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Armenian Development

Agency

Russian, Georgian, Uzbek and Kazakhstani Market Research for Pharmaceutical Industry

When diet is wrong, medicine is of no use. When diet is correct, medicine is of no need. Ancient Ayurvedic Proverb

TABLE OF CONTENTS

LIST OF TABLES AND FIGURES ................................................................................................................. 4

Harmonized System Codes (HS Code) for Pharmaceutical Products ...................................................... 6

Fast Facts about Pharmaceutical Products ............................................................................................. 6

GLOBAL PHARMACEUTICAL INDUSTRY OVERVIEW ................................................................................ 7

INTRODUCTION ................................................................................................................................... 7

EXECUTIVE SUMMARY ........................................................................................................................ 7

MARKET OVERVIEW ............................................................................................................................ 8

GROWTH DRIVERS ............................................................................................................................ 11

PHARMACEUTICAL INDUSTRY LEADERS ........................................................................................... 12

EXTERNAL TRADE .............................................................................................................................. 14

R&D PRODUCTIVITY .......................................................................................................................... 15

REGULATORY REQUIREMENTS.......................................................................................................... 16

PRICING ............................................................................................................................................. 17

PATENT EXPIRIES AND GENERICISATION .......................................................................................... 19

BUILDING TRUST ............................................................................................................................... 20

FORECAST .......................................................................................................................................... 20

CONCLUSION ..................................................................................................................................... 21

REFERENCES ...................................................................................................................................... 22

PHARMACEUTICAL INDUSTRY IN RUSSIA .............................................................................................. 23

EXECUTIVE SUMMARY ...................................................................................................................... 23

MARKET OVERVIEW .......................................................................................................................... 24

FOREIGN TRADE ................................................................................................................................ 30

INVESTMENT ..................................................................................................................................... 31

PRICES ............................................................................................................................................... 31

CITY KEY TRENDS ............................................................................................................................... 32

OTC REGISTRATION AND CLASSIFICATION ....................................................................................... 38

VITAMINS AND DIETARY SUPPLEMENTS REGISTRATION AND CLASSIFICATION .............................. 44

SELF-MEDICATION/SELF-CARE AND PREVENTATIVE MEDICINE ....................................................... 48

FORECAST .......................................................................................................................................... 48

REFERENCES ...................................................................................................................................... 52

PHARMACEUTICAL INDUSTRY IN GEORGIA .......................................................................................... 53


MARKET OVERVIEW .......................................................................................................................... 54


FOREIGN TRADE ................................................................................................................................ 63

PRICES ............................................................................................................................................... 66




FORECAST .......................................................................................................................................... 72

REFERENCES ...................................................................................................................................... 73

PHARMACEUTICAL INDUSTRY IN UZBEKISTAN ..................................................................................... 74


MARKET OVERVIEW .......................................................................................................................... 75

FOREIGN TRADE ................................................................................................................................ 80

INVESTMENT ..................................................................................................................................... 82




FORECAST .......................................................................................................................................... 86

REFERENCES ...................................................................................................................................... 87

PHARMACEUTICAL INDUSTRY IN KAZAKHSTAN.................................................................................... 88


MARKET OVERVIEW .......................................................................................................................... 88

FOREIGN TRADE ................................................................................................................................ 94

INVESTMENT ..................................................................................................................................... 94



SELF-MEDICATION/SELF-CARE AND PREVENTATIVE MEDICINE ..................................................... 101

FORECAST ........................................................................................................................................ 102

REFERENCES .................................................................................................................................... 102


LIST OF TABLES AND FIGURES

1. GLOBAL PHARMACEUTICAL INDUSTRY OVERVIEW

Pie Chart 1. Share of Global Pharmaceutical Market for 2010 Bar Chart 1. Top Pharmaceutical Expenditure in GDP by Country in 2009, % Table 1. Consumer Expenditure on Pharmaceutical Products, Medical Appliances and Equipment Table 2. Production of Pharmaceuticals and Medicinal Chemicals by Countries Table 3. Top 25 Global Pharmaceutical Companies by 2011 Sales Table 4. Exports of Medicinal and Pharmaceutical Products Table 5. Imports of Medicinal and Pharmaceutical Products

