Written by: Jason Hovet
Photo by: Luminum
Private health clinics continue to sprout up, restructure, or expand. Finding clientele among large, mostly international firms is helping growth, as a number of individuals are starting to look elsewhere for what they can’t get from the public system.
“CYCLICAL DEBTS in public health insurance have a lot of implications for everybody involved in healthcare,” says Petr Seidl, director of the private clinic Medicover, mentioning not only patients, but providers and suppliers as well. For original pharmaceutical manufacturers (those that conduct their own research and development to produce “original” drugs), new cost-saving measures in health insurance will leave many of their prescriptions too expensive and uncovered. Unfortunately, these problems and debates are nothing new and have been discussed for years, which doesn’t leave many hopeful that substantial changes are around the corner. Despite this, companies involved in private healthcare continue to grow in an ever-tougher system.
Regardless of these problems, public healthcare providers and suppliers are relatively prosperous. For private health clinics, corporate clients remain important customers. “The majority of our revenue comes from corporate contracts,” Medicover’s Seidl says. Medicover, one of the biggest clinics, cooperates with around 200 corporate clients, caring mostly for both middle- and upper-managers. This accounts for 90% of its patient list, and is split between both Czech and foreign individuals – although Seidl sees the proportion of expats decreasing. Medicover, part of an international group active in eastern Europe, entered the market in 2001 by acquiring První pražská zdravotní and has since been restructuring its operations. During that time, its client list more than doubled – to 13,200 in the second quarter of this year from 5,800 two years before.
While Medicover has a proven track record with corporations in other markets, many Czech-operated clinics are awakening to opportunities. Medicentrum Beroun, created in 1995 after the Beroun clinic was privatized, typically serves patients covered under public health insurance but now makes a more concentrated effort for firms. “We offer health services to foreign clients, whose numbers are expanding each year,” says Medicentrum director, Martin Holub. These numbers mainly involve patients from multinational firms, which are usually looking for programs tailor-made. “They (firms) are much more sophisticated,” he says. One example is a growing demand for occupational health services. “These lead to a lowering of illness, as well as sick leave,” Holub claims. Medicover sees opportunities here, too, and even organized a conference about occupational healthcare in 2002. It cited studies showing that CZK 30 billion are annually spent on illness benefits, whereas CZK 8 billion “was paid without need or justification.”
Growing interest in occupational health, which is a focus of many multinational companies, is a good example of the positive influence of increased foreign investment. Another example is the tender process, which Seidl says is more sophisticated than a decade ago. He points out that better corporate governance is one major reason behind the improved organization. Contracts usually last one or two years, and competition for corporate clients is now getting more fierce. However, according toTáňa Tomanová, a client care manager at GHC Clinic, “clients are typically long-term.” GHC, though, relies more heavily on individual clients – and health tourists (see sidebar, p. 36) – than other clinics, and also only invoices clients directly, bypassing insurance.
Choosing their place
Most other clinics accept cash payments, as well as private and public health insurance, which gives them a higher stake in the ongoing insurance dilemma. Medicentrum’s Holub says insurance claims 10 years ago were being paid within 25 days; today it now takes more than 60 days. Health insurance woes are on the mind of a lot of private health clinics today. “The real issue is that they (the nine public health insurers) are not allowed to compete,” Seidl offers. Just as well, pharmaceutical companies, mainly original medicine producers, have similar complaints about healthcare funding. “This system definitely needs some reform,” says Jana Mikotová, director of the International Association of Pharmaceutical Companies (MAFS).
With debt of more than CZK 14 billion in public health insurance, new Minister of Health David Rath plans to rely more heavily on generic drugs in the future. The country already is a strong user of generics – which accounted for more than 50% of volume and 33% of costs in 2004, according to Infopharm; some studies have shown that insurers already save CZK 4.5 billion by preferring generics. This worries original pharmaceutical companies, as so much of their portfolios are aimed at prescriptions. Currently, three-quarters of the market is in prescription sales. As a result, research is becoming more specialized. “New medications will be aimed at specialists,” says Jiří Pešina, communication affairs manager at Roche. “Companies that conduct their own research and development of new drugs will yield the market of first-line prescription, which is where the cheaper generics will be used,” he adds. Roche’s sales in the Czech Republic (excluding over-the-counter [OTC] products) now total CZK 1.8 billion, a three-fold rise since 1996, and account for 5% of the market, according to the company. Roche has a specific portfolio with products mainly in oncology (cancer treatment) and transplant medicine.
