Czech Republic Pharmaceuticals and Healthcare Report Q4 2010

Czech Republic Pharmaceuticals and Healthcare Report Q4 2010

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In BMI's Pharmaceuticals & Healthcare Business Environment Ratings for Q410, the Czech Republic has retained its top position and has extended its lead over second placed Poland. The long-term outlook for pharmaceutical sales has improved since Q310, mainly as a result of the healthier macroeconomic indicators. BMI has revised up the 2010 real GDP growth forecast to 2.7%, from 2.2% previously, as the Czech Republic continues to enjoy robust exports data on account of a improving German economy. The compound annual growth rate (CAGR) for Czech drug market expenditure now stands at 6.05% in local currency terms and 6.98% in US dollar terms between 2009 and 2014.

The combination of a concurrent high Rewards score, which positions the Czech Republic second only to Russia in this category, and a superior Risks score behind only Slovenia and Estonia are weighted and combined to deliver the Czech Republic's top position in the Pharmaceuticals & Healthcare Business Environment Ratings for Q410.

The Czech Republic's pharmaceutical market grew by 9.0% in local currency terms in 2009 to CZK79.16bn (US$4.16bn) at consumer prices. Based on the improved macroeconomic data and early figures from the State Institute for Drug Control (SKL), our Q410 forecast for 2010 drug expenditure has improved moderately to 7.1% growth to CZK84.80bn (US$4.30bn), compared to 6.2% growth forecast in the Q310 report.

Following the legislative election in May 2010, the outlook for healthcare and the potential for reforms were examined by BMI. The new centre-right coalition's plans for the healthcare sector in the Czech Republic are generally favourable in terms of financial sustainability and the positive implications for the healthcare and pharmaceutical industries. However, BMI remains concerned that the strength of the healthcare reform programme is dependent on the delivery of a more comprehensive and exhaustive budget plan, as well as definitive actions to deliver the planned reforms.

Government departments face budget cuts of 10% from 2011 but the treasury has ring fenced health insurance contributions. Healthcare is viewed as a major priority for the government, with extensive reform programmes expected in the medical services sector and the pensions system. On the macroeconomic front, growth is expected to slow in 2011 as the government pursues fiscal austerity and export growth moderates. While we regard the government's austerity drive as positive for the Czech Republic's long-term macroeconomic stability, it will undoubtedly be a drag on headline growth due to lower government consumption and the depressing effect this will have on private consumption growth.

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