Emerging Opportunities and Growth Prospects in the Russian Travel Intermediaries Industry: Analyses and Forecasts to 2016
- Language: English
- 39 Pages
- Published: January 2012
- Region: Russia
The Russian pharmaceutical market remains one of the most attractive in Central and Eastern Europe due its sheer size and the long-term growth potential of the Russian economy. The increased role of the state in the sector, on both the production side and as a purchaser of medicines has expanded the size of the market, although it has equally imposed more onerous regulations in what was once a fairly liberal pricing environment. Russia’s World Trade Organization (WTO) accession should drive improved intellectual property regulation and force Russian drugmakers to deal with stiffer competition from low-cost generics from China and India, as well as Eastern Europe. A key concern in the months ahead is political stability, amid widespread reports of tensions between the presidential administration and members of the government over key policies. On a broader level, the ability of the Russian government to deliver efficient investment and expand coverage will determine whether the pharmaceutical market can achieve greater than BMI’s 8.63% US dollar and 9.78 ruble compound annual growth rate for the 2011 to 2016 period. Whilst this rate outpaces most European markets, many observers feel Russia can do better, given the sheer amount of unmet demand for medicines amid the wider population.
Headline Expenditure Projections:
- Pharmaceuticals: RUB607.4bn (US$20.65bn) in 2011 to RUB664.60bn (US$20.95bn) in 2012;
+ 9.4% in local currency terms and + 1.4% in US dollars. Forecast is virtually unchanged from Q312.
- Healthcare: RUB2,506.7bn (US$85.24bn) in 2011 to RUB2,745.7bn (US$90.62bn) in 2012; +
9.5% in local currency terms and + 6.3% in US dollar terms. Forecast is virtually unchanged from Q312.
- Medical devices: RUB187.97bn (US$6.39bn) to RUB209.12bn (US$6.59bn) in 2011; + 11.2%
in local currency terms and + 3.1% in US dollar terms. Forecast is virtually unchanged from Q312.
Russia’s Risk/Reward Rating (RRR) sits at 58.7, with the country ranking third out of the 20 Central and Eastern European (CEE) markets in our matrix. The country continues to benefit in terms of population size, sustained if not spectacular economic growth and expansion of state healthcare coverage. The country should lead the region in terms of sheer population size and growth potential, but issues such as corruption, political and economic risk continue to post major challenges for current and potential investors.
Key Trends And Developments:
- Following his re-election, President Vladimir Putin is under pressure to deliver on social commitments, in particular healthcare. On cue, in late September 2012, health minister Veronika Skvortsova, a technocrat appointed in May, announced that the preliminary results from the Ministry's audit of regional healthcare authorities claim the federal government's modernisation strategy for the Russian healthcare system has yielded results ahead of schedule. In a statement released in mid-September 2012, the Ministry of Health declared that a boost in expenditure and government subsidies had made significant improvements to public healthcare in 57 regions within Russia. At the same time, however, the audit acknowledged major (and chronic) shortfalls in primary care coverage in Russia’s regions, which have contributed to the country’s stubbornly low life expectancy rates. Notably, Skvortsova pledged to put a priority on preventive medicine and stated that in 2013, annual medical screenings for children will become mandatory and fully subsidised by the state. Russian citizens will also be called for clinical screenings at regular intervals, dependent on age, gender and medical history.
- Another important pledge by the president is the long-delayed implementation of the new,
comprehensive Medicines Insurance System. In August 2012, Skvortsova said that the Ministry of Healthcare will present its strategies at the beginning of December for the full implementation of the Medicines Insurance System in the country by 2020. In a presentation to industry representatives, she sketched out some of the details of the new system, including a tiered rate of reimbursement depending on the nature of the illness, with the state, on average covering around 50% of the costs of medicines. Additionally, the number of therapeutic areas covered are to be increased in stages between 2014 and 2020. The rollout of the system will be closely watched after the debacle of last decade’s implementation of the DLO (Provision of Supplemental Medicines (DLO)) programme, which went wildly over-budget amid widespread allegations of corruption and mismanagement.
- Following the formation of a new government in May 2012, it appears that multinationals had a long pipeline of local development deals in the wings, pending confirmation of political stability.
The result was a torrent of deals involving US, European and Japanese majors within a few weeks between June and July 2012. Among these, Abbott Laboratories announced it would be working with Russia-based ChemDiv Research Institute (CDRI), a subsidiary of US-based ChemDiv to explore improved formulations of Abbott's existing drugs. At the same time, J&J's venture capital subsidiary Johnson & Johnson Development Corporation (JJDC) and Russia’s state-backed technology venture fund, the Skolkovo Foundation, entered a co-investment agreement. ChemRar Ventures and JJDC will collaborate with the Skolkovo Foundation on the BioPharmCluster for the Northern region, a biotechnology and medical device hub. In the same month, Pfizer and the ChemRar High Tech Centre announced an agreement under which Pfizer grants ChemRar subsidiary SatRx exclusive rights to PF-00734200, a DPP-IVi compound. In addition, Russian drug producer Akrikhin has signed an agreement on manufacturing and packaging with MSD in Russia to produce six key MSD products, covering different dosages and formulations, for the Russian market. Novartis and RT-Biotechprom signed a memorandum of understanding (MoU) for the localisation of drug provision for patients with chronic myeloid leukaemia in Russia. Japanese pharmaceutical company Eisai announced at the same time that it would expand its operations in Russia following the approval of epileptic drug Zonegran (zonisamide). Finally, UCB Pharma and CDRI have signed an agreement on cooperation in the design and synthesis of chemical compounds for drug discovery.
