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Although dwarfed in size by some of the biggest economies in Europe with which it shares its borders, the Czech Republic is one of the Central and Eastern European (CEE) region’s best-performing economies. Indeed, on a per capita level, the Czechs are well ahead of their CEE neighbors, with GDP (PPP) per capita standing at USD 39,337 in 2019.Moreover, the Czechs can proudly boast one of the best healthcare systems in the CEE; despite healthcare expenditure as a percentage of GDP standing at 7.2 percent compared to an EU average of 9.8 percent. A universal healthcare system funded by seven insurance companies covers the healthcare needs of the vast majority of the country’s ten million citizens.
In the words of Janssen’s managing director, Martin Minarovič, the Czech healthcare system is “slowly progressing and converging with Western standards.” Minister of Health Adam Vojtěch agrees, stating that, “we are comparable to all EU members and can serve as an example to countries in the East.” Minister Vojtěch adds, “There are no barriers for patients in need of treatment.”
Against this backdrop stands a USD 3.38 billion domestic pharmaceutical market buoyed by regulatory reforms aimed at increasing patient access to innovative new therapies. Although still tightly regulated, industry stakeholders are cautiously optimistic that the Czech Republic stands to further close the gap with Western Europe.
The country’s diminutive size also belies its historical weight in scientific innovation. “The Czech Republic is the birthplace of medical inventions that have improved the lives of millions” exclaims Patrik Reichl, CEO of CzechInvest, the country’s investment agency. Two of the most notable discoveries include the first soft gel contact lenses, first produced in 1961 by Otto Wichterle, and the breakthrough antiretroviral drugs developed by pioneering Czech scientist Professor Antonín Holý which have revolutionized the treatment of HIV and hepatitis B. Holý’s invention is still considered the backbone of HIV therapy, and Gilead Sciences’ managing director Pavel Brezina believes “his achievements have not received the appreciation they deserve.”
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Over recent years, the Czech healthcare system has undergone major advances in the treatment of certain therapeutic areas including oncology, cardiology, and diabetes, in line with Western European standards with an increased focus on preventative treatment.
The updated Czech Health Strategy 2030 aims to introduce more preventative measures, whilst focusing on difficulties in primary care and tackling the country’s lack of education and misinformation. Introduced at the start of 2020 by Minister Vojtěch states that, “the reform of primary healthcare will tackle prevention for non-communicable diseases, as the role of general practitioners is very important here.” He continues, “Better education will lead to better results in the area of prevention,” acknowledging that the Czech Republic has one of the lowest health literacy scores in Europe and concluding that “despite the obstacles that the system presents in certain areas, we should be proud of what we have.”
For example, in the past 15 years, the mortality rate of breast cancer has dropped from 43 to 29 percent thanks to the adoption of a rigorous breast screening program, a recent European Coordination Committee of the Radiological, Electromedical and Healthcare IT Industry (COCIR) study shows. In diabetes, it is mandatory for Czech citizens over the age of 45 to be evaluated by a GP every two years, which Jan Škrha, president of the Czech Diabetes Society, feels is a “positive step in the context of early diagnosis.”
Pharma industry stakeholders are generally quick to suggest that the Czech Republic is one of the most over-regulated markets in Europe, with new or innovative therapies facing significant delays before being able to enter the market. “Compared to Slovenia, Slovakia or Hungary, the regulations involved in permitting access to innovative therapies in the Czech Republic are very complex” comments Janssen’s Minarovič.
For companies to overcome this barrier, they must first engage in a dialogue with the State Institute for Drug Control (SUKL). Emmanuelle Boishardy, general manager of GSK, agrees that “the market access process takes a long time, and it is difficult to predict the outcomes of assessments as SUKL lacks transparency.” However, Boishardy adds that “we can already see a lot of effort being made by SUKL.”
Ipsen’s VP for Central Eastern Europe Patrik Zachar also feels that there have been “significant improvements particularly over the last couple of years” in terms of the discussions that companies can engage in with SUKL, adding, “this has led to an improved and more predictable overall process with fewer bottlenecks.” Minarovič notes that “while the timelines are still outside the defined framework, the situation is much better than it was before and continues to improve further.”
