BMI View: A focus on reining in Serbia's bloated public sector following an agreement with the IMF will inevitably lead to cuts in healthcare spending. Furthermore, Serbia's healthcare authorities will continue to cut prices to reduce their pharmaceutical expenditure as a means to contain healthcare costs. We expect the growth outlook for the Serbian pharmaceutical market to worsen in the short - term as household and government consumption decline.
Headline Expenditure Projections
Pharmaceuticals: RSD92.43bn (USD1.05bn) in 2014 to RSD97.15bn (USD872mn) in 2015; +5.1% in local currency terms and --16.6% in US dollar terms. Forecast unchanged from Q215.
Healthcare: RSD401.44bn (USD4.54bn) in 2014 to RSD415.54bn (USD3.73bn) in 2015; +3.5% in local currency terms and -17.9% in US dollar terms. Forecasts revised downwards from Q215 due to historical revision of data.
Serbia's Pharmaceutical Risk/Reward Index score for Q315 is 45.7 out of 100, making it the 15th most attractive pharmaceutical market in Central and Eastern Europe. This is a decline compared to Q215, where it was ranked 11th with a score of 50.1. The decline is primarily the result of the depreciation of the Serbian dinar against the US dollar and the subsequent impact of that on market values and growth rates as measured in US dollar terms. The country's overall score remains below the regional average of 49.5.
Key Trends & Developments
In June 2015, talks between the Serbian government and private investors fell through over the sale of state-owned drugmaker Galenika.
In May 2015, the health ministry announced that the prices of around 930 drugs in Serbia are set to become up to 30% cheaper. Prices for drugs related to Alzheimer's and Parkinson's disease, psychosis, depression, osteoporosis, migraine, benign prostatic hyperplasia, bacterial and fungal infections, bronchial asthma, chronic obstructive lung disease, and menopause were to be reduced. The lowering of these prices by the Republican Fund for Health Insurance follows the termination of the centralised procurement of medicines on the 2015 list.
In May 2015, Serbia's Minister of Health Zlatibor Loncar granted approval to the use of certain Cuban medicines and vaccines in the country. The decision was made during an official visit to Cuba as part of a delegation of Serbia's President Tomislav Nikolic. The two countries have also agreed, as part of a bilateral agreement, to jointly manufacture vaccines and medicines in Serbia. The agreement will enable direct collaboration between the healthcare systems of Cuba and Serbia.
In March 2015, Actavis was set to launch 25 new drugs in Serbia for treating cardiovascular diseases, female healthcare, neurological disorders and psychiatric medicines.
BMI Economic View
The Serbian government's fiscal consolidation drive will continue over the coming quarters. Although politically popular, the government will remain committed to cutting public sector wages and pensions to adhere to IMF loan conditions.
BMI Political View
Serbia's social stability will deteriorate in the coming months, and has prompted us to revise down our short-term political risk index for the country. Nevertheless, social instability will not result in the ousting of Prime Minister Aleksandar Vucic's cabinet, which will remain in power for the duration of its term ending in 2018.