For the pharmaceutical industry, the COVID-19 year became sort of a challenge and a

test of strength. Sale uplift due to the roaring demand for medicines, rise of the
national segment, increase in the value and speed of adoption of legislative proposals
—all of this had a significant impact both on the overall market dynamics and on its
conditions. Moreover, all of it was going on in a changing environment, to which we
all had to get used.
One of the most important legislative proposals of the government became
introduction of a fast track (a procedure for accelerated approval of medicines and
medical products in the event of an emergency). This provided domestic
manufacturers with an opportunity to promptly get approved and introduce two
medicines intended to treat the coronavirus disease, Favipiravir and Levilimab.
The accelerated approval also opened the way to the introduction of local vaccines
against COVID-19 and to the beginning of a mass vaccination as early as in January
2021.

2020 Russian Pharmaceutical Market Dynamics

The pharmaceutical market value in Russia in 2020 exceeded 2,040 billion rubles,
which is 9.8% more than in 2019. In terms of dollars and euro, there was stagnation in
2020. The March ruble depreciation resulted in a situation where the market capacity
did not really grow when translated. So, in dollar terms, the market value in 2020
amounted to 29 billion dollars, which is just 0.2% more than a year before. In euro,
driven by a higher increase in the exchange rate (11%), market dynamics is even
negative (-1.6%).

Source: DSM Group, Russian Pharmaceutical Market 2020

Sales of medicines in kind dropped by 4%, equal to 6.17 billion package items.
Source: DSM Group, Russian Pharmaceutical Market 2020
Dynamics in the commercial segment of medicines in 2020 was hard to forecast: all
trends that had been forming over extended periods collapsed. The sales gain noted in
March 2020 turned out to be one of the most substantial ones over the past number of
years. Such panic buying was caused by the beginning of the coronavirus disease
spread and an exacerbating economic crisis. Russians began buying up medicines left
and right, waiting for a price rise in the midst of an exchange rate leap and for a
shortage of necessary drugs because of restrictive measures. Naturally, after this
advance buying the sales dynamics was weak and even turned negative during some
months. Only in December the market got back to growth rates that were in January
and February (before the coronacrisis). The growth driver, starting from April, was
'anti-COVID drugs'. Their composition could vary, but due to a considerable demand
for them the market demonstrated overall positive dynamics in rubles (+10.6%) and
only dropped by 2.3% in package items.
The total share of imported medicines in the market totaled 56.3% in rubles and
31.4% in package items at year-end 2020. The market growth in kind was negative
both for drugs produced in Russia (-4%) and for foreign-made medicines (-3%). In
ruble equivalent, locally made medicines increased by 13% and imported ones by 8%.

Pharma Market Structure from Different Perspectives

Source: DSM Group, Russian Pharmaceutical Market 2020
In 2020, the leadership on the drug sales top list by volume as per ATC (Anatomical
Therapeutic Chemical) groups was taken over by Group A: Alimentary tract and
metabolism (15.09%). The second place is taken by Group N: Nervous system, with
the market share of 14.34% by volume. Top three is closed by Group R: Respiratory
system (12.86%).
Foreign companies—Sanofi, Novartis, Bayer—retained first places in the
manufacturer's ranking. The top 20 list includes three domestic manufacturers:
OTCPharm, Biocad, and Pharmstandard.

