Summary
Russian market growth continues to outpace even optimistic forecasts, and BMI has adjusted its forecast for full-year 2006 pharmaceutical market value from US$8.8bn to US$9.2bn. This represents 20% growth year-on-year compared to 2005 and the new forecast reflects higher than expected spending within the government's DLO medicines reimbursement programme. DLO spending in h206 reached RUB30bn (US$1.1bn), equivalent to the entire year's budget. This raises some worrying questions about future funding and stability of the programme. Also, higher dollar forecasts take into account the recent strengthening of the rouble against the US dollar and revised forecast exchange rates through 2010 provided by BMI's Country Risk Service.
A key indicator, however, will be volume data. As reported in the Q206 report, volume growth in Q1 was flat, reflecting growth through price rises and a higher volume of costlier medicines in the sales mix. Price growth against a background of a weaker dollar may prompt further measures by the government to cut prices paid under the DLO, as occurred in May when prices were cut across the board by 5%. Also, the main drug regulator has publicly proposed potentially radical changes to the current DLO list. Most controversially, it would exclude certain high-cost imported drugs for treating cancer, multiple sclerosis (MS) and haemophilia while setting new fixed prices for generic medicines. In theory, these excluded drugs would be covered by specific programmes from other elements in the budget, but the proposal has provoked an unusual level of protests by MS sufferers.
Major M&A deals appear to be brewing in the Russian pharmaceuticals market, and at least one deal is likely to go through during Q3. Russian media have reported negotiations between Indian generics maker Ranbaxy and the owner of domestic producer Akrikhin, which had sales of US$38mn in h206. Akrikhin would provide access to DLO contracts, which accounted for around 20% of its sales during the period. Another rumoured deal is reported to be imminent with the sale of pharmacy chain Ozon by its owner. German wholesale giant Celesio and Alliance Boots are reported to be in the final round of a closed auction process. Whatever the outcome, the deal would bring a major foreign player into Russia's fast-growing pharmacy sector for the first time. Meanwhile, German generics maker Stada's recent acquisition of leading Serbian producer Hemofarm, which had estimated sales of around US$58mn in Russia last year, will boost Stada's Russian presence. Hemofarm is due to begin production at a new facility in Obninsk during Q3 and Stada already owns domestic player Nizhpharm.
Russia's attractiveness for multinationals is confirmed in BMI's Q306 Business Environment Rankings, where Russia now scores first among the 14 largest markets in Central & Eastern Europe (CEE). Continued political and economic stability coupled with one of the fastest market growth rates among any of the major world markets will continue to lure new market entrants. The hope is that the government will not make moves to upset a market that has never been more attractive.
Key Benefits of Report
- Rely On Our Independent 5-Year Forecasts As A Benchmark to test other views - a key input for successful budgetary and strategic business planning.
- Target Business Opportunities & Risks through our reviews of latest industry trends, regulatory changes, and major deals, projects and investments
- Exploit Latest Competitive Intelligence & Company SWOTSon your competitors and peers through company rankings by sales, market share and ownership structure – includes multinational and national companies.
Scope of Report
An at-a-glance perspective on latest regulatory developments, key forecast indicators and major corporate developments, covering the prescription, OTC and generics markets. The SWOT outlines strategic factors which affect BMI’s forecast analysis, and taken together with BMI’s Economic and Business Environment SWOTS, give a complete overview of market climate.
Market Summary
Outline of market characteristics, growth factors, leading therapeutic segments and a competitivness of the market.
Regulatory Regime
Guide to and analysis of country intellectual property developments and pricing & reimbursement issues, which constitute the regulatory make-up of the market.
Industry Developments
Focus on government healthcare reforms, epidemiological trends, company M&As, product launches, market entries, FDI activity, R&D and patent legislation.
5-Year Industry Forecast
5-Year Forecasts to end-2010 for all key industry indicators (see list below), supported by explicit assumptions, plus analysis of key downside risks to the main forecast, including:
- Drug market expenditure (US$bn); drug expenditure per capita (US$); as % of gdp
- Prescription drug market (US$bn)/as % of total market; sales by alimentary tract/metabolism; antibiotics, cardiovascular, central nervous system, oncology, musculoskeletal and respiratory system
- OTC market (US$bn)/as % of total market (sales by analgesic, cough and cold, digestives, skin treatments, vitamins and minerals)
- Generics market (US$bn)/ as % of total market
- Health expenditure (US$bn, % of gdp and per capita); public sector health expenditure as % of total; number of hospitals; beds, hospital admissions, doctors, births and deaths per 000 population
Forecasts based on bespoke BMI economic modelling, using historical data sets of macroeconomic and industry variables to derive rigorous statistical relationships, anchored in advanced linear regression techniques.
5-Year Macroeconomic Forecasts BMI forecasts for all headline macroeconomic indicators, including:
Nominal and real GDP, % real GDP growth, % private consumption growth, % industrial output growth, % consumer price index, % GDP price deflator, exports, imports, trade balance, current account balance, foreign direct investment, exchange rate against US$, government expenditure, external debt
Competitive Landscape & Profiles Intelligence on the market position of major MNC power houses and indigenous companies. Company SWOTS are provided for all key strategic players, complete with a company activity overview, its leading products and analysis of business opportunities.
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