Russia Pharmaceutical Market Overview Pharma companies target Russia despite the challenges it presents

Introduction

The Russian pharmaceutical market generated $10.1 billion in sales in 2009, growing by 14.5% between 2008 and 2009. Key growth drivers include a preference for foreign drugs rather than domestically manufactured products. The government has also designated healthcare a strategic priority for the country's future development which is expected to stimulate Russia's pharmaceutical market.

Scope

*Overview of socioeconomic and demographic trends, healthcare system, regulation, pricing and reimbursement and intellectual property in Russia

*Assesses the size of the Russian pharmaceutical market by prescribing setting, therapy area, leading brands and by leading companies

*Examines the Russian generics and biosimilars landscape in terms of regulatory issues, level of penetration, key players and degree of brand erosion

*Quantifies the R&D and manufacturing infrastructure for the leading pharmaceutical companies, including key metrics and domestic M&A analysis

Highlights

Private health expenditure accounts for one third of all healthcare costs of which 82%% is met by out-of-pocket costs due to insufficient availability of healthcare services and medicines through the public healthcare system, as well as the widespread informal payments for healthcare services.

Registration of drugs in the Russian Federation remains a cumbersome and lengthy procedure which lacks clarity and transparency and is subject to frequent change. Cultural and language barriers present further obstacles to foreign companies "going it alone".

The generics industry is complex and fragmented, dominated by a small number of international generics manufacturers. Generics produced by these companies enjoy preferential uptake driven by their perceived superiority to domestically manufactured generics, with Russians choosing to pay higher prices for guaranteed quality.

Reasons to Purchase

*Evaluate the evolving regulatory landscape and the impact of pricing and reimbursement controls on market access in Russia

*Quantify the size and growth of the prescription pharmaceutical market in Russia, analyzing key therapy areas, brands and companies

