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Russian Pharmaceutical Market Trends in 2017

Track & trace system: additional costs or opportunities?
Deloitte CIS Research Centre
Moscow, 2017

Russian Pharmaceutical Market Trends in 2017

Contents
01 Introduction

02 Key findings

01 Introduction 04
Russian pharmaceutical
03
market in figures

Key findings 05 Overall situation on the Russian
02 04
pharmaceutical market

Future directions for the Russian
Russian pharmaceutical market in figures 06 05
03 pharmaceutical market
Market size 07
Market size by sector 08 06 Efficiency of government
regulation in the industry
Medicine price inflation 09
07 Our respondents
Commercial segment structure by the end of 2016 10
08 Contacts
Regulatory trends in the pharmaceutical industry 11
Pharmaceutical output in Russia 13
Russian pharmaceutical market
on the global map in 2016 14

02

Russian Pharmaceutical Market Trends in 2017

Contents
01 Introduction

02 Key findings
Overall situation on the Russian Efficiency of government regulation in the industry 30
04 pharmaceutical market 15 06 03
Russian pharmaceutical
Priority areas requiring better government regulation 31 market in figures
Russian pharmaceutical industry: current situation 16 Government initiatives aimed at reducing the share of
Overall situation on the Russian
Russian pharmaceutical market: outlook for 2017 17 pharmaceutical imports 32 04
pharmaceutical market
Pharmaceutical companies in Russia: current situation 18
Pharmaceutical companies in Russia: outlook for 2017 19 Future directions for the Russian
05
07 Our respondents 33 pharmaceutical market
Expectations for the key performance indicators
on the Russian pharmaceutical market 20
06 Efficiency of government
regulation in the industry
08 Contacts 36
07 Our respondents

08 Contacts
Future directions for the Russian
05
pharmaceutical market 21
Pharmaceutical business development
strategies for Russia 22
Cost optimization approaches 23
Track & trace system as a way to approach
business process optimization 24
Preparations for implementing the track & trace system 25
The foreign trade structure on the Russian
pharmaceutical market 27
Economic expectations: pharmaceutical imports in Russia 28
Top-14 issues facing pharmaceutical companies in Russia 29

03

including pharma counterfeit drugs and provide the business •• Top-14 issues facing pharmaceutical distributors. While staying competitive in the industry requires a continuing flow of •• Regulatory measures aimed at reducing the Please feel free to contact us if you have any financial support and rigorous innovation. offerings. As one of the most high-tech intensive pharmaceutical market industries.Russian Pharmaceutical Market Trends in 2017 Introduction 01 Introduction 02 Key findings Deloitte CIS would like to thank all of the Even though the Russian pharmaceutical Key topics: Russian pharmaceutical participants of the survey. the pharmaceutical industry 05 •• Pharmaceutical companies in Russia: recent pharmaceutical market views and expectations regarding the prospects is under close government scrutiny where developments and future prospects for your own company’s development and the decisions by authorities set a development Oleg Berezin market overall. with the industry itself having the potential to become one of the Best regards. community and the government with a companies in Russia transparent view of product flows. mandatory medicine development strategies Head of Life Sciences Our recent survey includes the views of labeling and distribution monitoring (track & •• Cost optimization approaches 07 Our respondents & Healthcare Industry  respondents from 58 Russian and foreign trace) framework to go live. This framework group in the CIS generic and original drug manufacturers is designed to protect consumers against •• Track & trace system 08 Contacts in Russia and abroad. 04 pharmaceutical market opinions allowed us to conduct an integrated •• Russian pharma industry: recent analysis of the situation on the Russian As an area of high social and economic developments and future prospects Future directions for the Russian pharmaceutical market. pharmaceutical investments can generate lucrative returns. powerhouses of the Russian economy. questions about the report. as well as to study your importance. the pharmaceutical sector is •• Expert opinion: priority regulatory areas for We would be grateful if you would participate in characterized by rapid changes in product improvement our next survey. for their time and interest. share of pharmaceutical imports. We are pleased to present the full report. which was held in market has been demonstrating an overall 03 •• Analysis of the key statistics of the market in figures August 2017 as part of the research project stable growth. The industry •• Pharmaceutical companies in Russia: 06 Efficiency of government regulation in the industry Partner is waiting for a new. Oleg Berezin 04 . Your expert nearly two times. path for the whole industry. particularly in ruble terms. from 14 percent to 7 percent. We •• Trading policies on the Russian hope that you will find it useful and informative. the pharmaceutical market and the pharma “Russian Pharmaceutical Market Trends in growth rates over 2013–2016 are down by industry in Russia Overall situation on the Russian 2017”.

as well as subsidies •• Of those surveyed. imports came from Europe. in monetary terms and framework (67 percent) regulation.7 percent in output increased by 23. the total exports. The Russian market is ranked 14th in the world in terms of size. anticipate an average up by 10 percent •• Medical products: perception (a balance •• Medicine pricing (87 percent) decrease of 11 percent 06 Efficiency of government regulation in the industry •• QuintilesIMS: up by 4 percent of +7 percent) •• Public procurement New trends in strategic •• Most companies (59 percent) up by 9.8 percent.8 billion. The post-Soviet countries remain the major export The share of local medicines markets for Russian medicines. positive perception (a companies. 05 . 04 pharmaceutical market Market growth forecasts for balance of +82 percent) and privileges for Russian A focus on new product 39 percent expect that 2017 (in ruble terms): Output forecast for 2017 by the companies. launches is the top operating costs will see an Future directions for the Russian •• DSM Group: Russian Ministry of Industry View of the future development strategy for average growth of 16 percent 05 pharmaceutical market up by 8-9 percent and Trade: prospects of: Demand for more efficient pharmaceutical companies in while another 26 percent •• RNC Pharma: •• Medicines: up by 8 percents •• Pharma industry–neutral regulation Russia. grew by 1. while another 33 percent 08 Contacts 2017 (in unit terms): for 77 percent of the percent) expect that their headcount •• DSM Group: Essential Drug List.Russian Pharmaceutical Market Trends in 2017 Key findings 01 Introduction Market snapshot Pharmaceutical market perception Business development strategy 02 Key findings In 2016 the pharmaceutical In Russia pharmaceutical View of the current state of: Demand for regulatory Medicine labelling is a new Expectations for key indicators: market grew by 6.8 •• Pharma industry–positive measures aimed at reducing regulatory trend that is likely •• Most companies (82 percent) Russian pharmaceutical ruble terms while remaining percent to RUB 286 billion perception (a balance the share of pharmaceutical to have an impact on how expect an average growth 03 market in figures unchanged from 2015 while medical product of +52 percent) imports: localization incentives companies and the industry as of 13 percent in ruble in unit terms.2 percent •• Pharmaceutical businesses– regulation (74 percent) development: focus on are not planning any 07 Our respondents By the end of 2016 medicines positive perception •• Regulation of on-line sales of R&D activities and deeper headcount adjustments Market growth forecasts for produced in Russia accounted (a balance of +42 percent) medicines and telehealth (67 localization. are planning to increase •• IPT Group: up by 4-6 percent. pay levels by 7 percent on and Germany. Change in the share of imports •• State registration of Top challenges: stronger will increase on average up by 1-2 percent as expected by the Russian medicines (67 percent) competition and a shift of the by 7 percent •• QuintilesIMS: In 2016 almost 80 percent of market: down by 3 percent •• Mandatory track & trace focus to gaps in the industry •• Most companies (63 percent) up by 4. terms in 2017 Overall situation on the Russian RUB 52. primarily from France by 4 percent in unit terms. output grew by 15 percent to •• Pharmaceutical businesses– and privileges for foregn a whole will develop. average In 2016 pharmaceutical price inflation was 5 percent.2 pp in monetary accounting for 86 percent of terms.

