Georgia Pharmaceuticals and Healthcare Market

Pharmaceutical and Healthcare Market Forecast
Date: June 29, 2019

Pharmaceutical Market Forecast
Despite its small population size, Georgia will remain of interest to multinationals. Factors drawing this interest include the authorities' commitment to healthcare system improvement, a solid regulatory environment, and also the proximity of other similar markets, which supports economies of scale.

Latest Updates

In May 2018, the government created a new public-private initiative (Partnership for Access to Healthcare), which aims to facilitate access to medicines for the treatment of chronic conditions and medical services across the country by providing them (initially to pensioners) at lower prices.

In March 2018, Georgian and Hungarian delegations met to discuss Georgia’s NATO membership aspirations, also noting that Hungary annually exports around USD25mn worth of pharmaceuticals to Georgia.

Structural Trends
Georgia's pharmaceutical market was worth some GEL1.05bn (USD419mn) in 2017. By 2022, the market is forecast to reach GEL1.51bn (USD603mn), with a five-year local currency compound annual growth rate (CAGR) of 7.5% (7.5% in US dollar terms). Over the extended 2017-2027 forecast period, we forecast the drug market to grow at a CAGR of 6.6% in local currency terms and 6.6% in US dollar terms, reaching a value of GEL1.98bn (USD794mn), with spending per capita growing from USD107 to USD209. In terms of its share of the total healthcare spend, pharmaceuticals command a disproportionate 43.7% (as estimated for 2017), and a substantial 2.8% of thecountry's GDP, which is likely to make them a target or cost-cutting initiatives in the future.
The Georgian pharmaceutical market has flourished in recent years, annually expanding by double-digits. This has been boosted by the introduction of the country's Universal Healthcare Program in 2013, which rapidly increased the population's access to publicly-funded healthcare services, from 40% in 2012 to 90% by 2014. However, this rapid expansion has placed pressure on public finances, especially as pharmaceuticals account for over 40% of all healthcare spending. As a result, the government has been highly vocal in its support of cheaper generic medicines in an attempt to reduce its pharmaceutical expenditure. This will inevitably pose a headwind to the continued high growth of the country's pharmaceutical market in value terms.
On a positive note, in addition to the growth in market share of generic medicines, the government has sought to boost the development of the domestic pharmaceutical manufacturing industry through public-private partnerships. The resulting increase in competition within the marketplace, allied to a lack of pricing regulation, will drive down medicine prices. For example, medicine prices fell by 12% through the first half of 2016, as domestic medicine production has continued to grow.

Healthcare Market Forecast
Positives of the Georgian healthcare market include the universal healthcare programme and the authorities' commitment to its modernisation and improvement. Rising per capita purchasing power will also benefit most market segments, as private expenditure accounts for a large slice of the overall healthcare bill. On the downside is the small population size, as well as concerns that this number will continue to dwindle.

Latest Updates

From the start of May 2018, Georgia banned smoking in public spaces, including libraries, bars and restaurants, in a move that the National Center for Disease Control and Public Health says would save the country GEL27mn per annum in public healthcare costs and target the annual 11,000 tobacco-related deaths in the country.

In the same month, Businesspressnews’s report listed Evex Medical Corporation, a major private healthcare services provider that employs over 10,000 people across the country, at the top of the 10 largest companies in Georgia, with the list also including Geo Hospitals and Aversi-Pharma.

In February 2018, a multiple sclerosis (MS) management conference was hosted in the capital Tbilisi under the auspices of Roche Georgia, which markets Ocrevus (ocrelizumab) in the country, the first and only product approved both for primary progressive and relapsing MS forms.

Structural Trends
Between 2017 and 2022, we forecast that health expenditure in Georgia will increase at a compound annual growth rate (CAGR) of 5.2% in local currency and 5.3% in US dollar terms, from GEL2.41bn (USD959mn) to GEL3.10bn (USD1.24bn). Over our extended 10-year forecast period to 2027, we project that healthcare expenditure will reach GEL4.08bn (USD1.63bn), posting a 10-year local currency CAGR of 5.4% (+5.4% also in US dollars). As a percentage of GDP, we forecast healthcare expenditure to decrease from 6.4% in 2017 to 5.0% in 2027. On the other hand, per capita healthcare spend is set to increase from USD245 to USD429 over the same period.

The government contributed just 22.4% of total healthcare expenditure in 2017, highlighting the strength of the private healthcare insurance market. Nevertheless, government spending will continue to increase over the coming years, rising to an estimated 25.6% of the total in 2027, supported by public sector programmes and the universal healthcare insurance drive.

In fact, Georgia's healthcare system has undergone significant reform over the past few years, with the principal aim to expand access to healthcare services to the entire population. In 2013, the Universal Healthcare Program was launched, which significantly increased the number of people able to benefit from state-assisted health insurance. As such, the number of people that benefit from partially state-financed healthcare coverage rose from 40% in 2012 to over 90% in 2014. There has also been a significant increase in the number of hospital visits in the past few years, according to the National Statistics Office of Georgia (Geostat).

While these developments have been highly positive for the population and the healthcare sector, the government has begun to struggle to meet the financial demands of this increase in access. The state exceeded its healthcare budget limit for two consecutive years in 2015 and 2016. While there is considerable need to reduce healthcare expenditure, the implementation of this programme has been the most popular accomplishment of the government and it is, therefore, unlikely to experience cuts. The amendments to the programme implemented in May 2017 aim to increase the cost-effectiveness of the system whilst improving healthcare service quality. The government will likely also increase its pro-generic medicine rhetoric in order to lower the expenditure on medicines. As the government continues to improve the reach of healthcare services to those in remote, rural regions, its contribution to the country's total healthcare expenditure is forecast to rise.

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