SerbiaPharma reportAugust 2011

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Serbia has had an undoubtedly troubled history since the breakup of Yugoslavia in the early 1990s. A costly war and ensuing UN sanctions have left the country’s economy a few years behind those of its

regional counterparts. The subsequent global financial crisis in the late 2000s resulted in another hit to many of the country’s key industries, including Serbia’s pharmaceutical and healthcare sectors. These historical events explain some of the key issues that underlie the sectors’ current challenges, such as non-liquidity and inadequate funding. And while Serbia’s population currently amounts to roughly 7.3 million inhabitants, “it is a little-known fact that 1.2 million people have no income, and that the state provides 520 dinars (roughly $7.30) per year for them,” asserts Serbia’s Ministry of Health.

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In an attempt to address the liquidity crisis in the Serbian healthcare industry, the government of the landlocked republic recently decided on a 10% price clawback across its drug reim-bursement list. It has created an atmosphere of unpredictability for the pharma industry in the country. However, whether it is to grow the product portfolio, to expand into new markets via Serbia as a gateway, or to reduce manufacturing costs, both the national industry and the multinational companies (MNCs) in Serbia still see a huge potential for this roughly $1.21 billion Eastern European market.

The Three MuskeTeers of serbian PharMaDragomir Marislavljevic, executive director of the Domestic Drugs Producers Association in Serbia, gives one important reason for the ongoing positive interest in the Serbian market. “For centuries, Serbia served as a bridge between East and West, and this is still an advantage to be capitalized on,” he says. “Collaborations between the world’s largest pharmaceu-tical companies and Serbia’s domestic industry have been hap-pening for over 70 years. Today, with the possible exception of biotech medicines, there is no product on the market that cannot be produced by the domestic Serbian industry. The po-tential for collaboration here is very high,” Marislavljevic adds.

As general manager of Serbia’s No. 3 flagship pharma com-pany, Nenad Ognjenovic agrees with this view. Overlooking Belgrade’s municipality of Zemun from the Galenika head-quarters, Ognjenovic expresses how it is his personal wish to see as many MNCs as possible present in Serbia. Explaining why, he states that “we do drug manufacturing for all world markets here. While doing so, we also enjoy cheaper inputs; we have a relatively cheap labor force, are in close proximity to the EU, and have more privileged relationships with Russia and the

Left: Zoran Stankovic, Minister of Health, Republic of Serbia; Right: Dragomir Marisavljevic, Executive Director, Domestic Drug Producers Association

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Commonwealth of Independent States (CIS) countries, because of Free Trade Agreements (FTA).”

The welcoming attitude toward MNCs also explains the so far unsuccessful attempt of the Serbian government to privatize Galenika by selling a majority stake to international pharma majors. Hemofarm Group and Zdravlje, the two other flagship Serbian players, have been more successful at completing a sale to German-based STADA Arzneimittel and Icelandic major Ac-tavis. Miomir Nikolic, current managing director at Zdravlje Actavis, praises the $50 million its parent has invested in the Serbian facilities since the takeover in 2002. “The positive ex-periences of aligning the company with the European standards and the synergy that we now have as part of the internationally renowned MNC Actavis also served as an example and guide-line for the community which is preparing to join the EU. We have shown that this demanding process is a true investment into the future. Today, Zdravlje Actavis continues to supply its domestic Serbian market with high-quality products in compli-ance with EU requirements, while at the same time opening the door to a great European Union market,” Nikolic says.

high risk, high rewardAlready the only country outside the CIS with an FTA with Russia, Serbia, as an export-oriented nation, has high expec-

tations for potential EU accession. “I strongly believe that EU integration will play a very positive role,” agrees Dejan Sencan-ski, AstraZeneca’s country manager for Serbia, Montenegro, Albania, and Macedonia. For Sencanski, accession will send a strong message to politicians to fully exploit the pharmaceuti-cal growth areas through avenues such as the country’s vast po-tential for clinical trials. “There is a lot of potential to do clini-cal trials here,” the local head of the UK-headquartered MNC concludes. “I believe that the main hope for change is the pro-cess of Serbia becoming a member of the EU,” concurs Bojan Trkulja, managing director of the Innovative Drugs Manufac-turers Fund (INOVIA), Serbia’s leading association for MNCs. “Serbia is a market where there is a lot of space for new compa-nies to expand and try to find better positions, because nothing is set in stone. Even in the pharma industry, almost all the major players are in Serbia. There is still a lot of space in the market for them to position themselves,” Trkulja finds.