03 Russian pharmaceutical market in figures 01 Introduction Current state and future prospects 02 Key findings Russian pharmaceutical 03 market in figures Market size Market size by sector Medicine price inflation Segment structure by the end of 2016 Regulatory trends in the pharmaceutical industry Pharmaceutical output in Russia Russian pharmaceutical market on the global map in 2016 Overall situation on the Russian 04 pharmaceutical market Future directions for the 05 Russian pharmaceutical market 06 Efficiency of government regulation in the industry 07 Our respondents 08 Contacts 06 .

7 percent in ruble terms “This year is going to be an market in figures 24% while decreasing by 3 percent in US dollar interesting one. 824 24 24 16% According to the forecast. RNC Pharma in an RNC Pharma: up by 10 percent. “Along with a growth in chronic illnesses.046 30 30 Market size forecast for 2017 medicines is also noteworthy. pharmaceutical industry 17% 919 28% 28 (in ruble terms): All of these factors can deliver Pharmaceutical 14% DSM Group: up by 8-9 percent. Future directions for the IPT Group: 05 Russian pharmaceutical market QuintilesIMS: up by 9.461 ruble exchange rate.344 risk sharing will have a huge Medicine price inflation In 2016 the market saw a positive 1. Pilot projects Market size terms due to a weaker weighted average 1. a move to Segment structure 1. will be a key driver for growth. combined with inflation. implement online sales of by the end of 2016 Regulatory trends in the 1. Overall situation on the Russian –8% interview to Pharmatsevticheskiy Vestnik 04 7% –9% It is expected that higher pharmaceutical market 6% consumption. the –32% ageing of the population will result in a higher consumption of medicines.” 06 Efficiency of government regulation in the industry 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 07 Our respondents RUB billion Forecast Growth rate (%) USD billion Forecast Growth rate (%) 08 Contacts Source: DSM Group.152 33 (in ruble terms) in 4Q2016.259 growth mainly due to the growth in sales impact. the Central Bank of Russia.2 percent. However. in medicine labelling and Market size by sector 1.” Russian pharmaceutical 695 20 8% market on the global 6% in the commercial segment. map in 2016 9% 9% –3% Director of Analytics. the growth a significant shift in the output in Russia 735 12% 12% 22 11% 11% 21 22 will be primarily driven by sales market.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Analysis of key market indicators: market size 01 Introduction 02 Key findings Market size dynamics Market size dynamics Trend Expert view Russian pharmaceutical (RUB billion) (USD billion) The year 2016 saw the Russian pharmaceutical 03 market grow by 6. 594 10% Pavel Rasshchupkin. the Russian Ministry of Economic Development 07 .

086 1.067 Expert view: 330 5.437 4. 20 March 2017 130 675 Overall situation on the Russian 118 609 04 537 pharmaceutical market 468 406 Future directions for the 05 Russian pharmaceutical market 06 Efficiency of government regulation in the industry 2010 2011 2012 2013 2014 2015 2016 2017* 2010 2011 2012 2013 2014 2015 2016 2017 07 Our respondents Public sector of Finished pharmaceutical products (FPPs) Hospital purchases and the State Commercial sector (parapharmaceuticals) Reimbursement Programmes 08 Contacts Commercial sector (FPPs) Commercial segment (FPPs) Share of public procurements 2017 forecast for the overall market Share of hospital purchases and * 2017 forecast the State Reimbursement Programmes Source: DSM Group 08 .121 1.122 226 195 reached the bottom. monetary and unit terms. sales was expected because Pharmaceutical 268 the market had already 230 4.116 1.986 4. General Director.” Russian pharmaceutical 211 183 market on the global 894 169 Sergey Shulyak. 27% Market size by sector The growth in the market is driven by the 20% •• IPT Group forecasts: +4-6 percent.6 294 4.460 million packages. 25% 26% 26% 26% 20% 20% 20% commercial segment.458 4.2 25% Medicine price inflation 23% 19% 19% percent in monetary terms and by 3.454 4. Market size 29% 22% •• QuintilesIMS: +4.8 percent.242 output in Russia 234 209 3. map in 2016 149 806 741 DSM Group.160 1.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Analysis of key market indicators: market size by sector 01 Introduction 02 Key findings Market dynamics in monetary terms Market dynamics in unit terms Trend: Market size forecast for 2017 Russian pharmaceutical (RUB billion) (in billion packages) The public sector decreased by 13 percent in (in unit terms): 03 market in figures unit terms and is continuing to shrink both in •• DSM Group: +1-2 percent.424 percent from the same period in 2016.032 by the end of 2016 1. Segment structure 336 1.106 962 January-April 2017 saw the commercial segment “A growth in retail package Regulatory trends in the 323 pharmaceutical industry sell 1. which is up by 13.1 percent in unit terms. which has grown by 8.

monetary terms..” 07 Our respondents Sergey Shulyak. Prices for expensive “Unfortunately.1 5. Russian Federal Statistics Service Source: DSM Group Overall situation on the Russian 04 pharmaceutical market In 2016 inflation in Russia slowed down to 5. DSM Group.8% pharmaceutical industry 3.0 Regulatory trends in the 5.8 8. the lowest inflation rate over the last grow – 7.4 6. medicines valued at RUB 500 or above grew just a downtrend both in ruble and unit terms.7 output in Russia 2008 2009 2010 2011 2012 2013 2014 2015 2016 2015 2016 2015 2016 Russian pharmaceutical market on the global Inflation (%) Medicine price inflation (%) map in 2016 Source: DSM Group. The share of by 1.3 percent) compared to other medicines the growth in the pharmaceutical market in (+6.3 6.5 Segment structure 6.4 8.7 14. more expensive medicines.9 percent).. prices for drugs regulation in the industry on the Essential Drug List (EDL) grew at a slower In 2016 inflation was the key factor driving Here we can actually say that the market is shifting toward rate (+1.2% Market size by sector 11. 09 .8 Medicine price inflation 10.9 Market size 13.9 percent.1 percent.6 8. General Director. medicines priced below RUB 50 is down by almost 2 percent. 20 March 2017 08 Contacts The market for EDL drugs accounts for about 50 percent of the total market.4 In 2016 the market for medicines priced below Expert view: percent with medicine prices growing by 5 RUB 50 per package saw the most significant percent.. 03 * 16.9 percent. both in unit and monetary terms.9% by the end of 2016 6.0 12.3 12.3% Pharmaceutical 0.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Analysis of key market indicators: medicine price inflation 01 Introduction 02 Key findings Inflation for 2008–2016 (%) Russian pharmaceutical According to the Russian Federal Statistics Service. 06 Efficiency of government Due to the regulatory efforts. the market for low-priced medicines has seen 05 Future directions for the Russian pharmaceutical market three years. Non-essential and Essential and market in figures non-vital drugs vital drugs 14.6 6.2 prices for medicines grew by 4.7 1.0* 2.

1% Segment structure 52.5% 42.8% 57. with 08 Contacts OTC drugs accounting for 80 percent in this price bracket.2 pp in monetary terms and by 1 pp in unit in monetary terms and by 2 percent Future directions for the shifting to cheaper generics. imported medicines only grew by 7 percent in monetary terms 06 Efficiency of government had an average price of RUB 111 per package. by 6 percent in ruble terms.2% by the end of 2016 85. in unit terms.6% Medicine price inflation 47. for medicines sold below RUB 50. with the average and by 5. 05 Russian pharmaceutical market •• In 2016 the average price per original drug •• While sales of local medicines increased by •• Sales of prescription medicines increased package was RUB 362 while generic medicines 18 percent.4% 69. terms.5% Regulatory trends in the 72.1% 63.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Analysis of key market indicators: commercial segment structure by the end of 2016 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures 27.9% 36.7% pharmaceutical industry Pharmaceutical output in Russia Russian pharmaceutical market on the global Generics Original medicines Imported medicines Local medicines OTC Rx map in 2016 Inner circle – in unit terms. Source: DSM Group 10 .3% Market size 14.9% Market size by sector 30. regulation in the industry price per package reaching RUB 71 for •• The pronounced growth in OTC drug 07 Our respondents local medicines and RUB 253 for imported prices is directly due to increased prices medicines. indicating that consumers are 1. outer circle – in monetary terms Overall situation on the Russian 04 pharmaceutical market •• The share of original medicines is down by 1.5 percent in unit terms.3 •• In 2016 the share of local medicines grew by •• OTC drug sales grew by 11 percent pp from 2015.

