BMI View: Within the Central and Eastern European markets, 2014 offers growth from periphery countries and decline in the heart of         Europe. While markets such as Russia and Kazakhstan will continue on their growth trajectories, this will come with the caveat         of persistent risk. Central European markets such as Hungary will continue to decline or stagnate as the overriding concern         will be to suppress pharmaceutical expenditure and balance budgets. Generic drugmakers will benefit primarily in all markets         as affordability of medicines and ensuring access remains the priority of the healthcare systems throughout the region.   The pharmaceutical markets of Central and Eastern Europe carry mixed elements of promise and decline for pharmaceutical companies.      Within the region, we see markets separating into two categories, characterised by their growth prospects in 2014; high growth      countries and countries where growth is expected to either decline or stagnate. High growth countries are primarily concentrated      on the periphery of Central and Eastern Europe in countries such as Russia, Kazakhstan and Azerbaijan, whereas markets where      growth is expected to decline or stagnant are located within the core of Europe.      Periphery Markets Carry High Growth, High Risk Prospects   High growth markets are characterised by their spending from a relatively low base compared to Western European markets and      the more mature markets within the CEE region. Pharmaceutical consumption within countries such as Kazakhstan (+11.57%), Russia      (+5.17%) will primarily be driven by consumer purchasing of prescription drugs and over-the-counter (OTC) medicines. Given      that consumers in these high growth markets have relatively small disposable incomes, pharmaceutical spending will on the      whole be directed at generic medicines and OTC products. The purchasing of expensive, innovative therapeutics will continue      to overwhelmingly reside on governments within these markets, with programmes such as the Russian Additional Drug Coverage      (DLO) driving spending. As a proportion of the whole market, generic drugs and OTC medicines will continue to dominate sales      in 2014, and for the long term.      We highlight that as in 2013, there are risks to these growth forecast numbers for these high growth markets. The looming      prospect of retrenchment in quantitative easing by the Federal Reserve in the US has lead to flight of capital from emerging      markets such as Turkey and Russia, leading to a sustained sell-off in their respective currencies. The Turkish lira has fallen      some 25% since the beginning of 2013 versus the dollar. Despite the slide in the lira against major currencies, our Country      Risk analysts expect that Turkey's large current deficit will continue to act as a source of pressure on the lira. Turkey's      reliance on imports for energy and cheap external credit to finance its internal consumption growth underpins our expectation      for a depreciatory trend over a long term horizon. This presents considerable currency risk for foreign companies operating      in Turkey who repatriate earnings to their country of domicile.      The Russian rouble has fallen 12-13% versus the dollar and euro this year as oil prices have subsided. The main reasons for      rouble weakness are the deteriorating trade balance, tepid demand for Russian financial and real assets, and a likely rate      cut in 2014 by the central bank in a bid to shore up the flagging economy. Further momentum behind the downward pressure on      the rouble will come from the Central Bank of Russia (CBR)'s ongoing transition from a managed float regime towards free floating      currency and inflation targeting by 2015, as well as a more accommodative stance in 2014-2015. The impact of changes to fiscal      policy will weigh heavily on the growth prospects of the Russian pharmaceutical market in 2014, but as long as spending maintains      its current growth trajectory, growth in real terms and US dollar terms will be sustained.       In markets such as Kazakhstan, while market stakeholders can expect continued growth in US dollar terms, the risk of price      containment is always on the horizon, especially since the government reorganised its procurement to be handled centrally,      such that the national drug procurer SK Pharmaciya can exact discounts in return for large contracts. While the government      has pledged to expand its nascent pharmaceutical industry, imports still constitute an overwhelming majority of pharmaceutical      consumption. The risk for a potential move to stem imports in favour of either local production remains.              Growth In The Periphery, But Risks Remain      2014: Central and Eastern European Pharmaceutical Spending Growth Rates (%)*         Source: BMI. *US dollar terms.               
   
   Woes Continue As Cost Containment And Weak Economic Growth Limit Market Growth   In Central Europe, the prospects of growth are indeed very weak across the board; cost containment will be the priority of      governments in markets such as Slovenia, Croatia, Greece and Hungary. Macroeconomic concerns will continue to weigh on fiscal      policies within these countries. The primary objective will be to rein in budget deficits and contain looming debts. If these      countries post economic growth, there will be leeway to increase healthcare spending. In the absence of any positive news,      government spending as a whole will have to be contained.       Greece will continue to remain an outlier as its pharmaceutical spending will face cuts after cuts owing to the government's      precarious situation of paying off a large debt burden and taxing its pharmaceutical companies to make up shortfalls in budgeted      pharmaceutical spend. At the same time, the Greek government will continue to implement aggressive pricing measures and forcefully      increase the uptake of cheaper generics over branded drugs.      Indeed pricing will become a key issue within Hungary, Poland, Romania and Croatia, Slovenia, Slovakia and the Czech Republic;      governments will continue to institute policies that seek to artificially distort and suppress drug prices. Although pharmaceutical      markets will see growth in local currencies, in US dollar and euro terms, they will continue to decline. Sales of patented      medicines will especially come under pressure as health authorities will strenuously negotiate for lower prices or refuse      reimbursement.             Central European Markets Continue To Decline       2014: Central And Eastern European Pharmaceutical Growth Rates, (%)*         Source: BMI. *US dollar terms.