Estonia Pharmaceuticals and Healthcare Report Q3 2009 - a new market research report on companiesandmarkets.com
In the Business Environment Ranking matrix for Q309, Estonia remains seventh out of the 20 major markets surveyed in the Emerging Europe region. The countrys overall pharmaceutical rating figure continued to fall over the past few quarters, in line with worsening economic conditions and their impact on the small market, which is based on a population of just 1.34mn and of modest relative annual incomes. Therefore, over the coming months, we expect Estonia to continue losing its attractiveness for drugmakers, as the financial crisis forces the authorities to limit availability of funding for the largely reimbursement-based public healthcare system.
In fact, following the February 2009 announcement that the system of sick leave compensation would be the target of a scheme to save EUR29mn, the authorities indicated that the countrys Health Insurance Fund (HIF) should experience further budget cuts. More specifically, in April 2009, the government stated that lower tax collection revenues required an additional EUR25mn reduction in public healthcare sector budgets. Estonia is also cutting second-tier pensions in line with similar developments in Latvia and Lithuania. In the meantime, we expect real GDP growth to contract by 10.3% in Estonia during 2009, while disinflationary trends remain firmly in place.
Consequently, we forecast that the countrys pharmaceutical market, valued at EEK2.99bn (US$280mn) in 2008 at consumer prices, will grow at a compound annual growth rate (CAGR) of 5.14% in local currency terms. Its US dollar value will suffer, due to the weakening of local currency, posting a negative CAGR of -3.46% in the same period.
The need for cost-containment will likely boost the share of generics by the end of the forecast period, although the faster development of the segment will be constrained by pricing and reimbursement factors. In the meantime, while the government is aiming to reduce pressure on the public healthcare system through the encouragement of self-medication, rising unemployment and falling consumer confidence will result in falling short-term sales of over-the-counter (OTC) medicines.
In terms of industry and company news, Estonias leading medicines producer which is nevertheless already in foreign hands may shut down its local production facilities. Latvian pharmaceuticals enterprise Grindeks, which owns Estonian Tallinna Farmaatsiatehas (Tallinn Pharmaceutical Plant), reported that it may close the plant and shift the production of ointments from Estonia to Latvia, with the decision to be made by the end of the year. Grindeks has already moved some production facilities abroad, making Estonia even more dependent on imports. The already small drug exports, in the meantime, will suffer from falling external demand.