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Croatia is on track to join the EU in 2013 and offers a well-developed pharmaceutical market. However, its EU membership application has undergone much scrutiny.
Following recent discussions, the EC has decided to support Croatia's entry into the EU. Croatia originally applied for membership in 2003, with formal discussions beginning in 2005, but progress faltered over time because of issues regarding the legal system and environment for competition (1). Bulgaria and Romania, which joined the EU in 2007, had previously failed to meet full EU standards in these areas, and their pre-accession environment was believed to be similar to that of Croatia. As a result of political and media criticism of these countries' ease in gaining entry, there was greater scrutiny of Croatia and a general reluctance to fasttrack the application. In particular, there were worries concerning corruption and organised crime in the country. It now appears that these concerns have been overcome, so Croatia is set to become the 28th member of the EU in 2013.
The Croatian pharmaceutical market is currently worth around €740.1 million and has been growing slowly because of the government's ability to fund healthcare as a result of the global economic crisis (2). In the short term, the market is considered challenging for manufacturers of branded products because of the prevalence and popularity of generic drugs, and strict reimbursement criteria. However, in the longer term there are predictions that the pharma industry will benefit from investment, as Croatia has been improving its healthcare system and pharmaceutical regulations to bring them into line with standards in the EU. German pharmaceutical distributor ANZAG reported that Croatia's pharmaceutical market grew by 4.3% during the second half of 2010 (3). In contrast, other emerging Eastern European markets didn't fare so well over the same period. Lithuania's pharma market, for example, decreased by 1.2% (3). As a whole, the pharmaceutical market of Central and Eastern Europe is growing at an annual rate of 7.7% (4), which puts the Croatian pharmaceutical market's positive growth rate in a favourable light.
Better access to high quality healthcare is leading to a rise in demand for the latest medicines in Croatia. As a result of healthcare reforms, the Croatian Institute for Health Insurance (HZZO) has established a special budget to provide access to innovative medicines. Between July 2009 and July 2010, 47 innovative molecules were added to the HZZO's lists of reimbursed medicines (5, 6). The pricing system in Croatia is considered strict, with international price comparisons being used to set maximum wholesale prices. The HZZO evaluates drug prices in Italy, France and Slovenia, but if prices from these countries are not available, then data from Spain and the Czech Republic are considered instead. If a drug is thought to be a breakthrough product, then the system does allow a company to charge up to 100% of the average price in Italy, France and Slovenia. The HZZO insists that its decisions regarding product innovation take into account the importance of a medicinal product from a public health viewpoint, as well as therapeutic criteria. Therefore, at least according to the regulations, there are opportunities for branded medicines' manufacturers to profit from marketing expensive, innovative products in Croatia.
As an industry, Croatia's pharmaceutical sector is very well developed. The pharmaceutical industry represents 4% of the country's total manufacturing industry and accounts for 1.7% of the manufacturing workforce. The major domestic pharmaceutical companies are Pliva, Belupo and Jadran Galenski Laboratorij (7), but around 50 international companies are also represented in the market, with more likely to enter now that EU entry has been confirmed. Croatia's adoption of better intellectual property laws, which are in line with EU standards, should also encourage other companies to enter the market.
Croatia's pharmaceutical potential is best highlighted by Pliva, the country's leading company. More than 80% of Pliva's products are exported, with the US being one of its top foreign markets— exports to the US were valued at €62.8 million in 2010 (8). In May 2011, the company received an award from the Croatian government for becoming the country's leading exporter to the US. The company also was responsible for the discovery of the globally successful antibiotic azithromycin, which is registered under the brand name Sumamed. Pfizer marketed the drug internationally as Zithromax and this arrangement boosted Pliva's finances dramatically. When the US patent for Zithromax expired in 2005, however, Pliva was placed under tremendous pressure to maintain growth and it became a target for acquisition. In 2009, Pliva was integrated into Teva, which was interested in turning the company's Zagreb site into an R&D hub.
One of the stumbling blocks to Croatia's EU application had been corruption and organised crime, and these issues continue to receive attention from those wary of Croatia's entry into the EU.
