Zentiva: Reimbursement rate to rise

The Ministry of Health is planning to lower the reimbursement rate for a range of medicines as of October. The changes are reportedly unusually high and wide reaching. While a lower reimbursement rate would probably have a short-term negative impact on Zentiva's sales and margins, we believe the company may gain in the mid-term due to a substitution effect (an increasing preference for cheaper domestic generic drugs over imports and original drugs reflecting pressure on lowering healthcare expenses while maintaining health-care standards).

Tomáš Gatěk