Moldova Pharmaceuticals and Healthcare Report Q2 2012

BMI View: Moldova’s pharmaceutical market recorded stronger growth in 2011, but its small marketsize and its status as the poorest countries in Europe limit its attractiveness as a destination forinvestment. We maintain our view that the pharmaceutical market will achieve elevated growth over thenext five years and this view has been reinforced by the latest available trade data. However, the countryeconomic growth path is dependent on the stability of the region partly because of its export supportedeconomy and the fact that almost 25% of national income is based on workers’ remittances fromemployment in Romania and Ukraine. The government is generally dedicated to healthcare reform butthe country faces political instability and, despite recent economic growth, remains the poorest country inEurope.

Headline Expenditure Projections

.. Pharmaceuticals: MDL2.54bn (US$216mn) in 2011 to MDL2.76bn (US$214mn); +8.8% inlocal currency terms and -1.1% in US dollar terms. Forecast upgraded from Q112 due to strongimport growth in 11M11.

.. Healthcare: MDL8.31bn (US$709mn) in 2011 to MDL9.17bn (US$711mn); +10.4% in localcurrency terms and 0.3% in US dollar terms. Forecast and historical figures upwardly revisedbased on new government healthcare fund budget projections

.. Medical devices: MDL543mn (US$45.8mn) in 2011 to MDL600mn (US$50.6mn); +10.4% inlocal currency terms and +0.3% in US dollar terms. Forecast improved due to analystintervention,Business Environment Rating: In our Q212 ratings, Moldova remains near the bottom of regionalratings, ranked 19th of the 20 CEE markets analysed. Moldova’s industry rewards score has improved andthe Risk/Reward score is up by 5.4% to 43.3 out of 100 which has improved due to more encouraging2011 trade data.

Key Trends And Developments

On January 18 2011, the Moldovan Ministry of Health announced its priorities for 2012. The ministry ofapproved the focus on the improvement of health care finance mechanisms, as well as upgrading theprimary healthcare systems to community health services as well as the development of the e-healthservices. Regarding the pharmaceutical market, the ministry has said that particular attention will begiven regulating pharmaceutical products on the market by promoting transparency in drug pricing andpurchasing them from public sources.

According to the Moldovan Minister of Health the price of drugs in pharmacies in 2010 increased by ahistorically low 0.75% as a result of the government decree in 2011, drug prices in pharmacies declinedby 2.7%. Though we note this is still below the significant contraction in drug prices the authoritiessuggested would occur back in January 2011 when fixed pharmacy and wholesale margins were firstannounced,

The IMF’s fourth review, staff report, published in February 2012, outlined government expenditureprojections for healthcare funding through to 2017. Our public healthcare expenditure forecasts remain inline with the IMF’s five-year projections in terms of y-o-y growth. Based on changes between the thirdand fourth review, we have boosted our healthcare expenditure outlook for 2012 to 10.4% growth, whiledowngrading our calculated public healthcare expenditure growth rate in 2011 to 5.4%.

BMI Economic View: We have raised our estimate for final economic growth in 2011 to 6.2%, from aprevious 5.3%, based on the positive national accounts data available for the first nine months of theyear. Growth is set to slow significantly in 2012 as recession in the eurozone weighs on the entire region,with Moldova's dependence on worker remittance inflows leaving it exposed to external risks.