336 3. This ena- 12.936 9.994 regulatory tasks: 258 Market size 271 10. as well as creating jobs Medicine price inflation •• Import substitution for drugs on the Essential Drug List.721 2. 3..233 Denis Manturov.303 1. market on the global 57 map in 2016 230 662 1.825 Overall situation on the Russian 04 pharmaceutical market 1. December 2016 by the end of 2016 •• Launches of innovative domestic products.402 bles building new production sites and innovative Market size by sector industry.223 9.055 Pharmaceutical 5. 7.762 246 Regulatory trends in the •• Stronger export potential of the 170 pharmaceutical industry 5. 6.” Segment structure 7.736 1.265 1.746 •• Technological upgrade of the pharmaceutical 9..788 2.one ruble in public investments accounts for market in figures almost five rubles in private investments.658 output in Russia implementing the model of innovation-driven Russian pharmaceutical development.911 230 1.990 10.681 integrated infrastructure.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Regulatory trends in the pharmaceutical industry 01 Introduction 02 Key findings The federal program “Pharmaceutical and Spending on Pharma 2020* (RUB million) Expert view Russian pharmaceutical healthcare industry development for a period 03 until 2020 and thereafter” sets forth the key 13.325 •• Availability of human resources necessary for 2.525 pharmaceutical industry.798 8.360 431 Future directions for the 05 Russian pharmaceutical market 2020** 2018** 2019** 2017** 2014 2013 2012 2011 2016 2015 06 Efficiency of government regulation in the industry Capital expenditures R&D Other areas 07 Our respondents * The federal program “Pharmaceutical and healthcare industry development for a period until 2020 and thereafter” 08 Contacts ** Expenses provided for in the program’s specifications (“passport”) as amended on 19 June 2016 Source: Russian Ministry of Economic Development Continued on page 12 11 . 282 7. Russian Minister for Industry and Trade.488 “.239 2.727 268 279 and expanding the tax base.

0% Overall situation on the Russian 04 pharmaceutical market 32.3 percent of by 2018.3% 07 Our respondents 08 Contacts 2011 2012 2013 2014 2015 2016 1Q2017 2011 2012 2013 2014 2015 2016 1Q2017 In unit terms In monetary terms In unit terms In monetary terms Source: DSM Group Source: DSM Group 12 .4% map in 2016 46.3% 24. Market size by sector growth in monetary terms is partially due to an segment was RUB 1.0% 44.4% Russian pharmaceutical 57.6% 11.4% 51.3% 30.0% 05 Russian pharmaceutical market 06 Efficiency of government 28.0% 46.700 per package while the Medicine price inflation increasing share of more expensive domestic price for the overall market was RUB 265.1% 55.0% 54.0% 46.0% 23. Segment structure by the end of 2016 Regulatory trends in the Share of local medicines over 2011–1Q2017 pharmaceutical industry Pharmaceutical As a percentage of total sales As a percentage of the segment of preferential provision of medicines output in Russia 60. In 2016 the average price in this by the end of 2016.0% 13.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Regulatory trends in the pharmaceutical industry 01 Introduction 02 Key findings Trend innovative medicines.1% 56. which drugs on the Essential Drug List should increase efforts by the government.8% 24. The more pronounced the segment.3% 14. This share was about 77 percent unit terms since 2015. This is particularly For better access to medicines.8% 58.0% regulation in the industry 27.0% 57.1% 13.0% Future directions for the 27.0% 26. with up to 76 percent by 2016 and up to 90 percent Market size growing in monetary terms since 2013 and in local medicines accounting for 32. the programme Russian pharmaceutical Increased share of local medicines sales have evident when looking at the segment of Pharma 2020 provides that the share of local 03 market in figures become one of the outputs from the regulatory preferential provision of medicines.0% 24. The sales have been includes innovative and expensive drugs.0% market on the global 57.2% 56.

RNC Pharma Output (manufacturer prices) Output (end-user prices) Growth rate (%) Growth rate (%) in an interview to ITAR-Tass 08 Contacts Source: Russian Ministry of Industry and Trade *2017 forecast 13 .0% growth rates on the Rus. 07 Our respondents Development Director.5 On the negative side.4% 06 Efficiency of government from the government.9% 8.0% 4.” regulation in the industry 2016 2017* 2013 2014 2015 2016 2017* 2013 2014 2015 Nikolay Bespalov. grow by 17.1% “Maintaining the existing •• The output of medical products will pharmaceutical market 4.0 17% 231 driven up prices for end consumers amid Regulatory trends in the the deteriorating purchasing power of pharmaceutical industry households. Pharmaceutical 185 181 2014 2015 2016 output in Russia Forecast for 2017 by the Russian Source: Russian Ministry of Industry and Trade Ministry of Industry and Trade Russian pharmaceutical market on the global •• The output of medicines will grow map in 2016 by 20 percent in unit terms and Expert view Overall situation on the Russian by 8 percent in ruble terms.9% 286 promoting import substitution and giving a Medicine price inflation localization impulse to foreign companies. 23.7 Segment structure 43.8 22% 24.3% 5.8% 15.0% 5.5% 45. 05 sian pharmaceutical market Russian pharmaceutical market requires additional measures 2.2 percent in unit terms Future directions for the and by 4 percent in ruble terms. A weaker ruble Market size and government measures helped Russian 309 54. 04 6. the crisis has also by the end of 2016 42.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Pharmaceutical output in Russia 01 Introduction 02 Key findings Output of medicines in Russia Output of medical products in Russia Localized medicines as a percentage of the Trend Russian pharmaceutical (RUB billion) (RUB billion) total output of medicines in Russia The crisis that emerged by the end of 2014 03 market in figures has had a positive impact on the evolution of the pharmaceutical market.9 23% companies strengthen their positions while Market size by sector 52.

the EIU predicts a Indonesia 07 Our respondents growth in sales by 31. 2016 keep its 14th place. Russia is a net importer of pharmaceutical market will grow by 26. accounting for 86 percent of Russian exports. primarily from Germany and France.Russian Pharmaceutical Market Trends in 2017 \ Russian pharmaceutical market in figures Russian pharmaceutical market on the global map in 2016 01 Introduction 02 Key findings Structure of exports Structure of imports Russian exports and Rx / OTC outputs (USD million) imports(USD million) Russian pharmaceutical 03 8 908 market in figures 10% 9% 10% 2% USA 2% 5% Market size China 5% Market size by sector Japan Medicine price inflation 6% Germany Segment structure 40% France by the end of 2016 37% Italy Regulatory trends in the 73% Mexico pharmaceutical industry 635 Canada Pharmaceutical output in Russia Brazil Russian pharmaceutical EU EU Exports South Korea market on the global EAEU USA Imports TOP-10 map in 2016 CIS (except for EAEU) Switzerland UK Georgia India Source: Russian Federal Spain Overall situation on the Russian South Korea Others Customs Service 04 Others pharmaceutical market India Source: Russian Federal Customs Service Russia 14th place Future directions for the 05 Russian pharmaceutical market Australia •• With pharmaceutical imports 14 times greater •• The EIU estimates that the global than exports. However.3 06 Efficiency of government Poland medicines . regulation in the industry Venezuela •• Almost 80 percent of imports come from •• Russia is outside the top 10 countries leading Europe. 0 200 000 400 000 600 000 Source: EIU 14 . percent in USD by 2021. in terms of size.4 percent for Russia over Taiwan •• The post-Soviet countries remain the major 2021 08 Contacts the next five years so that the country will Thailand export markets for Russian medicines.