Influence of COVID-19 on Retail Demand for

Medicines
However, the spread of a new coronavirus disease markedly altered the whole market
environment. Any new information about drugs that were included into a list for
coronavirus treatment or prevention led to a feverish demand for them and their
disappearance from drugstores. For example, at the start of the pandemic it was an
antimalaria drug with an INN of hydroxychloroquine that was believed to be
promising in combating the coronavirus. As a result, average monthly sales grew
almost twice in April-December as compared to the pre-COVID sales level (nearly
35-40K package items per month vs. 20K in 2019).
In 2020, there were neither seasonal patterns nor specific regularities that are common
to the pharma retail market. Antiviral drugs and antibiotics became leaders of
customer demand during the pandemic. What is more, even in summer sales in these
categories were notably higher than in previous years.
Source: DSM Group, Russian Pharmaceutical Market 2020
At year-end 2020, the retail sale market gain equaled to 11%, while turning negative
in package items (-2%). Therefore, nearly 5 billion package items of medicines
totaling to 1,128 billion rubles (in retail prices) were sold on the retail side.
At year-end 2020, the share of drugs produced in Russia increased from 2.3% to
44.2% in rubles and decreased by 0.2% down to 65.7% in package items. Locally
made medicines (+16.5% in rubles vs. 2019) have higher dynamics than imported
ones (+6.3%).
The change of the sales pattern in favor of locally made medicines was ensured, first
of all, by Russian antivirals Arbidol (+353.9% by value and +257.4% by volume) and
Ingavirin (+110.9% in rubles and +63.0% in package items).
The growth of the locally made medicines' share is an already long-held trend for the
pharmaceutical market. Since 2012, this rate has grown from 36% to 44%. In package
items, the dynamics is less evident: for 8 years, the share has only increased by 1.6%.
In spite of the fact that the number of Russian and foreign manufacturers in the market
is generally almost the same (nearly 540 and 560 companies respectively), there are
more foreign medicine brands presented in drugstores (around 3,368, which makes
9,053 SKU). This figure for domestic drugs is 36% less, equal to 2,480 brands (8,615
SKU). Therefore, it is apparent that foreign manufacturers sell more 'unique' units—
original medicines and branded generics. Russian medicines are issued in bulk in form
of non-branded generics by several companies simultaneously.
In 2020, the leader of medicine retail sales among ATC groups by volume became
Group A: Alimentary tract and metabolism (788.4 million package items). The best
sales dynamics in package items and by value was demonstrated by two groups: L:
Antineoplastic and immunomodulating agents (+30.9% in package items, +40.8% in
terms of total worth) and J: Antiinfectives for systemic use (+22.5% in package items,
+48.1% in terms of total worth).

Top Medicine Manufacturers in Retail Market

In 2020, more than 1,100 players were present in the Russian pharmaceutical market.
In aggregate, Top 20 companies cover 53.2% of the medicine sales total worth. As
compared to 2019, the total share of the Top 20 increased by 0.7%.

Top 10 Medicine Manufacturers by Total Worth in 2020

Position Sales, Gain, %     
No. Manufacturer Share, %
change M RUB 2020/2019
1  - Bayer 51,602.4 4.6% +18.1%
2 +2 Novartis 47,044.8 4.2% +26.6%
3 +4 OTCPharm 44,275.6 3.9% +37.1%
4 -1 Sanof 41,351.0 3.7% +6.2%
5 -3 Stada 40,857.0 3.6% +3.2%
6 -1 Teva 38,014.4 3.4% +10.1%
7 -1 Servier 34,190.3 3.0% +2.3%
8  - KRKA 30,861.9 2.7% +6.1%
9 +1 A. Menarini 30,683.7 2.7% +11.5%
10 -1 GlaxoSmithKline 29,729.7 2.6% +3.2%
Source: DSM Group, Russian Pharmaceutical Market 2020
The leader in the pharmacy segment at year-end, already as ever, is Bayer (4.6% in
rubles), which pharma sales have increased by 18.1%. The German corporation's
portfolio includes 68 brands sold in drugstores. The first place by sales volume gain
(out of Top 10 Bayer portfolio brands) is taken by an antacid Rennie (+40.7% as
compared to the 2019 sales level).
The second place is taken by the Novartis corporation with a 4.2% share. A number of
the company's leading medicines was characterized by a notable sales increase—
Broncho-munal (+156.8 as compared to the 2019 sales level), ACC (+54.3%),
Amoksiklav (+35.7%).
The Russian manufacturer OTCPharm (+4 position) moved up to the third ranking
position, having fallen to the leader with just a 0.6% share difference in rubles. The
company's sales in 2020 increased by 37.1% as compared to the previous year.
Russian drugstores sell 37 brands of the company. Out of them, a remarkable growth
of demand was recorded for antivirals Arbidol (+353.9%) and Amixin (+104.7%).

Online Sales Development Trend

In April, the State Duma enacted a law on distance selling of medicines. In 2020, the
rules covered over-the-counter medication, but in the event of an emergency and a
disease distribution threat, which is dangerous to people, the government is entitled to
temporarily permit online sales of particular Rx drugs, too.
Despite of appearance of a 'new' sales channel—online—its main participants are still
pharmacy chains. That is why the volume that is currently accounted for by online
trade almost entirely remains in pharmacy retail. The volume of pharmacy eCom in
2020 equaled to nearly 93.2 billion rubles (medicines and parapharmaceuticals
jointly), which corresponds to 6.6% of the pharma market capacity). At the turn of the
year, in January, it was already at a rate of 8.2%. However, if market sales dynamics
in general is about 10%, the turnover that accrued to online has increased by 62% as
compared to 2019.
Pharmaceutical brands traditionally give their preference to TV ads, but in the new
reality, online ads showed good progress: in the first half of 2020, the medication
online advertising market increased by 43%.