Market specialization is one way of extracting decent returns on the Czech pharma market – which is valued at USD 2.2 billion, according to research by Espicom. For the largest market share, though, generic drugs factor heavily – starting with the leader Zentiva, as well as Ivax and Novartis, both of which incorporate generics in their portfolio and round out the top three in volume sales. At Zentiva, 80% of its products are prescription-driven, says Václav Rejholec, the firm’s external affairs director and president of the Czech Association of Pharmaceutical Companies (ČAFF), which represents mainly generic pharmaceutical manufacturers. He tries to dispel the myth that generic drugs are cheap rip-offs, saying it takes nearly three years to bring a product to market and Zentiva employs a staff of 230 for research and development, budgeting CZK 600 million for their activities. Similarly, at Ivax, 8% of staff and 4% of the budget are dedicated to R&D, mainly in generics. Zentiva, for its part, hopes to move into original research in the future.
Still, both sides insist it’s not an us-versus-them fight in pharmaceuticals, agreeing that both types of drugs need to be available. They also both argue the need for a fairer marketplace, which would certainly be aided by a more transparent pricing policy. “We are working in an area without any rules,” Mikotová says. Similar to private health clinics, pharma companies want a healthcare policy focused more on what the patient needs, rather than economics. Most in private healthcare agree that more competition would be beneficial, and that preventive medicine, which might be more expensive in the short-term, should begin to have a greater impact on healthcare. “I hope the role of the patient will be much stronger,” says Medicover’s Seidl, “and that the patient will be the real decision-maker.”
|Bright lights, big markets
While attention from sector pundits is nothing new for generic drugs giant Zentiva, the spotlight has been brighter since its 2003 merger – joining Czech drug maker Léčiva with Slovak counterpart Slovakofarma Hlohovec – and its listing on the Prague Stock Exchange last year. Yet criticism isn’t deterring it from its goal of becoming one of the largest players in central and eastern European markets.Zentiva took a big step in October when it purchased a 51% stake in Sicomed, Romania’s largest generics producer. By year end it hopes to have the remaining shares in its hands. Besides Romania, external affairs director Václav Rejholec says company plans center on Poland, Russia and the Baltics. “There is still good potential [in those areas],” he says. Still, Zentiva will have a little work in the new markets. “One of our first steps will be to introduce our own modern medicine in [Romania],” he adds.
|Paying for protectionEven after heavy growth during the 1990s, most still say private health insurance is underutilized. According to the Czech Insurance Association (ČAP), it accounts for less than 4% of all private insurance policies. In 2004, health insurance totaled CZK 4.5 billion in policies – up from only CZK 190 million in 1995. Since that time, however, sales have been “quite variable,” says Radim Hamáček, a marketing manager for Generali. Václav Bálek, spokesman for České pojišťovna (ČP), parent of ČP Zdraví, says much the same. He expects renewed interest, especially with the problems surrounding public health insurers today, saying many will start turning to them for extra service. “We can expect more growth because of the limitations of public health insurance,” he says. Those question marks combined with higher salaries should send more people to private insurers for additional protection. Currently, the most popular products are sick leave benefits and accident insurance. Most clients are 30 to 50 years old with higher salaries and families, according to Bálek. These benefits are increasingly being offered as employee benefits, as well. At Generali, 10% of customers are corporate clients now, says Hamáček.
Sales of these policies are also piggy-backing on life insurance more often. “There is a new trend of including [health and accident insurance] in with life insurance contracts,” Hamáček says of the growing sales vehicle. And it might be working, as ČAP reported illness insurance jumping 40% in 2004, making it one of the biggest growers. In addition, with more Czechs working abroad today, they are increasingly looking to private insurers for coverage, says Ernest Flamini, an adviser with BUPA International, a global insurer, although they still only account for 5% of local sales.
To be sure, private health insurance has a long way to go in the Czech market, and ČAP has even said it “occupies the place of a poor relative.” One factor against it is the long-held belief that health insurance should be equal and free for everyone. However, some are starting to realize that in a bankrupt system, free and equal doesn’t mean much.
|Health Tourism: Luxury for the masses
The Czech Republic, and Prague in particular, is a growing destination for those seeking special health care services like spa trips or plastic surgery. Contrary to popular stereotypes, clients are not glamorous jet-setters, but rather average, middle-classed neighbors, most often from Germany or the United Kingdom. Besides traditional spa towns, more tourists are also heading to clinics in Prague. Ten-year-old GHC Clinic, a private clinic offering an assortment of medical services, has seen an expanding clientele in recent years. Without disclosing numbers, client care manager Táňa Tomanová notes that GHC clientele numbers in the hundreds, and that “we have new people here every week.” For spa programs, most clients hail from Germany and the Czech Republic, but also come from as far as the Middle East. The majority are women, although Tomanová says more couples and groups are visiting. Czechs remain avid health tourists, and help support this niche industry as much as foreign visitors. In 2004, according to Czech Tourism, there were more than 183,000 health care stays by domestic travelers. This compares to roughly 240,000 foreign tourists on health visits, which only makes up 4% of all tourism. However, industry players note that EU accession is increasing these numbers.