1. Russian Pharma Market Today Main trends & forecasts
PhD (pharma) David Melik-Gusseynov,
Head of advisory board in public health committee «Business Russia» (Delovaya Rossia)
Cegedim (Russia), director
Supported by
Main sources

2. Global Pharma* Global pharma market growth slows further in 2009-2010
Global Pharma Market Value,
Contribution to Global Pharma Market Growth
Global pharma market growth slows further in
US will make no contribution to growth in 2009, “Pharmergin” markets contribute around 50%.
*IMS Health

3. Big Pharma
North America
North Amercia (USA) is the largest Pharma Market in the world. But market growth rates are decreasing year by year (CAGR +1-3%) by the reason of generics growing consumption

4. Big Pharma
South America
Stable growth rates (CAGR 15-20%) in Brazila and Mexico by the reason of population growing and new State drugs’provision programmes (Reimbursment).

5. Big Pharma
Europe
In Europe is expected sluggish growth rates (CAGR 3-5%) by main market participants (France, Germany, UK, Italy and Spain).
Aging of population will motivate the market growth rate but situation will not change cardinal
East Europ is in better situation by the reason of natural consumption growing

6. Big Pharma
Japan
Japan market is the second one in the world and its growth rates are expected to be near 5% annually. New onco portfolio of some local pharma companies, state programs for desease preventing, two years restriction on price increasing – will favor the market development . State generic programs are not popular among consumers.

7. Big Pharma
Asia
China, India and South Korea will increase their share in global pharma market.
Huge population and fantastic growth rates will help these markets to be leaders in the world consumption in 5 years.

8. notBig Pharma
Our Russia
Наша Раша ?

9. Russian Pahrma Market Drivers
before 2009
2009г
after 2010
Demand swithes on more expensive drugs -
New Sate «Reimbursment»
Programms
New drugs launches
Prices increse
Prices increase
Well-being of the people
*ЛО – лекарственные обеспечение

10. Main Russian Pharma Market Questions
Macroeconomics
Social sphere depends on energy import (gaz, oil, etc)
Lack of State social (healthcare) budget
Low purchaise activity
Healthcare reforms
Regulation
Price restrictions (vital & essential drugs)
Protectionism of local manufacturers
Market
High market volatility
Not higly developed market infrustructer
Healthcare State dotetions (subsidy). Absence of long-term capital investment in industry aimed at getting profit

11. Russian Pharma 2009 Total Value: $15,7 bn*
Russian Pharma Value Supply, mln $
Ex-manufacturer prices
Russian Pharma Market grows fast CAGR +15%
Foreign Manufactures Dominate
State bodies try to control market more strictly as a very important social segment, which influences on politic stability
*Pharmexpert

12. CIS Drugs Consumption Per Capita 2008-2009
$450
$250
$700
JAPAN
POLAND
USA
Pharmexpert, CISSTAT

13. Russian and World Pharma InfrastructureUK
USA
drugstores
65 000
18 500
55 000
whalsellers
1120 10 40
manufacturers
1200
890
1800
Возвращаемся к количественным показателям. Сравнительно малая плотность населения с одновременно большим количеством участников рынка – такая картинка свойственна всем сегментам товаропроводящей системы. В России больше аптек, чем в США, в разы больше оптовых игроков, практически сопоставимо количество по производственным компаниям. Таким образом, делаем вывод, что инфраструктурно, рынок сформировался таким образом, и не смотря на все препятствия будет продолжать концентрироваться, глобализироваться - такая уж наша мировая участь.
Pharmexpert, IMS Health

14. Consentration for TOP 10 Companies MS % of TOP 10 Companies
Russia
Europe
USA
drugstores
19,3 70
92,4
whalsellers
78,5 98
85,6
manufacturers
34,2
42,5
46,3
Вернемся с денежным понятиям. Если 35% от денежной массы, то возникает вопрос, почему бизнес в России ущемлен такими мерами. Мы привели пример концентрации первой десятки различных сегментов рынка в России, Европе и США. Российские концентрационные показатели выглядят пока гораздо скромнее европейских и американских.
Хорошо это или плохо? Рост концентрации с одной стороны, конечно же плохо, сомкнувшаяся крона крупного бизнеса не дает возможность мелкому и среднему бизнесу быстро развиваться. С другой стороны, крупный бизнес более устойчив к внешним колебаниям. Кто сейчас больше всего страдает от кризиса в на российском рынке – отечественные производители. Отсутствие доступа к кредитным ресурсам, рост цен на сырье, коллапс кэша в системе – определяют за последними незавидную роль.
Pharmexpert, IMS Health

