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Russia Update
IMS HEALTH
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London
NW1 6JB, UK
Tel: +44 (0)20 3075 5888, Fax: +44 (0)20 3075 5999
service@imshealth.com
http://www.imshealth.com
The Information Service contained herein is confidential and provided subject to the IMS
Health Information Services Standard Terms and Conditions. This Information Service is
provided to the client on a personal basis under a non-exclusive and non-transferable
licence for the Client’s own direct benefit and use only, and may not be copied or divulged
to any other party. Whilst every possible care has been taken in the preparation of this
information, the publishers do not hold themselves responsible for any expressions of
opinion or error or omission, or any action resulting therefrom.
PRICE LEVELS
The values in this report are based on the new enhanced data for Russia for the retail
and hospital panels and the new Dopolnitel'noe Lekarstvennoe Obespechenie, DLO,
panel. This is a state-run restricted drug reimbursement programme introduced in 2005
to provide subsidised pharmaceuticals in the out-patient sector for the disabled, war
veterans, children under three years of age and families with three or more children.
Data for the retail and hospital panels are available from 2004 and the DLO from 2005.
Values in the hospital and retail sectors are shown at ex-manufacturer prices and in local
currency. Values in the DLO sector are shown at contract prices and in local currency.
The total market forecast is compiled from the retail, hospital and DLO panels, which
accounted for 92.7% of the total market in 2009.
The retail and hospital panels are based on all registered medicines and food
supplements and homeopathic products. The DLO panel is based on all registered
medicines in the DLO programme including expensive drugs for the seven life
threatening diseases.
Sales of the budget purchases are calculated historically using information from the
federal government.
Market Share
FORECAST METHODOLOGY
The IMS Market Prognosis projections are based upon ten years of volume and price
quarterly sales data. Pharmaceutical volume and price data in each audited market
sector are independently analysed using both univariate time series models and multiple
regression based models incorporating macroeconomic variables. The macroeconomic
variables are provided to IMS Health by a third party, the Economist Intelligence Unit
(EIU).
After the baseline projection has been optimised, events are applied to obtain a final
forecast for each audited market sector. This final forecast is also summarised below,
and the most important events described.
The forecasts below represent an update of the forecasts published in the IMS Market
Prognosis report in March 2010. Updated economic forecasts and IMS MIDAS data up to
Qtr I 2010 have been used to develop a new baseline forecast for each audited market
sector. Each event has been re-evaluated and, where necessary, events have been
added or deleted. The updated events have then been applied to the new baseline
forecasts to obtain a new final forecast for each audited market sector.
BASELINE EXTRAPOLATIONS
Real GDP 2000 RUB (billion) 11673 12137 12668 13229 13792
Consumer Price Index 2000 = 100 323.8 344.8 366.9 389.6 413.1
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
EVENTED FORECAST
EVENT ANALYSIS
This section contains an analysis of each of the events applied to the baseline forecasts,
based on IMS Health research.
Changes to prices of products not on the EDL: The new pricing mechanism on the
EDL will subject approximately 40% of the retail market to pricing controls. This is
expected to lead to, on average, a 10% reduction in price of the EDL products. Industry
analysts expect that this will result in an increase in prices for the remaining products on
the market as manufacturers seek to compensate from the loss of revenues from the
EDL products. See also: Pricing and Reimbursement
UPDATED EVENT: Upturn in OTC market: The OTC market experienced a slowdown
in growth from late 2008 to mid 2009 due to the financial crisis. The trend is similar to
that of the financial crisis at the end of the 1990s and the sector is expected to bounce
back again as the economy recovers. UPDATE: Economic recovery in the first quarter of
2010 was driven mainly by exports. Economic recovery is expected to continue
throughout 2010 and 2011 but consumer confidence is expected to lag behind and an
increase in spending in the OTC sector is now expected to begin in 2012. See also:
Pharmaceutical Business Environment
pressure, cholesterol, smoking and traffic injuries and to promote a healthy lifestyle.