*Assess drivers and resistors of generic and biosimilars uptake in Russia

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ABOUT DATAMONITOR HEALTHCARE 2
About the Healthcare Strategic Analysis Team 2
Geographic specific reports: 2
Global issue reports: 2
1. Executive Summary 3
Introduction 3
Strategic scoping and focus 4
Key Findings 5
Russia - Socio-demographic and economic analysis 5
Socio-demographic trends 5
Socio-economic trends 6
Russia - Healthcare system and drug regulatory analysis 8
Healthcare expenditure 8
Healthcare insurance 9
Regulatory issues 10
Pricing and reimbursement issues 11
Russia - Prescription pharmaceutical sales analysis 13
Pharmaceutical market size 13
Leading therapy areas 13
Leading pharmaceutical brands 13
Leading pharmaceutical companies 13
Russia - Drug expiry analysis 15
Generics market 15
Brand erosion post patent expiry 15
Biosimilars market 15
Russia - Drug Industry Infrastructure analysis 17
Pharmaceutical industry infrastructure overview 17
Related reports 19
Upcoming related reports 19
Table of Contents 20
2. Russia - Socio-demographic and economic analysis 21
Russia - Key findings 21
Socio-demographic trends 21
Socio-economic trends 21
Russia - Demographic trends 23
Population in Russia expected to decline rapidly 24
Population growth rate in Russia remains low due to low birth rates 24
Proportion of elderly people will remain lower than in all other markets 27
Life expectancy in Russia is poor and will remain so 27
Russia - Disease burden in Russia 29
Cardiovascular diseases and injuries are the leading cause of death and account for the highest disease burden in Russia 31
High level of preventable deaths in Russia 31
HIV/AIDS presents a worrying trend in Russia 32
Russia - Political climate 33
The political climate in Russia has undergone recent changes 33
Russia remains a centralized country with power centered on Moscow 33
Russia - Economic climate 34
Economy - recovery post-recession is slow but will gain momentum from 2010 34
Economic growth is impacted by income inequality in Russia 35
Russia - Business environment 37
Although impediments to investing in Russia remain, the government is prioritizing healthcare 37
The recession has impacted unemployment levels 37
Russia has a uniform tax rate 38
Pharmaceuticals are subject to a reduced VAT rate of 10% 38
Corruption significantly impedes foreign investment in Russia 39
Local knowledge is critical for business success 39
3. Russia - Healthcare system and drug regulatory analysis 40
Russia - Key findings 40
Healthcare expenditure 40
Healthcare insurance 40
Regulatory issues 41
Pricing and reimbursement issues 41
Russia - Healthcare expenditure 43
Russia - Healthcare System 45
Key bodies regulating the healthcare system 45
Ministry of Health and Social Development (MOH) 46
Parallel healthcare system 46
The Federal and Territorial Mandatory Health Insurance Fund 46
Additional experts and coordinating bodies 46
Primary versus hospital healthcare in Russia 47
In efficiencies in the primary care system lead to over-referral, over-hospitalization and over treatment 47
Significant disparities exist in the distribution of physicians and healthcare facilities 47
Access to healthcare is especially problematic for the poor population... 48
...but healthcare modernization plans are in place 49
Project 'Zdorovie' is focused on developing healthcare in Russia 49
Local governments draft modernization plans for regions 49
...but the government 2020 healthcare plan is aimed at improving healthcare 50
Russia - Health insurance 51
Mandatory health insurance was introduced in 1991 but has done little to improve healthcare 51
The healthcare system is funded by formal and informal means 52
Guaranteed Package Program does not necessarily guarantee access to medicines 53
Reformed mandatory medical insurance system is intended to give patients more choice 55
Private health insurance 55
Voluntary Health Insurance is in high demand 55
Concerns raised over privatization of a number of public hospitals 56
Russia - Regulatory issues 57
Drug approval and regulatory processes - registration of drugs in Russia is considered a cumbersome process 57
The high number of registered drugs indicates inadequate control of the registration process 57
There are two regulatory bodies involved in the licensing of medicines in Russia 57
New Federal Law on Circulation of Medicines attracts criticism 58
Regulation process now less costly but time taken to register a drug is increasing 58
Russia's manufacturing facilities will need to align with international GMP standards 59
Domestic clinical trials were to be required as a registration prerequisite under the new law 59
New law lacks orphan drug clause 59
Additional new provisions 60
Russia - Intellectual property environment 61
There are two ways of obtaining patent protection in Russia 61
Enforceability of patent laws is still weak and data exclusivity remains an unresolved issue 61
