Cistran Finance Exploring the Spirit of Capitalism's New Frontier

Thursday, October 19, 2017

Report: Russia offers possibilities, challenges for pharma companies

The Russian pharmaceutical market is one of the largest and fastest growing markets in the world today, worth more than $29 billion in 2012, with an annual growth rate of more than 10 percent in the past several years.

The market growth is due largely to the sheer size of the Russian population of more than 143 million people, with increasing health awareness and expanding disposable incomes, according to Max Rubin and Julie Blackbeard of Deallus Consulting in London, PMLive.com reports.

With nearly 60 percent of all prescription medicines being paid for directly by patients, the out-of-pocket drugs segment is the largest market segment in the country, valued at $17.32 billion in 2012. In the same year, 76 percent of total pharmaceutical sales came from imported drugs.

"The size and growth of the Russian pharmaceutical market offer a highly compelling prospect for foreign investors, but it is also a market in which challenges and opportunities are hard to separate," Rubin and Blackbeard said, PMLive.com reports.

In 2010, Russian President Vladimir Putin launched the "Pharma2020" program, a plan to overhaul the country's pharmaceutical market. One of the main objectives is that by 2020, at least half of all drugs and 90 percent of all "vital medicines" sold in Russia will be locally manufactured.

As a result, there were a record number of applications in 2011 from foreign companies wanting to either establish their own local manufacturing facilities or partner with regional manufacturers.

The global pharmaceutical industry has approached Russia with two distinct market strategies, building local manufacturing capabilities and partnering with domestic companies, Rubin and Blackbeard said, noting that the former is a high risk/high return strategy while the latter offers lower risk/lower return.

"Pharma companies need to continually assess their market strategy for Russia to ensure alignment between the investment required to satisfy Putin's demand for knowledge and expertise in the short-and/or medium-term with own corporate development goals and capabilities considering how each of these may change given fluctuations in broader market dynamics," Rubin and Blackbeard said, according to PMLive.com.