Following approval from SUKL, companies must then negotiate with the seven insurance companies on an individual basis, as reimbursement is fully funded by them. The General Health Insurance Company (VZP) is the biggest, covering around 60 percent of citizens, while the other six share the remaining 40 percent.
Takeda’s Kieran Leahy, general manager for Czech Republic and Slovakia, explains, “the current health technology assessment (HTA) process was not built for the portfolios pharma companies have now. It was built to assess treatments for thousands of patients that cost tens of euros, such as cardiovascular or diabetes medicines. We now have treatments for tens of patients that cost thousands of euros.” Minarovič concurs, adding that “the main bottleneck is now the negotiation process with payers and budget caps.”
In response, VZP has committed to invest CZK 14 billion (USD 581 million) in modern treatments in 2020, a 12 percent year-on-year increase and 28 percent increase compared to two years ago. David Šmehlík, VZP’s deputy director emphasises “we want to improve access to modern treatments, thus increase investments every year in this area.” While insurance funds are increasing their budgets allocated to innovative therapies, the process remains difficult and lengthy.
This is not the final hurdle to bringing innovation to the patients, as Lilly’s general manager, Miha Kline explains. “The other half of the challenge is to establish trust with the physicians who will prescribe the treatment to eligible patients,” he notes. Ipsen’s Zachar agrees, as they have to work on two fronts: educating healthcare professionals (HCPs), key opinion leaders (KOLs), and specialists, while increasing the awareness of patients and their families about new or different treatment options. Giving the example of Botox which can treat patients who develop chronic spasticity after suffering a stroke, Zachar explains that “Many patients are simply not aware that botulinum toxins can dramatically improve their symptoms. Moreover, HCPs are not accustomed or comfortable with injecting the toxin as a treatment to spasticity.”
Although there is still a long way to go in educating doctors, AstraZeneca’s Emelie Antoni believes communicating with HCPs on a one-to-one basis is easier in the Czech Republic than in Western Europe. “[Czech HCPs] very much welcome our sales representatives to learn from them about new science and knowledge. HCPs can receive tailored support and service. As a result, we still maintain quite a large field force, unlike in other markets” she states.
The Czech Republic’s reference pricing system, where reimbursement is set based on the lowest price in the EU, adds another layer of complexity to the already lengthy market access struggle. Drugs sold in the Czech Republic are, on average, priced 30 percent lower than the EU average. Sanofi’s country chair Paul-François Cossa sees this as a severe limitation to Czech patients’ access to innovation. “Strong price pressures limit our room for maneuver in launching innovative therapies while creating value for the company, especially considering the complex business model pharma companies have to navigate,” he posits.
GSK’s Boishardy agrees that there is a balance that global firms have to consider. “Volumes in the small Czech market cannot compensate for a price decrease in France,” meaning that companies therefore have to choose carefully when and where to launch innovations. Ipsen’s Patrik Zachar warns that “if getting the lowest price in Europe continues to be the focal point, access to innovation will worsen,” adding that it is irresponsible to “simply compare prices between various countries, as this does not necessarily reflect the differences and nuances between their respective systems.”
Moreover, low prices are having a detrimental effect on the industry, with many foreseeing the eventual exit of certain multinationals from the Czech market altogether.
Low prices are also having a knock-on effect on the availability of medicines, with many being exported to neighboring countries with higher prices. The Czech government is aware of this ‘parallel export’ phenomenon and acknowledges the fact that low Czech drug prices are leading to a high and constantly increasing number of exports. Taking its cue from neighboring Slovakia, the new Act on Pharmaceuticals aims to restrict parallel exports. Minister Vojtěch makes assurances that “stricter regulations are needed, and we are working on this.”
At the Avant-Garde of Consumer Healthcare
One notable trend in the Czech Republic is the country’s dynamic channel shift in the OTC market, with the increasing consolidation and vertical integration of pharmacies, coupled with an emerging e-commerce and mass market. This has resulted in chains such as Dr. Max and BENU controlling an increasing percentage share of the market. Paul-Francois Cossa, country chair of Sanofi Czech Republic & Slovakia and general manager consumer healthcare (CHC), describes the Czech consumer healthcare market as “fascinating due to the level of maturity it displays compared to other European markets. The market has made major advances in e-commerce.”