At the end of 2010, for instance, Pliva was surprisingly mentioned as part of the wikileaks controversy concerning a previous takeover battle between Barr Pharmaceuticals (US) and Iceland-based Actavis. According to the media reports, there had been rumours that the Croatian Prime Minister, Ivo Sanader, had been in collusion with the chairman of Pliva to ensure that the company was sold to a US firm (11). To make matters more complicated, the US Ambassador was also quoted in the Croatian media as stating that the sale of Pliva to Barr Pharmaceuticals would represent a demonstration of confidence by US companies in Croatia's investment climate. According to information cited by wikileaks, Sanader was upset by the negative way in which the deal was being portrayed by some sections of the media and called the US Ambassador to issue a statement denying any improper action on his part. The US ambassador duly issued a statement to indicate that market forces alone would decide the outcome for Pliva, but privately, the cables indicate that the US embassy saw the sale as a challenge to Croatia's regulatory system. At the time of the takeover attempt, the share price of Pliva had risen by 60%, which gave the press considerable material for speculation regarding the real factors behind the deal making. Barr's initial €1.58billion offer for Pliva had been countered by a €1.72 billion from Actavis (9). According to the US Embassy's discussions with Barr, the US company was satisfied with the activities of the Croatian authorities in the matter. Pliva transferred ownership of its US business to Barr Pharmaceuticals in 2007.
Another problem for Croatia is counterfeiting—even more so than for existing EU member states. The Croatian Customs Administration seized almost 1.3 million counterfeit items (10) in 2011, but despite these successes, the authorities say that the country is still being flooded with counterfeit products. These counterfeiting incidents have also affected the pharmaceutical sector. In 2010, a widely cited report appeared in a Croatian journal: out of 26 samples of erectile dysfunction drugs seized from an illegal supply chain, around half may have been counterfeit (11). To date, however, there have been no recorded incidents of counterfeit medicines entering the official supply chain. It is also worth putting incidents of counterfeits into perspective. In 2009, Pfizer conducted a study of pharmaceutical products seized by authorities under suspicion of being counterfeit Viagra. Of the total number of seizures worldwide, only approximately 1% came from Croatia— a similar level to many existing EU countries (12).
As the EU expands, one major concern is securing the pharmaceutical supply chain. The new EU's pharmaceutical package highlights the fight against counterfeit medicines as a priority to protect patients and will probably lead to amendments to strengthen Directive 2001/83/EC and to Commission Directive 2003/94/EC, which relate to medicinal products for human use and good manufacturing practice, respectively. The EMA is working closely with the Croatian authorities to both improve the detection of counterfeits and suppress the activities of those behind the illegal trade. The subject was covered in a pre-accession meeting in June 2011, held in Zagreb (Croatia), involving the EMA and Croatia's national regulatory Agency for Medicinal Products and Medical Devices of Croatia (HALMED).
The concerns about Croatia seem to have been overcome as the country's entry into the EU is on course for 2013. Because of its business environment and pricing system, Croatia is a challenging market, but it also offers a highly developed pharmaceutical sector and good growth prospects for the future. The fact that many international pharma companies have already moved into the market suggests that the industry is optimistic about its potential.
1. BBC News, "Croatia cleared for EU membership in 2013" (UK, 2011). www.bbc.co.uk, accessed 30 June 2011.
2. Business Monitor, Croatia Pharmaceuticals and Healthcare Report Q3 (UK, May 2011).
3. ANZAG, "ANZAG: Result under pressure" press release (Germany, 2011) www.anzag.de, accessed 30 June 2011.
4. Epsicom, The Outlook for Pharmaceuticals in Central & Eastern Europe (UK, April 2011).
5. L. Voncina and T. Strizrep, Eurohealth 16 (4), 20–22 (2011).
6. L. Voncina "Croatian 2009–2010 pharma reform", Ekonom:east Media Group, online (Serbia, 2011), www.emg.rs, accessed 30 June 2011.
7. FarmaVita.Net, "Croatia — Pharmaceuticals and Biotechnology" (2011), www.farmavita.net, accessed 29 June 2011.
8. Pliva, "Pliva: History" (Croatia), www.pliva.com, accessed 30 June 2011.
9. The Guardian, "US embassy cables: Allegations over Croatian pharmaceutical company deal rebutted" (UK, 2010) www.guardian.co.uk, accessed 30 June 2011.
10. PETO EVIC, "Croatia Fights Counterfeiting" (Belgium, 2011). www.petosevic.com, accessed 30 June 2011.
11. Securing Pharma, "Croatian study uncovers counterfeit medicines" (2010) www.securingpharma.com, accessed 29 June 2011.
12. V. Stecher et al., 12th Congress of the European Society for Sexual Medicine (Lyon, France, 2009).