2. PHARMACEUTICAL INDUSTRY IN RUSSIA

Table 6. Pharmaceutical Market Sizes in Russia Table 7. Production of Pharmaceuticals and Medicinal Chemicals in Russia Table 8. Sales of Consumer Health by Category in Russia Table 9. Sales of Consumer Health by City of Russia Table 10. Sales of Consumer Health by Distribution Format in Russia Table 11. Consumer Expenditure on Health Goods and Medical Services in Russia Table 12. Consumer Health Company Shares of Russia Table 13. Consumer Heath Brand Shares in Russia Table 14. Russia's Foreign Trade of Medicinal Agents Table 15. Investment in Health Care in Russia Table 16. Forecast Sales of Consumer Health by Category in Russia Table 17. Forecast Sales of Consumer Health by City of Russia

3. PHARMACEUTICAL INDUSTRY IN GEORGIA

Table 18. Production of Pharmaceuticals and Medicinal Chemicals in Georgia Table 19. Sales of Consumer Health by Category in Georgia Table 20. Sales of Consumer Health by Distribution Format in Georgia Table 21. Consumer Expenditure on Health Goods and Medical Services in Georgia Table 22. Consumer Health Company Shares of Georgia Table 23. Consumer Heath Brand Shares in Georgia Table 24. Georgia's Exports of Medicinal and Pharmaceutical Products Table 25. Georgia's Imports of Medicinal and Pharmaceutical Products Graph 1. FDI in Health and Social Work in Georgia Table 26. Forecast Sales of Consumer Health by Category in Georgia

4. PHARMACEUTICAL INDUSTRY IN UZBEKISTAN

Bar Chart 2. Manufacturing Output of Pharmaceutical Industry in Uzbekistan Pie Chart 2. Composition of Output of Main Medical Drugs in Uzbekistan for 2009 Table 27. Sales of Consumer Health by Category in Uzbekistan Table 28. Sales of Consumer Health by Distribution Format in Uzbekistan Table 29. Consumer Expenditure on Health Goods and Medical Services in Uzbekistan Table 30. Consumer Health Company Shares of Uzbekistan Table 31. Consumer Heath Brand Shares in Uzbekistan


Table 32. Imports of Pharmaceutical Products of Uzbekistan Table 33. Forecast Sales of Consumer Health by Category in Uzbekistan

5. PHARMACEUTICAL INDUSTRY IN KAZAKHSTAN

Table 34. Production of Pharmaceuticals and Medicinal Chemicals in Kazakhstan Table 35. Sales of Consumer Health by Category in Kazakhstan Table 36. Sales of Consumer Health by Distribution Format in Kazakhstan Table 37. Consumer Expenditure on Health Goods and Medical Services in Kazakhstan Table 38. Consumer Health Company Shares of Kazakhstan Table 39. Consumer Heath Brand Shares in Kazakhstan Table 40. Exports of Medicinal and Pharmaceutical Products in Kazakhstan Table 41. Imports of Medicinal and Pharmaceutical Products in Kazakhstan Table 42. Forecast Sales of Consumer Health by Category in Kazakhstan


Harmonized System Codes (HS Code) for Pharmaceutical Products

30 PHARMACEUTICAL PRODUCTS

3001 glands etc dry and ext, heparin, hum etc. subst nesoi

3002 human blood, animal blood, antisera, vaccines etc.

3003 medicaments nesoi of mixtures, not dosage etc. form

3004 medicaments nesoi, mixed or not, in dosage etc. fm

3005 bandages etc. coated etc. or in retail medic etc. fm

3006 pharmaceutical goods (specified sterile prod etc.)

Fast Facts about Pharmaceutical Products

It takes 10-15 years to develop a medicine or vaccine.

The research-based pharmaceutical industry currently spends over USD 100

billion (EUR 75 billion) on R&D.

It costs in average of USD 1.38 billion to develop a single medicine.

Nearly 20% of the world's top medicines were discovered and developed in

Britain.

In world terms, the UK industry has 9% of pharmaceutical R&D expenditure:

only the USA (49%) and Japan (15%) are ahead.

http://www.foreign-trade.com/reference/hscode.cfm?code=30








GLOBAL PHARMACEUTICAL INDUSTRY OVERVIEW

INTRODUCTION

PHARMACEUTICAL INDUSTRY The pharmaceutical industry deals with the study,

development, mass production and distribution of the medicinal agent designed for

prophylaxis, pain relief and disease treatment.

