BMI's Executive Summary

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According to BMI's latest estimate, Russia's pharmaceutical market reached a total value of US$11.7bn in final consumer prices 2007, representing 20% year-on-year (y-o-y) growth in dollar terms and bringing total per capita annual spending on medicines to US$82.3, twice 2004 levels. This is broadly in line with the growth rate recorded by local research groups DSM (20.2%) and RMBC for 9M07 (21%). More modest local currency growth rates of 11.2% reflect the distorting effect of the weakness of the US dollar. Looking forward, BMI's five-year forecast, extended to 2012, sees annual average dollar growth of 10.9%, a lower but potentially more sustainable growth rate, in particular if the rouble continues to appreciate against the dollar through the forecast period.

Russia's political outlook after post-March 2008 presidential elections became clearer during the final six weeks of 2007. President Vladimir Putin gave his long awaited endorsement to his favoured candidate, First Deputy Prime Minister Dmitry Medvedev. In turn, the Kremlin's candidate is all but assured of winning handily at the polls. The choice of Medvedev – who said he would appoint Putin as his prime minister after the elections – should be cause for guarded optimism for the foreign pharmaceutical industry, given his track record as a relative economic liberal. He should bring greater focus to healthcare, an area that falls under his current brief. He arguably made the best of a bad job when he was tasked with cleaning up the hugely indebted Supplementary Medicines Scheme (DLO), which all but collapsed due to overspending, mismanagement and outright corruption in late 2006.

At present, the pharmaceuticals industry appears to be an area of increased state attention. Prime Minister Viktor Zubkov hinted in October that the government would provide state support to the local industry to meet the country's 2010 start date for enforcement of Good Manufacturing Practice (GMP) standards. The new holding company of state vaccine and medicines research institutes and production facilities, Russian Pharmaceutical Technologies was due to be up and running by the close of 2007, early 2008. Such measures are similar to moves already taken in Brazil and other emerging markets. Perhaps more worrying, they were reports of a move to make small state distributor Lenfarm the exclusive wholesaler for the DLO programme in Leningrad Region, hinting at a greater potential role for state distributors.

Whatever the political risks, M&A in the industry picked up pace towards the close of 2007. Hungary's Gedeon Richter made a bold double acquisition, picking up Russian producer Akrikhin and Poland's Polpharma. These should boost its Russian market share lost during the DLO fiasco in late 2006. Meanwhile, a bid by German wholesale giant Celesio for Protek appeared on-hold at the end of the year, but by no means dead. Private equity group Texas-Pacific was also reportedly in talks to buy a stake in local distributor SIA International. Meanwhile, there was bound to be a sigh of relief by many in the industry as executives from once politically well-connected firm Brynstsalov-A – notorious for alleged counterfeiting – went on trial for trademark violation. Considering that 2007 started with the fresh fall out of the DLO debacle, conditions entering 2008 look far better than many had expected.

Contents

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Chapter 1 - Executive Summary

Russia Pharmaceuticals & Healthcare Industry SWOT

Russia Political SWOT

Russia Economic SWOT

Russia Business Environment SWOT

Chapter 2 - Russia: Business Environment Ranking

Business Environment Ranking

Economics - Long-Term Risk

Politics - Long-Term Risk

Regulatory Barriers

Domestic Sector Threat

Market Growth Potential

Market Size Ranking

Chapter 3 - Russia: Market Summary

Chapter 4 - Regulatory Regime

Intellectual Property Environment

Pricing & Reimbursement Issues

Chapter 5 - Industry Developments

Chapter 6 - Industry Forecast Scenario

Overall Market Forecast

Table: Russia Drug Market Expenditure Forecasts

Key Growth Factors - Industry

Key Growth Factors - Macroeconomic

Table: Growth And Output

Prescription Market Forecast

Table: Russia Prescription Market Forecasts

OTC Market Forecast

Table: Russia OTC Market Forecasts

Generics Market Forecast

Table: Generics Market Forecasts

Table: Russia Pharmaceuticals Exports & Imports Forecasts

Other Healthcare Data Forecasts

Table: Russia Healthcare Data Forecasts

Key Risks To BMI's Forecast Scenario

Chapter 7 - Competitive Landscape

Wholesale Sector

Retail Sector

Table: Pharmacies & Pharmacy Market Ratios

Chapter 8 - Company Monitor

Berlin-Chemie/Menarini Pharma GmbH

Gedeon Richter

Krka

Lek (Novartis/Sandoz)

Verofarm

Chapter 9 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Technical Process

Pharmaceutical Industry

Sources

Chapter 10 - Appendix: Regional Demographic Data

Wages (ave labour force per annum), US$ PPP

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Chapter 11 - Country Snapshot: Russia Demographic Data

Section 1: Population

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Competitive Landscape for Europe Pharmaceuticals and Healthcare: Sample of Companies Ranked

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Cross-border analysis of regulatory systems comparing the patenting environment, summarising regional pricing and reimbursement factors and monitoring the growth of the Pharmaceuticals sector across the region. Company SWOTs cover leading multinational and national drug companies operating in each market.

Network of European Pharmaceutical & Healthcare Sources

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BMI's Pharmaceuticals & Healthcare Reports are based on an extensive network of multilateral organisations, government departments, pharmaceutical & healthcare industry associations, chambers of commerce and company reports. Information sources include: