BMI View: Following the resignation of Emil Boc and his government in February 2012, there is now
considerable uncertainty with regard to reform of the Romanian healthcare sector. In particular, draft
structural healthcare reforms which were pulled in January – but were nevertheless expected to be
reconsidered – are now less likely progress. The new claw-back tax, which has been in effect since
October 2011 and was modified in November, is expected to remain in place. Furthermore, there will
now be delays to the implementation of co-payments in public hospitals – though we still expect these to
go ahead in 2012. The one upside to the departure of the government is that even a technocratic
administration could be pressured into appeasing protesting voters and, consequently, a rise in public
healthcare expenditure should not be discounted.
Headline Expenditure Projections:
.. Pharmaceuticals: RON12.66bn (US$4.15bn) in 2011 to RON13.39bn (US$3.97bn) in 2012;
+5.7% in local currency terms and -4.4% in US dollar terms. Forecast down moderately in
local currency terms from Q112 due to analyst modification.
.. Healthcare: RON28.12bn (US$9.22bn) in 2011 to RON28.12bn (US$8.74bn) in 2012; +4.8%
in local currency terms and -5.2% in US dollar terms. Forecast broadly unchanged from
.. Medical devices: RON1.45bn (US$476mn) in 2011 to RON1.52bn (US$451mn) in 2012;
+4.6% in local currency terms and -5.4% in US dollar terms. Forecast unchanged from Q112.
Risk/Reward Rating: Romania's pharmaceutical market narrowly avoided a ratings downgrade in the
industry risk category due to corrections announced in late-November 2011 to the reintroduced claw-back
mechanisms, which were less unfavourable than the measures that were originally proposed. However, a
weakening economic growth outlook and the expectation of modest depreciation of the leu has resulted in
weaker growth when measured in US dollar terms. This has contributed to a weaker overall score for
Romania, leading to downgrade in our Risk/ Reward Ratings (RRRs). In our Q212 assessment Romania’s
RRR score is 56.8 – a fall of 5.0% when compared with our Q112 assessment.
Key Trends & Developments
.. The surprise resignation of Romanian Prime Minister Emil Boc and his government on February
6 2012 was very bad news for private healthcare insurers, which at the start of the year were
hoping 2012 would usher in legislation that would allow private and public health insurers to
compete on equal terms – making the market far more accessible. On January 16 2012, the
government pulled its controversial draft healthcare reform bill following protests and
demonstrations. In the weeks that followed it looked like a new draft with new amendments
might get approval in 2012, but the resignation of the government has led us to question this
assumption. The resignation also has implications for the progress of other healthcare reforms
which were expected to advance this year.
.. Corrections to the reintroduced claw-back mechanism in Romania are favourable to drugmakers,
but the levy itself is still overly burdensome. In November 2011, the Romanian senate approved
a law which proposed three favourable amendments to the pharmaceutical claw-back tax that
came into force on October 1 2011. As predicted by BMI in early October 2011, the government
has been obliged to make certain changes. BMI believed the initial legislation was overly
simplistic and punished drug suppliers in excess of their original exposure.
.. The government has agreed to introduce the co-payment system for medical services in 2012. A
bill was approved in November 2010, and has passed through the senate. However, co-payments
were scheduled to take effect from February 1 2012, but are facing what are hoped to be shortterm
.. In December 2011, the Romanian Employers' Federation of Pharmacists, which represents
independent pharmacists, voiced its opposition to an amendment made by the senate with regard
to opening new pharmacies. The amendment, effectively liberalising the sector from 2012, was
approved by the chamber of deputies' health commission in November 2011. However, under the
amendment a new pharmacy can be opened for every 3,000 inhabitants in Bucharest, for every
3,500 in regional capitals and for every 4,000 in other locations. The changes fail to encourage
pharmacies to expand, according to the president of the College of Pharmacists in Ialomita,
BMI Economic View: We have revised down Romania's real GDP growth forecast to 1.4% and 2.3% in
2012 and 2013, from 2.5% and 2.9% respectively. Our significantly weaker outlook for the global
economy, combined with growing political risk in Romania, and the country's high exposure to peripheral
eurozone banks, is set to drag headline growth lower in the coming years.
BMI Political View: Romanian Prime Minister Emile Boc's decision to resign on February 6 2012 – on
the back of growing protests – is well-timed, as the country has successfully completed an IMF review
and met its financing needs for 2012. While ee expect the formation of a technocratic government, we
believe negotiations between President Traian Basescu and the opposition USL alliance will be extremely
tense, with the latter insisting on early elections.
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