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Russia Pharmaceuticals and Healthcare Report Q4 2009
Business Monitor International, Oct 2009, Pages: 88
The Russia Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's pharmaceuticals and healthcare industry.
This quarter BMI introduces 10-year forecasts for the Russian pharmaceutical markets, providing an opportunity to look beyond the current financial crisis and assess the growth potential for the largest and most populous pharmaceutical market in Central and Eastern European (CEE). By 2018, we forecast that the Russian pharmaceutical market will be worth US$50.9bn, representing an 11.28% compound annual growth rate (CAGR) – making Russia one of the most attractive markets over the long term. For the 2008 to 2013 period, growth in US dollar terms is forecast at a CAGR of 13.30%, reaching US$31.6bn in 2013, an impressive figure given our current forecast that the market will contract in US dollar value by 9.1% this year.
Predictably, Q109 showed a sharp market contraction in the retail market, with market watcher RMBC reporting a 16% US dollar contraction in wholesale prices and a 10% dip in volumes year-on-year (y-o-y). With Q109 seeing the peak of overall market instability and with the outcome of the (apparently successful) managed devaluation of the ruble, the government claims that Russia will see economic growth as soon as Q309. Statistical data through May suggest that larger local producers have grabbed market share during the crisis, although a significant portion of this has been taken from smaller local ones hurt by rising input prices. Top local producer Pharmstandart delivered 62% revenue growth and 47% profit growth in H109.
Going forward, we believe it will be regulation issues – too few of the right rules and too much market interference – that present the biggest challenge to the Russian pharmaceutical marketplace, not economic turmoil. In August, in a significant blow to original drugmakers, and boost to generics firms, the country’s Supreme Arbitration Court struck down a lower court’s ruling banning the registration of a pharmaceutical product prior to patent expiry, in a case involving Novartis’s antineoplastic blockbuster Glivec (imatinib). At the same time, the government is bent on keeping ruble package prices from rising a tall order given the devaluation and dearer cost of imported raw materials and packaging. In July, new regulations tightening margin limits on ‘essential medicines’ were presented by the health minister amid reports by DSM that the average ruble package price for medicines in the Supplementary Medicines Provision (DLO) programme had as much as doubled y-o-y in H109 – increasing by 11.5% from the beginning of the year, according to official figures.
While we retain a positive longer-term outlook for the marketplace, the sector is still dealing with the fallout from the economic crisis, as witnessed by the bankruptcy proceedings reportedly sought in August by distributor Protek against a subsidiary of Pharmacy Chain 36.6, the country’s largest private pharmacy operator. Despite 36.6 saying the suit was baseless, the two companies have been at loggerheads over its debts to the distributor. In better news for the sector, one of the few foreign companies to make firm production plans in the country since the global economic crisis began is Nycomed. After spending two years prospecting 20 green-field sites, a final decision is reportedly due in Q309, with production expected to commence by 2013-2014.
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