Serbia's pharmaceuticals and health care market to top $1.69 billion in 2013

The eastern European state of Serbia continued to improve its placement, and is now found in ninth position, out of the 20 key markets surveyed in the Emerging Europe region by Business Monitor International's fourth quarter 2009 Business Environment RatingP matrix

Key selling points of the Serbian market include its advantageous geographical position, which allows easy access to the rest of Europe, a largely untapped pharmaceutical market, and the low cost and abundant supply of skilled labor. However, Serbia will continue to be a challenging market for foreign investors, partly due to the prevalence of corruption, a large-scale black-market economy, and the poor state of the country's infrastructure. The publisher has recently downward revised its Serbian real Gross Domestic Product growth forecast for 2009, now expecting a sharper contraction of 3.8%, which will be negatively impacted by faltering aggregate demand, reduced access to credit, and lower levels of foreign investment.

Additionally, Serbia's market is characterized by a general trend of downward pressure on prices and an emerging regulatory environment, which often marginalizes foreign players. All of those factors, in combination with the challenging economic environment, will have an impact on pharmaceutical market performance over the coming years.

Nevertheless, BMI forecasts that pharmaceutical sales in Serbia will continue to grow over the next five years, registering a compound annual growth rate (CAGR) of 8.72% in local currency terms. From being worth some 74.9 billion dinar ($1.2 billion) at consumer prices in 2008, the value of the market is expected to top 113.77 billion dinar 2013. Due to limited financing available for health care in general (both in the private and the public spheres), generics and over-the-counter (OTC) medicines are forecast to post the strongest gains.

Govt commitment to modernizing health care

Still, the government appears committed to modernizing the country's health care. By May 2009, six institutions were connected to the new computerized medical information system for hospitals, allowing for a much faster transfer of medical information. The project is part financed by the World Bank, which is also funding a further update of hospital networks, provision of technical assistance for doctors and medical staff and help with the evaluation of the new diagnosis-related groups (DRG)-based payment system for hospital use.

In the meantime, the Serbian pharmaceutical market continues to attract foreign players. In July 2009, leading Macedonian drugmaker Alkaloid AD reported that its plans to begin drug production in Serbia. The 4 million-euro ($6.4 million) project, which will be realized in cooperation with Serbian Infarm, will eventually result in the manufacture of 19 types of drugs. According to Alkaloid, which already operates a subsidiary in Serbia - Alkaloid doo- the portfolio will target export markets, primarily Russia.

Around the same time, the government announced that the planned sale of local drug producer Galenika will be scheduled for September 2009. The majority stake will be sold through tender, rather than through the initial offer of stocks, as previously planned. Greek company Alapis - which owns a drugmaker and a wholesaler in Serbia - has already been linked with the Galenika purchase, although other European generic players are likely to join in the bidding, says BMI.