65 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE reinforcing the generics dynamic (BMI, 2025; World Bank, 2020). Croatian pharmaceutical exports reached approximately $1.33B, about 5% of GDP and among the top five export sectors (Eurostat, 2026; Observatory of Economic Complexity, n.d.). Despite this growth, Croatia remains structurally dependent on imports of high-value innovative medicines, particularly in oncology, immunology, and biologics—imports that totaled approximately $1.95B in 2024 and are expected to reach $2.5B by 2030 (BMI, 2025; Croatia Imports…, 2026). This expansion can be partially attributed to Croatia’s aging population with rising chronic disease prevalence (OECD, 2025). Croatia’s pharmaceutical market is divided between a smaller domestic segment and a larger foreign controlled one. Domestic manufacturers supply approximately 35% of national pharmaceutical demand by value and about half by volume (PwC, 2024). The most significant domestic producer is still PLIVA, but large international players like Johnson & Johnson, Pfizer, and Boehringer Ingelheim, among others, are present through local distribution and related activities. Recent actions illustrate the sector’s continued attractiveness to both foreign and domestic investors: Pfizer and Sobi committed more than $107M in a biologics plant for rare-disease therapies (N1, 2022), and JGL issued a $63M sustainability-linked bond, the largest in Croatia’s private nonfinancial sector, supported by the EBRD (n.d.-b). On the other hand, rising energy, production, and logistics costs have compressed margins across the sector (Enerdata, 2026), compounded by persistent inflation, high perceived market risks, and geopolitical vulnerability from export dependence on Russia. Together, these structural and macroeconomic pressures create an environment that increasingly discourages investment in innovation, a tension that lies at the heart of Croatia’s pharmaceutical challenge. The future of Croatia’s pharmaceutical industry Croatia has begun implementing reforms to address these constraints. Although its efforts have not yet materialized into sustained pharmaceutical upgrading, they establish an important starting point for understanding both what has been achieved and what remains structurally absent. The reforms can be observed across four areas: strategic commitments, institutional coordination, fiscal incentives, and market governance. Croatia’s recent strategy implementations At the strategic level, Croatia has made two formal commitments that signal its long-term priorities. Under the EU Smart Specialization Strategy framework, Croatia designated health and life sciences a priority sector, positioning pharmaceutical projects for EU-cohesion funding (European Commission, 2023). The second is the National Development Strategy 2030, adopted by the Croatian Parliament in February 2021, which reinforces this direction by prioritizing investment in research, technological development, and innovation across its strategic goals, signaling to investors and institutions where the state intends to direct resources over the coming decade (Pezer, 2021). Together, the commitments establish that Croatia, at the highest policy level, positioned the pharmaceutical sector as a pillar of its future economy. Whether strategic intent will be matched by institutional capacity and policy to act on it remains to be seen, as the use of funding ultimately depends on the decisions of firms and research institutions. Croatia has, nevertheless, taken initial steps to translate this uncertainty into practice. Established in 2014, HAMAG-BICRO (Croatian Agency for SMEs, Innovations, and Investments) serves as the primary domestic instrument for distributing grant funding, commercialization support, and collaboration platforms for firms and research institutions to pursue cluster-based coordination (Ministry of Economy, n.d.-a). Its operational scale has grown considerably since the approval of the National Recovery and Resilience Plan in 2021, distributing EU recovery funding to innovative firms across priority sectors (European Association of Guarantee Institutions, 2022). At the funding level, approved by the European Council in July 2021, $7.44B was channeled through Croatia’s National Recovery and Resilience Plan, with $1.17B allotted to stimulate education and research, providing a structural foundation for the scientific upgrading pharmaceutical development requires (European Council…, 2021; Ministry of Economy, n.d.-c). The Research Infrastructure Development Roadmap 2023–2027 prioritizes upgrading pharmaceuticals and life sciences capabilities (Ministry of Science and Education, 2023). Fiscal policy has also evolved to improve Croatia’s R&D tax incentive framework, allowing companies to claim tax base reductions on eligible R&D expenditures (INNOTAX, 2026; Ministry of Economy, n.d.-b). The Investment Promotion Act provides reduced corporate tax rates and other fiscal incentives for qualifying manufacturing investment projects (Deloitte, 2025), notably a record €21M tax incentive for JGL for increased capacity, the largest in the sector to
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