In our regional Business Environment Ratings (BER) matrix for Q210, Estonia is ranked 12th of the 20 key markets within Emerging Europe, up from 14th in the previous quarter. The improvement is a reflection of the country embarking upon a gradual economic recovery, although some risks have emerged in recent months.
These include the announced introduction of a new reference pricing system for reimbursement purposes, which will be based on active ingredients and route of administration, and speedier approval times for parallel imports. If the new regulations are implemented in a timely fashion - they are scheduled for April 2010 - we will update our forecasts accordingly.
Currently, we expect the Estonian pharmaceutical market to increase by a modest compound annual growth rate (CAGR) of 5.56% in local currency terms, rising from EEK3.52bn (US$315mn) in 2009 to EEK4.62bn (US$372mn) in 2014.
The national healthcare insurance body will continue to focus on costcontainment, both through direct budgetary reductions and the shifting of financial responsibility for medical services onto the patient (such as the recent increase in fees for hospital stays). Additionally, the increase of market values as measured in US dollars is under threat from the expected weakening of the Estonian kroon.
The changes to the reference pricing system, expected in April this year, will likely have the most damaging effect on the patented market in Estonia, which currently represents 40.5% of the total in value terms. Further challenges will emerge in the form of the recently-approved requirements that originator firms disclose information upon request about drug efficacy and safety to drugmakers with equivalent generic marketing authorisations.
Therefore, through to 2014, we forecast that this figure will fall to just over 38%. On the other hand, generics medicines are expected to increase their share of the overall market, from 43.7% estimated in 2009 to over 46.5% in 2014. While this represents CAGR value growth of 6.89% in local currency terms, it is but half the figure posted in the 2005-2009 review period. On a positive note, retail pharmacies started dispensing medicines on electronic prescriptions at the start of 2010, which should eventually result in lower administrative costs and therefore more funds for healthcare and medicines.
Written prescriptions are expected to be phased out within the coming months, with most Estonians already using electronic healthcare cards (eIDs) for medical insurance purposes. Around the same time, responsibilities for medical devices have been transferred from Estonia's medicines agency (Ravimiamet) to the newly created Health Board (Terviseamet).
Although some teething problems are to be expected, considerable efficiencies are likely to be realised in the longer term. Finally, restrictions on the advertising of over-the-counter (OTC) medicines have been lifted, which should stimulate the development of this market segment.