Romania: Staking its Claim - Pharmaceutical Executive

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Romania: Staking its Claim


Pharmaceutical Executive


GOING DUTCH?

"We have a major dysfunction. Underfunding is recognized, there are problems regarding transparency in the allocation of funds and the inefficient use of these funds, and inequities exist in access to health services—especially in rural areas. Thus, patient satisfaction is quite low," states Romania's new Minister of Health, Ladislau Ritli. And while institutions such as the Romanian National Health Insurance House (CNAS) have been lobbying for rectification of the insurance budget, President Traian Băsescu has denied additional financial resources before the Ministry of Health (MOH) demonstrates adequate control of its spending.


2010 funds allotted for medical products, equipments and services
Is there a way out of this vicious circle? According to Nicolae Lucian Duta, CNAS's president, increased involvement from the private sector could help. While a number of different routes can be considered, Duta presents two possible scenarios. "The first one is that CNAS remains the main public insurance fund that will finance a basic benefit package, while the private health insurance market fulfils a complementary or supplementary role. The other one is to move towards a healthcare system based on the Dutch model, where CNAS will become a regulatory body in charge of distributing the funds between several private insurance funds, which will offer variants of a basic benefit package."


Nicolae Lucian Duta, President of CNAS
"With regard to public expenditure on medical treatment, Romania regrettably holds the last place in the EU. Current expenditures are roughly €70 ($97) per person per year, which is a very low figure. At the same time, the public system is using most of the budget to purchase very expensive drugs. Therefore, a lot of people from the industry have come to believe that an important shift in Romanian public health policy is imminent," explains Laurentiu Mihai, executive director of the Romanian Association of Generic Medicines Producers (APMGR).

As the MOH has been urged to free up government funds through greater use of generic medicines, Romania has started viewing its drug spending differently. This eagerness has sparked the interest of the world's leading generic players. India's Dr. Reddy's Laboratories, for example, appointed Cristina Garlasu as early as 1995 to build a platform for growth in Romania.


Laurentiu Mihai, Executive Director of APMGR
Set to cross the $20 million turnover milestone this year, the country general manager reflects on the importance of Romania. "Within Dr. Reddy's global operations," Garlasu posits, "Romania forms part of the so-called G8 of countries that the company focuses on worldwide." Ascribing the attractiveness of Romania to the market's growth potential and the overall profitability of the business, Garlasu now looks at a compound annual growth rate (CAGR) of 30% through 2015, which will potentially include inorganic growth opportunities. "There is big potential in the Romanian market, which still has to grow in value and structure. This means that we also expect growth in the new therapeutic areas of success. For instance, Dr. Reddy's is successful with various biologic products in India, and I hope to be able to provide such products to patients in Romania one day. As a market, I feel we are now at the bottom and can only move up from here," concludes Garlasu.

The challenge for Romania's generic players is to ensure that the proper generic medicines reach patients with the support of the country's retail sector. At present, government has increasingly delayed its payments to the retail sector, which in turn creates delays with the wholesalers and eventually the manufacturers. "At the end of the day, the pharmaceutical industry in Romania has supported the healthcare system by financing it with a record €1.15 billion ($1.59 billion) in 2010," explains Makis Papataxiarchis, managing director at Johnson & Johnson Romania. Lacking liquidity has driven a high number of pharmacies into insolvency or bankruptcy, whereas surviving pharmacists consequently prefer selling innovative drugs to generate better cash flow. And all this when only 11 million out of the 21 million people in the country have proper access to medicines.

Apart from retailers, the long payment terms have pushed smaller, cash-hungry wholesalers and distributors to tap into parallel trade opportunities (accounting for an estimated 15% to 25% of the market). Now at a record 330 days, the industry remains hopeful that a recent EU Directive will take payment terms down to EU standards of 60 days by 2013. If successful, this will ensure better availability of cheaper medicines to the Romanian population.


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Source: Pharmaceutical Executive,
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