Very few MNCs are better positioned in the Serbian mar-ket today than the Danish Novo Nordisk. Predrag Radoševic, general manager of Novo Nordisk in Serbia, believes that the company’s 85% share of the Serbian insulin market can be ex-plained by the fact that the company was present in the mar-ket in the 1990s, through a cooperation agreement with local manufacturer Hemofarm. When NATO intervened in Serbia in 1999, Novo Nordisk took the unusual decision to remain in the country to become Serbia’s sole insulin provider. As a result, Serbia is the only country outside of Denmark where

Novo Nordisk enjoys such a high market share. In 2002-2003, the company restructured and Radoševic took on the position as general man-ager. He explains that learning from other countries in the region was extremely useful to him at this time. “In those early days, I relied a lot on the knowledge and experience of our neighboring countries, because everything that was happening in Serbia had already happened there in the years previous. It was an excel-lent opportunity to avoid mistakes, take advantage of their experiences, and approach things in an organized way,” he says.

welcoMe foreigner!Indeed, Trkulja of INOVIA supports the argument that companies have found Serbia so attractive since the market opened up at the beginning of the new decade. Compared to other European countries and even coun-

Dr Bojan Trkulja, Mana- ging Director of Inovia

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Predrag Radosevic, GM of Novo Nordisk

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tries in the Balkan region, Serbia’s lack of development has left large room for growth and expansion. “Serbia experienced very strong growth in the years before the financial crisis, and al-

though the country’s recovery is happening a little slower than in more developed countries, today’s data suggests that Serbia is starting to rally. I strongly believe that we are now in a po-sition where we will see large growth in the years to come,” Trkulja asserts. There is indeed plenty of data that supports the openness of the Serbian market for drugs of foreign produc-ers. The country’s Minister of Health, Zoran Stankovic, adds in a public statement that “there are 4,000 pharmaceuticals licensed to trade, which are produced by over 300 different producers. From the aforementioned number of pharmaceuti-cals, about 2,500 are produced by foreign producers.”

The growing trend of cost-containment measures across Europe has led companies to focus harder on the long-term future of healthcare. Many, including Zoran Labudovic, gen-eral manager of Pfizer Serbia, believe that copayment will play a larger role in the future of European healthcare. Labudovic believes that in Serbia, this leaves a lot of room for growth. “Pfizer has prospered in Serbia because of the potential of the country, which is apparent from the size of the population and the country’s attitude toward paying for healthcare out of pocket. Despite the fact that Slovenia and Croatia are much richer countries, the fact is that their populations are not in the habit of paying for healthcare. This is due to the fact that dur-

Nenad Ognjenovic, GM of Galenika

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ing sanctions, Serbians got used to the idea that in order to have access to certain medicines they needed to pay. This provides a good basis for the future,” Labudovic explains.

gaTekeePers of ProsPeriTyMany of the MNCs operating in Serbia today are run by Serbi-ans who are dedicated to ensuring their long-term presence in the Serbian market. Ana Govedarica is Roche’s general manager

in Serbia, and few in the indus-try are more dedicated to bring-ing high-level innovation into the country than her. Govedarica ex-plains that, while the route Roche has taken around the world has certainly made doing business in Serbia tricky in recent years, she is positive that the company’s pres-ence in the country should be for the long-term benefit of patients. “Our strategy is based on a five-year perspective. We would not be successful here as a company

if we only planned on a daily basis,” Govedarica explains. “Our strategy is to be the most successful company here in the Ser-bian market, and Roche certainly has the products in order to achieve this. We are moving purposefully, and we are a very brave company because we have taken the decision to stay com-mitted purely to innovation. Innovation requires very knowl-edgeable and brave people, because any innovation demands courage. I am therefore paying close attention to my people, in

order to equip them to be brave and extremely knowledgeable in their work, so that we can trans-mit Roche’s science to Serbia.”Surely, a lot of bravery and hard work will also be required in the Republic’s governmental layers. While the potential is there, it will be up to Serbia’s policymakers to provide the necessary political sta-bility to nurture an environment for growth, as they continue to hold the keys to fully unlock this growing Balkan market.

P� zer HCP Corporation, Representative o� ce BelgradeNeznanog junaka 5 • Tel: 381.11.3630 000 • Fax: 381.11.3630 033 • e-mail: offi ce@pfi zer.co.rs

Working together for a healthier world

Ana Govedarica, GM of Roche

Zoran Labudovic, GM of Pfizer

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