See also: Healthcare Provision
Innovative new products: The launch of innovative drugs will drive growth in the
market. See also: Pharmaceutical Business Environment
Expansion of indications on the DLO: Introduced in 2005, the DLO system provides a
formal scheme for the reimbursement of outpatient drugs. The DLO system barely
survived the first couple of years due to mismanagement and corruption across the
board. Its finances have stabilised in recent years due to tighter administrative controls
and a restructuring in 2008 when the scheme was split into two. The current programme
comprises the expensive drugs for the treatment of seven rare, life threatening diseases
and a broader range of essential drugs (the ONLS). Expansion of the DLO remains a
possibility, including the incorporation of diabetes drugs in the seven diseases sector.
However, this is not expected until at least 2012 as the government finances recover
following the crisis. See also: Healthcare Provision.
Demographic event: The population growth over the 2010-2014 period will increase
compared to the previous five-year period. See also: Economic Environment
NEW EVENT: Implementation of Drug Circulation Law: The Drug Circulation Law
came into force on 1 September 2010. The new law builds on the existing law and
makes recent market developments official. The key components of the law are as
follows. Drug registration will be harmonised with the EU and full registration will take a
maximum of 210 days. The law will allow for drugs to be sold in out-patient clinics, by
GPs and medical assistance offices if no drugstore is in place. It also provides for drug
safety monitoring and will standardise the state regulation of the EDL. Orphan drug
regulation will be defined to allow access for treatment for rare diseases and a new
regulatory agency will be set up comprising a merger between Roszdravnadzor and
Rospotrebnadzor. The date for implementation of GMP has been set to 1 January 2014.
Inspections of plants will be made up to the deadline and a decision will be made as to
whether the factory will close or be modernised. If some plants comply with Russian GMP
and not international GMP they will most probably be allowed to remain open. Clinical
trials will not be required in Russia if the country of the drug of origin has mutually
recognised results of trials or if Russia took part in multi-centre trials. If trials are
conducted outside of Russia then the manufacturer will have to produce phase II/III
trials which can be combined. This should lead to an increase in trials in Russia and
should also help boost access to new medicines. The new law marks an important step in
the development of the Russian pharmaceutical market. It should lead to improved drug
registration and to a more transparent system. As the new law builds on existing market
rules it will have a limited impact on the pharmaceutical market. Access to medicines for
patients living in the rural areas will improve and could provide a small increase in
volume growth.
UPDATED EVENT: Revision of the Essential Drug List: The revised Essential Drug
List was much anticipated throughout 2009 and a draft for consultation was finally
released and finalised at the end of that year. The final list contains 500 international
non-proprietary names (INN) of which 75 are old ‘Soviet’ drugs that are not
manufactured elsewhere, 261 are available as generics and the remainder are supplied
exclusively in imported form. Some multinationals were unhappy with the revised list
and will lobby the government in an attempt to add more products, such as cancer and
cardiovascular drugs, to the list. The list will be at the heart of cost-containment efforts
over the prognosis period due to the new maximum price calculation and control on
mark-ups (see Introduction of pricing controls on the EDL event). The EDL provides the
basis for hospital purchasing and could be extended to the outpatient and primary care
sector if the mandatory health insurance system develops. In the short term the revised
list will have serious implications for manufacturers which have seen their key products
removed from the list. However, in the longer term, lower prices could lead to an
increase in demand for pharmaceutical products, and if the EDL is used as a starting
point for a reimbursement programme then this could significantly impact growth in the
market, although such a development is not expected until late in the prognosis period
(see Introduction of health insurance event). UPDATE: Revision of the EDL has had a
minimal impact at the total market level, but some manufacturers have been more
impacted than others as they revised their product portfolios as a result of the changes.
Some manufacturers chose not to register their products following the introduction of the
EDL, but they have the choice of doing so in 2011 as the products have to be re-
registered each year. The impact of this event has been reduced to zero as the expected
impact was not seen at the total market level. This event does however remain an issue
at manufacturer level as products have to be registered each year for inclusion in the
EDL. See also: Prescribing and Dispensing, Pricing and Reimbursement
NEW EVENT: New packaging requirements: The Drug Circulation Law that came into
force on 1 September 2010 changes the drug packaging requirements in Russia. From 1
September 2010 the internal packaging must show the form of packaging whilst the box
must show the registered certificate number - both of which are currently provided on
the patient information leaflet. If a product is produced in Russia or imported before the
1 September with the old packaging it can be sold on the market until stock run out; any
products (domestic and imported) entering the market after this date will have to have
the new packaging. Most manufacturers do not have time to make the changes to the
packing before the September deadline and so wholesalers and distributors are stocking
up on products in order to maintain delivery until manufacturers are able to revise the
packaging. IMS Health anticipates that this will result in a short-term decrease in sales of
some products until the end of 2010.