TYPES OF MEDICINAL AGENTS The medicaments are included in the following two

categories: (1) prescription and (2) over-the-counter drugs. Usually no advertising campaign

is implemented for the prescription drugs. As a rule, these medicaments are introduced

with the patients by their doctors. And the patients can get them only when possessing the

doctor’s prescription. The over-the-counter drugs can be bought without any prescription.

Aspirin, cough medicine and others can be set as an example for over-the-counter drugs.

These medicaments relieve temporal pains and cure minor ailments.

PRODUCTION OF A NEW MEDICAMENT There is no a standing rule for a successful

development of a new product. Usually the developers of medicaments start to operate as

soon as there is a well-devised program and precisely defined aim. The production of a new

pharmaceutical includes the following three procedures: (1) study, (2) development and

production, (3) sale.

NAME OF A NEW MEDICAMENT The name of a new pharmaceutical is as much

important as to produce it. As a rule, a medicament has three names: (1) chemical name,

which defines its chemical composition (the chemical name of aspirin is “2-actoxybenzoic

acid”), (2) general name, which is the non-proprietary name of a medicament (the generic

name of aspirin is “Acetylsalicylic acid”), and (3) trade name, which enables a patient to

recognize the medicament (“Aspirin”).

EXECUTIVE SUMMARY Today pharmaceuticals have become an indispensable part of health care system around

the globe. Historically pharmaceuticals have played a vital role in the human development

by improving the quality of life and reducing the time spent in the hospitals. Thanks to

innovative pharmaceutical industry that almost all epidemics and chronic diseases are

curable today. Due to its direct link with the welfare and wellbeing of human beings,

pharmaceutical industry is of strategic importance for the development of a healthy and


productive nation. Nowadays, pharmaceutical industry is considered to be one of the largest

and rapidly growing global industries. It is a major source of employment generation and

foreign exchange earnings for many countries around the globe. However, despite all these

extraordinary achievements it’s a harsh reality that every year millions of people die across

the world, mostly in low income developing countries, due to unavailability and

inaccessibility of necessary medicines. According to the World Health Organization (WHO),

on average, 30% of the world population lacks access to life-saving medicines; whereas, in

some countries in Asia and Africa, the number may be as high as 50%.

Many developing countries have insufficient or no manufacturing capacities in the

pharmaceutical industry. Consequently, medicines are neither available nor accessible to a

large fraction of population and hundreds and thousands of people die of preventable and

treatable diseases.

MARKET OVERVIEW MARKET DATA The world pharmaceutical market grew by 4.5% in 2011. Average revenue

growth in established markets was 2.8% while that in emerging markets was over 4 times

higher at 12%. The top five pharmaceutical markets in the world remained the USA, Japan,

Germany, France and China, with the US representing 38.1% of global prescription

pharmaceutical sales (2010: 38.5%). While demand for medicines and world pharmaceutical

markets continued to grow in 2011, research-based pharmaceutical companies faced a

challenging marketplace. Industry returns are under pressure from declining R&D

productivity and intensifying pricing pressures, particularly in Established Markets facing

rising healthcare costs. We also face increased competition from generic medicines as some

of the world’s most successful drugs come off patent. In addition, greater regulatory

constraints are being placed on the pharmaceutical industry by governments and those who

pay for our medicines.

The industry remains highly competitive. Our competitors are other large research-based

pharmaceutical companies that develop and sell innovative, patent-protected prescription

medicines and vaccines, as well as smaller biotechnology and vaccine companies, and

companies that produce generic medicines. While many of our peers are confronting similar

challenges, strategically these challenges are being met in different ways. For example,

some companies have chosen to diversify by acquiring or building branded generics


businesses or consumer portfolios, arguing that this enables them to better meet changing

customer needs and smooth risk for shareholders.

Most companies continued to pursue their existing strategies in 2011, with some continuing

to diversify and others pursuing a focused strategy. There were, however, exceptions with

examples of companies shedding diversified assets. Key trends included efforts to improve

R&D productivity, expansion of geographic scope, especially in Emerging Markets and Japan,

and the pursuit of operational efficiency. Industry consolidation continued with both merger

activity and acquisitions of specific assets and capabilities.

