The Emerging Markets of the East - Pharmaceutical Technology

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The Emerging Markets of the East
The countries of Central and Eastern Europe and the Commonwealth of Independent States are closing in on global pharmaceutical competition.


Pharmaceutical Technology
Volume 33, Issue 10, pp. 50-52

Among BRIC nations, Russia holds #2 spot

Russia's pharmaceutical sales grew by approximately 20% between 2006 and 2007 to $7.9 billion, according to IMS Health, beating out its BRIC competitor nations Brazil, which grew 9.7%, and India, which grew 13%, over the same period (3). Russia's pharmaceutical sector is also expected to grow by 2% in 2010 and could recover from the global recession faster than other markets, according IMS Health. There are a few reasons Russia may be ahead, according to David Campbell, senior principal at IMS Consulting.

Historically, Russia's scientific sector has always been very strong and, because several companies identified the Russian market early on, the country has remained favorable for low-valued generic drugs, he says. The country is also considered a good bet for sourcing innovative pharmaceutical products and as a place of opportunity for imported pharmaceutical products.

Domestically, there is a lot of out-of-pocket cost for individuals buying medications in Russia, but a significant portion of the population is reimbursed by a government agency or another insurance system. "As a whole, the Russian market does well from this perspective," says Campbell.

Russia's overall economy also may explain why its pharmaceutical sector is likely to pick up faster than other markets, starting as soon as 2010. According to the Economist Intelligence Unit, says Campbell, oil prices may rise to $50–52 per barrel by the end of this year. In addition, Russian consumers are in a safer place financially than their counterparts in other countries because of low household debt and a small mortgage market, among other factors. A government stimulus package is cushioning the effects of the global recession, and finally, there is now a lower tax burden on some sectors.

Unlike Brazil and India, Russia does not have major issues with distribution channels, access, or intellectual property, says Campbell. "These simple challenges have prevented [Brazil and India] from growing as rapidly as the Russian market," he says.

China, on the other hand, has remained the BRIC leader (with growth of nearly 26% between 2006 and 2007) because of its large-volume market and its huge opportunities for innovative and generic products as the population turns away from Traditional Chinese Medicines and toward Western medicines, explains Campbell. In addition, China's infrastructure and distribution are more mature than in the other BRIC markets, and access is critical to market success, he says.

Looking ahead, Russia's domestic pharmaceutical sector is transforming. "We're seeing two things happening," says Campbell. "First, Russian physicians are increasingly open to prescribing highly innovative products. Second, the proportion of patients that have a need and desire to access these high-value innovative medications that weren't traditionally available is growing." Overall, the population at large is starting to feel that cheaper products and preparations are not necessarily what they want.

The government is also determined to change the way the pharmaceutical industry operates. With the recent currency devaluation, oil-price drops, and credit-crunch, the Russian government has spent most of 2009 working on pricing-control measures across the pharmaceutical sector, says Campbell. Specifically, they are changing various reimbursement lists to ensure that the government can meet the needs and expectations of the population. They also want to ensure that the country's life expectancy, which until recently was very poor (In 2007, life expectancy was age 66 in Russia and 80 in the European Union), continues to improve. "To do so, the government will have to invest in healthcare going forward," says Campbell.

The government wants to increase local pharmaceutical manufacturing, but what that means exactly (e.g., APIs, finished products, packaging)—and how it will be managed (e.g., tax rebates) remains to be seen. "Several pharmaceutical companies are looking at this intently and are concerned about the implications going forward," says Campbell. "We may see more strategic partnerships between local players and multinationals or multi-nationals moving manufacturing capabilities into the country in response."

References

1. A.E. Kramer, "Emerging Economies Meet in Russia," New York Times, June 16, 2009.

2. Gedeon Richter Press Release, July 22, 2008, http://www.richter.hu/EN/Pages/pressrel080722.aspx, accessed Aug. 28, 2009.

3. A. Drakulich, "A Reality Check on Emerging Markets," Pharm. Technol. 32 (7), 54–56 (2008).

For more on this topic, see the online exclusives "Multinational Firms Stake Claims", "CROs and CMOs Go Further East", and "Standard-Setting Bodies Engage Russia"


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