Looking ahead, Sławek Ludwiczuk, country head for Bayer Consumer Health Czech Republic & Slovakia, is on a mission to transform the local affiliate to succeed in a consolidated market, reasoning “My mission was to be at the avant-garde of this transformation because I would rather be in the driver’s seat than simply a passenger” in terms of positioning their OTC brands on the market. He understands that changing the mentality of his team before opening dialogues with the stakeholders in this area is key, adding “as experts in our niche categories, we can bring insights to those partners. It is just a matter of finding intersections where we can jointly make our value propositions more relevant for the consumer.”
Cossa concurs, adding that it is important to “bring disruptive business practices when it comes to engaging with HCPs about our products.”
A cross-industry push for better and broader access to innovative treatments is underway in the Czech Republic. Ripe for reform is the country’s orphan drug legislation as no standard pathway for their assessment, pricing and reimbursement currently exists. Companies must apply for exceptional reimbursement under the ominous ‘Paragraph 16,’ which takes up considerable time and energy for local market access teams, with SUKL offering a simple “accept or deny” result. Roche’s general manager Robin Turner indicates that a change to this process “will be beneficial to increase access to orphan drugs for which it is almost impossible to demonstrate cost-effectiveness,” which is standard criteria for an approval from the regulatory body.
This ambitious reform, called the Act on Public Health Insurance, is set to become law in late 2020. “It is not just about cost-effectiveness” explains Minister Vojtěch, adding that “through this amendment insurance companies, industry associations, patient groups, and experts will evaluate how impactful a given orphan drug is and how it will improve the quality of life of patients.” Takeda’s Leahy adds “Our goals are aligned with those of the Minister of Health, which are for patients to have access to innovative life-changing medicines as quickly as possible in an affordable way.”
Increased dialogue between SUKL and insurance companies has enhanced patient access for highly innovative, but extremely costly CAR-T treatments. In 2019, VZP announced it had negotiated access to two breakthrough CAR-T therapies: Gilead’s Yescarta for large B-cell lymphoma and Novartis’ Kymriah for B-cell acute lymphoblastic leukemia. “We have special proceedings for early access to modern treatments such as cell and gene therapies and orphan drugs” shares VZP’s Šmehlík. To achieve this, VZP and the Czech Haematology Society signed a memorandum to grant funding to these therapies for the next twelve months, defined patients with a strong medical need for treatment and developed recommendations for both products.
Martin Puchwein, country president & general manager pharma for market leader Novartis, celebrates “Novartis is now at the finish line!” Roche’s Turner agrees that for cancer treatment the country has been “quite successful in moving the needle, but we can do a lot better in small niche-indications.” He feels it is near impossible to gather enough clinical trial data, claiming “the whole model is not suited to the advent of personalized medicine based on genomic profiling.” If the Czech Republic wants to close the gap on Western Europe, “the country will have to change its approach to modern treatments.”
Turner quips, “the government is trying to fix the symptoms rather than treat the cause” and is less enthusiastic about other market access regulations for innovative pharmaceuticals in general. Gilead’s Brezina agrees, sharing his opinion that “these so-called soft criteria that orphan drugs will be assessed against should be taken into consideration for regular prescription drugs as well.”
Introducing expensive, innovative therapies weighs heavily on healthcare budgets. “Moving forward, health funds and budgets will not be able to continue paying for expensive innovation,” laments STADA’s executive director, Tomáš Mihál. This serves as an opportunity for generic companies to come to the forefront. As Milan Černek, general manager of Mylan claims, “money saved through generics opens the door to the introduction of innovative therapies,” communicating that the country “needs to strive for a sustainable healthcare system that benefits patients and the community as a whole.”
For instance, according to 2017 data from the Institute of Health Information and Statistics of the Czech Republic (ÚZIS), 87,000 patients in the Czech Republic suffer from rheumatoid arthritis, with 4,000 new patients with this disease added every year. An analysis by the Czech Association of Pharmaceutical Companies (ČAFF) has shown that the use of generics and biosimilars for the treatment of this disease has saved more than CZK 1.6 billion in the Czech Republic over the past ten years. Similarly, savings calculated by ČAFF in the last 10 years in the field of treatment for Alzheimer’s disease, amount to CZK 2.5 billion (USD 97.5 million).
