Russia Pharmaceuticals & Healthcare Report Available Now

The Russia Pharmaceuticals and Healthcare Report provides independent forecasts and competitive intelligence on Russia's pharmaceuticals and healthcare industry.

According to BMI’s latest estimate, Russia’s pharmaceutical market reached a total value of US$11.7bn in final consumer prices 2007, representing 20% year-on-year (y-o-y) growth in dollar terms and bringing total per capita annual spending on medicines to US$82.3, twice 2004 levels. This is broadly in line with the growth rate recorded by local research groups DSM (20.2%) and RMBC for 9M07 (21%). More modest local currency growth rates of 11.2% reflect the distorting effect of the weakness of the US dollar. Looking forward, BMI’s five-year forecast, extended to 2012, sees annual average dollar growth of 10.9%, a lower but potentially more sustainable growth rate, in particular if the rouble continues to appreciate against the dollar through the forecast period.

Russia’s political outlook after post-March 2008 presidential elections became clearer during the final six weeks of 2007. President Vladimir Putin gave his long awaited endorsement to his favoured candidate, First Deputy Prime Minister Dmitry Medvedev. In turn, the Kremlin’s candidate is all but assured of winning handily at the polls. The choice of Medvedev - who said he would appoint Putin as his prime minister after the elections - should be cause for guarded optimism for the foreign pharmaceutical industry, given his track record as a relative economic liberal. He should bring greater focus to healthcare, an area that falls under his current brief. He arguably made the best of a bad job when he was tasked with cleaning up the hugely indebted Supplementary Medicines Scheme (DLO), which all but collapsed due to overspending, mismanagement and outright corruption in late 2006.

At present, the pharmaceuticals industry appears to be an area of increased state attention. Prime Minister Viktor Zubkov hinted in October that the government would provide state support to the local industry to meet the country’s 2010 start date for enforcement of Good Manufacturing Practice (GMP) standards.

The new holding company of state vaccine and medicines research institutes and production facilities, Russian Pharmaceutical Technologies was due to be up and running by the close of 2007, early 2008. Such measures are similar to moves already taken in Brazil and other emerging markets. Perhaps more worrying, they were reports of a move to make small state distributor Lenfarm the exclusive wholesaler for the DLO programme in Leningrad Region, hinting at a greater potential role for state distributors. Whatever the political risks, M&A in the industry picked up pace towards the close of 2007. Hungary’s Gedeon Richter made a bold double acquisition, picking up Russian producer Akrikhin and Poland’s Polpharma. These should boost its Russian market share lost during the DLO fiasco in late 2006.

Meanwhile, a bid by German wholesale giant Celesio for Protek appeared on-hold at the end of the year, but by no means dead. Private equity group Texas-Pacific was also reportedly in talks to buy a stake in local distributor SIA International. Meanwhile, there was bound to be a sigh of relief by many in the industry as executives from once politically well-connected firm Brynstsalov-A - notorious for alleged counterfeiting - went on trial for trademark violation. Considering that 2007 started with the fresh fall out of the DLO debacle, conditions entering 2008 look far better than many had expected.

Companies Mentioned:

- Berlin-Chemie/Menarini Pharma GmbH
- Gedeon Richter
- Krka
- Lek (Novartis/Sandoz)
- Stada AG/Nizhpharm
- Verofarm

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