Boston, MA -- (SBWIRE) -- 01/03/2013 -- BMI View: Although Israel claims its very efficient healthcare system means it does not need to spend as much of its GDP on provision (some 7.6% was spent on this purpose in 2011), in reality the government's fiscal austerity and sick funds traditionally keep the most expensive innovative drugs and treatments unavailable. Additionally, as healthcare providers are prohibited from taking on debt, the shortage means that cheaper generics and low staff salaries have to be used to control overall costs, which often comes at the expense of services provided to patients. However, the recent ruling means that the state must increase payments to healthcare providers in order to account for rising costs, which provide some upside risks to healthcare forecasts.

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Headline Expenditure Projections

- Pharmaceuticals: ILS7.08bn (US$1.98bn) in 2011 to ILS7.39bn (US$1.92bn) in 2012; +4.4% in local currency terms and -3.0% in US dollar terms. Forecast slightly lower from Q312 on account of macroeconomic factors.
- Healthcare: ILS66.16bn (US$18.49bn) in 2011 to ILS70.58bn (US$18.33bn) in 2012; +6.7% in local currency terms and -0.8% in US dollar terms. Forecast slightly lower from Q312 on account of macroeconomic factors.
- Medical devices: ILS3.86bn (US$1.08bn) in 2011 to ILS4.03bn (US$1.05bn) in 2011; +4.2% in local currency terms and -3.1% in US dollar terms. Forecast slightly lower from Q312 on account of macroeconomic factors.

Risk/Reward Rating: In our latest regional Pharmaceutical Risk/Reward Ratings (RRRs), Israel again ranks third out of the 30 markets surveyed in Middle East and Africa (MEA), with its composite score unchanged at 56.4 out of the maximum 100. Risks will continue to be elevated mostly due to Israel's lacking intellectual property (IP) laws, though pressure from the US has led to the country agreeing to reform some of the worst aspects of its IP legislation.

Key Trends And Developments:

- In June 2012, the High Court of Justice in Israel gave the state six months to update the Health Expense Index, which according to a petition by Israeli health service providers has not been accurately updated in many years. This means hospitals have not been paid enough to maintain the highest standards of care and the ruling will result in extra expenses for the government and the general public.
- In the same month, US-based company OPKO Health reached a deal to purchase a 45% stake in Israeli company Sci-B-Vac, which makes a third-generation hepatitis B vaccine with the same name. The company produces the vaccine in its biologics manufacturing plant in Rehovot. The financial terms of the deal have not been revealed. The drug is a recombinant mammalian cell vaccine for the treatment of patients who do not benefit from conventional hepatitis B vaccines. Sci-B-Vac has secured marketing approvals in several other countries.

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