The new Slovak Republic is positioned right at the heart of Europe, surrounded by the Czech Republic, Poland, Ukraine, Austria and Hungary, and connected to its neighbours by the River Danube.

Slovakia was part of Czechoslovakia until January 1993, when it finally split from communism. In its first few years of independence, Slovakia experienced frosty relationships with the EU and NATO. But more recently a complete change of direction led to membership of both bodies in 2004.

The Slovak people are extremely proud of their culture, kept alive today through food, music, dance and song. Slovakia has even managed to preserve its own language, Slovak, as well as its currency, the Slovak Koruna - although this is set to change on 1 January 2009 when it adopts the Euro.

Slovakia covers an area of about 50,000 km2 and has around 5.4 million inhabitants. Despite its modern European economy and society, Slovakia has a significant rural element, with about 59% of Slovaks living in villages. Bratislava, the capital, is home to 430,000 inhabitants, with almost 19% of its population being under 15 years old.

The Bratislava region is the wealthiest and economically the most important of the eight Slovak regions, even though it is the smallest in terms of area and population. Significant government institutions and private businesses, including pharmaceutical companies, have their headquarters in Bratislava.

To find out more about the pharmaceutical industry in this fascinating 'new' country, Gerard Doherty from The MSI Consultancy talked to marketers working in Slovakia to report on how the healthcare system operates and to discover some of the main issues facing our industry colleagues today.

Funding

The economic situation in Slovakia is still a limiting factor in financing the healthcare sector. Although the economy is growing, performance is still below that of many of its European counterparts (the GDP in Slovakia per capita is about 48% of the former EU-15 average in 2003).

Sufficient healthcare financing is limited by this lower economic performance and productivity, and by the low income level of individuals and households. Public finance deficits are a major barrier to increasing funds for healthcare, as there are many other demands on the Government to provide subsidies to other areas of the economy, particularly agriculture and foreign investors.

In addition, prior to 2004, the health insurance system provided universal benefits that were too comprehensive, without cost restrictions and with 'free-of-charge' access to a generous package of services, which led to an unsustainable level of expenditure. This reached 7.7% of GDP in 2002, whereas revenue corresponded to only 6.8%. Spending continued to rise, causing increasing debt and an inability to provide the right services, resulting in escalating waiting times for patients.

Subsequently, healthcare reforms introduced by the Government in 2004 focused on controlling these spiralling costs and restraining future risks. Healthcare reforms were introduced to halt debt and eliminate deficit through cost containment, reducing the public's expectations and their excessive use of the healthcare system.

Price control

One of the main issues facing pharma in Slovakia is government price controls. At the moment new processes are being progressed to control drug cost, and in July prices for all prescription drugs will decrease by 7.4%. Interestingly, current drug prices in Slovakia are significantly higher than in the rest of Europe - this decrease will bring prices more in line.

Joining the EU has not had a huge impact on healthcare in Slovakia, apart from benchmarking prices and subsequent price controls resulting in a fairly static market. From 2009 all drugs being launched in Slovakia will be assessed against the EU average, putting even more downward pressure on prices.

Health insurance and reimbursement

Social health insurance in Slovakia is mandatory, with income-related health insurance contributions set at 14% and shared between employers (10%) and employees (4%). Until two years ago there were over 10 different health insurance companies, but following a period of consolidation there are now five official health insurers. Each Slovakian individual is allocated one of these companies depending on their location, employer, etc. Healthcare for dependants (e.g. unemployed, elderly, soldiers, disabled) is financed from public sources (i.e. tax), which means a fairly high burden for employers and employees, creating barriers to the creation of new (productive) jobs and solutions to long-term unemployment.

Payment of treatment under these schemes is dependent entirely on the 1995 Act on Treatment Code. Since this Act was adopted, pharmaceuticals registered for the Slovakian market are no longer automatically fully reimbursed by health insurance companies. Further to this law, a process called 'categorisation of drugs' was developed by a special committee of the Ministry of Health, which resulted in drugs being grouped according to their anatomic-therapeutic-chemical classification (ATC groups). All registered drugs in these groups were then divided into three categories: essential drugs (those fully covered by mandatory health insurance); partially reimbursed drugs (mostly patented equivalents or generics produced by different manufacturers), and out-of-pocket drugs (consisting mainly of vitamins and minerals which are non-reimbursable).

The Government decided that this categorisation of drugs as a stand-alone measure was not enough to prevent the escalation of drug costs, and in June 2003 made changes to this system. This resulted in greater participation of representatives from health insurance companies and a higher emphasis on cost-effectiveness analysis. A constant patient co-payment system was introduced, stating that the price of a drug is reduced after the publication of a drug list, with the insurance companies benefiting from a lower reimbursement. At the same time, spending caps were introduced for drugs and medical goods at individual provider level, so health insurance companies must negotiate prescription limits as part of their contracts with providers.

The Categorisation Committee meets four times a year to decide whether to approve new drugs and also what sort of reimbursement payment (categorisation and payment levels) to impose.

Some categories of drugs, such as obesity drugs, are not reimbursed at all. With part payment, the portion the Government will pay is based on how much the generic might be. This affects the more expensive brands, particularly if a generic is available. If a generic is not available, the Committee will look to the average EU price, with the level of reimbursement based on that.

Since January 2004 the Ministry of Health has set the maximum prices of drugs in concordance with EU Council Directive EU 89/105/EEC, which relates to the transparency of price measures for drugs and their inclusion in national health insurance systems.

Health system

The Slovakians operate a very straightforward health system where everyone has a GP who they must visit first, with community paediatricians for children. Only then can they be referred to the hospital system.

Most specialists operate from offices in the community rather than from a hospital. It is these specialists who care for the majority of the population, with just a small number based in hospitals. Prescribing power is held primarily by the GPs, then the paediatricians, the office specialists and finally the insurance companies. The Categorisation Committee sometimes imposes limitations on who is prescribing and what they can prescribe (e.g. HIV drugs can only be prescribed by HIV specialists). There can also be a limit on the total number of drug prescriptions dispensed, so either a patient is allowed to get treatment for a certain number of months or the clinician has access to a specific number of courses.

Slovakia follows the traditional pharma model where the GP is the key focus for promotional activity and the person to whom most sales calls go. Hospital activity is focused on developing opinion leader influence to drive more primary care use. As for other stakeholders, apart from the insurance companies, these are not yet well developed.

Some things you might not know about Slovakia...

Famous Slovaks

Tennis champion Martina Hingis, former world number one and winner of five Grand Slam singles titles and nine Grand Slam women's doubles titles, was born in 1980 in Slovakia to a Slovak father and a Czech mother.

The most famous American of Slovak descent is probably pop artist Andy Warhol (1928¿1987), whose parents emmigrated from Miková in north-eastern Slovakia.

Society and culture

Slovakia, along with the three Baltic countries, has the highest death rate for heart diseases in the EU.

Slovakia is among Europe's best educated countries. Ninety percent of Slovaks have completed at least secondary education - the highest score in the EU, but closely followed by Poland, the Czech Republic and Slovenia.

Economy

Slovakia has been called a European tiger economy, along with the Czech Republic, and it has the highest level of foreign investment, in part due to its 19% flat tax rate.

The Kia Motors European car factory is located in Slovakia, while Peugeot-Citroen and Volkswagen also have plants in the country. By 2008, Slovakia will be the biggest car producer per capita in the world.

Gerard Doherty is managing consultant at The MSI Consultancy. He can be contacted by e-mail at: gdoherty@msi.co.uk