04 Overall situation on the Russian pharmaceutical market 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures Overall situation on the Russian 04 pharmaceutical market Russian pharmaceutical industry: current situation Russian pharmaceutical market: outlook for 2017 Pharmaceutical companies in Russia: current situation Pharmaceutical companies in Russia: outlook for 2017 Expectations for the key performance indicators on the Russian pharmaceutical market Future directions for the 05 Russian pharmaceutical market 06 Efficiency of government regulation in the industry 07 Our respondents 08 Contacts 15 .

indicative of the continuing negative impact which is below the average by 8-9 pp economy demonstrating a 08 Contacts from the factors constraining the growth in the nascent recovery and the ap- industry. which is and pharmacies have a less upbeat view.Russian Pharmaceutical Market Trends in 2017 \ Overall situation on the Russian pharmaceutical market Russian pharmaceutical industry: current situation 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures 7% Overall 76% 24% 24% Overall situation on the Russian Production (including foreign production) 68% 32% 04 and/or wholesale of original products pharmaceutical market Production (including foreign production) 90% 10% and/or wholesale of generics Russian pharmaceutical Retail sales of medicines and medical products 67% 33% industry: current situation Russian company* 86% 14% Russian pharmaceutical Foreign company without localized 73% 27% market: outlook for 2017 production** 69% Foreign company with localized 72% 28% Pharmaceutical companies in production** Positive Negative Russia: current situation Pharmaceutical companies in Russia: outlook for 2017 Positive * Beneficiary owners are Russian residents Rather positive ** or the Russian subsidiary of a foreign company Expectations for the key Rather negative *** Positive views minus negative views performance indicators on the Russian pharmaceutical market View of a pharmaceutical manufacturer’s Trend Highlights •• The year 2017 is also characterized by Future directions for the representative 05 •• Spring 2017 saw a significant improvement in •• Generic manufacturers (+14 pp) and Russian positive sentiment among foreign companies. original drug manufacturers 46 percent to 73 percent past the crisis peak. almost one fourth of the companies trend reversed by early 2017. result of the positive developments for these maintained a negative view. we are number of positive responses growing from 07 Our respondents respondents surveyed (24 percent) have •• At the same time. up by view of the situation on the market. preciating ruble contributing to their [foreign companies] advantage. with the a negative view of the situation. which is a in Russia. In 2016 this group generally has significantly improved for 06 Efficiency of government 2. However. this regulation in the industry •• At the same time. Russian pharmaceutical market the sentiment on the Russian pharmaceutical companies (+10 pp) have a more optimistic including companies without localization “The situation in the industry market: the net sentiment*** is positive.5 times from 2016. with the foreign companies.” 16 .

non-localized foreign companies view their Russian government. (64 percent) do not expect any improvements 08 Contacts while another 29 percent expect a further The last year saw a fundamental shift in how *** Adverse market situation. the respondents percent expecting the situation to deteriorate. with 60 percent who have pessimistic views: a majority of them to improve”.Russian Pharmaceutical Market Trends in 2017 \ Overall situation on the Russian pharmaceutical market Russian pharmaceutical market: outlook for 2017 01 Introduction 02 Key findings Russian pharmaceutical A. weaker financial performance 17 . However. Retail businesses were less optimistic. difficulties in 2015–2016***. Pessimistic about the current situation performance indicators on the Russian pharmaceutical market Trend The respondents with a positive view of Highlights future prospects. this year Russian pharmaceutical market by industry representatives. Optimistic about the current situation ** or the Russian subsidiary of a foreign company Expectations for the key Situation to deteriorate C. Two thirds of the 73 percent of those expecting significant expect the situation to improve. expecting changes for the better in the industry. However. projectionist measures by the deterioration in the market. 7% Overall 21% 66% 13% % 64 29 % Overall situation on the Russian Production (including foreign production) 14% 68% 18% 04 pharmaceutical market % and/or wholesale of original products 66 Production (including foreign production) 33% 57% 10% 66% and/or wholesale of generics Russian pharmaceutical Retail sales of medicines and medical products 0% 83% 17% industry: current situation Russian company* 15% 71% 14% Russian pharmaceutical Foreign company without localized 35% 50% 15% market: outlook for 2017 production** Foreign company with localized 6% 83% 11% Pharmaceutical companies in production** Situation will improve Situation will not change much Situation will deteriorate Russia: current situation Pharmaceutical companies in Russia: outlook for 2017 Situation to improve A. Overall * Beneficiary owners are Russian residents Situation not to change much B. In 2016 this group generally Future directions for the 05 According to the consensus forecast for 2017 the situation in the industry also generally Generic manufacturers more often responded expressed negative views. 25% market in figures 13 9% C. the situation will maintain a positive view of the industry outlook. with 17 be due to the fact that after facing strong regulation in the industry significant change. situation. this group has expressing optimistic views dominate among It is quite the opposite with the respondents No one in this group responded with “situation a more optimistic view amid the stabilizing 07 Our respondents those who predict changes. 21% 03 % B. This may 06 Efficiency of government respondents (66 percent) do not expect any changes predict that the situation will improve. more than one third of them (35 percent) continue without change. with “situation to improve” in 2017 (+12 pp).

” 18 . discounters and ‘killer’ phar- macies result in falling profitability. prices offered by large pharmacy 08 Contacts chains.Russian Pharmaceutical Market Trends in 2017 \ Overall situation on the Russian pharmaceutical market Pharmaceutical companies in Russia: current situation 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures 9% Overall 91% 9% 25% Overall situation on the Russian Production (including foreign production) 89% 11% 04 and/or wholesale of original products pharmaceutical market Production (including foreign production) and/or wholesale of generics 100% 0% Russian pharmaceutical Retail sales of medicines and medical products 67% 33% industry: current situation Russian company* 86% 14% Russian pharmaceutical Foreign company without localized 96% 4% market: outlook for 2017 production** Foreign company with localized 89% 11% Pharmaceutical companies in 66% production** Positive Negative Russia: current situation Pharmaceutical companies in Russia: outlook for 2017 Positive * Beneficiary owners are Russian residents Rather positive ** or the Russian subsidiary of a foreign company Expectations for the key Rather negative *** Positive views minus negative views performance indicators on the Russian pharmaceutical market Trend Highlights View of a pharmaceutical manufacturer’s Future directions for the 05 With 91 percent of the respondents having •• Pharmacies more often tend to express representative Russian pharmaceutical market a positive view of how their companies a negative view. are more optimistic (+9 pp). 06 Efficiency of government pharmaceutical sector is clearly perceived •• At the same time. generic manufacturers the pharmacy market is fueling regulation in the industry as positive. with one third (33 percent) “The continuing consolidation on perform. fierce competition when dumping 07 Our respondents The overall optimism*** increased by 14 pp during the last year. the overall situation in the Russian responding with “rather negative”.