Drug counterfeiting is an ongoing problem but there are few recent developments 62
Drug importation - new law streamlines import procedures 63
Russia - Pricing and reimbursement 64
Russia is looking to its Essential Drug List to contain costs 64
Pricing issues - the government is increasing its controls 66
New Essential Drug List compiled in 2009 66
Mandatory state registration of maximum prices replaces voluntary system 66
Reimbursement issues - introduction of the federal reimbursement system DLO was a major change 68
Supply and deficit problems have historically hampered the DLO's success 69
DLO was modernized again and split into two procurement branches 70
Centralized program covers seven expensive-to-treat diseases 70
ONLS program covers remaining drugs 70
Oncology drugs had the highest sales volume in the DLO 71
Ongoing issues regarding the DLO program 71
4. Russia - Pharmaceutical sales analysis 72
Russia - Key findings 72
Pharmaceutical market size 72
Leading therapy areas 72
Leading pharmaceutical brands 72
Leading pharmaceutical companies 72
Russia - Pharmaceutical market size 74
Russia - Leading therapy areas 76
Central nervous system drugs hold the largest share of the Russian market value 78
Infectious disease drugs exhibited the strongest annual sales growth (2008-09) 78
Hematology drugs showed the fastest growth in terms of sales CAGR (2005-09) 79
Russia - Leading pharmaceutical brands 80
Velcade was the top selling brand in Russia 82
Octavi exhibited the strongest sales CAGR of the top 20 brands, but faces competition from its follow-on product 83
Glivec's gold-standard position drives uptake 83
Russia - Leading pharmaceutical companies 84
The leading international companies offer both innovative therapies and generic products 85
Domestic companies offer largely generic and consumer healthcare products 88
Pharmstandard 89
Valenta 89
Biosyntez 90
5. Russia - Drug expiry analysis 91
Russia - Key findings 91
Generics market 91
Brand erosion post patent expiry 91
Biosimilars market 91
Russia - Generics market dynamics 93
Russia generics volume uptake 94
Russia generics value uptake 95
Russia generics market size 96
Russia - Generics drivers and resistors 97
Despite universal health insurance, significant out-of-pocket costs limit access to generics 99
The new pharmaceutical bill will lead to enforced pricing and preferential listing of domestically manufactured generics 100
Domestic GMP standards are poor, but are set to improve 100
Lack of adequate pharmacovigilance puts patients at risk and reduces trust 101
Patients prefer branded generics 101
Russia - Key generics players 102
International funds invest in Pharmstandard 103
ratiopharm acquisition gives Teva a leading role in Russia 103
Stada sees high growth levels in the Russian market 103
Novartis holds a strong position in Russia through Sandoz, Lek and Hexal 103
Zentiva continues to shine in the Russian market for Sanofi-Aventis 104
Ranbaxy fails in its attempt to enter the Russian market 104
Opportunities for the generics industry 105
Russia - Small molecule brand erosion 106
Overview of drugs analyzed 106
Mean level of brand erosion in Russia 107
Brand erosion in the Russian retail and hospital setting 109
Brand erosion by therapy area in Russia 111
Brand erosion by drug formulation in Russia 113
Russia - Biosimilars market dynamics 115
Drivers and resistors to biosimilar uptake in Russia - development costs and lack of regulation is attractive to biosimilar manufacturers 115
Biosimilars available in Russia 117
Biosimilar filgrastim 118
Opportunities for the biosimilar industry 120
Biosimilars in development internationally 122
Russia presents challenges for monoclonal antibody manufacturers 123
6. Russia - Pharmaceutical industry infrastructure analysis 125
Russia - Key findings 125
Russia - Pharmaceutical infrastructure overview 126
The new pharmaceutical bill will lead to enforced pricing and preferential listing of domestically manufactured generics 126
Domestic GMP standards are poor, but are set to improve 126
Russia is becoming a hotspot for clinical trials 128
Russia - key company infrastructure 130
Novartis 131
Sanofi-Aventis 134
Johnson & Johnson 137
Roche 140
Pharmstandard 143
Bayer Schering 146
Servier 149
Teva 152
Merck & Co. 155
Gedeon Richter 158
Gedeon Richter boosts its Russian presence 160
7. Russia - Bibliography 161
Russia - Executive summary 161
Publications and online articles 161
Datamonitor reports and products 162
Russia - Socio-demographic and economic analysis 162
Publications and online articles 162
Publications and online articles 165
Russia - Healthcare systems and regulations 165
Publications and online articles 165
Datamonitor products 170
Russia - Prescription pharmaceutical sales analysis 170
Publications and online articles 170
Datamonitor reports and products 170
Russia - Drug expiry analysis 170
Publications and online articles 170
Datamonitor reports and products 173
Russia - Pharmaceutical industry infrastructure analysis 174
