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The Russian Pharmaceuticals & Healthcare Market Is Expected to Increase by 10.5% in 2007
DUBLIN, Ireland -- Research and Markets has announced the addition of Russia Pharmaceuticals & Healthcare Report Q4 2006 to their offering.
The Russia Pharmaceuticals & Healthcare Report provides independent forecasts and competitive intelligence on Russia’s pharmaceuticals & healthcare industry.
At the end of 2006, Russia remained one of the most dynamic of the large pharmaceutical markets in the world, but recent policy moves by the government have taken some of the shine of the market, impacting BMI’s previous growth forecast going forward. The government’s decision in October 2006 to severely cut the number of higher priced, imported medicines covered by the DLO reimbursement scheme will hit market numbers in 2007. A decline in the value of the US dollar versus the rouble, from 27.7 in 2006 to 26.0 in 2007, according to forecasts by BMI’s Country Risk Service, will mask the slowdown in dollar terms. However, it also will encourage the government to tighten prices in the DLO system, as happened in March 2006, when the government introduced across-the-board price cuts for medicines. On top of these developments, a major corruption scandal unfolded in November 2006, forcing the resignation of the minister of health and posing serious questions about the management of DLO and insurance funds. We forecast 10.5% market growth in 2007, compared to more than 20% in 2006 and 33% in 2005.
Market growth is expected to steady at 10% per annum between 2008 and 2010. The Russian government says at least 30% of DLO spending will go to domestically produced medicines, although many in the market dispute whether the local market will be able to replace many of the high-priced, research-based medicines that have been eliminated from the programme. Still, there is some good news -- Russia appears set to liberalise the insurance market as part of its deal securing US support for World Trade Organisation (WTO) accession, allowing foreign insurers to operate independently in the Russian market for the first time. This will drive growth in the Russian market for private health insurance and greater consumption of imported medicines, in part countering the decline in DLO spending. Much of the rest of the market should be buoyed by out-of-the-pocket spending as Russia’s GDP continues to grow, expected to average 5.6% between 2006 and 2010.
The mergers and acquisitions deal flow continued in Russia during Q406, although at a slower rate than previously anticipated, perhaps due to uncertainty over the DLO and the need to carefully vet acquisition targets as Russia’s private pharmaceutical industry has been historically less transparent than other consumer sectors in Russia. One of the biggest deals to date was the November 2006 EUR47mn (US$61mn) acquisition of a 51% stake in local producer Zdrovje by Icelandic generics maker Actavis. Speculation continued that the controlling shareholder local player Akrikhin continued to explore a possible sale and ‘cooperation’ talks with Indian generics giant Ranbaxy were reportedly ongoing. On the pharmacy retail front, leading domestic distributor Protek acquired the OZ chain in early December, combining it with its existing Rigla chain to create the country’s second largest pharmacy network.
Heightened regulatory risk and a downgrade in Russia’s growth forecast mean Russia has dropped from first to fourth in BMI’s updated Business Environment Rankings for the 14 leading markets in the Central and Eastern European region. In 2007, it will be government policy and its consistency (or lack thereof) that will determine whether Russia’s pharmaceutical market growth can be sustained in double digits.