which is three times previously. At the same from a pharmacy chain Russian pharmaceutical market outlook for pharmaceutical companies. 19 . •• Retailers tend to be more pessimistic about foreign companies are much more optimistic financing . As mentioned The prevailing positive views indicate that situation to deteriorate. non-localized specialists and insufficient regulation in the industry same. another 14 percent point to potential “Bureaucracy. respond positively even if it comes to simple cal companies” stabilization.all deter develop. with 17 percent predicting the about their future (+21 pp). such companies tend to ment of Russian pharmaceuti- companies enjoy a favorable situation. 06 Efficiency of government specifying that the situation will remain the the situation to improve.Russian Pharmaceutical Market Trends in 2017 \ Overall situation on the Russian pharmaceutical market Pharmaceutical companies in Russia: outlook for 2017 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures 5% Overall 47% 48% 5% Overall situation on the Russian Production (including foreign production) 36% 64% 0% 04 and/or wholesale of original products pharmaceutical market Production (including foreign production) 67% 24% 9% and/or wholesale of generics Russian pharmaceutical 47% Retail sales of medicines and medical products 33% 50% 17% industry: current situation 48% Russian company* 50% 36% 14% Russian pharmaceutical Foreign company without localized 54% 46% 0% market: outlook for 2017 production** Foreign company with localized 33% 61% 6% Pharmaceutical companies in production** Situation will improve Situation will not change much Situation will deteriorate Russia: current situation Pharmaceutical companies in Russia: outlook for 2017 Situation to improve * Beneficiary owners are Russian residents Situation not to change much ** or the Russian subsidiary of a foreign company Expectations for the key Situation to deteriorate performance indicators on the Russian pharmaceutical market Trend Highlights •• Most Russian companies (68 percent) do View of a representative Future directions for the 05 The respondents have a divided view on the •• Generic manufacturers are the most not expect any deterioration. with 67 percent expecting deterioration. but with 08 Contacts some uncertainty still involved. •• Unlike localized companies. 07 Our respondents the future. lack of qualified percent expecting improvement and 48 percent their companies. with 47 optimistic when it comes to the outlook for time. higher than the average.

20 . most Future directions for the 05 of pharmaceutical companies and the accompanied by a growth in operating costs. a growth in revenue is generally •• Due to their stabilized position. which is almost twice as high as the by 13 percent in rubles in 2017.Russian Pharmaceutical Market Trends in 2017 \ Overall situation on the Russian pharmaceutical market Expectations for the key performance indicators on the Russian pharmaceutical market 01 Introduction 02 Key findings Revenue Operating costs Headcount Average wages Russian pharmaceutical 03 3% market in figures 3% 9% – 30%* – 7%* – 10%* 15% Overall situation on the Russian 26% 04 – 11%* pharmaceutical market 33% +7%* 39% 34% Russian pharmaceutical +16%* industry: current situation Russian pharmaceutical 63% +7%* market: outlook for 2017 82% 58% Pharmaceutical companies in +13%* 35% Russia: current situation Pharmaceutical companies in Russia: outlook for 2017 Growth No changes *Average expected change (based on smoothed average) Expectations for the key Decline performance indicators on the Russian pharmaceutical market •• Positive expectations for the outlook •• In practice. 07 Our respondents reduce operating costs by an average of 11 inflation forecast by the Central Bank of Russia percent while another 35 percent will keep (4 percent). regulation in the industry planning to increase the average pay level by percent) expect to see their revenue grow •• At the same time. expectations for changes in the key operating costs to grow by an average of 16 •• Two thirds of the companies (63 percent) are 06 Efficiency of government performance indicators: Most companies (82 percent. 26 percent are planning to 7 percent. 08 Contacts their operating costs the same as in 2016. companies (91 percent) do not need to reduce Russian pharmaceutical market industry are further reflected in the Our survey has found that 39 percent expect staff numbers.

05 Future directions for the Russian pharmaceutical market 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures Overall situation on the Russian 04 pharmaceutical market Future directions for the Russian 05 pharmaceutical market Pharmaceutical business development strategies for Russia Cost optimization approaches Track & trace system as a way to approach business process optimization Preparations for implementing the track & trace system The foreign trade structure on the Russian pharmaceutical market Economic expectations: pharmaceutical imports in Russia Top-14 issues facing pharmaceutical companies in Russia 06 Efficiency of government regulation in the industry 07 Our respondents 08 Contacts 21 .

Preparations for implementing Separation and/or sale of non-core/ companies (71 percent). development strategies for Russia indicates that the Russian pharmaceutical Broader localization 23% market is picking up. Top-14 issues facing 1. •• New joint ventures (23 percent) Innovative products and R&D 28% Unlike Russian companies (11 percent). pharmaceutical •• M&A plans (15 percent) companies in Russia •• R&D and innovative products (28 percent) Russian companies (22 percent) In Russia generic manufacturers more more often tend to consider M&A 06 Efficiency of government often engage in developing new generic deals as a way for growth. localized from 31 percent to 17 percent. from Russian/foreign producers 23% 24% 28% and broader localization (23 percent). the track & trace system 2% 4% 7% •• No strategic changes in the non-priority business 2017 2016 2015 The foreign trade •• New production sites in Russia (32 percent) pipeline (17 percent) structure on the Russian This strategy is often chosen by companies Over the last year. Companies with Economic expectations: pharmaceutical imports in Russia foreign companies: 50 percent). •• Deeper localization (23 percent) Cost optimization approaches Almost every second foreign company Track & trace system as a way No strategic changes 17% 31% 15% Highlights: (43 percent) with production facilities in to approach business process •• Launches of new products (62 percent) Russia has plans for deeper localization. This optimization M&A 15% 10% 16% This strategy is of more interest to generic strategy is also more popular with original drug manufacturers (88 percent) and non-localized manufacturers (28 percent). the group of companies pharmaceutical market that already have production sites in Russia without plans for strategic changes decreased (Russian companies: 56 percent. foreign Future directions for the Russian In 2017 companies are demonstrating more 05 manufacturers more often prefer setting up pharmaceutical market interest in strategies such as R&D (28 percent) New joint ventures with participation joint ventures (localized companies: 29 percent. This generally a negative view of their position more often includes large companies employing more than avoid plans for changes (50 percent). 04 New production sites in Russia 32% 24% 36% pharmaceutical market companies in Russia. 07 Our respondents 08 Contacts 22 . compared to original drug manufacturers (24 percent). regulation in the industry products (35 percent). which Pharmaceutical business non-localized companies: 25 percent).000 people (70 percent).Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market Pharmaceutical business development strategies 01 Introduction for Russia 02 Key findings Russian pharmaceutical 03 market in figures Trend Almost half of the companies that expect New product launches 62% 59% 57% A focus on product launches remains the top improvements in their market situation (48 Overall situation on the Russian development strategy for pharmaceutical percent) view this strategy as the way to go.

As the retail pharmaceutical market information is still difficult to access. often tend to maintain focus on working Economic expectations: capital (81 percent). structure on the Russian cost optimization strategy. 08 Contacts Deloitte CIS 23 . Top-14 issues facing This cost optimization strategy is more pharmacies have to divert pharmaceutical often employed by large companies with companies in Russia an annual turnover above RUB 30 billion funds from their working (71 percent). mid-size and large-size chains.” 07 Our respondents Oleg Berezin Partner.Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market Cost optimization approaches 01 Introduction 02 Key findings Russian pharmaceutical 03 Inventories and receivables management 64% market in figures Optimization of business processes 55% Overall situation on the Russian 04 pharmaceutical market Optimization of promotion and marketing costs 51% Future directions for the Russian 45% 05 Staff cost optimization pharmaceutical market Control over distributors 23% Pharmaceutical business development strategies for Russia IT cost optimization 15% Cost optimization approaches Other 4% Track & trace system as a way to approach business process optimization Expert view Preparations for implementing Trend Top 4 cost optimization strategies: •• Optimization of promotion and the track & trace system Businesses need full and correct information •• Inventories and receivables management advertising costs (51 percent) “The commercial segment regarding the flow of medicines on the market (64 percent) Generic manufacturers more often tend to The foreign trade to ensure efficient implementation of the Companies with an annual revenue from focus on the optimization of marketing costs is still facing a wave of grow. •• Optimization of staff costs (45 percent) segment consolidates into pharmaceutical imports in Russia Most localized foreign companies (60 percent) •• Business process optimization (55 percent) have plans to optimize staff costs. a market share. this RUB 1 billion to RUB 10 billion more (65 percent). as well as by companies with capital amid the fight for 06 Efficiency of government regulation in the industry hospital procurements as their major source of revenue (71 percent). ing receivables. Unfortunately.