Publications and online articles 174
Appendix 177
Exchange rates used in this report 177
Russia brand erosion - additional data and analysis 178
Brand erosion - methodology 180
Datamonitor prescription pharmaceutical definition and therapy area classification 183
About Datamonitor 184
About Datamonitor Healthcare 184
Datamonitor consulting 184
Disclaimer 186
List of Tables
Table 1: Russia - demographic indicators, 2005 and 2010 6
Table 2: Russia - key economic indicators, 2005-2012 7
Table 3: Russia - healthcare expenditure indicators, 2006-09 9
Table 4: Russia - a range of pricing and reimbursement tools are used 12
Table 5: Russia - sales and volume of the pharmaceutical market ($ and IMS Standard Units), 2009 14
Table 6: Russia - key metrics for the generics and biosimilars market, 2010 16
Table 7: Russia - R&D and manufacturing infrastructure for the top 10 companies in Russia, 2010 18
Table 8: Russia - demographic indicators, 2005 and 2010 23
Table 9: Russia - top 10 causes of mortality, 2004 29
Table 10: Russia - disability-adjusted life years (DALY) rates compared to Australia, Japan, the other BRIC nations, North America and five major EU markets (5EU), 2004 30
Table 11: Russia - key economic indicators, 2005-2012 34
Table 12: Russia - healthcare expenditure indicators, 2006-09 44
Table 13: Russia - key health workforce statistics, 2000-09 48
Table 14: Russia - a range of pricing and reimbursement tools are used 64
Table 15: Russia - sales and volume of the pharmaceutical market ($ and IMS Standard Units), 2009 75
Table 16: Russia - pharmaceutical sales ($m), 2009 75
Table 17: Russia - pharmaceutical sales by therapy area ($m and %), 2005-09 77
Table 18: Russia - pharmaceutical volume by therapy area (SUm and %), 2005-09 78
Table 19: Russia - sales growth for top 20 pharmaceutical brands ($m and %), 2009 81
Table 20: Russia - volume growth for top 20 pharmaceutical brands (SUm and %), 2009 82
Table 21: Russia - sales growth for the leading international pharmaceutical companies ($ and %), 2009 86
Table 22: Russia - volume growth for the leading international pharmaceutical companies (SU and %), 2009 87
Table 23: Russia - sales growth for the leading Russia-based pharmaceutical companies ($ and %), 2009 88
Table 24: Russia - volume growth for the leading Russia-based pharmaceutical companies (SU and %), 2009 89
Table 25: Russia - key metrics for the generics and biosimilars market, 2010 92
Table 26: Russia - comparison of generic penetration versus other major pharmaceutical markets ($ billion and %), 2007-08 93
Table 27: Russia - leading generics companies, 2008-09 102
Table 28: Russia - brands exposed to generic competition, 2010-13 105
Table 29: Russia - biosimilars registered in Russia, 2009 117
Table 30: Russia - sales (based on 2009 sales data) of original biologics both expired and expected to come off-patent in the five major EU markets (Germany, France, Spain, Italy and UK) 2010-15 121
Table 31: Russia - sales of branded monoclonal antibodies, 2008-09 123
Table 32: Russia - sales growth for the top 10 pharmaceutical companies ($ and %), 2009 130
Table 33: Russia - Novartis's R&D and manufacturing infrastructure, 2010 131
Table 34: Russia - Novartis's R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 132
Table 35: Russia - Sanofi-Aventis's R&D and manufacturing infrastructure, 2010 134
Table 36: Russia - Sanofi-Aventis's R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 135
Table 37: Russia - Roche's R&D and manufacturing infrastructure, 2010 137
Table 38: Russia - Johnson & Johnson's R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 138
Table 39: Russia - Roche's R&D and manufacturing infrastructure, 2010 140
Table 40: Russia - Roche's R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 141
Table 41: Russia - Pharmstandard's R&D and manufacturing infrastructure, 2010 143
Table 42: Russia - Pharmstandard R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 144
Table 43: Russia - Bayer Schering's R&D and manufacturing infrastructure, 2010 146
Table 44: Russia - Bayer Schering's R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 147
Table 45: Russia - Servier's R&D and manufacturing infrastructure, 2010 149
Table 46: Russia - Servier's R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 150
Table 47: Russia - Teva's R&D and manufacturing infrastructure, 2010 152
Table 48: Russia - Teva's R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 153
Table 49: Russia - Merck & Co.'s R&D and manufacturing infrastructure, 2010 155
Table 50: Russia - Merck & Co.'s R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 156
Table 51: Russia - Gedeon Richter's R&D and manufacturing infrastructure, 2010 158
Table 52: Russia - Gedeon Richter R&D and manufacturing infrastructure data compared with other top 10 companies in Russia, 2010 159
Table 53: Russia - Gedeon Richter Italy-based M&A activity, Q1 2008-Q2 2010 160
Table 54: Currency exchange rates, 2010 177
