The countries of Central and Eastern Europe represented a total market of 302 million people and a combined GDP of US$3.3 trillion in 2012.
Central & Eastern Europe is composed of a diverse range of markets, all at different stages of development. Markets throughout the region grew very rapidly until 2008, as many
countries joined the EU between 2004 and 2007. All have healthcare systems in great need of renovation and updating, and spending on new diagnostic equipment in particular has been very strong. Most new equipment is imported, as Russia, Poland, the Czech Republic, Ukraine and Hungary represent the five largest markets in the region. Slovenia is a small market, but has the highest per capita expenditure, on a par with much of Western Europe.
The Economic Situation
All countries in the CEE region were affected by the global economic crisis to some extent; Ukraine was particularly hard hit with its economy contracting by 14.8% in 2009. However, most of the region emerged from recession in 2010 and all CEE countries were exhibiting positive growth rates by 2011. The regional economy is expected to grow by an annual average of 3.1% between 2012 and 2016, although the ongoing eurozone crisis may negatively impact this rate. The CEE region contains export-dependent countries such as the Czech Republic and Hungary, which will be vulnerable to any depressed demand in the eurozone. However, financial assistance provided by the IMF has helped countries such as Romania to strengthen their economies and limit the effects of the recession on the health sector; overall demand for medical devices has therefore remained strong, particularly in the consumables field.
Regional Health Expenditure
Total health expenditure for the CEE region is projected to reach an estimated US$329.0 billion by 2016, equal to 6.7% of GDP. At present, only 29% of spending in the region is
private, but over 85% of this is composed of out-of-pocket payments. The area of private healthcare plans remains largely undeveloped within most markets. Slovenia, the wealthiest country per capita in the region, is the only state in which private plans have become a strong feature, representing almost half of total private spending.
Focus on market opportunities: Diagnostic Imaging
The table below shows the rise in demand for imported diagnostic imaging equipment since the end of the economic crisis, following a period of slow-moderate growth. Between 2006 and 2010, the CAGR for such equipment did not exceed 20% in the countries listed below; however, import performance was much more encouraging in the year ending October 2011, particularly in Romania and Poland where growth rates reached 47.8% and 34.0%, respectively. Only modest growth was observed in the Czech Republic and Slovakia, however. It will take time for countries such as Ukraine to return to pre-crisis growth rates; renewed investment in high-tech equipment will ensue as
Highlights from the region
The Czech Republic was one of the larger and richer former Soviet countries to join the EU in May 2004. Its regulation and trade rules are now generally aligned to EU standards. It is well-located in central Europe and has an estimated population of 10.5 million in 2012. Healthcare funding is largely public, and mainly through health insurance. Private spending only accounts for an estimated 16.6% of total health expenditure in 2012. Provision of care is also largely public; the Czech Republic has yet to develop a substantial private sector. Around 80% of the Czech Republic medical device market is supplied by imports, which have risen rapidly in the past decade. The country has a small but skilled manufacturing sector.
Funding for healthcare in Poland is principally through the public health insurance system. Financing remains a problem as Poland only spends around 7.4% of GDP on healthcare. This does not fully cover the cost of medical equipment and upgrades required in hospitals. The private sector is underdeveloped, although it is growing in Warsaw and other major cities. Around 85% of the medical device market in Poland is supplied by imports. The market experienced rapid growth until the end of 2008, but imports fell back sharply in the early part of 2009. Poland’s economy did not contract as a result of the economic crisis however, and positive import growth was seen in 2010 and 2011.
The Hungarian medical device market is the fourth-largest in the CEE region. The current single-party government has identified healthcare reform as a top priority. Around half of the market is supplied by imports which are increasingly being sourced from Western European countries, principally Germany. Local medical device production is carried out by around 200 device manufacturers, which concentrate on exports. The market grew very rapidly prior to 2008, but in the wake of the global economic crisis, imports of medical equipment fell by around 10% in 2009. Imports recovered in 2010 however, increasing by 24.8%.
The Russian medical market is potentially huge, given its population and potential wealth of natural resources. Health expenditure remains low however, and patients are often forced to rely on out-of-pocket payments for treatment. A system of medical insurance is in place, but it is badly managed and the quality of treatment varies from region to region. Russian medical device manufacturers are generally small and undercapitalised, and tend to produce obsolete products; they can only compete with Western products in terms of cost. The country has a strong scientific research base but has no experience of commercialising new products. Exports are low and centred on other former USSR markets. Over 70% of the market is supplied by imports.