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Czech health care still ailing
Written by: Klára Smolová
Photo: Tomáš Kubeš
The Czech health care system is still
in crisis. With accession to the EU rapidly approaching, total reform
is inevitable - but health care providers must now dig in, hang
on, and make plans for maintaining their market positions.
| Megamergers
Although the pharmaceutical sector grew more slowly in 2002
than in 2001 because of economic slow-downs in the largest
markets (the US, Japan, and Germany), it is still one of the
most profitable branches of health care business - with sales
of USD 340-390 billion a year. Nearly 51% of the global pharmaceutical
market is now controlled by ten companies, and the concentration
of drug production continues apace. Mergers are saving costs,
expanding the portfolios of companies, increasing the base
for research, and strengthening new subjects' positions on
the market.
Mergers are now in process for the following companies: Pfizer
and Pharmacia, Roche and Chugai Pharmaceutical, and Novartis
and Lek Pharma. The merger between Léčiva (now producing 25%
of the pharmaceuticals here) and Sklovakofarma (14%) is very
important for the local market. This merger - through which
Wartburg Pincus LLC, an investment fund with a majority stake
in Léčiva, intends to acquire a 69% stake in Slovakofarma
Hlohovec - is still under negotiation. "If all goes according
to plan, new plants are expected to be opened," says
Léčiva's spokesman, Petr Polievka. The merger will produce
the largest pharmaceutical company in Central Europe, aiming
to penetrate markets in Poland, Russia, and countries of the
former USSR. The Swiss concern Novartis also wants to strengthen
its activities in this region, by acquiring LEK Pharma of
Slovenia.
The merger of Pfizer and Pharmacia has already been approved
by shareholders of both companies, and now only awaits approval
by regulatory bodies. "Pfizer will now be able to extend
its portfolio, because Pharmacia has products in areas in
which Pfizer does not operate, and will have more room for
research," says Richard Pulson, director of Pfizer's
Czech branch. "The company's capacities in the Czech
Republic will not be greatly affected by the merger,"
adds company spokesman Jiří Tráva. The new company will control
12% of the global market.
A merger between the Swiss firm Roche and the Japanese pharmaceuticals
producer Chugai Pharmaceutical is currently in its final phase.
As a result, the fifth largest Japanese pharmaceutical company
will have access to the global market, and Roche will again
be among the top ten players on the market.
Anita Lišková |
|
THE CZECH HEALTH care system, above all else, is short of cash.
According to the Health Care Information and Statistics Institute,
Czech hospitals owe their suppliers over CZK 9 billion, 5 billion
of which is past due, with another CZK 280 million in unpaid leasing
installments. Only half of the total 187 hospitals are financially
in the black.
The monetary situation inevitably affects the way the entire sector
operates. Companies, for their part, must be extremely careful when
selling expensive equipment to hospitals. "Banks are loathe
to extend installment plans to hospitals, due to their great indebtedness,
and in this way the problem is shifted to suppliers," says
Josef Krmenčík, director of Siemens' Medical Systems Division. "Hospitals
owe us half a billion crowns... But this debt is not yet past due.
We are currently looking for a strategic partner for financing."
However, medical equipment accounts for only a portion of the firm's
turnover of CZK 37 billion in this country.
Bayer, which specializes in laboratory equipment, has also become
caught up in the debt spiral. "We do have outstanding receivables,
although they are rather marginal. But the situation affects our
business and investment possibilities," says Marcin Kouri,
Bayer Diagnostics director for the Czech and Slovak Republics. If
hospitals lack money for purchasing new equipment, the result is
a deterioration in quality of patient care. "Debts have an
effect on us: without money, you can't invest. While in the EU equipment
is out-dated after six years, in this country it's used for twenty
years and more," says Roman Holba, a department manager for
Miele Professional, a provider of washing and disinfecting machines.
Hospital creditors also include pharmaceutical distributors. Four
of the largest - Aliance Unichem, Phoenix, Purus, and Gehe - account
for 70% of the market, and are owed some CZK 700 million. Last year,
they decided to sue. "We don't know when or whether we'll get
it (the money)," says Pavel Suchý, director of the Association
of Drug Distributors (AVEL), a group that includes the litigating
companies. Minister of Health Marie Součková is expected to submit
a health care reform proposal soon. Its main points are optimizing
the health care facilities network, and implementing legislative
standards and health care financing. One step toward gradual transformation
has already been made - district hospitals have now been placed
under regional administration. Although most interested parties
are concerned that the regions will not have sufficient funds to
help the hospitals, they hope the situation will improve.
