The Bear Awakens from Hibernation! Understanding the Current Size and Trends of the Russian OTC and Pharma Market
Recent developments have transformed Russia into one of the most enticing OTC and pharma markets in the world.
The last decade has proved to be relatively turbulent for the Russian economy and the Self-medication and Rx markets have been no exception. However, the last few years have provided much encouragement for those interested in this market, particularly due to the resilience of the market. As such it may be worth considering entering the market in Russia.
The state sector, comprising: regional hospital purchases, EDL list tenders accounts for 36% of the total drug volume in the Russian market, with the private sector naturally, accounting for the balance.The market has been expanding in recent years, with the highest rate of growth in purchases belonging to Healthcare Institutions (HCI) at 23,5%, representing a valuation of approximately 401 billion rubles.
While the value of purchases funded at a regional state level has remained relatively similar, federal expenditure has decreased by 16%. With the private purchases rising substantially.
This particular trend has largely been influenced by what appears to be a shift in the purchasing dynamics in the hospital drug segment. Indisputably, one of the most pivotal factors which have had an effect on the purchasing dynamics of the hospital segment in Russia has been the COVID-19 outbreak.
Having already experienced the inflationary consequences of the Russian economic downturn that symbolized the 2010s, many Russians rushed to stock up on drugs fearing the likelihood of rising prices. Naturally, after the fever pitch of spending subsided, the market itself became far more subdued, relying heavily on the sales of COVID-19 related essential drugs. This did, however, show the resilience of the market with drug volume falling only by 2,3%, while still growing in value by 10,6%.
When further dissected, this translated to a 4% contraction in the demand of drugs locally manufactured, and 3% of foreign origin. However, in terms of value, the market continues to grow with the locally manufactured drugs registering a growth of 13%, while foreign drug value also grew by 8% from the previous year in rubles.
Concerning the variation of drugs dispensed, the Rx market has risen to even greater prominence, accounting for roughly 67% of the total value of the market. In terms of volume, however, OTC drugs are preeminent, due to their more competitive pricing, constituting 54,9% of the market. It is worth noting that one of the fundamental reasons for these disparities in volume and value could also be lent to the avenues in which these respective drug segments are purchased. The vast majority (97% of total value) of OTC drugs are sold directly via pharmacies. Whereas Rx Drugs (roughly 90% of total value) are predominantly sold in the state segment through bid purchasing.
A deeper dive into the OTC market also reveals some noteworthy insights. For one, the branded drugs comprise 43,7% of the value while representing only 15,9% of the volume. Their value has seen a slight rise of 3%, as the state has become more actively involved in purchasing expensive medication. It is worth noting, however, that generic drugs do have the fastest growth rate at around 12% versus 8% for branded drugs. The Russian market has an additional overlapping designation, known as the Vital and Essential Drugs (VED). VEDs are drugs whose prices are regulated by the Federal government due to their importance. These drugs make up more than 50% of the market in terms of both value and volume.
Ultimately, in spite of the pandemic, the Russian pharma and OTC markets have experienced stable growth, further outlining the obstinacy of the market. As such it presents an alluring proposition for market entry for foreign players, regardless of their segmental persuasion. Get in contact with us to get more information on how you can expand into the Russian OTC and pharma market!