The Russian pharmaceutical market is now considered to be one of the most dynamic in the world.
It is estimated at around US$ 20 billion growing at a CAGR of around 11 per cent. The retail/out of pocket market contributes to around 66 per cent of the total market.
The Russian pharmaceutical market remains a powerhouse in the Emerging Europe region according to a Espicom Business Intelligence report. The country is already the eleventh largest pharmaceutical market and is projected to reach a value of US $26.7 billion by the end of this year.
Furthermore, this tremendous growth is being achieved thanks to the government support through its ambitious "Pharma 2020 Plan", introduced in October 2009. The programme is aimed at achieving a complex structural upgrade of the national pharmaceutical industry by means of a substantial improvement in production capacity - increasing both domestic and export production. The plan, outlined alongside other pharmaceutical innovations , is currently in its second stage and on course to achieve the following goals by 2017:
n Home production of national generics and achievement of medicines independence of the Russian Federation
n Accreditation of all foreign producers of pharmaceutical substances and official medicines entering the Russia market by the regulatory bodies in order to strengthen quality control for official medicines
Establishment of joint manufacturing and R&D structures with production sites on the territory of Russia.
According to a report from from Business Monitor International (BMI), Russia’s pharmaceutical market continues to be one of the most attractive in the Emerging Europe region, primarily due to its sheer size, plus a growing economy and increasing government investment in healthcare. Key drivers of market growth include programmes to fund medicines for specific segments and disease groups, and the pledged introduction of a universal medicines insurance system.
Pharmaceutical sales in Russia are expected to reach $ 24.29 billion this year from $22.22 billion in 2012 which is up 9.3 per cent in US dollars and 11 per cent in local currency terms. Healthcare spending overall is expected to reach $130.40 billion from $118.16 billion last year, increasing 12.1 per cent in local currency and 10.4 per cent in US dollars, says the BMI report.
Also, Russia’s recent accession to the World Trade Organization (WTO) should drive improvements in the country’s intellectual property (IP) environment, particularly in enforcement, which has been "conspicuously lacking," it adds.
The report also sees a short-term deteriorating macroeconomic picture which will serve to moderate growth, as consumer spending is expected to cool. However, over the longer term, Russia’s ageing population and significant disease burden will accelerate pharmaceutical spending, it says.
While the Russian pharmaceutical market represents a challenging operating environment at present, says the report, it also notes that the upcoming roll-out of national drug insurance promises to sustain the rapid growth seen in the national market.
One of the major trends that is currently observed in the Russian pharmaceutical industry is the gradual shift to more expensive, quality drugs and away from their cheaper counterparts. Analysts predict that during the next two years the market will remain almost at the same level as in 2012.
With Russia pegged as one of the world's fastest-growing markets, drug makers have been angling to build up their businesses here. For free access to the market, the Russian government now requires foreign companies to team up with local players – and to share technology with them.
Drug makers large and not-so-large have made big deals with or invested in Russian firms.
Back in 2011, the Association of International Pharmaceutical Manufacturers pledged a minimum of $1 billion in investment in Russian manufacturing, packaging and R&D. Novartis, which has invested $ 500 million in five years, Nycomed, Novo Nordisk and Sanofi have all been developing operations in Russia since 2010.
Others, such as Roche, are partnering with local manufacturers under out-licensing agreements.
Russia’s $6 billion pharmaceutical programme Pharma2020, which aims to develop the country’s healthcare and pharmaceutical industry through supporting local drug manufacturers, would like to increase the share of domestically produced drugs to 50 per cent by 2020 from 20 per cent in 2007.
“The share of imported pharmaceuticals in Russian market in 2012 accounted for about 73.1 per cent in cash value while in volume terms it was about 35.9 per cent,” says Nickolay Bespalov, Director of Pharmexpert Analytics and Consulting. “The share of locally made medicines has been increasing for the past two years as the result of new government’s strategy.”
Industry experts note that the complex pharmaceutical market of Russia is becoming even more challenging following the introduction of new healthcare laws and regulations, including the major Federal Law “On Fundamentals of Citizens’ Healthcare Protection in the Russian Federation.”