Transparent pricing and payment
"Greater pressure will be exerted on economic management, in
order to determine whether a hospital has a solid basis for existence.
This involves effective and professional management," opines
Pavol Mazan, of the International Association of Pharmaceutical
Companies (MAFS). Suchý of AVEL is of a similar opinion: "not
all of the hospitals are necessary; their role could also be played
by polyclinics. Some of them must be eliminated, not due to their
indebtedness, but rather because of their overall [lack of] efficiency."
The need to close hospitals has been under discussion for some time,
but it's a sensitive issue with a lack of political will for resolution.
Experts in the field, however, unlike politicians, are demanding
prompt action. "We think that the least sensible step would
be to come up with a unique solution, instead of adopting an existing,
well functioning model from an EU country," says Petr Polievka,
the Léčiva pharmaceutical company spokesman, summing up the majority
opinion. Polievka's is an opinion that may carry weight; Léčiva
is a powerful company, currently the leading producer of medications
sold on the Czech market.
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| Pavel Suchý |
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Next year the Czech Republic is to become a member of the EU, and
health care providers promise us that noticeably improved market
conditions will follow. "Many processes will be accelerated
and unified, which will speed up the registration of top modern
medications, for example," opines Marie Hrudková, PR director
for Abbott Laboratories, which supplies pharmaceutical products
and diagnostic equipment. "We believe that pricing will also
be improved and made more transparent, as will the size of payments
provided by insurers. Equal conditions will thus be created for
everyone wanting to do business on the market." Jaroslav Dyčka,
the Czech and Slovak Republic director for Philips Medical Systems,
sees the greatest shift associated with the Czech Republic's entry
into the EU in certification simplification. "Every instrument,
prior to its launch on the Czech market, must currently go through
a complicated verification and certification process. In the future,
certification by the manufacturer should suffice," Dyčka says.
"In commercial terms, I believe that the number of private
diagnostics subjects will increase substantially," he adds.
Perhaps the health care system will see some basic changes soon,
but so far it seems that systemic improvement is subject more to
political agendas than the best interest of patients.
| Private
needn't mean expensive
 |
| Kateřina Čihařová |
Many private health care facilities have emerged and continue
to emerge in the Czech Republic, offering patients comprehensive
care. Contrary to the widespread assumption that these facilities
are only for the wealthy, the lion's share of "polyclinics"
operate on the basis of procedures paid for by insurance.
Interestingly, it is precisely this subsidized system that
causes problems for private clinics.
Mediscan, for example, already has two branches in Prague
- in Prague 4 (diagnostic center) and in Prague 1 (providing
a broad range of care). According to DC Mediscan Staré Město
director Kateřina Čihařová, all standard procedures except
physiotherapy and treatments for the obese are paid for by
insurance. The center offers both therapies and preventive
care to three types of patients: 1. employees of firms that
have contracted for health care with Mediscan; 2. people who
walk in off the street; and 3. foreign clients. "We currently
have 70,000 registered patients, and contracts with nearly
20 companies," Čihařová says, "also we are constantly
expanding, and we may double our capacity." If someone
is interested in above-standard services, he or she can pay
extra for a membership card, which costs about CZK 1,000.
Similar systems exist at other facilities, such as Soukromá
ordinace (Private Clinic) on Mezibranská street or NPI Lékařský
dům (House of Medicine). The Mezibranská street clinic, where
there are twelve treatment rooms for specialists (as opposed
to the original four), provides services to about 20 companies,
and NPI serves 60. However, private health care providers
agree that making a living in health care in this country
is very difficult. According to them, the main problem is
that health care in the Czech Republic is controlled by insurance
companies, which can essentially dictate conditions with strict
limits. "Inconsistent business conditions are the rule
here. Large state-owned hospitals are at center stage, with
private facilities marginalized," says Jan Mašek, NPI's
director, adding that unlike large hospitals that are foundering
in debt, private facilities cannot afford to carry debts.
According to Mašek, prices for individual procedures are set
so low by insurers that they don't even cover costs.
"Private facilities are very limited, they are not allowed
to set up the new treatment facilities that they may need;
there are set tables for everything, and if you exceed the
limit you simply won't be paid for the procedure," Mašek
complains. Čihařová has had similar experiences: "So
far we aren't making money on anything. We would be able to
make money if we had more foreign patients, as foreign insurers
pay more than Czech ones."
