Nurturing import substitution, creating a favourable environment for investments, technology and innovation are the key focus areas for Russia's pharma industry today. They are reflected in the relevant state programme until 2020. According to experts, the Russian pharma market is set to grow faster than the global market in the near term, which will boost the inflow of foreign investment and increase the industry's export potential.
All across the globe, pharma and IT are amongst the most appealing sectors for investment.
Pharma and biotech represent the largest segment of the healthcare market: in 2016, Frost & Sullivan estimated it at more than USD 1 trillion. The annual growth rate of this segment is projected at 4.6%, and by 2025 it will total USD 1.7 trillion.
Since 2010, the pharma and biotech market has been slowing down (from 7% to 4–5%), which was triggered by the expiry of patents for many “blockbuster” drugs. It helped many countries to refocus consumption on cheaper generics.
According to IMS, the USA and Canada account for about 50% of the world pharma market, Europe for 22%, and Japan for 8%. Russia ranks 5th in terms of sales on the European pharma market, lagging behind Germany, France, Italy and the UK. According to analysts, this segment in Russia will be growing by 5–6% per year within the next five years (had a CAGR of 11% historically in 2011–2015).
The state of the pharma industry has a direct impact on the quality of living, which makes its development a strategic priority for the government.
Russia’s Development of the Pharmaceutical and Medical Industry for 2013–2020 programme provides for bringing the share of domestic drugs on the list of vital and essential drugs to 90% by 2018, while in 2016, it was almost 70%.
In general, domestic drugs account for 30% of the market in money terms and 58% in volume terms.
According to the Ministry of Industry and Trade, the country’s pharma industry grew by 20% in 2016 (vs 25% in 2015).
During the programme’s term, private investment in the pharma market has exceeded RUB 120 billion, and state investment has gone over RUB 39 billion. More than 30 Russian companies have been upgraded and more than RUB 50 billion raised to create new production sites.
By early 2017, the programme has helped develop and introduce 44 drugs intended for import substitution and 2 innovative medicines, along with 10 innovative medical products and 65 products for import substitution.
Until 2020, the state programme is intended to support setting up production sites for 132 drugs from the above list and developing 390 innovative drugs. In the budget for 2016, RUB 10.3 billion was allocated to the programme, and in 2017 RUB 11.6 billion is to be provided.
The programme is helping establish pharmaceutical clusters with production facilities, R&D and educational centres, and facilitates localising imported drugs.
Today, Russia has about 10 pharmaceutical clusters in operation. The largest ones in the Tomsk and Kaluga regions provide jobs to more than 11,000 people each.
Investments by foreign pharmaceutical companies in various forms of localisation in Russia amounted to over 2 billion – since 2013, they have opened 20 production sites. Pfizer is running three localisation projects together with Russian partners, and one of the projects involves construction of a new plant.
In summer 2016, an agreement was signed between the government of the Kaluga Region and Novo Nordisk, a Danish pharma company, on the construction of a new shop for the assembly of FlexPen, pre-filled insulin pens, paving the way for the full-cycle production of modern insulins.
According to experts, Russia’s pharma industry has a significant export potential.
In 2016, the country’s pharma exports amounted to USD 540 million, up 2% year-on-year.
Nearly three quarters of Russian exports go to CIS countries, including Ukraine, Kazakhstan, Uzbekistan, Belarus and others. According to Frost & Sullivan, geographical diversification of Russia's exports may be expected in the near future, e. g. in January 2017, Russia supplied medicines for a total of USD 3.6 million to Ecuador.