15. Distributor sales dynamics
Pharmexpert, IMS Health

16. Pharma market stocks: all stages of distribution chain
2008
1st m
2nd m
3rd m
4th m
5th m
2009
1 m
1 m
1 m
Manufacturer stage: import/manufacturing, customs etc.
Distributor stage: logistics
Drugstore, hospital stage: drug provision/sales

17. The infrastructural revolution has already occurred!
2000
2009
Market value, bn USD (retail prices)
3 510
15 700
Number of manufacturers
650
1025
MS%, TOP 10 manufacturers
29,3
33,0
Number of distributors
1800
1120
MS%, TOP 10 distributors
65,2
78,8
Number of drugstore chains
200
600
MS%, TOP 10 drugstore chains
<1%
14,2
Number of drugstores
47600
65000
Pharmexpert, DSM group

18. Distributor concentration
Pharmexpert

19. Chain concentration
Pharmexpert

20. What is new in 2010?
Since 2010, Russia, Belarus, and Kazakhstan joined the Common Customs Union :
Common customs tariffs for all commodity types (since 2010). An exemption (probably temporary) was made for specific commodity groups, including drugs, viz. custom duties have remained unchanged
Commodity certification regulations will harmonized
A common customs border will be in place since July 2011
This is the first stage of developing the Common economic area

21. Декларации
The Common economic area will become operative in 2012
What will that mean for pharma market players?
Unification of the drug circulation legislation
Common drug registration system
Free drug circulation within the borders of the three countries
Development of intra-union distribution network and retail trade
Drug price control system will be in place
Expansion of sales markets for local manufacturers

22. Regulation
Conflicts of interests
Prices

23. State regulation of drug prices
«It goes about pharma companies and numerous intermediaries in the distribution chain striving to make super profits using imperfections of the legislation and other opportunities. The existing drug price registration system is in fact a formality. Therefore I think that it is both necessary and possible to impose a tougher regulation on part of the state. Manufacturers will have to prove that they have grounds for revising the Essential and Vital drug prices, and federal authorities will get efficient tools for checking the accuracy of their calсulations».
Vladimir Putin,
Russia’s Prime Minister

24. Washing-out of cheap drugs from pharmacy product range*
Conclusion
Washing-out of cheap drugs is irreversible. Regulation of Essential&Vital drug segment will speed up the process.
*price segmentation in units.
Prices fixed as of 2002.
Pharmexpert 24

25. Potential Russian Promo Regulation
Pharma company activity
Status in new law
How to overcome
Calls to docs during their working time
Doctor could be visited in his free time (after-hours) on workplace + possibility to visit administration during working time
Presents / gifts
It is possible to present something to doc officially (by contract)
Conferencies / meetings
It is possible to organize conference for docs with a co-sponsor (financed by several companies)
Samples
It is allowed to spread samples officially by determined quatas
DTC
It is allowed to promo OTC drugs using DTC channels
Post clinical trials
It is allowed to make PCT officially in plenipotentiary clinics

26. Pharmaceutical Company Settlements
2008
2009
2009
for improper billing and irregular pricing practices
$ 650 mln.
for violation of marketing laws
$ 1,42 billion
for improper drug promotion
$ 2,3 billon
for mislabeling Botox
$ 600 mln.
2010
2010
2010 .
for violating laws relating to potential off-label marketing and promotion of Trileptal
$ 185 mln.
for illegal marketing of schizophrenia drug Seroquel
$ 520 mln. 26

27. Global Pharma Promo Activity
GLOBAL TRENDS Spending in $ bn
$90.7
$91.7
$93.2
+1,1%
+1,6%
% change
2009 / 2008 % % % % % % % %

28. Russia’s President outlined key parameters for pharma market development
The drug market has been developing dynamically due to the state programs and funds that have flowed to this sphere. It has been growing by 10–12 percent on average year-on-year. According to expert calculations, drug sales in this country will amount to about 1.5 trln rubles in 10 years, which is quite impressive. In fact, we must reach the average European drug consumption level that will, in the long run, be translated in longer life expectancy and higher living standards. Medical equipment sales must also be growing at a high rate. The main thing is to act in the interests of Russia’s citizens and local manufacturers.
Dmitry Medvedev speaking at the meeting of the Committee for Modernization and Technological Development of Russia’s Economy, city of Pokrov (Vladimir region),
31 Aug 2009

29. Experts’ estimations bln USD, consumer prices, Rx+OTC, incl VAT
+22,5%
+19,5%
15 700
19 250
23 000

30. Thank you!