Russia Pharmaceuticals and Healthcare Report Q4 2011

BMI View: Russia continues to offer both outsized risks and outsized opportunities for foreign drugmakers, according to BMI. Positive trends in recent years include increasing state coverage of medicines and, more recently, a recovery in consumer purchasing power after a short but sharp contraction during the global economic crisis. World Trade Organisation (WTO) accession could come as soon as 2012 after nearly two decades of negotiations. This will force Russia to improve a chronically poor intellectual property (IP) environment. On the downside, the state has taken hands-on management of the production sector as part of its highly interventionist strategy for the pharmaceutical industry. Price controls are another major concern.
Headline Expenditure Projections.
.. Pharmaceuticals: RUB544.3 (US$17.92bn) in 2010 to RUB592.2 (US$20.09bn) in 2011; +8.8% in local currency terms and +12.1% in US dollar terms. Forecast unchanged from Q311.
.. Healthcare: RUB2,324bn (US$76.51bn) in 2010 to RUB2,550bn (US$86.49bn) in 2011; +9.7% in local currency terms and +13.0% in US dollar terms. Forecast sown slightly from Q211 due to macroeconomic factors.
.. Medical devices: RUB156.70bn (US$5.16bn) in 2010 to RUB175.29bn (US$5.95bn) in 2011; +11.9% in local currency terms and +15.2% in US dollar terms.
Business Environment Rating: Russia’s position in BMI’s Business Environment Ratings remained unchanged this quarter, with the country ranking fifth with a composite score of 57.5. Russia’s sheer market size and levels of demand ensure it remains attractive for multinationals, while a modicum of political and economic stability make it the most attractive among the markets of the Commonwealth of Independent States (CIS).
Key Trends & Developments
.. In July 2011, the State Duma (parliament) considered a second reading of the draft law ‘On the Basis of Health Protection in Russia’. The bill aims to fill chronic funding gaps in the mandatory insurance system with a mix of mandatory medical insurance fillips (a recent law already enforces universal membership), direct government financing and an increasing role for the private sector, long advocated by the president. Critics warn, however, that the bill fails to adequately distinguish between which treatments should be made freely available and which would require additional payments. The timing for the final bill is unclear and several highprofile public figures, including prominent public figure and doctor Leonid Roshal, have strongly criticised the bill.
.. According to the government’s latest, updated Federal Target Plan ‘For the Development of the Pharmaceutical and Medical Industry of the Russian Federation to 2010’, some 75 pharmaceutical enterprises will be re-equipped to meet GMP standards. The plan, in line with the government’s adopted Pharma2020 strategy, also foresees the creation of 20 research and development centres with the use of federal money. BMI remains sceptical about the plan’s goal of producing 90% of all essential medicines in Russia by 2016. In July 2011, the Ministry of Industry and Trade announced the opening of tenders for 18 projects under the plan.
BMI Economic View: We are looking to revise our real GDP growth outlook for Russia following a disappointing economic performance in the first half of 2011. A weak consumer, hurt by high inflation in H111, and low private sector confidence have conspired to largely offset the positive impact of high oil prices. Going forward, Russia's economy will settle into a significantly lower growth trajectory than in the years leading up to the global financial crisis and the country's 7.8% real GDP contraction in 2009.
BMI Political View: Despite persisting political uncertainty in the run-up to legislative elections in December and particularly relating to the presidential poll scheduled for March 2012, we believe that policy continuity will unlikely be affected by the outcome. Indeed, despite seemingly differing views between President Dmitry Medvedev and Prime Minister Vladimir Putin on economic policy and the need to 'modernise' the Russian economy, emphasis will continue to be placed on reducing the role of the state. Instead, emphasis will shift to strengthening the country's investment climate as the hydrocarbons sector can no longer provide the assurances of robust economic growth and wealth creation as during the years of Putin's two-term presidency between 2000 and 2008.

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Executive Summary 5
SWOT Analysis 7
Russia Pharmaceuticals And Healthcare Industry SWOT 7
Russia Political SWOT 8
Russia Economic SWOT 8
Russia Business Environment SWOT 9
Pharmaceutical Business Environment Ratings 10
Table: Central And Eastern Europe Business Environment Ratings, Q411 10
Rewards 11
Risks 12
Russia – Market Summary 13
Regulatory Regime 16
Intellectual Property Environment 19
Pricing And Reimbursement Issues 22
Industry Developments 27
Recent Industry Developments 31
Industry Forecast Scenario 33
Overall Market Forecast 33
Table: Pharmaceutical Sales Indicators 2007-2015 34
Key Growth Factors – Industry 35
Table: Healthcare Expenditure Trends, Historical Data and Forecasts, 2007-2015 37
Key Growth Factors – Macroeconomic Forecast 39
Table: Russia – Economic Activity 42
Prescription Drug Market Forecast 43
Table: Prescription Drug Sales Indicators 2007-2015 44
Generic Drug Market Forecast 45
Table: Generic Drug Sales Indicators 2007-2015 46
OTC Medicine Market Forecast 47
Table: OTC Medicine Sales Indicators 2007-2015 48
Pharmaceutical Trade Forecast 49
Table: Pharmaceutical Imports & Exports Indicators 2007-2015 51
Medical Device Market Forecast 52
Table: Medical Devices Sales Indicators 2007-2015 55
Key Risks To BMI’s Forecast Scenario 56
Competitive Landscape 57
Manufacturing Sector 57
Recent Company Activities 62
Wholesale Sector 63
Retail Sector 64
Company Profiles 67
Berlin-Chemie/Menarini Pharma GmbH 67
Gedeon Richter 69
Krka 71
Lek (Novartis/Sandoz) 73
Stada AG (Stada CIS) 75
Veropharm 77
Pharmstandard 79
Country Snapshot: Russia Demographic Data 82
Section 1: Population 82
Table: Demographic Indicators, 2005-2030 82
Table: Rural/Urban Breakdown, 2005-2030 83
Section 2: Education And Healthcare 83
Table: Education, 2002-2005 83
Table: Vital Statistics, 2005-2030 83
Section 3: Labour Market And Spending Power 84
Table: Employment Indicators, 2001-2006 84
Table: Consumer Expenditure, 2000-2012 (US$) 84
Table: Average Annual Wages, 2000-2006 85
Glossary 86
BMI Methodology 88
How We Generate Our Pharmaceutical Industry Forecasts 88
Pharmaceuticals Business Environment Ratings 89
Risk/Reward Ratings Methodology 89
Ratings Overview 89
Table: Pharmaceutical Business Environment Indicators 90
Weighting 91
Table: Weighting Of Components 91
Sources 91
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