Serbia: Ready to Flourish

Aug 01, 2011

Dance, oil on canvas (Copyright Mirjana Petrovic)

Serbia has had an undoubtedly troubled history since the breakup of Yugoslavia in the early 1990s. A costly war and ensuing UN sanctions have left the country's economy a few years behind those of its regional counterparts. The subsequent global financial crisis in the late 2000s resulted in another hit to many of the country's key industries, including Serbia's pharmaceutical and healthcare sectors. These historical events explain some of the key issues that underlie the sectors' current challenges, such as non-liquidity and inadequate funding. And while Serbia's population currently amounts to roughly 7.3 million inhabitants, "it is a little-known fact that 1.2 million people have no income, and that the state provides 520 dinars (roughly $7.30) per year for them," asserts Serbia's Ministry of Health.

In an attempt to address the liquidity crisis in the Serbian healthcare industry, the government of the landlocked republic recently decided on a 10% price clawback across its drug reimbursement list. It has created an atmosphere of unpredictability for the pharma industry in the country. However, whether it is to grow the product portfolio, to expand into new markets via Serbia as a gateway, or to reduce manufacturing costs, both the national industry and the multinational companies (MNCs) in Serbia still see a huge potential for this roughly $1.21 billion Eastern European market.


Zoran Stankovic, Minister of Health, Republic of Serbia
Dragomir Marislavljevic, executive director of the Domestic Drugs Producers Association in Serbia, gives one important reason for the ongoing positive interest in the Serbian market. "For centuries, Serbia served as a bridge between East and West, and this is still an advantage to be capitalized on," he says. "Collaborations between the world's largest pharmaceutical companies and Serbia's domestic industry have been happening for over 70 years. Today, with the possible exception of biotech medicines, there is no product on the market that cannot be produced by the domestic Serbian industry. The potential for collaboration here is very high," Marislavljevic adds.

Dragomir Marisavljevic, Executive Director, Domestic Drug Producers Association
As general manager of Serbia's No. 3 flagship pharma company, Nenad Ognjenovic agrees with this view. Overlooking Belgrade's municipality of Zemun from the Galenika headquarters, Ognjenovic expresses how it is his personal wish to see as many MNCs as possible present in Serbia. Explaining why, he states that "we do drug manufacturing for all world markets here. While doing so, we also enjoy cheaper inputs; we have a relatively cheap labor force, are in close proximity to the EU, and have more privileged relationships with Russia and the Commonwealth of Independent States (CIS) countries, because of Free Trade Agreements (FTA)."

Per capita total expenditure on health
The welcoming attitude toward MNCs also explains the so far unsuccessful attempt of the Serbian government to privatize Galenika by selling a majority stake to international pharma majors. Hemofarm Group and Zdravlje, the two other flagship Serbian players, have been more successful at completing a sale to German-based STADA Arzneimittel and Icelandic major Actavis. Miomir Nikolic, current managing director at Zdravlje Actavis, praises the $50 million its parent has invested in the Serbian facilities since the takeover in 2002. "The positive experiences of aligning the company with the European standards and the synergy that we now have as part of the internationally renowned MNC Actavis also served as an example and guideline for the community which is preparing to join the EU. We have shown that this demanding process is a true investment into the future. Today, Zdravlje Actavis continues to supply its domestic Serbian market with high-quality products in compliance with EU requirements, while at the same time opening the door to a great European Union market," Nikolic says.

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