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N. Yutanova, MD, PhD, MBA

Head of Life Sciences Practice, Ward Howell

The pharmaceutical market, the most massive sector of the Life Sciences industry
, with a volume of up to USD 825 billion is a very challenging environment worldwide and particularly in the Russian Federation.

According to IMS Health the global market for pharmaceuticals should grow by  $1.1 trillion by 2014. This industry growth is driven by stronger near-term growth in the US market and is based on the global macroeconomy; the changing combination of innovative and mature products, in addition to the rising influence of healthcare access and funding on market demand.

Different regions of the world will influence the pharmaceutical industry trends in different ways. Although the U.S. will remain the single largest market, with 3 to 6 percent growth expected annually in the next five years and reaching USD 360  to 390 billion in 2014, up from USD 300 billion in 2009, even now, Russia is already the world’s 11th largest pharmaceutical market, according to IMS Health, a leading pharmaceutical and healthcare research firm. In 2009, the Russian pharma market stood at USD 17.1 billion, overcame USD 18.5 billion in 2010 and is predicted to stand at USD 24.3 billion by 2012.

Russia accounts for just under a third of the total Central & Eastern European pharmaceutical market, due to its population more than 142 million; however, per capita, in comparison to, for example, Romania, Russia is also one of the smallest markets. The Russian pharmaceutical market is predicted to expand at a relatively high compound annual growth rate (CAGR) in American terms over the next few years and will continue to be driven by import growth; a heavy reliance on imports has resulted from the lack of locally-manufactured innovative pharmaceuticals. Over the last few years, import growth has been boosted by the federal drug supply system (DLO) and about 80% of DLO funds are spent on imported pharmaceuticals.

The Russian government is now implementing the Pharma 2020 Strategy, which aims to encourage growth in the local pharmaceutical industry for the period up to 2020. In accordance with this plan, the government will help local producers to cover the costs of the Research and Development (R&D) that is required to boost production of innovative pharmaceuticals. It also hopes to create new companies, which will be able to attract investment, create new jobs and produce competitive, safe, good quality, affordable products that fulfill the requirements of patients and the healthcare system.

It seems that by 2020, the local industry will be responsible for 50% of drugs in circulation, 80% of which will be innovative. The Strategy will require a lot of investment, which will be sourced mainly from the federal budget, but the Russian government is also trying to encourage international pharmaceutical companies to invest. So far, all the leading international companies in innovative and generic products as well have begun investing in Russia.

So far, our government has unveiled a plan to modernise Russia’s pharmaceutical industry and give local firms a greater presence in international markets, injecting 120 billion RUR of state funds into the sector and establishing more than 17 R&D centers.

40 billion RUR were invested by local and international companies into development of domestic pharmaceutical manufacturing in 2010.

In late 2010, Prime Minister Vladimir Putin set the target of domestically producing 90 percent of Russia’s vital medicines and 50 percent of its medical equipment by 2020, while increasing exports eight times. Foreign pharmaceutical companies and medical equipment manufacturers in Russia would face sales restrictions if they are not prepared to share their expertise, he warned.

As for now, the pharmaceutical market in Russia is dominated by generic products. Over the last decade, there has been a shift in demand from cheap locally produced generics to more expensive branded generics of foreign origin. Branded generics are popular for historical reasons. They were practically the only pharmaceuticals available in the former USSR and both patients and doctors remain loyal to well-established brands. Furthermore, the traditionally high level of self-medication within the population has encouraged companies to produce pharmaceuticals with recognisable names. However, 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.

In addition to realities at the local level, the global challenging environment strongly stimulates all R&D pharmaceutical companies to innovate and reach new markets, while ensuring operational efficiency amid pricing pressure, decreasing reimbursement levels, and soaring R&D and marketing costs. To complicate matters, expiring patents are jeopardising long-term revenue streams.

Facing all these challenges pharmaceutical companies need new LEADERS worldwide, and particularly, in Russia. The value of talent equity is difficult to overestimate in such circumstances. For example to meet pharmaceutical and other industries’ demands in new leaders our company established internal research and development division  -  Talent Equity Institute (TEI) to generate and disseminate knowledge about managerial talent and leadership. Strategic, multi-experienced, creative leaders with the broad operational skills to achieve business goals, and the ability to articulate a strong vision, are more in demand than ever.

Now Talent Equity is a key element of  clients’ global and local strategies. To deliver high class Talent Equity Consulting executive search inclusive and to meet contemporary demands of market as consultants it is necessary to have deep knowledge of the industry from the inside

The Russian pharmaceutical market of top-level professionals is quite tight. People with medical background, impressive managerial experience driving results for big pharma on Russian market are already in leading positions for more than 10-15 years. The industry needs new ideas and new approaches.

Every day pharmaceutical clients asking executive search companies to find talents from other industries, mainly from the Fast Moving Consumer Goods (FMCG) sector, but for certain positions, people from the tobacco industry sectors, GRs from tobacco, for instance, are in big demand for all industries including pharmaceutical as very regulated. Historically, worldwide pharmaceutical business is driven by people without medical background, but in Russia, an absolute majority of managers are professionals with a medical background which is not a minus, but sometimes, may to a certain extent limit the essential helicopter view needed for breakthrough results. Leadership qualities are not developed based on the type of background. Therefore these days, the search for a true leader for pharmaceutical industry is a fine selection broadband art required from all talent equity consultants.

Talent equity is key to a company’s success and executive search consultants in Russia are passionately dedicated to help their clients in this adventurous never-ending journey of attracting, retaining and developing new leaders. 

Source:  AEB BUSINESS QUARTERLY, Summer 2011

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