strengthening their drugs to a significant extent. With the Russian Federal Tax Service as two key priority areas for market participants Industry Services in the CIS process. but a step into the Economic expectations: pharmaceutical imports in Russia future never comes without Top-14 issues facing challenges. structure on the Russian Federal Customs Service for a period until efficient control over receivables. as well as in a OPEX and CAPEX for a busi. which will inevitably Pharmaceutical business expenses for the purchase of labelling and and importers that act quicker to gain access development strategies for Russia While this system is designed to protect scanning equipment. In addition. to approach business process optimization also provide authorities with control over the enabling a near real-time analysis of the flow position or winning over some share from the which is an important fac- flow of products on the market. Therefore. finance. pharmaceutical market expected to be completed by 1 January 2019. According to the existing schedule. This “The track & trace system pharmaceutical market aimed at testing a track & trace customs and legal experts. Businesses can market leaders. gain a significant edge. may result in a significant change in the legal above all means additional Future directions for the Russian system. Preparations for implementing participation in design and implementation of further benefit from such data and analysis tor as far as health security the track & trace system track&trace system has already been reflected as they implement their strategies aimed at Oleg Berezin of Russian citizens is con. Manufacturers ness. However. of medicines on the market.g. data looking to optimize their costs. Cost optimization approaches consumers against adulterated drugs and also has huge potential for pharmaceutical & trace system (e. by purchasing data from However. additional software implementation costs and major disruption in the market. the and financial interactions between producers/ 05 across-the-industry deployment of the system is The deployment will inevitably lead to distributors and pharmacies. the deployment of the arrays that can be analyzed to optimize 04 the supply chain. The foreign trade in the development program for the Russian a higher turnover of inventories and more Partner.Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market Track & trace system as a way to approach business process optimization 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures In February 2017 the government an operator of the track & trace system. it will provide them with access to valid data. the system to data on sales of their products in the track result in higher sale prices. View of a representative from started a pilot project involving inputs are also likely to be used for the purpose the track & trace system will generate data a large pharmacy chain Overall situation on the Russian a number of companies across of tax control. Which is system requires the involvement of tax. This is a complicated pharmaceutical market 2020.” pharmaceutical companies in Russia 06 Efficiency of government regulation in the industry 07 Our respondents 08 Contacts 24 . For instance. it will curb illegal Track & trace system as a way ensure a quick removal of counterfeit and manufacturers and distributers as it can distributors and pharmacies) will be able to low-quality products from the market. promotional and advertizing campaigns. which are the Head of Life Sciences & Healthcare cerned.

structure on the Russian Non-localized companies demonstrate the pharmaceutical market highest level of concern. with the market waiting for the first results and 06 Efficiency of government more definitive steps from the government. regulation in the industry 07 Our respondents 08 Contacts Continued on page 26 25 . Tax and financial accounting 20% 44% 9% 27% pharmaceutical market 27% 39% 14% 20% Future directions for the Russian Promotion and sales 05 34% 32% 9% 25% pharmaceutical market IT Pharmaceutical business development strategies for Russia High risk No risks Low risk Not assessed / I don’t know Cost optimization approaches Track & trace system as a way to approach business process optimization Trend an uninterrupted data exchange. with 56 than half of the respondents (53 percent) do not the track & trace system percent mentioning the high risk involved in the see any significant risks. which may be due to a The foreign trade implementation of the track & trace system. with 63 percent already Highlights Economic expectations: seeing a strong risk coming from the potential At the same time. This is because the pilot track & trace companies in Russia system only started as we conducted the survey. do you see any risks Russian pharmaceutical for the business functions within your company? 03 respondents assess the implementation risks facing their market in figures business units and what preparations they are taking to Production and logistics 56% 16% 4% 24% Overall situation on the Russian 04 prepare for the changes. Another concern is about the asked about risk exposure for their business pharmaceutical IT function. lack of deeper insights in related areas. more Preparations for implementing processes as most vulnerable to risk. which is responsible for ensuring functions.Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market Preparations for implementing the track & trace system 01 Introduction 02 Key findings The survey has provided us with insight into how our In terms of the introduction of the track & trace system. about one fourth of the pharmaceutical imports in Russia negative impact on production units and respondents replied with “don’t know” when Top-14 issues facing logistic functions. In regard to Experts cite production and supply chain commercial and accounting functions.

Development of special software respectively). experts have started assessing Commercial function staff training/hiring IT staff training/hiring potential benefits and risks of using 08 Contacts generated data. 26 . based on generated data providing focused training is necessary. Production staff training/hiring 07 Our respondents Finance staff training/hiring Furthermore. scanning and monitoring equipment 06 Efficiency of government Integration of software with the existing accounting systems do not believe that hiring new talent and regulation in the industry Assessment of potential risks and business process optimization areas.Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market 01 Introduction 02 Key findings Please specify whether your company is implementing or planning to implement these Russian pharmaceutical initiatives as part of the preparations for implementing the track & trace system? 03 market in figures Overall situation on the Russian 04 71% 72% pharmaceutical market 70% 68% 65% Future directions for the Russian 05 60% pharmaceutical market 57% 53% Pharmaceutical business development strategies for Russia Cost optimization approaches 42% Track & trace system as a way to approach business process optimization 30% 28% 26% Preparations for implementing the track & trace system 21% 20% 18% 19% The foreign trade 14% structure on the Russian 13% 12% pharmaceutical market 9% 9% 9% 9% 5% Economic expectations: Trend Highlights pharmaceutical imports in Russia In terms of the preparations. about the initiatives. the focus is Waiting for results of the pilot project Top-14 issues facing primarily on equipment purchases (80 percent) explains the relatively low completion rates pharmaceutical Completed / implementing Planning No plans as well as on software development and with only 15 percent of the companies going companies in Russia integration (70 percent and 82 percent. most of the respondents Purchases of labelling. However.

companies in Russia •• Almost one fourth of the importers •• More than one fourth of the exporters *Please note that this import/export structure is relevant for the 06 Efficiency of government (23 percent) purchase APIs from China. with percent of the respondents. Original drug manufacturers (51 percent) for Russian pharmaceutical products. imports of APIs and FPPs for pharmaceutical products to the countries in the Eurasian Top-14 issues facing of FPPs. we do not have Economic expectations: and non-localized foreign companies sufficient data to analyze the geography pharmaceutical imports in Russia •• Europe accounts for a major portion of the 39 percent of exporters shipping their (53 percent) are the most frequent importers for the exports of substances. structure on the Russian •• As mentioned earlier. (26 percent) responded that they ship sample of our survey. to other CIS countries. 08 Contacts 27 . products to European countries. pharmaceutical companies in Russia (50 percent Economic Union (EAEU) and 22 percent and 68 percent. Chinese producers account for a tiny portion 07 Our respondents of these imports (2 percent). as regards FPP imports into Russia. The foreign trade pharmaceutical products (FPPs) and 31 percent are the most frequent importers of APIs.Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market The foreign trade structure on the Russian pharmaceutical market 01 Introduction 02 Key findings Share of importers* (%) Share of exporters* (%) Russian pharmaceutical 03 Europe 50% 68% Europe 26% market in figures China 23% 2% EAEU 39% Overall situation on the Russian 04 EAEU India pharmaceutical market 9% 7% 4% Others 9% 4% CIS (except for EAEU) 22% Future directions for the Russian 05 pharmaceutical market India 5% 4% USA and Canada 9% Pharmaceutical business CIS (except for EAEU) 5% 5% development strategies for Russia US and Canada Cost optimization approaches 0% 11% Active pharmaceutical Finished pharmaceutical Finished pharmaceutical Track & trace system as a way ingredients (APIs) products (FPPs) products (FPPs) to approach business process optimization Trend: Highlights Trend Highlights Preparations for implementing Of the respondents surveyed. the post-Soviet pharmaceutical market said that their companies import Active As exports of APIs were only indicated by 7 countries represent a major export market pharmaceutical ingredients (APIs). Please see “Our Respondents” for more regulation in the industry details. 78 percent Generic manufacturers (56 percent) and Almost one third of the respondents the track & trace system Generic manufacturers (59 percent) indicated that their companies import Finished localized foreign companies (50 percent) (29 percent) are exporters of FPPs are the most frequent exporters of FPPs. respectively). However.

