While larger than its Baltic counterparts in terms of value, the Lithuanian pharmaceutical market remains one of the smallest in the Central and Eastern European (CEE) region, according to Research and Markets study.

While its’ recent growth has been strong - 14% year-on-year (y-o-y) for the three months February through April 2007 - according to distributor Tamro, funding pressures and out-of-pocket spending on drugs, limited by patient purchasing power leads the author to forecasts for the coming five years annual growth at single-digit figures. Market growth is also contingent on the country’s fractious parliament and current weak government managing to steward the fast-growing economy or fresh elections yielding more workable arrangements before the next round of scheduled parliament polls in October 2008.

In the meantime, the country’s creaking public services - in particular healthcare - require urgent attention despite the attempts of successive governments to develop a modern primary sector, with doctors providing a gatekeeper function to specialists. While the president appears committed to reducing corruption, power struggles and appeals to populism are blamed for preventing movement on badly needed economic and social reforms. However, although the fractious political scene threatens to derail the much-needed reforms, the new multiparty governing coalition has put forward a platform based on investment in social services.

In the adjusted Business Environment Rankings for the 15 major markets of Central & Eastern Europe (CEE), Lithuania is ranked joint twelfth, alongside Croatia. While Lithuania’s strong economic growth and surging levels of consumer spending are stimulating pharmaceutical market growth, economic and political risks remain a cause for concern. Lithuania was expected to fully harmonise national with EU pharmaceutical legislation by the end of 2007, which should further facilitate market entry for foreign players.

The country’s drug manufacturing sector is small and export-oriented, given the constraints of the local market. Given the trend of industry consolidation following the European Union (EU) membership, even the larger players in the country could potentially emerge as take-over targets for key global players in the medium to longer term. Multinationals will continue to supply the bulk of patented medicines through imports, although no plans are being made for establishing local manufacturing facilities. The strong local demand for generics is fuelling the expansion of large CEE players in the Lithuanian market.