? In a notable development for the private healthcare sector, local private hospital and clinical operator MD Medical Group claimed in September 2012 that it was seeking a London share listing, putting it along Medsi – owned by the Sistema conglomerate – as one of the country’s most prominent private care providers. It has nine modern healthcare facilities, comprising a hospital and eight outpatient clinics in Moscow, St Petersburg, Ufa and Perm. Three franchised outpatient clinics also operate in the Ukrainian capital Kiev and Irkutsk. The group recorded revenues of RUB2,908mn (US$91.7mn) in 2011 up 42% on the previous year, EBITDA was up by 19% to RUB1,292mn (US$40.7mn), though debts increased as the firm financed its expansion efforts. While BMI is sceptical of IPO announcements translating into concrete action, the group’s disclosures underline the emergence of a competitive modern, private healthcare sector driven primarily by private insurance policies, a common benefit provided by companies in the face of a deeply dysfunctional state system.
BMI Economic View:
Our below-consensus view on Russian growth is playing out well, with weaker retail sales data over the past few months reinforcing our long-held view that private consumption would start to slow in H212. Although our 2012 real GDP growth projection of 3.4% remains some way below Bloomberg consensus estimates of 3.8%, with retail sales growth falling to 4.3% year-on-year in August 2012, from 7.1% just two months earlier, we believe consensus will soon converge towards our own forecast.
BMI Political View:
Attacks on moderate Muslim leaders in Tatarstan have raised the spectre of radical Islam taking hold in a core region of the Russian Federation. There is now a risk that the Kremlin will overreact to the incidents, thus provoking a backlash among the Tatar people. Over the longer term, if Tatarstan were to become radicalised along the lines of the North Caucasus region, then this would pose a major threat to Russia. SHOW LESS READ MORE >
Executive Summary 5
SWOT Analysis 8
Russia Pharmaceuticals And Healthcare Industry SWOT 8
Russia Political SWOT 9
Russia Economic SWOT 9
Russia Business Environment SWOT 9
Pharmaceutical Risk/Reward Ratings 11
Table: CEE Pharmaceutical Risk/Reward Ratings, Q412 11
Russia – Market Summary 14
Regulatory Regime 17
Intellectual Property Environment 21
Pricing Regime And Controls 22
Clinical Trials 28
Industry Trends And Developments 31
Industry Developments 35
Industry Forecast Scenario 37
Overall Market Forecast 37
Table: Pharmaceutical Sales Indicators 2008-2016 38
Key Growth Factors – Industry 39
Table: Healthcare Expenditure Indicators 2008-2016 40
Table: Healthcare Governmental Indicators 2008-2016 41
Table: Healthcare Private Indicators 2008-2016 41
Key Growth Factors – Macroeconomic 42
Table: Top 15 Planned Infrastructure Projects By Value 45
Table: Russia - Economic Activity 47
Prescription Drug Market Forecast 48
Table: Prescription Drug Sales Indicators 2008-2016 49
Generic Drug Market Forecast 50
Table: Generic Drug Sales Indicators 2008-2016 51
OTC Medicine Market Forecast 52
Table: OTC Medicine Sales Indicators 2008-2016 54
Pharmaceutical Trade Forecast 55
Table: Exports and Imports Indicators 2008-2016 57
Medical Device Market Forecast 58
Table: Medical Devices Sales Indicators 2008-2016 61
Key Risks To our Forecast Scenario 62
Competitive Landscape 63
Manufacturing Sector 63
Company Activity 69
Wholesale Sector 70
Retail Sector 71
Company Profiles 73
Berlin-Chemie/Menarini Pharma GmbH 73
Gedeon Richter 74
Lek (Novartis/Sandoz) 77
Stada AG (Stada CIS) 79
Demographic Outlook 85
Table: Russia's Population By Age Group, 1990-2020 ('000) 86
Table: Russia's Population By Age Group, 1990-2020 (% of total) 87
Table: Russia's Key Population Ratios, 1990-2020 88
Table: Russia's Rural And Urban Population, 1990-2020 88
BMI Methodology 91
How We Generate Our Pharmaceutical Industry Forecasts 91
Pharmaceuticals Risk/Reward Ratings Methodology 92
Ratings Overview 92
Table: Pharmaceutical Business Environment Indicators 93
Table: Weighting Of Components 94
Berlin-Chemie/Menarini Pharma GmbH
Stada AG (Stada CIS)