Introduction and Market overview
Like many other countries, Romania’s pharmaceutical market operates in the context of a national health insurance program. However, the business environment lacks three important elements: transparency in policymaking, communication with stakeholders, and stability in legislation. These challenges play out against a backdrop of chronic underfunding by the Government in healthcare in general, where the absence or poor quality of preventative and primary care worsens general public health and fuels demand for treatment that cannot be met.
Despite extremely difficult conditions for pharmaceutical firms, the market is growing. Romania’s pharmaceutical market grew by 14.1% in local currency terms (manufacturer prices) in 2010 versus 2009, according to data from primary market research firm IMS Health. On a volume basis, in 2010, there was a reduction of - 2.7% versus previous year, compared with a year–on-year growth of 2.7% recorded in 2009 and 13.7 % in 20081.
The retail pharmacy channel outpaced the hospital market, recording a rate of 16.9% and accounted for around 87% of total sales. Hospital sales grew by only 12.9% in local currency to RON 1.3bn (US415mn). As predicted, prescription drugs outgrew OTC medicines, increasing by 16.7% year-on-year (y-o-y) versus a marginal 0.9% for OTC’s, both reported to performances recorded in 2009.
The total Romanian pharmaceutical market amounted to RON 8.2bn (US$ 2.6bn) in 2010. Romania is forecast to be the fastest expanding EU pharmaceutical market in 2011, albeit at a lower rate than in 2010.
According to IMS Health, Romania’s market for prescription medicines in 2010 was worth RON 7.05bn (US $2.22bn), accounting for 85.6% of the total market for pharmaceutical products. In early 2009, the Ministry of Health began implementing a new reference- pricing regime (the reference country basket was changed – two new countries, Greece and Spain, were added) which placed some downward pressure on prices. Prices fell by 20% on average.
Hospital sales account for around 13% of the pharmaceutical market in Romania, although if the government were to make the needed improvements in the primary care network the hospital’s share would decrease.
In the private health system, pharmaceuticals are not reimbursed by either public or private insurance.
Romania’s domestic pharmaceuticals market is fragmented, but undergoing a process of consolidation. The market is supplied by over 490 manufacturers, 57 of which own domestic manufacturing facilities. The top 10 companies account for more than half of the total market in local currency sales. Government-owned Antibiotice is the only state owned domestic player in the top 20, and several past attempts to privatize it have remained unsuccessful. Antibiotice’s portfolio (per it’s name) has a strong focus on antibiotics, and has been declared by the Romanian Government of “strategic interest”, together with National Institute for Vaccines “Cantacuzino”.
The domestic pharmaceutical manufacturing sector consists of the Romanian branches of Sankyo, Sanofi-Aventis, GlaxoSmithKline, Gedeon Richter, Actavis, etc. In 2010, locally manufactured products accounted for 15.2% of the pharmaceuticals on the market, with value of sales growing at 7.6% annually. This rate is slower than the entire pharmaceutical sector, which grew a 14.1%. Viewed against a 9.1% decrease in unit terms, the situation indicates an underlying average price increase, which is best explained by portfolio re-structuring.
While almost all Romanian pharmaceutical plants have been acquired by major international firms, their portfolios still include traditional brands. The largest drug manufacturers active on Romanian territory are Sankyo (through its subsidiary Terapia Ranbaxy), Labormed, Antibiotice, Sanofi-Aventis (through Zentiva), GlaxoSmithKline (through Europharm), Biofarm, Actavis, Gedeon Richter (owner of Armedica). Of these, only the first five rank among the top 20 players in the industry.
Healthcare Reform and Insurance
Romania's centrist government seeks to reform of the healthcare system, including the introduction of patient fees (co-payment) and decentralization of the government-owned hospital system.
One of the cornerstones of the healthcare reform is the introduction of patient fees, a scheme which was originally scheduled for implementation in September 2009, before the collapse of the government coalition. In November 2010, the Government approved changes to the Health Reform Law no. 95/2006, by including co-payment in a revision of Article 190. Co-payment will provide a source of financing. Although given the green light by the Romanian Senate in December 2010, the amendments have not yet been passed into law, while the approved Framework Agreement 2011-2012 and Application Norms drafts only include references to the right and obligation of healthcare service providers to retain co-payment amounts from patients.
Under the scheme, patients' copayment fees would be charged on a scaled basis, ranging from EUR1.20 (US$1.50) for a consultation with a general practitioner, EUR2.20 (US$2.80) for one day spent in hospital, to EUR50 (US$64) for an MRI scan. Patients will pay a maximum of EUR140 (US$196) per year in co-payment fees. According to statements by Ministry of Health officials, the fees are expected to generate revenues of EUR89mn (US$125 million) per year. The funds will be collected and retained by the healthcare provider. Private healthcare providers would have no restrictions, but public providers would be required to invest the funds in medical service. Though extremely vague, and extremely modest (the amounts are very low and as much as 50% of the population would be exempt from copayment), this provision is viewed as a positive alternative to having the copayments transferred to the national treasury and may result in improvements in healthcare. To date, the Government has not moved to approve this regulatory draft. No tangible action has been undertaken by the Government to speed up the process of approval of the above-mentioned regulatory draft.
In the other EU countries, co-financing health spending through this means is much higher than in Romania (24% vs. 18% in 2008)2. Although the co-payment amounts are extremely low by Western standards, even this small amount of collection would be an equitable step toward reducing the gap between public healthcare revenues and expenditures. Familiar arguments about co-payment are raised in Romania as well: physicians’ associations have criticized co-payment as a barrier to patient accessibility and the philosophy of a “fixed menu” of rates. Proponents hope co-payment will reduce or offset unnecessary patient visits to healthcare providers, and point to the Czech Republic’s introduction of copayment in 2008 saving the Czech state US$500 million in the first year.
According to healthcare industry consultancy Link Resource, co-payment will not redistribute patients from public to private healthcare providers, as few of the services supplied by private providers are reimbursed by the public insurance fund. Private healthcare insurance has remained embryonic, as the legal framework governing it has been left undeveloped at only a few articles in Title X of the Health Law no. 95/2006. The absence of secondary legislation and the State’s failure to decide what “basic package” of services its health insurance will cover remain barriers to the development of a supplementary, private health insurance market and insure that the National Health Insurance House retains its market dominance. Further confounding private insurance is existing tax regulation that limits at $200 per year individual deductions for health insurance premiums. This low number stifles the development of private insurance.
Structure of Romania’s Public Healthcare System
Under the law, the National Health Insurance House (NHIH or CNAS) is set up as an independent institution working in coordination with the Ministry of Health. The NHIH establishes the general strategy, supervises the functioning of the health insurance system and co-operates with the Ministries of Health and Finance to pay for and coordinating healthcare programs. Its policy is implemented through local health insurance houses (LHIH), one in each county plus Bucharest, reimbursing the local providers of healthcare services (doctors, pharmacies, hospitals, etc.).