Executive director of ČAFF, Martin Mátl is dedicated to increasing awareness of the benefits and savings his member companies can offer the Czech healthcare system. “We would like to focus more on data to be able to explain to stakeholders what is going on in the market,” he reveals. In 2019, generics represented 54 percent of the pharmaceutical market share in terms of volume and 23 percent in terms of value. “Based on these figures, we can say that generics represent a less expensive spectrum of pharmacotherapy, which is not a surprise,” notes Mátl. “They are essential to making pharmacotherapy available to a wider range of patients and to control public spending on medicines.”
Ingrid Šmerdová, a seasoned general manager at Adamed, a Polish generics firm with a footprint in the Czech Republic since 2016, outlines “our mission is to respond to the key challenges of modern medicine” to add value to the healthcare system, explaining “the ultimate goal is to bring new possibilities of treatment to Czech patients and the whole healthcare environment.”
STADA’s Mihál also boasts of the benefits that biosimilars can bring to the country, boldly declaring “they can be the answer if health funds are looking for savings.” Many stakeholders agree that the increased use of biosimilars is inevitable, including the VZP’s Šmehlík, who says that as a result of introducing biosimilars, “the number of patients being treated with modern medicines has increased faster than spending, thus the yearly cost of modern treatment per patient has decreased.”
STADA aims to capitalize on this shift by launching eight biosimilars in the country over the coming years, and Šmerdová believes “our new pipeline will be a vital driver to differentiate the company locally.” However, Mátl believes that a faster uptake of biosimilars is needed, since “we have already held discussions with healthcare funds and they have stated that they would like to increase the spread of biosimilars, yet there has not been much progress made.”
Scratching below the surface, the Czech Republic boasts an infrastructure ready for the healthcare advances of tomorrow and a location right at the heart of Europe. Roche’s Robin Turner praises the country’s centers of excellence in oncology, adding “the more patients that can receive treatment in specialized centers, the better their chances are of survival.” These centers can also provide CAR-T therapies, having undergone rigorous certification procedures. “All this is done with the single aim to assure the highest quality standards which are critical for the best possible treatment outcomes for the patients” attests Gilead’s Brezina.
These specialized centers are also perfect sites for clinical trials, as Jakub Dvořáček, CEO of the Association of Innovative Pharmaceutical Industry (AIFP) numerates, “CZK 1.7 billion (USD 72 million) is invested in clinical trials per year, with 21,000 patients treated.” The Czech Republic is often picked for conducting clinical trials within the CEE Region, with the country contributing as many patients as some of the biggest countries in the EU. Novartis currently conducts more than 90 clinical trials in the country, with Janssen establishing a Global Clinical Operations department dedicated to this area. As Puchwein of Novartis puts it, “this showcases the quality of Czech clinical centers and demonstrates the openness of physicians to work at the forefront of new therapies together with pharmaceutical companies.”
Moreover, multinationals continue to pin the Czech Republic, and Prague in particular, as the perfect destination for their Regional Hubs, supporting global or EMEA business operations. The capital is home to MSD’s IT Centre, Bayer’s Pharmacovigilance Hub, and Novartis’ Global Service Center, providing a wide array of services in areas such as finance, IT, HR and procurement. Puchwein feels that “the city has positioned itself as a technology hub, thanks to a combination of top universities, a great start-up ecosystem and big multinational players.”
With a robust economy, a regulatory framework increasingly conducive to faster market access for innovative therapies, and a budding innovation and operational ecosystem, the future looks bright for Czech healthcare and life sciences. The main challenge moving forward will be for all key stakeholders to take a holistic view of the added value of innovative therapies, weighing up the cost from both a social and economic perspective. Takeda’s Leahy points out that “constructive dialog must be kept among all to make new medicinal technologies accessible.” Roche’s Turner adds that “Czechs should believe in their proven ability to succeed and invest in a truly healthy future.”
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The Digital Version of the Healthcare & Life Sciences Review: Czech Republic is available and optimized for desktop browsers.
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2020. Healthcare & Life Sciences Review was produced by Pharmaboardroom.
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