Overview

The Russian pharmaceutical market has tremendous promise and warrants consideration by U.S. exporters.  In 2019, per capita spending on medicines was $160 per person, placing Russia 19th out of 32 central and eastern European (CEE) economies.  $19.9 billion of pharmaceuticals were sold in Russia in 2019, equal to 1.2% of GDP and 22.6% of the nation’s health spending.

The Russian pharmaceutical market can be divided into prescription drugs and over-the-counter (OTC) medicines. Prescription drug sales have traditionally dominated the market, and this trend continued in 2019; prescription medications represented 63.3% of sales. Of this amount, sales of generics constituted 68.4% of Russian prescription sales in 2019.

Units: $ millions
Source: Fitch Solutions (formerly known as Business Monitor International)

For many years, the Russian government accounted for approximately half of health care expenditures.  However, the industry anticipates a significant shift towards private healthcare spending.

The Russian healthcare system is funded by the federal government, social spending, and the Federal Mandatory Insurance Fund (FOMS). The FOMS’s budget consists of two revenue streams: companies paying for their employees and the federal government paying for the unemployed. The FOMS operated at a deficit in both 2017 ($516 million) and 2018 ($1.25 billion), but experts project a 2019 surplus ($801 million) due to the scheduled increase in the payroll deduction for FOMS from 5.1% to 5.9%.

Drug manufacturers prefer not to work with retail pharmacy chains or pharmacies directly, relying instead on distributors to promote their products to retail outlets. Distributors operate vast networks of contacts and work to direct retail distribution channels.  Protek, Pulse, Katren, R-Pharm, Pharmkomplekt, Grand Capital, BCC, and Profit-Med are some of the major distributors in the Russian market. The number of pharmacy chains is growing and currently exceeds 50,000.  Major sales are coming from the following chains:  Asna, Rigla, Erkapharm, Apteka 36.6.

U.S. pharmaceutical exporters face a complex regulatory landscape in Russia.  Russia’s new Good Manufacturing Practices regime may lead to delays in foreign pharmaceutical products’ receiving market access, and there is relatively weak protection of intellectual property rights for patented drugs.  IPR issues include erosions in regulatory data protection and patent rights and the risk of compulsory licensing.

Leading Sub-Sectors

Cardiovascular diseases, cancer, and HIV are the most prevalent diseases in Russia and are driving demand for associated pharmaceutical products. High rates of smoking and alcohol consumption also contribute significantly to illnesses. Per a 2015 WHO report, 39.1% of the Russian population smokes compared to a rate of 22.7% globally and 27.3% in Europe.  In addition, per capita alcohol consumption of 15.1 liters of pure alcohol per year between 2008 and 2010 far exceeded the global average of 6.04 liters.

Opportunities

Demographic factors will continue to drive pharmaceutical market growth as the population ages.  However, the Russian government’s desire to curb imports may constrain opportunities for U.S. exporters.

The Russian government is focused on creating its pharmaceutical industry as outlined in its “Pharma 2020 Strategy,” which aims to reduce the reliance of the Russian economy on imported pharmaceuticals.  In July 2016, Prime Minister Medvedev said that he expected domestic production to increase from 28.5% to 75% of all medicine sold in Russia by 2020.  Despite the challenges that U.S. companies face as the result of this strategy, profitable opportunities persist, including licensing agreements/technology transfers by U.S. manufacturers of pharmaceutical products, as well as U.S. manufacturers supplying pharmaceutical production and packaging equipment. The Ministry of Industry and Trade is developing the “Pharma 2030 Strategy,” which will be a continuation of the existing “Pharma 2020 Strategy.” In the short-to-medium-term, the market for generic drugs will continue its growth due to incentives from the Russian government, as well as the population’s preference for cheaper drugs.

Trade Events

Pharmtech & Ingredients, International Exhibition of equipment, raw materials, and ingredients for pharmaceutical production
Moscow

Zdravookhraneniye, International Exhibition for Health Care, Medical Engineering and Pharmaceuticals
Moscow

Resources

• DSM Group - Russian pharmaceutical marketing agency
• Association of International Pharmaceutical Manufacturers (AIPM)
• Association of Pharmaceutical Companies «Innovative Pharma» (InPharma)
• Remedium
• Pharmaceutical Herald
• Vademecum
• Fitch Solutions (formerly known as Business Monitor International)