Analytical Report RUSSIAN Pharmaceutical Market Results of 2014

During the crisis period, the pharmaceutical market is the most sustainable segment of the economy because its social component is fairly strong. In 2014, like before, the market's biggest growth driver was the interventions from the regulator.

The RF State Duma passed in 2014 40+ draft laws pertaining to the public health service: the Federal Law to amend the Federal Law on Drug Commerce, which defines a great number of terms; a new List of Vital and Essential Drugs was approved; amendments were made to the RF legislative acts against commerce in fake, counterfeit, substandard and unregistered medicinal products and dietary supplements.

Of importance for the industry are decisions related to import substitution: rescheduling of the adoption of GMP standards by Russian producers to 1 January 2016; discussion of proposals for limiting the procurement of foreign-made drugs by the government; prolongation of public procurement preferences until 1 January 2016.

At year-end 2014, size of Russian pharmaceutical market was worth 1,152 bln rbl. (incl. of VAT) in the consumer prices, up 10% on 2013.

The Russian pharmaceutical market remains import-driven. 77% of consumer medicines in money terms are made abroad. That is why the highest-ranked manufacturers are foreign companies: NOVARTIS, SANOFI and BAYER. OTCPHARM, the only domestic manufacturer, was placed 14th in the top 20 players of Russia's pharma market at year-end 2014.

The distributor segment has two clear trends: cost reduction and business diversification. Virtually all distributors have diversified to some extent. In 2014, the leader in terms of sales was still the distributor KATREN, his share having increased up to 17.2%. The runner-up is the PROTEK distributor, with a share of 15.9%. The 2014 triumvirate is completed by the distributor SIA, which posted one of the largest gains in the ranking. The total market share of the top three distributors is 44.6%. In 2014 were announced two deals that will affect the balance of power in the distributor line-up: Oriola-KD came under the control of Aptechnaya Set 36.6. 2015 could see a merger between two distributors, SIA and R-PHARM.

2014 was a year of mergers and acquisitions for the pharma retail market that involved its heavy hitters, with the company A.V.E. group leading the parade. Over the year the pharmacy chain sold the regional assets of the 36.6 pharmacy chain, and in the latter part of the year it became the owner of the pharmacy STARY LEKAR and 03 Apteka. The top spot at year-end was claimed the RIGLA chain; the runner-up was the A.V.E. group chain (through a merger with 36.6); the rear is brought up by Imploziya. Their total share is as high as 8.8%.

The commercial drugs segment of the Russian market was worth 975 bln rbl. in 2014, up 11% on 2013. There were sold 4.2 bln units, down 4.5% on 2013.

Parapharmaceutical segment was worth 183 bln rbl. in 2014, up 8% on 2013. The segment's growth slowed down due to lower purchasing power.

State sector was up 10% in 2014. That is one of the most stable segments in the pharmaceutical market because its growth is fuelled by public money. At year-end 2014, medicines were purchased for benefit-entitled citizens worth 84.4 bln rbl. (the same figure as for 2013). At year-end 2014, the hospital procurement segment was worth 209.8 bln rbl., up 15% on 2013.

Medicinal drugs import into Russia in 2014 were 13.0 bln USD., down 13% on 2013.

According to a forecast from DSM Group, the Russian pharmaceutical market will grow in 2015 by 15% in roubles to 1.3 trillion rbl.

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