Russia has been one of the fastest growing emerging pharmaceutical markets in the world in recent years and it is among the countries where consumption of medicines is expected to grow dramatically.
Russia accounts for just under one third of the total Central & Eastern European pharmaceutical market, due to its population of 141 million. 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.
One of the most important factors driving Russian drug market growth has been the governmental Beneficiary Drug Provision Program (DLO), introduced in January 2005 in compensation for the cancellation of certain social welfare benefits. Under the DLO free medicines are provided to people receiving state benefits or who are hospitalized. In June 2008, the Health Minister, Tatiana Golikova and the Prime Minister, Vladimir Putin, discussed the future of the DLO; Putin announced that the health sector would be reformed in 2010, with the DLO being replaced by a system of compulsory health insurance. The new system will provide free or low-cost prescription drugs to all Russians. It has been reported that only Russian-produced drugs will be subsidized under the new arrangements.
The market will continue to be driven by import growth as a result from the lack of locally-manufactured innovative pharmaceuticals. Over the last few years, import growth has been encouraged by the federal drug supply system (DLO). Around 80% of DLO funds are spent on imported pharmaceuticals.
Russia is an ideal branded generic market, as consumers are willing to pay higher prices for brands associated with quality. This is due to the fact that several domestic manufacturers operate plants that are not GMP (good manufacturing practice) compliant. As a result, foreign pharmaceutical companies have been effective at driving growth by promoting their brands over local products. Branded generics account for 47% of sales in value terms.
Generics may eventually lose market share to branded pharmaceuticals if the government's plan to vastly increase the number of locally manufactured innovative drugs is successful. A strategy for encouraging growth in the local pharmaceutical industry for the period up to 2020 envisages the government helping local producers to cover the costs of the R&D that is required to encourage production of innovative pharmaceuticals.
In November 2006, Russia and the USA signed an IPR bilateral agreement, which is an important element of Russia's accession to the World Trade Organization (WTO). As part of the agreement, Russia committed to protect against the unfair commercial use of undisclosed pharmaceutical test data submitted during the marketing authorization process, deter counterfeiting through criminal penalties, strengthen border enforcement and make Russian laws compliant with WTO and international IPR norms.
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