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Volume 36, Issue 10
Though comparatively smaller when positioned against some of the country’s neighbors, the pharmaceutical market in the Czech Republic finds itself on a solid growth trajectory, with innovator drug developers grabbing a larger piece of the value pie in the traditionally generics- dominated setting.
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The Czech Republic, with its population of approximately 10.5 million, today ranks as the third most populous country within Central and Eastern Europe (CEE) after Poland and Romania. Outwardly many of the economic signs are positive. The country has experienced modest but steady GDP growth of between 0.5 and 2.7 per cent over the past four quarters in spite of the economic slowdown that has afflicted much of Western Europe and it's pharmaceuticals industry continues to assert itself boldly.
Recent data from the European Federation of Pharmaceutical Industries and Associations determines the overall market size as roughly USD 2.4 billion. Though comparatively smaller when juxtaposed against some of the country's larger neighbours, the growth trajectory nonetheless appears rosy with pharma sales widely predicted to increase by as much as USD 1.27 billion by 2020. What's more, in a marketplace historically dominated by cheap generics, innovator drug developers are also performing well and now officially account for as much as two thirds of its value despite possessing only one third of its volume.
One commentator who has long been anticipating a picking up of the business winds and detects solid evidence of the advancement of innovation-driven pharma is Karel Kucera, CEO of the Czech Business and Investment Development Agency, CzechInvest. "We increased the number of employment opportunities in high-end industries by 250 percent since 2014, making the healthcare and life science industry a strategic pillar of development because the investments go beyond manufacturing", highlighting that pharma R&D is an "integral part of high-end value chains," he notes.
Such developments only serve to complement the many longstanding positive structural attributes commonly associated with the Czech Republic: namely a strategic geographic positioning right at the heart of CEE and a location on the very doorstep of some of Europe's largest pharma markets. "Nor should anyone forget," points out Kucera, that "the Czech Republic also attains a level of political and economic stability that few other countries within the region can realistically match." "You could even say that the attractive combination of an easily accessible and highly skilled talent pool, sophisticated infrastructure and advanced quality of life actually renders the Czech Republic more comparable to Bavaria than to the other CEE countries," he muses.
Despite growing recognition of the local pharma market as a strong regional force, the Czech Republic healthcare and life sciences arena is not entirely free of challenges however; the most significant being the thorny issue of how to sustainably finance the nations' health needs. In the words of Andrej Babiš, Czech Minister of Finance, the national health expenditure "risks spiralling out of control" with the public coffers struggling to satiate the "black hole" of surging demand and skyrocketing prices. Others disagree and claim that current budget allocations are inappropriate for the scale of task at hand.
Svatopluk NÄmeÄek, minister of Health
Although national healthcare spending has undoubtedly increased year-on-year in recent years, Health Minister Svatopluk NÄmeÄek is eager to point out that "total healthcare expenditure in the Czech Republic remains a mere seven percent of GDP," thus stubbornly below the nine percent average enjoyed by many OECD countries. What's more, he is keen to counter claims of financial misallocation and wastage noting that, on the contrary, the Czech public health spending ranks "third among European nations in terms of sheer effectiveness and value for money, despite its overall comparative paucity."
Jan Å½aloudík, chairman of the committee of Health and Social Policy in the Czech Senate and advisor to the prime minister
Jan Å½aloudík, chairman of the Committee of Health and Social Policy in the Czech Senate and advisor to the Prime Minister, somewhat agrees. For him, the true problem lies not so much in wastage and misallocation of funds per se, but rather in a "woeful lack of transparency and openness." In his opinion, though the health system itself "remains broadly stable, it is this sheer opacity surrounding how money is spent" that inhibits the desire at the governmental level to inject the level of financing that is truly required.
Karel KuÄera, CEO of the Czech Business and Investment Development Agency, CzechInvest
To be fair, Minister NÄmeÄek has taken the fundamental first step toward addressing the palpable lack of accountability in healthcare finances by "establishing the National Medical Information System" which manifestly aims to enable the ministry to regain "a precise overview of the costs for each diagnosis". Leading this project is Ladislav Dušek, director of the Institute for Health Information and Statistics, who refers to the task of shedding light on the financials of Czech Healthcare "my core mission." "When I initially assumed this position, the information gathering system was nothing short of disastrous," he candidly recalls. Prior to his appointment, the institute had been "collecting the data manually [using] 70,000 sheets of paper distributed throughout the healthcare system". Dušek explains that he himself expects "large swathes of the healthcare system to be underfunded ... as it should be obvious that the financial requirements of healthcare-given the aging population, longer survival rates, new molecules, new diagnostic techniques, and much more-will necessarily rise!"
Motivated by a steadfast and unwavering desire to help the Czech population, Ladislav Dušek reveals that the information gathered will not only be utilized in order to "cast a spotlight on the system", but more specifically will climax in a remodelling of current reimbursement legislation as "the segment of reimbursement is the most in need of transparency in order for us to know how to distribute the finances correctly", and that the challenge of financing Czech healthcare "cannot [be] solved by a flat decision to increase finances". "Our overriding goal is to bring about a truly fair and rationalised system of reimbursements," agrees Minister NÄmeÄek.
