New Market Report Now Available: Russia Pharmaceuticals & Healthcare Report Q2 2011

April 21, 2011 - PRLog -- BMI View: Our forecast for the Russian pharmaceutical market remains robust, seeing 13% US dollar growth over the next five years. Currency appreciation could be a key factor in the short run and complicate the government's focus on "localising domestic production" as local input - primarily labour - becomes costlier, although it eases access to imported raw materials. Spikes in the oil price could drive out-of-pocket spending on medicines further, but for the first time, arguably, for two decades, the key driver - and potential brake - on the Russian pharmaceutical market will be government intervention on both the supply and demand sides. The success of the government's first concrete plans to trial a new medicines insurance scheme in 2012 will be critical, as will the success of a slew of new projects by multinationals, including Novartis, AstraZeneca and Teva

Headline Expenditure Projections

* Pharmaceuticals: RUR503.1bn (US$16.6bn) in 2010 to RUR547.5bn (US$18.6bn) in 2011; +8.8% in local currency terms and +12.1% in US dollar terms. Forecast down moderately from Q111 due to macroeconomic factors.
 * Healthcare: RUR2,479bn (US$81.6bn) in 2010 to RUR2,740bn (US$92.9bn) in 2011; +9.7% in local currency terms and +13.8% in US dollar terms. Forecast down marginally from Q111 due to updated local data.
 * Medical devices: RUR165.8bn (US$5.5bn) in 2010 to RUR188.1bn (US$6.4bn) in 2011; +13.5% in local currency terms and +16.9% in US dollar terms. Forecast up moderately from Q111 due to analyst modification.


Business Environment Rating: Russia's score deteriorated slightly, from 59.0 out of 100 in Q111 to 57.5 in Q211. The main culprit was a decline in the Industry Rewards rating linked to some deterioration in the longer-term economic and political outlook. However, it still remains the top ranked Commonwealth of Independent States (CIS) market, although notably it has fallen behind Turkey, another large market with strong regional trade links. We believe Russia will become the most attractive pharmaceutical market in the Central and Eastern Europe (CEE) region by sheer market size and population over the next two to three years, but the country needs to get through the potentially volatile 2011 parliamentary and 2012 presidential elections.

Key Trends & Developments

* Russian agency Pharmexpert reported in February that a new progamme for medicines reimbursement would be rolled out in a number of regions in 2012, an apparent first step in the long-awaited implementation of a national medicines insurance scheme first pledged in 2008 and currently due by the beginning of 2013.
 * The head of the Federal Anti-Monopoly Service (FAS) warned in February of the continued dangers of "cartel agreements" in certain sectors, including pharmaceuticals. The remarks suggest that FAS could renew probes into the concentration in the wholesale and retail sector before the financial crisis - sending fresh signals of regulatory intervention on pricing following the price controls enacted in 2010.
 * In December 2010 Novartis committed to building a plant in St Petersburg, as part of wideranging five-year investment of US$500mn, also including R&D and public-health initiatives. The plant is one of the largest single projects by a multinational in Russian history, underlining the successes to date of the government's localisation strategy.


BMI Economic View: The Russian economy is in good shape, and we are looking for (an aboveconsensus) 4.3% real GDP growth this year. Exports will be boosted by elevated oil prices, infrastructure spending for major sporting events will be positive for investment, and government spending should also be strong as parliamentary and presidential elections approach. Higher inflation will continue to impact consumption through the first half of the year, though we expect household spending to pick up during H211.

BMI Political View: The deadly bomb attack at Moscow's Domodedovo airport on January 24 is likely to result in a hefty domestic crackdown, with Russian Prime Minister Vladimir Putin keen to protect his record of improving security ahead of parliamentary and presidential elections. On the social side, we caution that things could get ugly, with tensions between Russian nationalist groups and immigrants from the North Caucasus (where the suicide bomber is thought to have come from) already high. The market reaction will be much more muted, with similar incidents in recent years having failed to significantly concern investors in Russia.

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.