BMI View: Market growth, instigated by Germany and other leading EU members, is expected to have a positive impact upon pharmaceutical trade in the Czech Republic in the coming years. With healthcare measures focusing on transparency and reimbursement, access to private healthcare will be favourably impacted, allowing patients more increased access to medicines. On a similar note, legislation surrounding the export of drugs with limited availability is being tackled. Progressive reimbursement policies have also been put in place to spur on investment in the development of orphan drugs that treat rare diseases - a field that is proving to be lucrative .
Headline Expenditure Projections
Pharmaceuticals: CZK76.77bn (USD3.43bn) in 2014 to CZK78.83bn (USD3.58bn) in 2015; 3.1% in local currency terms and 5.2% in US dollar terms. Forecasts revised upwards from last quarter.
Healthcare: CZK280.80bn (USD12.54bn) in 2014 to CZK284.72bn (USD12.94bn) in 2015; +3.0% in local currency terms and 5.1% in US dollar terms. Forecasts revised upwards from last quarter.
Risk/Reward Inde x
In Q4 2015, results for the Czech Republic on BMI's Risk/Reward Index come in with a Reward score of 40.8 out of 65, a Risk score of 22.4 out of 35, and an overall score of 63.2 - ranking it as the most attractive market in the Central and Eastern European Region. Drugmakers will face challenges in the Czech pharmaceutical market as a result of pricing pressure, poor access to the market and increasing generic substitution. Additionally, adopted and proposed amendments to healthcare and insurance laws have attracted criticism from the pharmaceutical sector. The Czech pharmaceutical market will nevertheless remain relatively attractive and rewarding due to the regionally high pharmaceutical expenditure per capita compared with its neighbours, an ageing population and a favourable urban-rural distribution.
Key Trends And Developments
In July 2015, The Czech health ministry announced that it is working to amend current legislative laws aimed at bringing more transparency to the reimbursement of medical devices and supplies from the public health insurance system. The Czech Institute for Drug Control (SUKL) will set the level of reimbursement through administrative proceedings and the reimbursement itself would be based on a price referencing system. Under the amended law, medical devices will be categorised into various reimbursement categories and an annexure to the amended law will specify categories that are eligible for full reimbursement. The new reimbursement system is expected to save the country approximately CZK4bn (USD162.7mn) annually, noted the ministry.
The Czech Republic will remain the most accessible market in the medium-term for orphan drugmakers in Central and Eastern Europe due to the progress made in its national strategy for rare diseases, as well as its progressive reimbursement policies towards orphan drugs. Furthermore, improving patient access to genetic testing and the establishment of national patient registries will widen the commercial opportunity for orphan drugmakers in the country. However, the same drugmakers will need to adopt looser pricing policies given the strict cost-benefit hurdle that the Czech health technology assessment agency has established for reimbursing orphan drugs.
In July 2015, The Czech health ministry has announced its plans to amend the current law surrounding drugs to prevent shortages as a result of parallel exportation. Under the proposed changes, the Czech Institute for Drug Control (SUKL) will compile a list of medicines whose availability is threatened by parallel exports, with the list to be updated on a quarterly basis. Drug suppliers will then be required to report the re-exportation of such medicines to the SUKL in advance, and could be banned from re-exporting the drug if its availability is limited. Distributors could face a fine of around CZK20mn (USD0.81mn) or lose their licence for up to two years if they fail to report the re-exportation of drugs.
BMI Economic View
Credit growth in the Czech Republic will pick up steam in the coming quarters, as the brightening growth prospects will boost credit demand. The country's banking sector is well placed to meet growing credit demand due to its healthy fundamentals, such as high capital adequacy ratios, robust asset quality and a strong sovereign profile.
BMI Political View
A recent no confidence vote in the Czech Republic's centre-left government would likely diminish the popularity of Finance Minister Andrej Babis, and his ANO party - the junior coalition partner in the coalition. This, however, is likely to result in a shift in the balance of power towards the ruling CSSD party, instead of rise in support for the opposition parties.