pharmaceutical imports will decline imports in unit terms. almost one third of the medicines dominate the hospital procurement pharmaceutical imports in Russia respondents surveyed (29 percent) expect an or hospital sales segment with a share of 73 34% Top-14 issues facing increase in pharmaceutical imports in monetary percent in unit terms while for the commercial pharmaceutical terms. imports will see a growth in unit terms. 64 percent 30% 30% expect that pharmaceutical imports will Companies operating in the hospital Preparations for implementing decrease within a range of up to 10 pp in unit procurement or hospital sales segment expect the track & trace system terms and 57 percent expect a similar decrease a stronger decline from 5 pp to 10 pp in unit The foreign trade in monetary terms while only 13 to 14 percent terms (63 percent) while companies from the structure on the Russian expect a more significant decrease. 06 Efficiency of government 14% Growth by 10 pp and above regulation in the industry 13% Growth by 5-10 pp Growth by 1-5 pp Decline by 1-5 pp 07 Our respondents In monetary In unit Decline by 5-10 pp terms terms Decline by 10 pp and more 08 Contacts 28 . commercial segment predict a decrease of up to pharmaceutical market 5 pp (33 percent). while Track & trace system as a way monetary terms. 42 percent of the representatives from Russian –3% to approach business process companies predict a decline of up to 5 pp.Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market Economic expectations: pharmaceutical imports 01 Introduction in Russia 02 Key findings Russian pharmaceutical 03 market in figures How will the share of pharmaceutical imports change on the Russian market over the next two years? Overall situation on the Russian 04 pharmaceutical market 4% Future directions for the Russian 05 pharmaceutical market 2% Trend Highlights 11% 9% Based on the consensus forecast by The representatives from foreign companies Pharmaceutical business representatives from pharmaceutical expect a sharper decline in pharmaceutical development strategies for Russia 14% companies. with 42 percent Cost optimization approaches 11% by 4 percent in unit terms and by 3 percent in predicting a decline from 5 pp to 10 pp. A slightly lower number of respondents segment this share is only 57 percent. This is expected since Russian Economic expectations: 27% At the same time. optimization –4% Of the respondents surveyed. according companies in Russia (22 percent) expect that pharmaceutical to data available by the end of 2016.

respectively) pharmaceutical imports in Russia 4% 5% while Russian companies pay significantly policy. has only started. compared to •• Strengthening market only 10 percent in 2016.Russian Pharmaceutical Market Trends in 2017 \ Future directions for the Russian pharmaceutical market Trend •• Insufficient public financing (27 percent) Our survey has shown that the Understandably. price regulation and import Insufficiently optimised supply chain processes 2% 2% Top-14 issues facing less attention to it (40 percent). the shortcomings of for the second year in a row. as well as on sales that are government efficiency in 2017. with an annual decrease in concern down by 24 of households (20 percent) This issue comes fourth in importance 02 Key findings pp. the govern. substitution. curement spending continues to Currency risk (fluctuations in ruble exchange rate) 11% 27% decline in real terms. Insufficient public financing 27% 10% decrease in importance (-17 pp). Another significant concern for pharmaceutical operating in Russia (32 percent). As a constraint Russian pharmaceutical government regulation have been voted as the 03 to growth. Pharmaceutical business development strategies for Russia Insufficient purchasing power of households 20% 20% In 2017 strengthening competition on the Cost optimization approaches Strengthening market competition 15% 2% market poses a concern for more companies Expert view Track & trace system as a way Growing production and selling costs 13% 7% (+13 pp). At the same time. including risk-sharing regulation in the industry situation in the economy: 45 percent of the companies with an annual turnover of RUB models. reflecting the fact that the market “As consolidated on public pro. on non-localized foreign companies healthcare companies face in Russia today. it has the strongest impact market in figures Please select and prioritize the top three issues pharmaceutical and top issue (60 percent). mainly structure on the Russian Large share of countefeit products 5% 5% This is above all the top issue for localized by focusing on more active steps pharmaceutical market Lack of qualified talent 5% 8% and non-localized foreign companies in the area of anti-monopoly Economic expectations: Geopolitical risks (69 percent and 64 percent. part of the State Reimbursement Program pharmaceutical companies In 2017 experts are less concerned over (ONLS/DLO) (77 percent) 01 Introduction •• Insufficient purchasing power in Russia the situation in the Russian economy. Overall situation on the Russian respondents is insufficient public financing. with 04 pharmaceutical market 27 percent voting for it in 2017. At the same time. the pharmaceutical 2017 2016 •• Situation in the Russian economy (36 percent) discussion of cost optimization companies in Russia The representatives from large companies through more efficient medical demonstrate a stronger concern over the 06 Efficiency of government treatment. competition (15 percent) Shortcomings of government regulation 60% 50% Future directions for the Russian In 2017 Russian companies more frequently 05 Current situation in the Russian economy 36% 60% pharmaceutical market Forex risks have seen a significant cite growing competition (23 percent).” 10 billion to RUB 30 billion and 49 percent of 07 Our respondents the companies with an annual turnover above Oleg Berezin RUB 30 billion. this issue is of utmost Top-14 issues facing pharmaceutical market’s concern has shifted from macroeconomics to concern for businesses focusing on hospital sales (45 percent). to approach business process is picking up after the economic events optimization Corruption 11% 20% of 2014-2015. Partner. Preparations for implementing Highlights the track & trace system Insufficient production capacities 10% 8% ment places particular emphasis •• Shortcomings of government The foreign trade Inaccessible external financing 8% 4% regulation (60 percent) on more efficient spending. Deloitte CIS 08 Contacts 29 .

Russian Pharmaceutical Market Trends in 2017 \ Efficiency of government regulation in the industry 06 Efficiency of government regulation in the industry 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures Overall situation on the Russian 04 pharmaceutical market Future directions for the Russian 05 pharmaceutical market 06 Efficiency of government regulation in the industry Priority areas requiring better government regulation Government initiatives aimed at reducing the share of pharmaceutical imports 07 Our respondents 08 Contacts 30 .

