Industry Trend Analysis - Public Funding Deficit Poses Risks To Drugmakers - FEB 2018

BMI View: The developed nature of the Czech Republic's healthcare market presents opportunities for innovative drugmakers ; however , increasing cost containment will attenuate growth potential. A growing deficit in public healthcare funds will demand either an increase in employee contributions or aggressive cost savings, both of which pose downside risk to market growth. Growth will remain repressed relative to its CEE peers but above its Western European neighbours.

The focus on healthcare spending efficiency will persist into 2018 in the Czech Republic, placing additional pressure on drugmaker revenues. Aligning with our long-held forecast for healthcare expenditure growth in 2018, Minister of Health Miroslav Ludvik announced in October 2017 that public health insurance will benefit from an increase in funding to the tune of CZK15-16bn (USD697-743mn) in 2018. However, despite this rise in spending by 5.9% year-on-year, the provision of care and funding for additional medicine reimbursement will be largely unaffected. We note that public health insurance expenditures account for in excess of 90% of total public health expenditure, with the remainder allocated to the Ministry of Health's centralised budget; as such, public health insurance expenditure is a strong proxy for total public health spend.

According to the Memorandum on Financial Stabilisation of the Czech Health Service (October 11 2017), healthcare wages will be increased by 10% in 2018. Indeed, of the additional CZK15-16bn allocated to public healthcare funds in 2018, a vast majority will be apportioned to wages:

  • Cost Containment To Rperess Growth
    Czech Republic: Healthcare Expenditure Forecast
    f = BMI forecast. Source: World Health Organization (WHO), BMI

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