted for 86% of the Serbian market, with generics representing approximately one-third of the market in value terms.
BMI expects the market to exceed US$610mn in 2010, up from US$437mn in 2005. Generics will continue to make gains in terms of both value and volume. The penetration of branded medicines will be improved by gradual alignment of the local intellectual property (IP) environment with international standards, stimulated by the country's desire to join the European Union (EU). However, poor economic performance and the fragile political climate will remain obstacles to higher levels of foreign direct investment (FDI), although the country has become an attractive location for clinical trials.
In regional terms, BMI's adjusted Business Environment Rankings countries places Serbia last out of 14 Central and Eastern European (CEE) states surveyed. The country lags behind a number of other markets in the region, not just the more advanced markets such as Hungary, but also its more immediate neighbours, such as Croatia. From the point of view of research-based multinationals, negative factors include the strong local generics manufacturing sector, widespread deficiencies within the country's regulatory infrastructure, preferential treatment for the domestic industry and the existence of a sizeable counterfeit industry. Rising customs duties and high inflation will continue to place downward pressure on pharmaceutical margins and revenues, as will the latest round of correctional price cuts, which were introduced in October 2006. They disproportionately affect foreign-made drugs, aligning the Serbian price with those in reference countries, including Slovenia.
Local producers meet the bulk of the country's demand for pharmaceuticals. Multinationals mostly deal in imported medicines, although in recent months, foreign companies increased their involvement in the market with acquisitions of domestic players. The trend is likely to continue at a modest pace, boosted by privatisation initiatives but also dependent on wider economic and political environment. However, threatening the 'basic fabric' of the industry, Serbia's pharmaceutical companies are unlikely to meet the 2009 deadline to adopt European standards of good manufacturing practice (GMP) because of the scale of reconstruction involved and the estimated costs of at least US$125mn.
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