Table 55: ATC (anatomical therapeutic chemical) classification codes assigned to a given therapy area within the prescription pharmaceutical market 183
List of Figures
Figure 1: Russia - population and population growth rate, 1950-2050 24
Figure 2: Russia - population growth compared to Australia, Japan, the other BRIC nations, North America and five major EU markets (5EU), 1950-2050 25
Figure 3: Russia - birth rates per 1,000 individuals compared to Australia, Japan, the other BRIC nations, North America and five major EU markets (5EU), 1950-2050 26
Figure 4: Russia - proportion of population over 65 years compared to Australia, Japan, the other BRIC nations, North America and five major EU markets (5EU), 1950-2050 27
Figure 5: Russia - life expectancy compared to Australia, Japan, the other BRIC nations, North America and five major EU markets (5EU),1950-2050 28
Figure 6: Russia - GDP per capita growth rate compared to Australia, Japan, the other BRIC nations, North America and the five major EU markets (5EU), 2005-09 36
Figure 7: Unemployment rates in Russia, France, Germany, Italy, Spain, UK, US, Canada, Australia, Japan, Brazil, India, and China, 1990-2008 38
Figure 8: Russia - the proportion of GDP expenditure on healthcare is lower than in all other developed or even BRIC nations, 2006-07 43
Figure 9: Russia - the healthcare system includes many bodies both at the federation and regional level 45
Figure 10: Russia - Mandatory Health Insurance Fund financing, 2007 51
Figure 11: Russia - Mandatory Health Insurance Fund (MHIF) financing in Russia, 2010 53
Figure 12: Russia - state purchasing of drugs structure, 2010 68
Figure 13: Russia - relative sales and volume of the Russian pharmaceutical market (indexed against volume or value in 2005), 2005-09 74
Figure 14: Russia - pharmaceutical sales by therapy area (%), 2005-09 76
Figure 15: Russia - sales growth for the leading pharmaceutical brands ($m and %), 2009 80
Figure 16: Russia - sales growth for leading pharmaceutical companies (%), 2005-09 84
Figure 17: Russia - comparison of generic volume uptake versus other major pharmaceutical markets (%), 2007-08 94
Figure 18: Russia - comparison of generic value uptake versus other major pharmaceutical markets (%), 2007-08 95
Figure 19: Russia - comparison of generics market size versus other pharmaceutical markets ($ billion), 2007-08 96
Figure 20: Russia - key factors impacting generics uptake in Russia, 2010 97
Figure 21: Russia - mean erosion (by value and volume) of branded small molecules during the first 2 years of generic competition (%) 108
Figure 22: Russia - mean erosion (by value and volume) of branded small molecules by prescribing setting during the first 2 years of generic competition (%) 110
Figure 23: Russia - mean erosion (by value and volume) of branded small molecules by therapy area during the first 2 years of generic competition (%) 112
Figure 24: Russia - mean erosion (by value and volume) of branded small molecules by formulation during the first 2 years of generic competition (%) 114
Figure 25: Russia - key factors impacting biosimilars uptake in Russia, 2010 115
Figure 26: Russia - biosimilar versus branded filgrastim value uptake (%), 2006-09 118
Figure 27: Russia - biosimilar versus branded filgrastim volume uptake (%), 2006-09 119
Figure 28: Russia - sales (based on 2009 sales data) of original biologics both expired and expected to come off-patent in the five major EU markets (Germany, France, Spain, Italy and UK) 2010-15 120
Figure 29: Russia - key biosimilars both launched and in development internationally by product class, 2010 122
Figure 30: Russia - drivers and resistors to biosimilar monoclonal antibody entry 124
Figure 31: Russia - drivers and resistors for conducting clinical trials in Russia 128
Figure 32: Russia - Novartis's pharmaceutical operations, 2010 133
Figure 33: Russia - Sanofi-Aventis's pharmaceutical operations, 2010 136
Figure 34: Russia - Johnson & Johnson's pharmaceutical operations, 2010 139
Figure 35: Russia - Roche's pharmaceutical operations, 2010 142
Figure 36: Russia - Pharmstandard's pharmaceutical operations, 2010 145
Figure 37: Russia - Bayer Schering pharmaceutical operations, 2010 148
Figure 38: Russia - Servier's pharmaceutical operations, 2010 151
Figure 39: Russia - Teva's pharmaceutical operations, 2010 154
Figure 40: Russia - Merck & Co.'s pharmaceutical operations, 2010 157
Figure 41: Russia - Gedeon Richter's pharmaceutical operations, 2010 160
Figure 42: Russia - sales erosion of branded small molecules during the first 2 years of generic competition 178
Figure 43: Russia - volume erosion of branded small molecules during the first 2 years of generic competition 179
Figure 44: Drugs experiencing generic erosion between Q1 2006 and Q2 2007 180
Figure 45: Erosion curves for each drug experiencing generic entry 181
Figure 46: Mean erosion curve for drugs A, B, and C experiencing generic entry 182

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