Boston, MA -- (SBWIRE) -- 12/27/2012 -- Proposed legislative amendments to healthcare and pharmaceutical policy are negative for pharmaceutical companies operating in the Czech Republic, though not as damaging as harsh price erosion mechanisms introduced in previous years. The government will continue with measures designed to tighten public expenditure across the board, while the challenging economic outlook will negatively affect the availability of private funding for medical products and services. Despite mediumterm concerns, after 2012 we expect more normal growth to resume. We believe the need for innovative medicines will drive growth well above the rates of expansion achieved in Western Europe over our 10- year forecast period.

Headline Expenditure Projections

- Pharmaceuticals: CZK80.71bn (US$4.56bn) in 2011 to CZK79.74bn (US$4.26bn) in 2012; -1.2% in local currency terms and -6.7% in US dollar terms. Local currency forecast moderately revised upwards due to stronger reported growth in Q112.
- Healthcare: CZK298.26bn (US$16.86bn) in 2011 to CZK299.85bn (US$16.01bn) in 2012; +0.5% in local currency terms and -5.1% in US dollar terms. Forecast moderately down due to macroeconomic factors.
- Medical Devices: CZK28.03bn (US$1.59bn) in 2011 to CZK28.47bn (US$1.52bn) in 2012; +1.6% in local currency terms and -4.1% in US dollar terms. Forecast moderately down due to macroeconomic factors.

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Risk/Reward Rating: Despite a weak outlook for the Czech Republic's pharmaceutical market, it has reclaimed the top position in the Central and Eastern Europe (CEE) Pharmaceuticals and Healthcare Risk/Reward Ratings (RRRs). However, the Czech Republic's leading position is not due to any improvement in our assessment of the risks and rewards for this market, but rather the worse assessment for Poland. For the Czech market, the prospect of pricing pressure, impeded market entry and increased generic substitution have all contributed to a relatively flat outlook over the next few years.

Key Trends And Developments

- Historic and planned changes to the VAT rate applicable to pharmaceuticals may complicate the assessment of actual market growth. The Czech Republic increased the VAT applied to pharmaceuticals, including prescription and over-the-counter (OTC) medicines, from 10% to 14% at the start of the 2012, and is expected to increase it to 15% at the start of 2013. While our market size calculations are for consumer prices including VAT, we do not include changes in the VAT rate in projected figures, and our growths for 2012 and 2013 exclude the expansion of the market due to changes in tax. This enables a more accurate comparison of the actual growth rates for manufacturers and retailers.

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