Over the past several years, the Russian pharmaceutical market has experienced the fastest growth in the world mainly due to the improved living standards of its population. According to the DSM group, the leading Russian pharmaceutical marketing agency, the total market size in 2008 amounted to $18.5 billion at the retail level. Growth in 2008 was 11% versus 15% in 2007.
The Russian pharmaceutical market can be divided into two segments, namely commercial and government. The former includes all retail sales of drugs, health and beauty products, and non-medical products ("para-pharmaceuticals"). The latter comprises sales under the Federal Reimbursement program (FRP), also known as Additional Drug Supply Program (DLO), as well as sales through prevention and treatment facilities and clinics.
Despite the economic crisis that hit Russia beginning October 2008, the commercial segment grew steadily last year. It should, however, be noted that the sector was not as active as it was in 2007. Pharmacy chains did not invest in new outlets, but rather worked to increase sales at existing locations. No significant mergers were noted among manufacturing companies.
DSM's research highlights that the commercial market segment accounted for $9.5 billion (at retail prices) in 2008, or 51% of the market. The 28% increase over 2007 can be explained by an increase in drug consumption (12%) and price increases. The average price of drugs was approximately $2, and the increase from 2007 was more than 10%. It is also estimated that the average Russian spent around $67 on drugs in 2008.
According to Remedium magazine about 60% of total domestic output is led by 10 large manufacturers, including Pharmstandart, Microgen, Valenta, Velopharm, Nizhpharm, PharmFirma Soteks, Pharm-Centr Otechestvennye Lekarstva, Materia Medica Holding NPF, Biosyntez, and Akrikhin. Besides the production of generics, domestic pharmaceutical producers specialize in the tableting and packaging of drugs made from imported active ingredients. From 85% to 90% of all the substances used in pharmaceutical production are imported from Western Europe, China and India.
The DSM report notes that total imports in the first 10 months of 2008, compared to the same period in 2007, increased 42% to 196 billion rubles or $7 billion. Distributors and foreign companies' subsidiaries contributed 88% of total imports. From January-October 2008 subsidiaries accounted for 45% of sales, versus distributors at only 40%; this situation was quite the opposite in 2007. Servier, Sanofi-Aventis, and Schering are the leading subsidiaries in terms of sales. Approximately 4,000 registered distributors of pharmaceuticals exist in Russia but only 700 distributors are major players in the market. This concentration of the distribution sector has been growing and is now approaching that of developed countries. According to industry experts, the top 10 distributors in the first 10 months of 2008 were Protek, CIA International, ROSTA, P-Pharm, Katren, Apteka-Holding, Genezys, Biotek, Moron, and Transatlantic. The share of those ten distributors accounted for 80% of the total market.
Distributors operate vast networks of contacts and work to direct retail distribution channels. Drug manufacturers prefer not to work with retail pharmacy networks or pharmacies directly, relying instead on distributors in promoting their products to retail outlets. In recent years, increasing amounts of health and cosmetic goods are also being sold through pharmacies. The assortment of products sold through pharmacies has increased from 2,000 to 8,000 items over the past few years. Large cosmetic manufacturers use the same strategy in marketing their goods as drug manufacturers; they seldom work with retail outlets directly and rely almost exclusively on distributors.
The number of pharmacy networks and member-pharmacies has grown rapidly. The overall number of pharmacies and kiosks now exceeds 50,000. Leading pharmaceutical networks include, in Moscow: Apteka 36.6, Rigla, Stolichnye Apteki, Doctor Stoletov, Staryi Lekar, Vita and Biotek; in St. Petersburg: Farmakor, Pervaya Pomosch, and Natur Products; and Implozia in Samara.
Better Health Outcomes:
The pharmaceutical industry develops and produces products that help treat a variety of diseases, saving millions of lives and helping people suffering from diseases and illnesses to recover and lead more productive lives. The pharmaceutical industry develops drugs that treat every type of condition imaginable, such as influenza, sexually transmitted diseases, cardiovascular disease, diabetes, hepatitis, Parkinson's disease and cancer, to name a few. Many of these are devastating and life-altering diseases, and these products help keep patients alive longer.
While some may view the cost of pharmaceutical drugs as a negative aspect of the industry, you can also see cost as a benefit. According to the Pharmaceutcial Research and Manufacturers of America (PhRMA), the market share of generic pharmaceuticals was between 42 and 58 percent in 2006. What this means is generic drugs are increasingly available to patients, which drives down costs. Most reports in the media discuss the high cost of drugs and lack of access for certain patients, but the reality is that drugs today are cheaper and more accessible than ever before due to increased competition in the marketplace. Additionally, economic development in countries like India and China are driving down global prices for pharmaceutical products even more.