government intends to create a more stable pricing environment and remove the
uncertainty caused by exchange rate fluctuations. Once the pricing system is stabilised,
Roszdravnadzor, the federal agency for healthcare surveillance, will develop and
maintain a pricing database and could use this as a means of introducing price controls.
The new price controls differ for multinational and domestic products and apply to drugs
on the Essential Drug List. The maximum price for an imported product will be based on
the custom price declared by importing countries. These must be in line with the
minimum price of the product in the country of origin, and the average price under which
the medicines were imported into Russia previously. From January 2011 all imported
products maximum sales prices will be registered in roubles. All products on the EDL
have to be re-registered with Roszdravnadzor by the end of March 2010, after which
they will trade at their new prices. In addition to the price controls, the government has
introduced a new method to standardise the calculation of pharmacy and wholesaler
mark ups across Russia in order to control price growth at the pharmacy level. The main
intention of the new pricing controls is to stabilise prices across the Russian
pharmaceutical market. During the first three months of 2010 companies were in the
process of re-registering their products and the full effect of the changes will be seen on
the market during the second quarter. Although the intention is to stabilise prices, IMS
Health estimates that this will lead to a reduction in price for products on the EDL across
all sectors. Local producers will also revise their product portfolios and remove cheap
and unprofitable products and review their API providers in order to reduce costs.
Foreign manufacturers will also review their investment strategies in Russia. UPDATE:
According to Roszdravnadzor, by 12 May 2010, 6778 essential medicines had applied for
price registration and 6379 medicines had had their prices registered. IMS Health data
show that the pricing controls have been effective in reducing inflation in trade prices for
EDL products, with a small effect at the total retail market level. At the retail price level,
price inflation increased for the non-EDL products in Q1 2010 and declined by 4% for
EDL products. Although the EDL has had the desired effect on prices the government is
investigating claims that some companies have put in higher prices than they should
have done whilst registering the drugs. The next stage of the plan is to transfer
responsibility to the regions which will then supervise the prices of products on the EDL
and ensure that the medicines are provided in the pharmacies. From 1 September 2010
prices of products not on the EDL will no longer be controlled by the regions, but the FAS
is expected to monitor the prices and review any increases. Roszdravnadzor will maintain
a supervisory role. See also: Healthcare Provision, Pricing and Reimbursement
Start Year
Changes to
prices of
4 2010 90% 90% 90% 2 1.0% 0.0% 0.0% 5.0% 0.0% 0.0%
products not on
the EDL
UPDATED
EVENT: Upturn 1 2012 55% 75% 95% 12 5.0% 0.0% 0.0% 1.5% 0.0% 0.0%
in OTC market
UPDATED
EVENT:
Purchasing 1 2012 75% 85% 95% 24 3.0% 0.0% 0.0% 1.5% 0.0% 0.0%
power
increases
UPDATED
EVENT:
4 2010 35% 55% 75% 57 5.0% 0.0% 2.0% 0.0% 0.0% 0.0%
Healthcare
reform
Innovative new
4 2010 95% 95% 95% 57 0.2% 0.2% 0.2% 0.5% 0.5% 0.5%
products
Expansion of
indications on 1 2013 50% 50% 50% 24 0.0% 10.0% 0.0% 0.0% 5.0% 0.0%
the DLO
UPDATED
EVENT:
Introduction of 1 2013 25% 45% 55% 24 5.0% 0.0% 5.0% -2.0% 0.0% -2.0%
health
insurance
Demographic
4 2010 90% 90% 90% 57 0.2% 0.2% 0.2% 0.0% 0.0% 0.0%
event
NEW EVENT:
Implementation
9 2010 65% 85% 95% 52 0.1% 0.0% 0.1% 0.0% 0.0% 0.0%
of Drug
Circulation Law
UPDATED
EVENT:
Revision of the 4 2010 99% 99% 99% 9 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Essential Drug
List
NEW EVENT:
New packaging 7 2010 90% 90% 90% 3 -0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
requirements
NEW EVENT:
Government
investigation 4 2010 75% 85% 95% 57 0.0% 0.0% 0.0% 0.0% 0.0% -2.0%
