PARSIPPANY, NJ, DECEMBER 3, 2012 –
Russia's rapidly growing over-the-counter market, posting a 12% increase to reach RUB 480 billion (USD 16.4 billion) at the manufacturers’ level in 2011, holds much potential for pharmaceutical companies. Although a slight decrease in growth was observed against the previous year, according to new analysis Emerging Markets Rx-to-OTC Switch: Forecasts and Opportunities by global consulting and research firm Kline & Company, the Russian market remains highly robust compared to the U.S. market’s 2.4% growth and comparable with the neighboring emerging market of China posting 15.0%.
The OTC drug segment in Russia accounts for a significantly larger share of sales compared to prescription medications claiming nearly 66% of the total pharmaceutical market. Similarly, the OTC segment posts a healthy 14.2% growth in 2011, while the prescription market, tempered by a decrease in state budget allocations, sees growth of a little under 9.0%.
Factors shaping current market dynamics in Russia are manifold, including an increase in medication costs. Equally of note is consumers’ growing purchasing power. Among the positive factors driving sales growth is the implementation of new regulations under the Pharma 2020 Strategy, a Russian pharmaceutical revitalization program. Specifically, this is attracting numerous pharmaceutical companies following the government's initiatives to modernize its national health care system and educate the public about illnesses and medicines.
Pharmaceutical innovations in Russia are largely driven by foreign companies, while local companies tend to focus on the manufacture of generic alternatives of innovative drugs. Local innovative brands claim only 20% of the market and one of Pharma 2020 Strategy’s goals is to increase the share to 50%. Nevertheless, the initiative is set to create and encourage opportunities for both foreign and local pharmaceutical companies.
There are some attractive prospects for Rx-to-OTC switch; however, the costs of pursuing approval can be daunting. With a lack of clear procedures for Rx-to-OTC switch set within Russia, one of the main criteria for the the Ministry of Health of the Russian Federation (Minzdrav) is whether the medication has gained OTC status in other countries. The challenge remains with the pharmaceutical industry to create new ways of meeting consumer needs, overcoming regulatory hurdles, and identifying which switch drugs will offer commercial success.
The Russian OTC market is estimated to increase by an approximate compound annual growth rate of 11.5% by 2016. Sales growth forecast for 2013 and beyond will come through price increases for products not included in the Vital and Essential Drugs List (EDL) and expansion of the Additional Medicines Supply (DLO) program which provides pensioners and low‐income families with free medicine.
The vast and growing Russian market offers much promise, but requires cautious assessment. For more information on key issues and implications regarding Rx-to-OTC switches and more in both Russia and China, inquire about Kline’s Emerging Markets Rx-to-OTC Switch: Forecasts and Opportunities. A web-based, interactive forecasting model which predicts switch probability and sales forecasts is also available to subscribers of this report.
Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for over 50 years. For more information, visit www.KlineGroup.com.