BMI View: Pharmaceutical manufacturers will face increased pricing pressures from the National Health Insurance Fund ( NHIF ) as we expect a wave of cost-containment measures to be adopted. The NHIF will leverage its purchasing power to reduce its runaway pharmaceutical expenditure, with negative implications for the sector's growth profile. We expect generic drug penetration to rise and patented drug sales to slow considerably as the NHIF rebalances its expenditures.
Headline Expenditure Projections
Pharmaceuticals: BGN2.53bn (USD1.72bn) in 2014 to BGN2.46bn (USD1.38bn) in 2015; -2.7% in local currency terms and -19.5% in US dollar terms. Forecast revised downwards from Q 1 15.
Healthcare: BGN6.04bn (USD4.10bn) in 2014 to BGN5.97bn (USD3.35bn) in 2015; -1.2% in local currency terms and -18.3% in US dollar terms. Forecast revised significantly downwards from Q115.
Risk/Reward Ratings: Our proprietary Risk/Reward assessment tool has been gradually adjusted to be increasingly transparent and sensitive in relation to potential Rewards. In Q3 2015, Bulgaria's Risk Reward Index (RRI) score (48.2) has fallen below the regional average (49.5). It has also fallen in our RRI rankings from eighth in Q215 to twelfth in Q3. The scores take into account the challenges for drugmakers operating in Bulgaria, such as the downward pressure on the prices of drugs and the uncertain political outlook.
Key Trends And Developments
In April 2015, at a meeting with the Bulgarian generic drugmaker association BGPharmA, the health minister Dr Petar Moskov stated that the health ministry would introduce five new measures within amendments to the Health Insurance Act to curb pharmaceutical expenditure.
In April 2015, the Bulgarian health ministry announced plans to merge the management of nine hospitals in Sofia. The move will result in approximately 350-400 job cuts. Under the current plan, all nine state hospitals around Aleksandrovska are set to be merged in terms of administration, but hospital operations will remain separate.
In March 2015, the Bulgarian Health Ministry established a working group to work out a more relaxed clinical trial regime in the country in order to shorten the time it takes for the receipt of approvals. Currently, pharmaceutical companies have to wait for more than three months to secure approval for a clinical trial. The proposed amendments are expected to reduce the waiting time to two months.
In February, the Bulgarian government approved the establishment of a centralised public procurement body tasked with offering tenders for inpatient drugs. The entity will enter agreements with drug distributors based on the requirements of hospitals and will be able to negotiate lower prices for bigger supplies of certain drugs.
In January 2015, Bulgaria passed legislation amending the Health Insurance Act that shored up the national health insurer's funding over the long-term, established a basic package of benefits for insured Bulgarians, increases the state's contributions to healthcare insurance from 2016 and mandates that the National health Insurance Fund (NHIF) negotiate discounts for pharmaceuticals that are to be added to the Positive Reimbursement List.
In January 2015, Petar Moskov stated that the health ministry was preparing a major change in the reimbursement model. At present, the model is based on reimbursing consumption. Taking inspiration from other Western European countries, the ministry wants to introduce a scheme through which the NHIF will establish the reimbursement rates for patient outcomes, transferring some of the risk to pharmaceutical companies.
BMI Economic View
The boost to Bulgarian household purchasing power from low global oil prices and strong real wage growth will enable consumer spending to support modest headline growth rates over the next two years. However, an over-valued currency, a highly indebted private sector and a weak capital stock will remain considerable hindrances to growth.
BMI Political View
Bulgaria's centre-right minority coalition government will not enjoy a honeymoon period. Rather, the government will have to manage a banking collapse, un-freeze EU funding and reform the country's ailing energy sector.