The global pharmaceutical industry, after experiencing a shrink during the past 2-3 years, is

now in its recovery period, which will be followed by its growth. Decline in global

pharmaceutical market was largely due to the economic recession. Meanwhile,

pharmaceutical markets in some developing regions, like Asia and Latin America have been

continuously witnessing huge growth rate for the last few years on account of increasing

prevalence of diseases, rising healthcare spending, and increasing affordability. United

States is still the largest pharmaceutical market in the world with a market size of around

USD 300 billion and it is expected to reach USD 370 to USD 390 billion by 2015 (see the pie

chart below).

Source: www.businessvibes.com

33%

30%

18%

7%6%

2% 2% 1% 1%

Pie Chart 1. Share of Global Pharmaceutical Market for 2010

USA Europe Japan

Latin America China Middle East

Australia Canada Africa

http://www.businessvibes.com/industryportal/135/Pharmaceuticals

http://www.businessvibes.com/


Today’s major pharmaceutical markets, consisting of 17 countries, are slated to grow in the

range of 15-17% in 2012, representing sales of USD 170-180 billion. China, which is now the

third largest market in the world, is expected to grow 25-27% to more than USD 50 billion in

2012. As far as developed markets are concerned, Japan is slated to grow 5-7% in 2012.

Major European markets like the UK, Germany, France, Italy and Spain are expected to

deliver combined growth of 13%.

In 2009, the USA was a global leader in pharmaceutical expenditure in GDP with 2.14%. The

bar chart below represents the top leader countries in pharmaceutical expenditure in GDP

for 2009.

Source: www.businessvibes.com

The data of consumer expenditure on pharmaceutical products, medical appliances and

equipment are displayed in the table below.

Table 1. Consumer Expenditure on Pharmaceutical Products, Medical Appliances and Equipment

mln USD

Country 2006 2007 2008 2009 2010 2011 WORLD 677492.5 753760.0 831961.9 865376.1 954592.7 1061056.8

USA 320890.2 340695.1 352307.1 366235.8 384350.3 410189.0 China 36916.6 43621.9 53718.5 74949.6 90537.0 112497.7 Japan 38107.9 36509.9 44897.0 53269.5 65428.9 72703.4

Germany 25981.7 29207.5 33649.2 31667.8 31709.5 34497.8 France 20042.2 22745.1 25946.5 25159.9 24522.3 26474.9 Canada 14766.4 17009.8 17926.8 17527.8 20341.7 22431.4 Russia 8748.8 11908.7 15883.2 14591.8 17766.0 22227.1 Italy 15832.3 17540.4 19163.6 17646.0 17007.2 18375.6

Switzerland 7680.2 7973.8 10245.2 10396.2 12334.1 15127.7 UK 13439.3 15367.5 14265.7 12635.9 12407.8 13316.8

2.14

1.58

1.54

1.53

1.28

USA

Japan

Spain

France

Belgium

Bar Chart 1. Top Pharmaceutical Expenditure in GDP by Country in 2009, %

http://www.businessvibes.com/industryportal/135/Pharmaceuticals

http://www.businessvibes.com/


Spain 8099.4 9599.9 10939.5 10346.7 10099.7 10701.8

Source: www.portal.euromonitor.com

The figures in the table above prove that the world consumer expenditure on

pharmaceutical products, medical appliances and equipment is growing steadily: an 11.2%

growth in 2011 over the 2010 record. The figures prove the growing trend in consumer

expenditures of this category as the world population has a growing trend. USA, China and

Japan are in the first, second and third place respectively.

PRODUCTION According to Euromonitor data, in 2011, China has exceeded its production

of pharmaceuticals and medicinal chemicals excelling even the USA production (by circa

9.2%). Japan has demonstrated a stable growth as the time series show: a 4.3% growth in

2010 over the 2009 record, and a 9.5% growth in 2011 over the 2010 record.

