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It is worth reiterating our view that while 2012 is set to be a challenging year for drugmakers operating in Poland, we do not believe the impact of the Drug Reimbursement Act will lead to an annual market contraction, though we warn growth will be negligible. Small amendments to the act pushed through in January 2012 following doctors and pharmacists protests are mainly cosmetic, with the main changes reducing the financially punitive aspect of the legislation.

Headline Expenditure Projections

- Pharmaceuticals: PLN33.37bn (US$11.26bn) in 2011 to PLN33.91bn (US$10.64bn) in 2012; +1.6% in local currency terms and -5.4% in US dollar terms. Forecast down slightly from Q112 due to analyst modification.

- Healthcare: PLN104.04bn (US$35.10bn) in 2011 to PLN108.61bn (US$34.09bn) in 2012; +4.4% in local currency terms and -2.9% in US dollar terms. Forecast down slightly from Q112 due to analyst modification and macroeconomic factors.

- Medical devices: PLN6.96bn (US$2.35bn) in 2011 to PLN7.26bn (US$2.28bn) in 2012; +4.3% in local currency terms and -3.0% in US dollar terms. Forecast down slightly from Q112 due to macroeconomic factors.

Risk/Reward Rating

In our Q212 Risk/Reward Ratings (RRRs) assessment of the region, while Poland has its fair share of challenges in 2012, it still leads our Central and Eastern Europe (CEE) ratings. While the Drug Reimbursement Act has been introduced in 2012, we do not anticipate this resulting in an absolute contraction of the pharmaceutical market.

Key Trends And Developments

- The Drug Reimbursement Act took effect on January 1 2012 and has faced fierce opposition from the public and members of the healthcare profession. Following doctors and pharmacists protests in early January, amendments were introduced and signed by the president that removed some of the punitive aspects of the legislation. The amendments became law on February 9.

- On January 30 2012, Iceland/Switzerland-based Actavis and Polish company Bioton announced the formation of a joint venture (JV) company for the development and registration of insulins, including analogue insulins. The decision was described by the companies as a shake-up for the diabetes market. The long-awaited formation of a JV between Actavis and Bioton in the field of insulin production and commercialisation is highly favourable for both companies. However, we highlight that the deal has taken an exceptionally long time to complete, which has aggravated investors in the Polish firm.

- In mid-November 2011, an updated reimbursement list came out containing 279 new products, including 256 generic drugs and 22 products of new active ingredients. The total list has 3,491 medicinal items and 382 were removed at the request of drugmakers. Reimbursement levels were lowered for 1,055 items and raised for 299 items after price negotiations and the addition of cheaper equivalents. The list excluded 847 previously reimbursed medicines, provoking criticism from doctors and patient groups. Changes to the reimbursement list prohibit off-label prescribing – a practice that is potentially dangerous for the patient and is not a good use of publicly funded medicine. The string of changes to the reimbursement list created almost buying panic in November and December as patients were worried that they would have to pay more for their medicines.

- In late December, the Ministry of Health made some amendments to the list, which it said were last-minute corrections of previous mistakes that left patients who suffer from certain diseases with no subsidised medicines.

- In mid-December, the ministry introduced long-expected regulations relating to the terms and conditions of agreements between the countrys pharmacies and the National Health Fund (NFZ) regarding the filing of prescriptions for reimbursed medicines. This came into effect with the introduction of the Drug Reimbursement Act.

BMI Economic View

Having posted solid growth of 4.3% in 2011, we have reaffirmed our constructive outlook for the Polish economy. Nevertheless, weak external demand and constitutionally mandated fiscal austerity will mean growth slows to 2.6% in 2012. Beyond then we see the country going back to growth levels similar to those observed in 2011 and we reiterate our 3.2% forecast for 2013. On the back of a wave of downgrades to our eurozone growth forecasts, in November we revised our expectation for Polands expansion path. The main element underpinning the downgrade was the potential for transmission of risk from the eurozone banking sector to lending in the Polish economy. This factor, together with a strong dependence on exports to the eurozone and a sharp fiscal consolidation mandated by constitutional debt ceilings, tarnish the otherwise positive outlook for the economy.

BMI Political View

Re-elected Prime Minister Donald Tusk will have a challenging 2012 as public accounts will have to be set on a sustainable path at a time when the economy is already slowing. Notwithstanding fiscal austerity, major investments in shale gas technology will be needed for gas field exploitation to start in 2014. In foreign policy, the government is expected to face substantial tension with Russia over gas prices and pressure from European partners to create a timeline for euro adoption.

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