Industry Trend Analysis - Healthcare Issues Limit Drugmaker Revenues Over Short-Term - APR 2017

BMI View: Azerbaijan ' s healthcare sector is at an inflection point as it attempts to reform the financing model away from a state-run system to a compulsory healthcare insurance model. Highlighting ongoing challenges for drugmakers operating in Azerbaijan, i n the short term, the country 's population will continue to be plagued with poor access ibility to healthcare services with high levels of regional inequality. However, over the longer term access to healthcare is expected to increase given the reform proposals. The long-term outlook for drugmakers is dependent on the success of these reforms .

Pharmaceutical firms will face significant challenges in Azerbaijan due to the inefficient healthcare sector. Azerbaijan's health system is defined by a lack of funding. The country's healthcare expenditure as a share of GDP, at 7.15% in 2016, is high relative to its CIS peers (regional average 5.90%). However, this is distorted by the fact that Azerbaijan's economy has been severely hit by the sharp reduction of oil prices between 2014 and 2016, resulting in the country experiencing a 3.8% reduction in real GDP in 2016. On a per capita basis Azerbaijan spends just USD259 on healthcare, which is closely in line with other markets in the region that have also suffered from severe underfunding issues. Moreover, with pharmaceuticals accounting for less than 15% of total healthcare expenditure, the country will remain a low-reward market.

Healthcare provision is predominantly provided by the state, overseen by the Ministry of Health. Medical facilities, such as hospitals and polyclinics (outpatients only), administer services free of charge, funded through the government budget. Independent and private healthcare facilities do exist; however these make up an insignificant proportion of the total market on a value and demand perspective due to the high levels of poverty and low average income.

An Unattractive Market
CIS Countries: Pharmaceutical Market Size (USDbn)
Source: BMI

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