THE INTERNATIONAL TRADE OF MEDICINES IN THE REPUBLIC OF SERBIA | Опубликовать статью ВАК, elibrary (НЭБ)

THE INTERNATIONAL TRADE OF MEDICINES IN THE REPUBLIC OF SERBIA

Scientific article

Milica Tomic

Higher School of Professional Business Studies in Novi Sad, Novi Sad, Serbia

Abstract

The author reviews the problems that arise in Serbia in the pharmaceutical industry and pharmaceutical products on the market. Solutions to problems such as untapped export potential, differences in price between domestic and foreign pharmaceutical products, and the lack of incentives from the state, inter alia, to a large extent depend on the state authorities that measures of economic policy in the short and medium term can improve situation the pharmaceutical industry in Serbia

Key words: import and export of drugs, drug prices, the pharmaceutical industry, Serbia

The importance of medicine (drugs) in international trade of the Republic of Serbia could be expressed not only with economic effects, which show the involvement of this product category in total merchandise trade, but also with the medicine products as a specific kind of products in this trade. Since it has concerned the products that are intended to satisfy the need of population (high priority), the medicine traffic has became the job of special social significance, with higher tasks that especially include and emphasize secured supply.

After 90s, the period that was closed (problematic) for the external trade between Serbia and other countries, several trade and other international agreements relevant for Serbian pharmacy industry have been signed. One of the most important is CEFTA, the South East European Free Trade agreement. Since 2006 the CEFTA agreement is being used. The replacement of former 32 bilateral agreements of regional free trade, its upgrade and contribution to the liberalization and facilitation of the trade conditions, are the crucial advantages of CEFTA agreement. [1]

The agreement signed up with Russian Federation in 2009 regarding further liberalization of mutual trade, is also included into one of the important foreign trade agreements.

Medicine traffic in the international trade is regulated by the Law on foreign trade of the Republic of Serbia, which is regulated in accordance with the World Trade Organization (WTO) and the regulations of the European Union (EU).

The share of imports of medicinal and pharmaceutical products in 2011 was 5, 7% of total import of goods into Serbia. [2] The import of pharmaceutical products, mainly from European Union, is growing from year to year, with annual growth rate of up to 30%. [3]

Table 1. The import and export of medicine (drugs) prepared for retail sale (mil. EUR) [7]

Medicine traffic in the country is secured by official wholesalers, who are making a significant impact on the importing and the medicine positioning in the medicine market.  The interesting fact is that domestic pharmaceutical manufactures have one untapped export potential, because they do not use all the export capacity and opportunities.

During the years, the medicine import in Serbia has grown (in period between 2005 and 2008). After 2008, both, export and import have faced the stability. In 2006 and 2007 the medicine export has noticed its rapid growth.

This phenomenon showed up as a result of mentioned trade agreements and contracts, which significantly contributed to export increase, and only 2 year later, when the medicine market has left the place for it, the imports have increased too.

In the international medicine (drugs) traffic in Serbia, there is one specific problem. The problem is caused by the price-difference between domestic and imported pharmaceutical products.  Namely, it shows discrimination policy in terms of taxes. This discrimination suites better for the importer; the value-added tax (VAT) on the import of the raw materials is 18%, and on the finished (final) medicine only 8%.

Another importers advantage is reflected in term of tariff policy where the tariff on the raw material import is 1-5% and on the final (finished) medicine (drug) 0% (for the CEFTA countries) and 3,6% (EU Members States). [3] The consequences of such State regulations are that the drugs with same chemical compositions appear cheaper when they are imported than when they are bought from domestic manufactures. This creates dissatisfaction among domestic pharmaceutical companies, which are trying, for several years now, to follow the prices of the imported pharmaceutical products.

The share of the foreign pharmaceutical companies in Serbian market is being much more evident over the last few years. The world’s largest pharmaceutical companies with their headquarters in the United States, Switzerland, the United Kingdom and Germany, have taken a significant share of the entire Serbian market. The foreign pharmaceutical companies do have a positive financial performance, which is much better in compare to the domestic medicine manufacture. However, the participation of foreign companies in the entire Serbian market does not exceed 20%. [4]

On the other hand, domestic pharmaceutical companies have objected to the lack of initiation measures from the official side, the state and government side, which are constantly ignoring the pressure made from the domestic companies and their complains. This problem is considered as one of the key reasons why the export of the domestic pharmaceutical industry has not reached its best capacity. However, the current improvements in this area have become visible. In 2009, for the first time, one Serbian pharmaceutical company has exported its medicine products into the United States.

The agreement about trade liberalization made with Russian Federation has increased the export of drugs (medicine) into this country. It is important to note that some of the exported drugs apply to export into Bosnia and Herzegovina. Despites the improving trends regarding export situation, the share of medicine export is 2, 12 %, which makes it still very low. The good side of the situation is still progressive trend regarding the export, but on the other hand, we still have the growth of the import. It gives a bad picture for a foreign trade and makes a deficit in this industry. [5]

Like many other countries in transmission, Serbia has problems with the financing of health care, medicine traffic as well as its trade deficit. An ideal solution for these problems is still missing and current results are not very satisfying. First of all, government export incentives are not fully implemented. On the other side, custom reliefs of medicine imports are supported as long as they don’t reflect, negatively, on the domestic medicine production as well as their price. Therefore, the medicine price procedure in Serbia, and the costs of it are very popular subject in the media, followed by very sharp controversy, like one mid July 2012. [6]

The growth of drugs prices causes a big problem, considering purchase capability of the Serbian people, which is very low. State and government should consider relation between export capabilities and negative impact of import reliefs, which have contributed to the fact that imported medicine, is cheaper than domestic, which leads to further weakening of the domestic pharmaceutical industry. Only through reforms, the image of pharmaceutical industry of Serbia can be change and despite everything has a great potential.