According to Mašek, local health care still operates on the
socialist basis of solidarity, but this results in inconsistent
practices. Health care financing reform must appear hand-in-hand
with amended laws, allowing evaluations of medical procedures
according to realistic costs - and above-standard care for
anyone who wants it. |
| Prices
- a hard pill to swallow
 |
| Pavol Mazan |
Pharmaceutical companies are also indirectly affected by
problems in the system, and the lack of funding in the health
care sector. Most products are sold through distribution companies,
which pay producers with nearly no problems. But what does
not please drug producers is the way prices are set in the
Czech Republic, particularly payments for medications by insurers.
One of the main complaints raised by pharmaceutical companies
is that they are forced to cut their prices substantially
in the Czech market. "Even with unique, original medications,
prices are often among the lowest in Europe," says Marie
Hrudková, from the public relations department of Abbott Laboratories,
an American firm that manufacturers diagnostic instruments
and pharmaceuticals for treating diabetes, respiratory diseases,
and HIV. "The same is true of Všeobecná zdravotní pojišťovna
(VZP - General Health Insurance Company), which often forces
original producers to cut back their activities in the Czech
market," she adds. Pavol Mazan, the executive director
of the International Association of Pharmaceutical Companies
(MAFS) confirms this. "Prices are constantly being lowered.
There are dozens of medications for which the ministry has
unilaterally decided to decrease payments, hoping that producers
will set their prices so as not to force patients to pay too
much extra."
Naturally, this system benefits generic drugs that are no
longer protected by patents and are therefore older and less
expensive compared to new drugs. "The Ministry of Health
boasts that in this country there is a fully paid drug for
every disease. But the problem is that a drug paid for (by
the insurer) is the least expensive, and in many cases it
is less effective," Mazan claims. "The result is
that of the six most important therapeutic groups, there are
no new, imported drugs in five of them." For purposes
of comparison, in the Czech Republic, generic drugs account
for 45% of all medications sold, while in the EU they account
for only 15%.
The Ministry of Health decides which drugs will be paid for
by insurers, and how much will be paid, based on twice-yearly
recommendations by the so-called categorization committee.
However, Mazan says that the decision-making process is neither
transparent nor flexible with respect to the market entry
of new drugs. This is why MAFS, which associates the major
pharmaceutical companies operating in the Czech Republic,
such as Pfizer, GlaxoSmithKline, and Novartis, has entered
into negotiations with the new Minister of Health on changing
the system, which should make decisions more transparent and
give producers a chance to appeal them - adding medications
to the register on a more steady basis. One of the subjects
on the agenda will also be a variant for setting fixed prices
for medications. |
| Hospitalization
- like a hotel stay
 |
True, hospitals are suffering from a lack of financing, but
patients need not suffer from a lack of anything during a
hospital stay. This is made possible by private health insurance,
which is currently offered by thirteen insurers in the Czech
Republic.
A person who arranges private health insurance can stipulate
how much money he will receive while ill, and on which day
he will start receiving benefits. An example: if he/she chooses
to start receiving daily benefits on the fifth day, the total
annual premium will be lower than if the insurer started paying
him on the first day, something that is inconceivable with
state insurance. Another popular product is insurance that
provides daily benefits during hospitalization. Česká pojišťovna
Zdraví (Czech Health Insurance) offers policies that ensure
above-standard accommodation for hospital stays. On the basis
of contracts, hospitals in the Czech Republic provide clients
with above-standard room furnishings (single room, television,
etc.). If the hospital does not have a room like that available,
the insurer guarantees the client compensation for the "spent
sums".
The greatest interest in private health insurance is demonstrated
by entrepreneurs who have less protection than their employees
in the event of illness. Insured parties also include managers
who get insurance policies as a part of their compensation
packages. "Our most common clients are entrepreneurs,
often small tradesmen like masons or cabinet makers who do
not have employees and have families to feed," says Stanislava
Mundlová, illness insurance manager for Generali.
Besides Generali, private insurance is also offered by other
international concerns like ING and Allianz. However, the
leader is Česká pojišťovna Zdraví, a part of the Česká pojišťovna
financial group. According to the Czech Association of Insurers,
in 2001 this company controlled 55% of the market. "The
private health insurance market in the Czech Republic is changing,"
says Přemysl Gistr, general director of ČP Zdraví. "For
example, in 2001 year-on-year growth reached 52.5%, and it
is clear that such a tempo cannot be sustained for long,"
he notes. However, Gistr feels that if an amended law proposed
by the finance ministry is adopted, under which the employer
would pay the ill employee for the first day of sick leave,
the market could be stirred up again.
Petr Vykoukal, Martin Zika |
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