A fairer reimbursement system is indeed keenly sought after by the industry itself with many pharma executives describing the existing Czech market access framework as unnecessarily complex and cumbersome. Jaroslav Duba, CEO and founder of OAKS Consulting-a local champion in providing market access services-explains that "the Czech Republic has a dual regulation system in place, one for ex-factory maximum prices and the other for price reimbursement". Elaborating on the system, Duba proclaims that price-pressure is something headquarters and expatriates unrightfully "lament about," explaining that the ex-factory price is referenced to the average price of the lowest three prices in a basket of 19 EU nations concluding that "if pharmaceutical companies manage their pan-European pricing strategy correctly, they can avoid a price surprise" highlighting that the ex-factory price can only be as low as it is in other countries.
Ladislav Dušek, director of the Institute for Health Information and Statistics
Martin MinaroviÄ, managing director of Janssen Czech Republic agrees, pointing out that "all of those countries reference in between each other, all striving for low drug prices, therefore it is logically inconclusive to argue that one has the lowest price when this price in fact was referenced to the one it is compared against".
Heidrun Irschik, CEO and CPO of Novartis Czech Republic
Despite contesting the notion of a harsh pricing system, Duba acknowledges "Czech reimbursement procedures are slightly different from the norm across Europe," explaining that local market reimbursement is "assessed on the basis of therapeutic interchange-ability." This results in a greater need for comprehensive analyses of the segment pharmaceutical companies wish to enter including "how it treats and what other options are available for patients." Duba emphasizes that "if the product is not interchangeable, then the reimbursement level depends on pan-European price management."
Jaroslav Duba, CEO and founder of OAKS Consulting
Levels of reimbursement, however, are not the only challenge as John P. Kennedy, general manager for Pfizer Czech Republic states, "pathways for pricing and reimbursement exist" but "there are certain areas where we need to improve our in-depth understanding." Kennedy criticizes the fact that "in reimbursement procedures the innovative treatment can be placed within the same reference group as a treatment with lost exclusivity" which consequently lessens the value of innovation.
Martin MinaroviÄ, managing director of Janssen Czech Republic
The underlying issue is the complexity of the system at large, adds Radek Korbel, head of Sanofi-Genzyme's Czech and Slovakian affiliate, to the extent that "when I explain this system to my colleagues from the US, for instance, they will not understand and deem it to be illogical. In MS, we're referenced to other local drugs which gets quite complicated."
John P. Kennedy, general manager for Pfizer Czech Republic
"It is true that in the Czech Republic we have a unique referencing system which results in some specific challenges," agrees René Bastl, managing director at Merck Group Czech Republic, while accepting that, "innovative biological treatments have a high price thus the system must achieve savings somewhere." On the other side of the coin, "the Czech Republic's regulatory framework ranks one of the best in the CEE in providing patients access to new medicines," he enthuses.
Radek Korbel, head of Sanofi-Genzyme's Czech and Slovakian affiliate
Jakub DvoÅáÄek, executive director of AIFP, the Czech innovative pharmaceutical association very much concurs, "Pricing is always going to be a challenge in any market in an era when drug development costs never cease to rise, but I am happy to be able to say there are other factors that very much enhance the attractiveness of the Czech market! Market access, for instance, is one of the best in the region."
OndÅej Halász, country manager of CSL Behring Czech Republic and Slovakia explains why Czech market access can be considered amongst the very best in the region. "Visibility, stability and predictability enable companies like ours to forecast sales, price and reimbursement level with very high accuracy," he notes. "Today's system is a massive step up on what went on before because nowadays negotiations are not possible anymore, nepotism is successfully eliminated and everything is driven by precise bureaucratic procedures," he describes. This predictability outweighs the pricing and reimbursement challenges because "it is simple to forecast the price and reimbursement of your product, therefore you can assess from the very beginning if the right conditions for your product exist" which enables a well-informed decision whether "to launch or not launch."
The generic industry seems to be equally satisfied with the market access procedures. Martin Mátl, executive director of CAFF, the Czech generic pharmaceutical association, highlights that in the Czech system there is an "appropriate differentiation between original and generic, thus allowing the mechanism we have in place today which guarantees being on the reimbursement list within two months of market registration".
Jakub DvoÅáÄek, executive director of AIFP
Ensuring smooth market access procedures for generics is significant for Czech authorities as "the role and added value of generics are appreciated" reflects Ingrid Šmerdová, Country Manager of Polpharma Czech Republic, "For instance, for the state authorities, from a pure economical point of view it is clear that generics are crucial in cost control and healthcare spending. Furthermore, from an access to treatment point of view generics are the way to provide all patients with access to treatments, now and in the future! It has happened before that new treatments were introduced in the market but only selected patients actually had access to them."