Table 2. Production of Pharmaceuticals and Medicinal Chemicals by Countries

mln USD

Country 2006 2007 2008 2009 2010 2011 China 71694.7 92582.2 119343.7 134128.5 159419.7 189005.7 USA 193194 184801.6 173401.6 163905.3 168072.1 173594.2

Japan 58181.6 59371.9 66883.8 67402.6 70322.5 77690.9 France 48936.8 54778.1 60290 59602.3 59513.2 65848.7

Germany 42597.4 49693.0 52563.9 46645.4 44316.8 49526.4 UK 32116.4 37105.4 35816.5 32424.7 34252.3 37489.8

Italy 30468.5 35411.7 36905.6 31984.1 31345.5 33786.7 Spain 15815.4 18589.5 23379.5 23063.6 21348.9 22949.6


GROWTH DRIVERS EXPANDING PATIENT POPULATIONS The world population has already passed 7 billion in

2011, increasing from 6 billion in 1998 and is expected to reach 9 billion by 2050. In

addition, the number of people who can access healthcare continues to increase,

particularly among the elderly. Globally, it is estimated that the number of people over 65

will be almost one billion by 2030, double what it was in 2005.

Faster-developing economies, such as China, India and Brazil, offer new opportunities for

the pharmaceutical industry to help an expanding number of patients who can benefit from

innovative medicines. Emerging markets now represent approximately 85% of the world

http://www.portal.euromonitor.com/



population. In addition, pharmaceutical revenues in those markets grew significantly faster

than those in established markets in 2011 and it is estimated that this trend will continue.

UNMET MEDICAL NEED In most established markets, ageing populations and certain

lifestyle choices such as smoking, poor diet and lack of exercise drive an increased incidence

of chronic diseases such as cancer, cardiovascular/metabolic and respiratory diseases which

require long-term management. The prevalence of chronic disease is increasing in middle

income countries and is also beginning to have an impact in low income countries. For

example, there are 36 million deaths every year from non-communicable diseases and, of

those, 80% are in lower and middle income countries. It is estimated that nearly 33% of the

world’s diabetes patients will come from India and China by 2030.

ADVANCES IN SCIENCE AND TECHNOLOGY Innovation leading to new drugs is critical to

meeting unmet medical need. Existing drugs will continue to be important in meeting the

growing demand for healthcare, particularly with the increasing use of generic medication.

At the same time, advances in disease understanding and the application of new

technologies will be required to ensure the delivery of new medicines. Such approaches

include personalized healthcare and predictive science as well as new types of therapy.

With advances in the technologies for the design and testing of novel compounds, new

opportunities exist for the use of innovative small molecules as new medicines. The use of

large molecules, or biologics, has also become an important source of innovation, with

biologics among the most commercially successful new products. Forecasts for 2016 predict

that of the world’s top 100 pharmaceutical products, 45% of sales will come from biologics.

This compares with only 33% in 2010 and 15% in 2002. Most pharmaceutical companies

now pursue both small molecules and biologics R&D.

PHARMACEUTICAL INDUSTRY LEADERS For 2011, the pharmaceutical industry analysts list the top industry leaders as Pfizer,

Novartis, Merck & Co, Sanofi-Aventis, Roche, GlaxoSmithKline, AstraZeneca, Johnson &

Johnson, Abbott, Eli Lilly and Bristol-Myers Squibb.

Headquartered in New York, Pfizer has over 110,000 employees and is the leading research-

based pharmaceutical company worldwide. Pfizer reported a 36% rise in revenue for 2010.

This is largely thanks to its acquisition of competitor Wyeth, which Pfizer purchased for USD

68 billion. Pfizer manufactures the 2010 number-one selling prescription drug in the US,


Lipitor. Sales for Lipitor reached USD 7.2 billion in 2010 and represented 18% of the

company’s biopharmaceutical revenue. Lipitor is used to treat patients with raised levels of

cholesterol. Pfizer also acquired King Pharmaceuticals in 2010 at the cost of USD 3.6 billion.

King manufactures various medications for use in pain management, a market worth USD 22

billion. King products that will likely boost Pfizer sales include Embeda and Remoxy, which

are painkillers that pose less risk of addiction than other offerings on the market. Emeda

sales for the six-month period following its launch reached sales of almost USD 24 million.

Swiss-based Novartis was established in 1996 with the merger of Sandoz and Ciba-Geigy.

Among its well-known drugs are Gleevic, used in the treatment of chronic myeloid leukemia.

In one of its initiatives, Novartis supplied Gleevic to 27,000 patients spanning 80 countries.

In 2010, Novartis’s Gilenya was approved in the US by the FDA and also in Russia and

Switzerland. Gilenya is the first oral treatment used in the treatment of relapse-remitting

multiple sclerosis. In the second quarter of 2011, Novartis saw its net sales grow 27% to

almost USD 15 billion. Its core operating income increased 29% to USD 4.2 billion.