g. including the procedure for that would regulate online sales of medicines pharmaceutical imports Special investment contracts (SPICs) 57% updating the Essential Drug List and the related and telehealth (76 percent). In 2016 localized foreign companies Overall situation on the Russian pricing policies (87 percent) and better public expressed a far stronger concern over this 04 pharmaceutical market procurement regulations (74 percent). compared to non-localized Medicine pricing 87% areas requiring more efficient government companies (42 percent). above all.Russian Pharmaceutical Market Trends in 2017 \ Efficiency of government regulation in the industry Priority areas requiring better government regulation 01 Introduction 02 Key findings Russian pharmaceutical As mentioned previously. The respondents surveyed note. and telehealth providers) (67 percent) government regulation Companies focusing on the commercial Government initiatives aimed Limitations on methods for promoting medicines 63% Highlights segment are more interested in having rules at reducing the share of Medicine pricing. we have identified top areas for improvement. for better price regulations. the producers more often cite the need for changes need for more efficient government medicine in this area. As regards issue (77 percent). practices often cite the need for better registration for applying preferences or restrictions as and certification regulations. including rules this issue: 71 percent of the companies with a regulating the GMP certification of production Subsidies and loans at a reduced interest rate 48% revenue above RUB 30 billion and 70 percent of sites (67 percent) the companies with a headcount above 1. However. The respondents Legislation on the trade in medicines 50% 08 Contacts and medical products in the EAEU from large companies are less concerned over State registration of medicines. Original drug manufacturers (81 percent) Protection of intellectual property 48% and foreign companies (73 percent) more Public procurement regulations (e. regards public procurements or the procedure for purchases based on the trade name list) Track & trace framework (67 percent) (74 percent) The track & trace system is a priority area for The recent years have been characterized Russian companies (85 percent) and localized by a pronounced protectionist policy in foreign companies (73 percent). equally relevant for all foreign companies Regulations for online sales of medicines (80 percent). 06 Efficiency of government 67% and telehealth These concerns are closely followed by the State registration of medicines.000. Based on the survey. regulation in the industry 67% following issues (67 percent): regulations of online Regulations over online sales of medicines including GMP certification rules sales. public procurements. The State Duma price calculation methodology (87 percent) approved the related legislative act at first Tax regulations 57% 07 Our respondents Almost all the respondents indicated the need reading on 15 June 2017. This is the reason why foreign 03 market in figures issue facing the industry. with a focus on import 31 . state registration and certification and the and healthcare services (online pharmacies Priority areas requiring better Track & trace system 67% implementation of the track & trace system. the year 2017 Future directions for the Russian regulation. these remain the top concern for a has seen the priority of this issue becoming 05 Regulation for public procurments 74% pharmaceutical market third year in a row. pharmaceutical experts perceive government regulation to be the top Trend substitution.

Russian Pharmaceutical Market Trends in 2017 \ Efficiency of government regulation in the industry Government initiatives aimed at reducing the share of pharmaceutical imports 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures Positive incentives for foreign manufacturers to shift to a full-cycle production (i. Priority areas requiring better foreign companies in public procurements participating in public procurements (-11 government regulation 36% 47% pp). This may be due to the fact that public •• Pricing regulations for products from the procurements already impose relatively strict. of the products is also important. rather than on more restrictions) and privileges. 08 Contacts Additional registration procedures for medicines approved and produced abroad 15% 24% Compulsory licenses for medicines 11% 10% 2017 2016 32 . incentives and privileges imports. They believe that subsidies and packaging in member states of EAEU are (including public procurements) and more investment for Russian innovative producers Future directions for the Russian 55% 31% privileges are also important for Russian not considered local products. including 17% of procurements for federal and municipal products priced below RUB 50. The origin 05 pharmaceutical market producers (55 percent).e. 1289 “On restrictions and participation medicines included in the Essential Drug List. Essential Drug List continue as one of the Government initiatives aimed protectionist requirements. This is clearly a non-market at reducing the share of Initiatives to fight corruption and increase competition required by Russian Government Regulation mechanism that affects the profitability of pharmaceutical imports 17% 22% No. including tax benefits. Guarantees for sourcing medicines in the EAEU for the purpose of public procurements. Specifically. incentives •• As in 2016 the respondents see incentives needs” of 30 November 2015. this is top issues. requirements for foreign medicines included which could ultimately result in scaled-down 07 Our respondents including a possibility to participate in biddings as a sole bidder in the Essential Drug List for the purpose production of certain medicines. due an Indexation of registered prices for essential drugs produced in Russia / obligatory discount of 15% applied to the price no indexation or slower indexation for essential drugs produced abroad •• There has been a significant decrease in the of foreign-origin medicines in case a relevant 06 Efficiency of government 38% 35% number of respondents who would like to see regulation in the industry bidder wins a government procurement stricter requirements for foreign producers More limitations on the participation of non-localized tender. rather than restrictions 2017 for the purposes of applying the Overall situation on the Russian 55% 51% and limitations. as the key to promoting aforementioned Resolution all drugs 04 pharmaceutical market localization to reduce pharmaceutical undergoing solely primary and secondary Government support for Russian producers in the form of subsidies. As of 1 January based on priviledges and benefits.

07 Our respondents 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures Overall situation on the Russian 04 pharmaceutical market Future directions for the Russian 05 pharmaceutical market 06 Efficiency of government regulation in the industry 07 Our respondents 08 Contacts 33 .

Russian Pharmaceutical Market Trends in 2017 Our respondents 01 Introduction 02 Key findings Company type Company’s core operations Respondent’s job function Russian pharmaceutical 03 market in figures 10% 5% 21% 5% Overall situation on the Russian 24% 04 31% pharmaceutical market Future directions for the Russian 05 pharmaceutical market 48% 14% 36% 60% 06 Efficiency of government regulation in the industry 45% 07 Our respondents 08 Contacts Russian company whose beneficiary owners Production (including foreign production) and/or wholesale Management are Russian residents of original medicines as a predominant activity Sales Foreign company or Russian subsidiary Production (including foreign production) Finance of a non-localized foreign company and/or wholesale of generics as a predominant activity Other Foreign company or Russian subsidiary Production (including foreign production) and/or wholesale of a localized foreign company of medical devices (equipment) as a predominant activity Retail sales of medicines and medical products As in 2016 almost half of the respondents Most of the respondents represent The majority of respondents are finance surveyed are representatives of non-localized pharmaceutical companies. 34 . coming from original drug manufacturers and and sales function representatives (14 percent). executives (21 percent) foreign companies (45 percent). 36 percent from generic manufacturers. The other respondents come from Russian companies (24 percent) and localized foreign companies (31 percent). with 48 percent professionals (60 percent).

Other respondents percent).000 employees (21 percent) and Hospital purchases represent a major source small companies with a headcount below of revenue for 16 percent of the companies 100 employees (14 percent).Russian Pharmaceutical Market Trends in 2017 Our respondents 01 Introduction 02 Key findings Key sales channel Annual revenue Headcount Russian pharmaceutical 03 3% market in figures 7% 14% 14% 16% 21% Overall situation on the Russian 04 pharmaceutical market 16% Future directions for the Russian 16% 05 pharmaceutical market 06 Efficiency of government regulation in the industry 74% 55% 64% 07 Our respondents 08 Contacts Commercial segment (pharmacies) Below RUB 1 billion Below 100 employees Hospital procurements From RUB 1 billion to RUB 10 billion From 100 to 1.000 employees Regional/municipal procurements under the State Reimbursement From RUB 10 billion to RUB 30 billion Over 1. from RUB 1 billion to RUB 10 billion represent a represent companies with a headcount majority of the survey (50 percent).000 employees Programme (ONLS/DLO) Over RUB 30 billion “Seven rare diseases” and other federal programmes The commercial segment is a major sales Our survey covers both large and small companies A majority of the respondents are from mid-size channel for most of the respondents (74 in terms of revenue. Companies with a revenue companies (64 percent). surveyed. above 1. 35 .

Coordinator Tax and Legal.ru 36 . 1025) 07 Our respondents + 7 (495) 787 06 00 (ext.Russian Pharmaceutical Market Trends in 2017 Contacts 01 Introduction 02 Key findings Russian pharmaceutical 03 market in figures Overall situation on the Russian 04 pharmaceutical market Future directions for the Russian 05 pharmaceutical market Oleg Berezin Ekaterina Kirasirova Partner.ru abelyaev@deloitte. Consumer and Industrial Products.ru oberezin@deloitte. 06 Efficiency of government regulation in the industry Head of Life Sciences & Healthcare Deloitte CIS Industry Group. 2188) ekirasirova@deloitte.ru 08 Contacts Lora Zemlyanskaya Mikhail Gordeev Artyom Belyaev Research Centre Leader Senior Research Specialist Senior Designer Business Development Department Research Centre Brand and Business Development Deloitte CIS Deloitte CIS Deloitte CIS lzemlyanskaya@deloitte.ru mgordeev@deloitte. Deloitte CIS + 7 (495) 787 06 00 (ext.

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