POLISH VAT REFORM STILL CAUSE FOR UNCERTAINTY

Drugmakers present on the fast-growing Polish market have welcomed a likely reduction in VAT on registered medicines, but it still remains unclear which products will now escape the previous rate of 22%. Under a new finance ministry decree, a new 7% rate should benefit all so-called "centrally registered" products. Such drugs are those which have been approved according to EU rules in another member state, and then granted marketing approval in Poland under EU mutual recognition procedures.

However, local observers claim that the EU-compliant law -- which became effective at the end of May -- fails to clarify whether the 7% rate will apply to all drugs registered after Poland's accession to the EU in May 2004, or those included within the old medicinal products register, which was replaced in October 2002. The status of medicine products which do not officially require registration is also unclear, according to the reports.

International drugmakers present on the US$4.8bn Polish market are likely to require urgent answers to these questions, especially in view of the country's burdensome import policies. Nevertheless, the market continues to grow strongly, with retail sales reaching US$1.44bn in the first four months. Hospital purchases accounted for a further 10% of sales, although growth in this segment was sharper than the 9.9% average for the overall drug market. Although antibiotics performed most strongly, the increasing popularity of self-medication led OTC sales to expand by a stellar 10.7%, reaching US$370mn in January through April.