into hospital
expenditure
UPDATED
EVENT: Drive
1 2011 25% 35% 45% 48 0.0% 0.0% 0.0% -2.0% -2.0% -2.0%
in increase
domestic
on the EDL
Event Title
Introduction of
pricing controls
4
Start Month
Start Year
2010
IMS Market Prognosis Europe
99%
Probability (medium term)
99%
Probability (long term)
99%
6
Time to impact (months)
11
Hospital Market Impact (price)
-6.0%
IMS Market Prognosis Europe Russia Update 2010
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
400000
350000
RUB (million)
300000
250000
200000 Baseline forecast
160.0
140.0
120.0
100.0
80.0 Baseline forecast
500000
450000
400000
RUB (million)
350000
300000
250000 Baseline forecast
200000
Evented forecast
150000
100000
50000
0
2009 2010 2011 2012 2013 2014
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
100000
90000
80000
RUB (million)
70000
60000
50000 Baseline forecast
40000
Evented forecast
30000
20000
10000
0
2009 2010 2011 2012 2013 2014
120.0
100.0
80.0
20.0
0.0
2009 2010 2011 2012 2013 2014
100000
90000
80000
RUB (million)
70000
60000
50000 Baseline forecast
40000
Evented forecast
30000
20000
10000
0
2009 2010 2011 2012 2013 2014
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
70000
60000
RUB (million)
50000
40000
Baseline forecast
30000
Evented forecast
20000
10000
0
2009 2010 2011 2012 2013 2014
160.0
140.0
120.0
100.0
80.0 Baseline forecast
90000
80000
70000
RUB (million)
60000
50000
Baseline forecast
40000
30000 Evented forecast
20000
10000
0
2009 2010 2011 2012 2013 2014
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
The prognosis for the Russian Federation has been revised upwards. Forecasts for
economic growth (GDP and consumer expenditure) have been revised upwards for 2010
and inflation and government consumption forecasts have been revised downwards. US$
exchange rate forecasts are lower in 2010 but higher for the medium term.
The outlook for 2010 remains relatively unchanged from the previous forecast; however
recovery from 2011 is expected to be slightly lower than previously expected due to slow
recovery in the economy. The introduction of pricing controls on the EDL led to a 4%
decline in price for these products in Q1 2010, whilst an increase was seen for products
not on the EDL. The new pricing controls have led to a standardisation of drug prices
across Russia and from January 2011 all drug prices will be registered in roubles.
Combined, these measures should result in a more stable pricing environment over the
prognosis period.
Healthcare reform is expected to continue over the prognosis period and will boost
volume in the retail and hospital sectors.
The government has taken the first step in introducing a mandatory health insurance
scheme which will provide free healthcare to citizens across Russia. As of September
2010 the first draft of the bill had passed through the State Duma. The bill is expected to
boost demand in the retail and hospital sectors, and if combined with a reimbursement
system, could lead to pressure on price growth, although this is not expected until the
latter part of the prognosis period.
The final prognosis is based on the forecasts of Tables 6, 7 and 8. IMS Health captures
92.7% of the total pharmaceutical market.
The prognosis contains a projection of the DLO sector. The budget for the DLO in 2010 is
estimated to be in the range of RUB 83-88 billion. The future of the DLO as it currently
stands is uncertain. The forecast assumes that the government will continue funding the
DLO and exert strict control over prices. The government may also add new indications
to the programme, such as diabetes or cancer.
The prognosis incorporates an estimate of the value of the Budget Purchases sector and
assumes that this will grow in line with the rest of the market and hold a 7.3% share
during the forecast period.
The total pharmaceutical market is expected to grow at a compound annual growth rate
(CAGR) of 11.4% in terms of roubles and 12.6% in terms of US$ during the period
2009-2014.
Table 10: Total Market Sales at Actual Prices (2009-2014) RUB (million)
Table 11: Total Market Sales at Actual Prices (2009-2014) US$* (million)