The Serbian government has intervened to support its pharmaceutical sector, while plans for the implementation of centralised public procurement for healthcare have been announced.
IHS Global Insight perspective | |
Significance | The Serbian government has intervened to save the Serbian pharmaceutical sector, while in recent days, the country’s health minister has provided details of plans to implement a system of centralised public procurement in healthcare, among other reforms. |
Implications | The deal between the Serbian government and pharmaceutical companies and the proposed centralised public procurement in healthcare are included in two separate legislative bills set to be decided on by the Serbian parliament. |
Outlook | The situation in Serbia’s pharmaceutical sector finally looks more positive after the recent interventions, and the domestic industry will benefit particularly from this. The implementation of centralised public procurement is likely to have a downward impact on prices, and therefore could be fairly negative, although for larger players it could prove less unfavourable. |
Deal to save Serbian pharma sector
At the end of October, a deal was struck between representatives of pharmaceutical companies in Serbia, and the Serbian health minister, Slavica Ðukic Dejanovic, together with Mladan Dinkic, the Serbian finance minister, under which the Serbian state assumes full responsibility for the liabilities of pharmaceutical wholesalers, relating to non-payment by the Republic Health Insurance Fund (RFZO). Under the plans set out by the Serbian government, the liabilities of the wholesalers will be converted into government debt, which will be repaid over a period of three years. According to the internet news service of Serbian state broadcaster RTS, the debt will be paid back in quarterly instalments. However, as the source reports, the Serbian state will receive a discount amounting to 50% on the debts for drugs delivered to hospitals in recent years. The debts of the RFZO that exceed 30 days were due to have been converted to the public debt of the Serbian state to make it possible for the RFZO to go into 2013 without debt.
Centralised public procurement to tackle corruption
On Monday 26 November, Dejanovic announced that from 31 March 2013, a new system of centralised procurement will come into effect, due to the difficult situation in the public healthcare system, as reported by Serbian news agency Tanjug. She is reported as saying that a special unit will be established within the government, specifically within the Ministry of Health (MoH), which will have responsibility for public procurement. She added that the World Bank – to which Serbia is still indebted – is keen to provide technical assistance towards the project. According to Dejanovic, centralising public procurement for the public healthcare sector is one of the most important anti-corruption measures to be taken in this sector. She is reported as estimating that between 20% and 50% of funds will be saved as a result of the implementation of centralised procurement – although no details were given. The head of the parliamentary committee on health and families Dušan Milisavljevic was reported by Tanjug as saying that there should be a debate in parliament about the 13.5 billion Serbian dinar (USD154.999 million) debt in the public healthcare sector, promising to seek out those accountable for this situation, and calling for an investigation.
Wider healthcare reform planned
Health minister Slavica Ðukic Dejanovic was reported by Serbian newspaper Danas as stating that the introduction of the public procurement system will be part of a process of public healthcare reform, which will also involve the reorganisation of public healthcare institutions. As well as procurement, it has been reported that another change set to be introduced will be that pharmacies will calculate the net cost of medicines to be covered by the RFZO, not the wholesale cost, as currently.
Bills submitted to parliament
According to a report on Serbia on the website of German governmental organisation Germany Trade & Invest a bill has been submitted to the Serbian parliament for adoption relating to the repayment schedule. The same source also reported that the public procurement system is included in a different legislative act, which also includes plans to reduce the maximum payment terms for the RFZO to pharmacies from 200 to 150 days in 2013, and down to 120 days in 2014 and 90 days in 2015.
Outlook and implications
The situation in Serbia’s pharmaceutical market, which about six months ago appeared to be in very serious danger of total collapse, is starting to look more manageable, and there is now some real hope that a sustainable solution to the long-term problems in the sector can be solved. The solution is not ideal for the pharmaceutical industry, considering that it is being asked to accept a 50% reduction in the level of liabilities which it can expect to be repaid – however, a more favourable deal was never likely to emerge. It will be a particular relief to Serbia’s own pharmaceutical industry, which has been plagued in recent years by late payments, non-payments and corruption scandals (see Serbia: 18 April 2012: Serbian Pharmaceutical Sector on Verge of "Collapse").
The implementation of centralised procurement is likely to mean that medicine prices will be forced down, particularly in the case of high-volume products, those most likely to already be available in generic versions. This could benefit larger players who are able to benefit from economies of scale. The hopes being attached to centralised procurement in Serbia are very high – indeed, it was reported recently that the system would be extended from public pharmacies to private pharmacies too (see Serbia: 16 October 2012: Centralised drug procurement to be extended to private pharmacies in Serbia). As regards the potential for public procurement to combat corruption, while in theory it could improve transparency, this will be dependent on many other factors, including monitoring systems and the free and open availability of information about tenders.