Martin Mátl, executive director of CAFF
There is of course frequent dialogue between the pharmaceutical industry, relevant regulatory authorities, and government stakeholders, but this dialogue is often strained. The Czech Senate's Jan Å½aloudík explains that around the turn of the millennium pharmaceutical companies still "treated the Czech Republic as a banana republic," but emphasizes that this relationship has changed drastically and that today he has a "very positive experience with the pharmaceutical industry." Minister of Health, Svatopluk NÄmeÄek agrees and regards the dialogue as "very important and inspiring," but accentuates his underlying desire to ensure that the pharmaceutical industry "serves the interests of the patients, not the other way round."
OndÅej Halász, country manager of CSL Behring Czech Republic and Slovakia
ZdenÄk Blahuta, director of the state institute for drug control, adds that "predictability, transparency, and an outgoing approach within the decision-making practice of the Institute should be a natural parameter of this relationship" in order to create a fair and equal dialogue in the interest of Czech patients.
Ingrid Šmerdová, country manager of Polpharma Czech Republic
Merck's Bastl confirms that the dialogue exists and that the relationship is beneficial, "with the regulatory stakeholders not offering special favours to specific industry players, but an equal dialogue within legislative compliance is established." Nonetheless there seems to be leeway for improvement, for example Novartis's Irschick identifies that "synergies could be created, improving the healthcare outcome and economy alike. We are open for such collaboration and are willing to commit, however, the interest, openness and commitment must be mutual."
Vladimír Uraz, general manager Slovakia & Czech Republic for ALK concurs. "Our strategy and philosophy is to move the segment at large towards full standardization; for us this simply means raising the bar across Europe in collaboration with patient organizations, medical societies, physicians, regulatory authorities and government stakeholders so there is still a lot of work to do," he reveals. Uraz sees an increase in regulatory requirements as "the logical future of our industry" and is seeking a strong collaboration with relevant government stakeholders to ensure fast and safe access of patients to innovative treatments, highlighting that "in a dialogue, we could collaboratively work on solutions!"
Vladimír Uraz, general manager, ALK Czech Republic & Slovakia
Overall, the Czech pharmaceutical landscape appears to have come a long way since first implementing rules and regulations to the level of mature markets in 2008. Today, it is a well-developed country with highly sophisticated rules and regulations, a prospering industry, and public as well as private stakeholders converging in an effort to realize potential synergies. Located at the geographic heart of Europe and serving as a transit nation between Western and Eastern Europe, the Czech Republic certainly holds the key to the door of greatness!
Renata Martinakova, country manager of LEO Pharma Czech Republic and Slovakia
The Czech Republic and Slovakia share a common heritage as "Czechoslovakia" prior to the velvet divorce and parting of ways back in 1993. 23 years later, many companies still regard both markets as one-rightfully so, explains Renata Martinakova, country manager of LEO Pharma Czech Republic and Slovakia, "the most significant success in the past two years was the successful restructuring of our organization across both markets into one cluster organization rather than having two separate entities. I matched both teams and merged them which allowed me to utilize a leaner cost structure and synergies benefiting patients and business development alike." She furthermore elaborates that LEO Pharma now enjoys "significant growth potential to tap into which is just one of the reasons why we're so important towards LEO Pharma's global operations!"
Jana Mittman, general manager for Exeltis Czech Republic and Slovakia
Indeed, LEO Pharma is not the only pharmaceutical company busy realizing the potential synergies between both markets. Juan Carlos Conde, recently made general manager for Teva Czech Republic & Slovakia, aligns with the former explaining that he has "implemented some structural changes in order to enhance effectiveness and efficiency in both markets alike. Rather than on a country basis, so as to be able to operate as cluster with individual business units." "I am not saying that both countries are the same, yet they are similar enough that most challenges can be solved with the same solution," he analyses.
Jozef Urban, general manager, Angelini
However, clustering both markets is not as easily performed as it might initially appear, explains Jana Mittman, general manager for Exeltis Czech Republic and Slovakia. "Although I was able to apply some learning to the Czech market and although we've been one country for many years, the Slovak and Czech people as well as their respective markets are most contradistinctive. My initial priority upon assuming responsibility for our Czech affiliate was to get to know the country. I had to meet people, study the country, and look for advice and information, thus completing the picture of the new market and learning how to do business in the Czech Republic" says Mittman. Although challenges needed to be overcome, Mitmann elaborates that the synergies are evident as "despite the differences, I can confidently say that we adapted our operations to the Czech market and Czech people just as successfully as we established ourselves in Slovakia. We were able to grow our market share by 35 percent within the last two years and only one competitor out of almost 20 is able to grow as fast as we do and compete."
Lucia Frzonová, country manager, Czech Republic & Slovakia for Wörwag
Although the markets are different as such they do have certain aspects in common, as Lucia Frzonová, country manager Czech Republic & Slovakia for Wörwag explains," historically, as we were one country for many years, aspects such as client mentality and communication are highly similar." The common history as one country also impacts the scientific landscape of both countries, elaborates Frzonová, "two universities-one in Prague and one in Bratislava-dominate the scientific landscape and today's industry professionals that have graduated from these universities are still linked. For us as pharmaceutical company, the latter benefit is quite significant as it naturally results in an excellent network. This scientific link also allows us to easily transfer our positive image from one country to the other."
René Bastl, managing director, Merck