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Bulgarias pharmaceutical market will be under some pressure in 2012 due to a weakening economic outlook and the tightening of publicly funded healthcare services. However, we have broadly maintained our cautiously optimistic growth outlook for the year, supported by the fact that despite contractions in the wider economy in 2009 and weak growth in 2010, the drug market remained resistant to this weakness. Out-of-pocket expenditure will continue to be the main driver of growth, even in a slowing economy.

Headline Expenditure Projections

- Pharmaceuticals: BGN2.04bn (US$1.45bn) in 2011 to BGN2.18bn (US$1.43bn) in 2012; +6.4% in local currency terms and -1.5% in US dollar terms. Forecast moderately down since Q112 due to macroeconomic factors and analyst intervention.

- Healthcare: BGN4.83bn (US$3.44bn) in 2011 to BGN4.91bn (US$3.23bn) in 2012; +1.6% in local currency terms and -5.9% in US dollar terms. Forecast down since Q112 due to macroeconomic factors and analyst intervention.

- Medical devices: BGN281mn (US$200mn) in 2011 to BGN286mn (US$188mn) in 2011; +1.7% in local currency terms and -5.8% in US dollar terms. Forecast down since Q112 due to macroeconomic factors and analyst intervention.

Risk Reward Ratings

Bulgarias Pharmaceuticals Risk/Reward Rating (RRR) is broadly stable in our latest analysis. Bulgaria still ranks 13th out of the 20 markets surveyed in the region. Its composite score has increased by 1.3% compared with the previous quarter on account of a slightly improved country risk score, which takes into account political continuity and has improved following the conclusion of elections in October 2011.

Key Trends And Developments

- Healthcare expenditure is set be to flat in 2012, according to the budget delivered in November 2011. The National Health Insurance fund (NHIF) will have a budget of BGN2.63bn (US$1.77bn) in 2012, which is about the same as in 2011. While the spending available for medicines is up by 28.3%, we emphasise that this increase is mainly due to the NHIF taking responsibility for the funding of medicines that were previously financed through the Ministry of Health.

- In mid-January 2012, the NHIF said ti was ready to start negotiating with pharmaceutical companies to achieve better discounts on drugs 100% covered by the fund. It has also suggested that pharmaceutical companies offer new discounts for medicinal products that are partially reimbursed at the 25%, 50% and 75%.

- Bulgarian Minister of Health Stefan Konstantinov has said the ministry will ban smoking in closed public spaces in summer 2012. He said the decision has sufficient political support. The cabinet has issued a formal proposal to enforce the smoking ban in the closed public areas from June 1. However, the ban was initially scheduled for 2010 but the government delayed it over fears it might harm the tourism sector.

BMI Economic View

In late December 2011, BMIs Country Risk team revised down our Bulgarian real GDP growth forecasts for 2012 and 2013 to 1.1% and 2.3% respectively, from 2.5% and 2.7% previously. The lack of a decisive resolution to the eurozone sovereign debt crisis will continue to weigh on Bulgarias economic outlook, dragging down the countrys trade, investment and consumption outlooks.

BMI Political View

The government is likely to continue facing significant challenges in 2012, particularly as it struggles to combat high levels of corruption and rising ethnic tension. We believe minimising internal party friction will be vital in the face of tougher economic conditions, which could provide the weak opposition with an opportunity to gain ground.

The results of October 2011s controversial presidential and local elections, which saw GERB candidate Rosen Plevneliev win the presidency, are also likely to intensify opposition criticism. Seventy-one members from the opposition Bulgarian Socialist Party, the Movement for Rights and Freedoms and the nationalist ATAKA party have already unsuccessfully sought to cancel the results of the election, citing organisational irregularities as the reason to dismiss the outcome. While we do not expect further challenges to the result, the significant consolidation of political power in the hands of GERB is likely to provide an incentive for the opposition to present a more united front in the coming months and confront the government on key issues.

Click for Report details:Bulgaria Pharmaceuticals and Healthcare Report Q2 2012