The following table represents the pharmaceutical company sales by country for 2011.

Table 3. Top 25 Global Pharmaceutical Companies by 2011 Sales

Country Ticker Company bln USD USA PFE Pfizer 57,70

Switzerland NVS Novartis 54,00 USA MRK Merck & Co 41,30

France SNY Sanofi-Aventis 37,00 Switzerland RHHBY Roche 34,90

UK GSK GlaxoSmithKline 34,40 UK AZN AstraZeneca 33,60

USA JNJ Johnson & Johnson 24,40 USA ABT Abbott 22,40 USA LLY Eli Lilly 21,90 USA BMY Brystol-Myers Squibb 21,20

Israel TEVA Teva 16,70 USA AMGN Amgen 15,30

Japan TKPYY Takeda 15,20 Germany N/A Boehringer Ingelheim 13,80 Germany BAYRY Bayer 12,80

Japan DSNKY Daiichi Sankyo 11,60 Denmark NVO Novo Nordisk 11,50

Japan ALPMY Astellas 11,40


USA GILD Gilead Sciences 8,10

Japan OTSKY Otsuka 7,40 Germany MKGAY Merck KGaA 7,20

USA BAX Baxter International 6,10 USA MYL Mylan 5,50

France N/A Servier 5,00 Source: Pharmaceutical Executive

The American Pfizer and Merck companies take the first and third places with the sales of

USD 57.7 and 41.3 billion respectively. The Swiss Novartis company is in the second place

with the sales of USD 54.0 billion.

EXTERNAL TRADE EXPORTS Top three leaders in exports of medicinal and pharmaceutical products are

Germany, Switzerland and Belgium. Despite the world leader in pharmaceutical and

medicinal chemical production is China, the leader in exports is Germany. The most famous

German pharmaceutical companies are Boehringer Ingelheim, Bayer and Merck KGaA.

Table 4. Exports of Medicinal and Pharmaceutical Products

mln USD

Country 2006 2007 2008 2009 2010 2011 Germany 44963.7 55311.1 66722.1 63732.7 65335.2 69416.6

Switzerland 29872.7 34700.3 42118.5 43960.8 47612.2 54967.8 Belgium 38114.5 47394.2 50225.7 52278.9 51214.9 49772.0

USA 28794.1 32968.1 37711.8 44055.6 44437.0 42954.2 Ireland 17897.6 20205.0 24520.0 29981.8 32120.6 36723.5

UK 25425.6 29086.0 32073.1 32046.7 34367.4 36297.3 France 25186.3 28853.8 33973.0 35078.4 34672.8 33974.5

Italy 14053.4 15647.3 16696.2 16057.9 17591.1 20410.7 Netherlands 12620.7 15200.9 10448.5 11835.6 13873.6 15942.7

Spain 7570.6 9632.3 11288.7 10863.1 11754.2 14498.1 China 4488.2 5992.0 8079.3 8615.7 10685.1 11815.6


IMPORTS The list of medicinal and pharmaceutical product importers is represented below.

Table 5. Imports of Medicinal and Pharmaceutical Products

mln USD

Country 2006 2007 2008 2009 2010 2011 USA 44654.7 52344.9 58175.9 58569.1 63784.7 68220.0

Germany 34636.7 40806.1 45959.9 46049.5 46824.5 51370.9



Belgium 35243.4 41445.5 43962.1 43722.6 42712.4 36807.7 France 19199.9 22793.5 25546.8 28188.5 28792.2 30083.6

UK 16860.1 20360.8 21020.6 21041.4 23902.4 26504.1 Italy 15702.6 18178.4 20273.4 21382.8 21698.2 25048.4

Japan 8517.5 9144.4 10997.2 14204.0 17352.0 21545.5 Switzerland 13804.9 15864.1 16789.3 16558.9 17893.0 21309.1

Spain 9514.4 11975.8 15203.2 17173.4 15161.7 17852.2 Netherlands 12831.6 16342.8 12730.7 12213.4 12340.9 14030.9

Canada 9533.0 10527.6 11227.8 12067.3 12320.7 13091.8 China 2716.3 3889.1 5528.1 6688.2 8018.4 11282.6


USA, Germany and Belgium are the top importers of pharmaceutical and medicinal products

despite the import volumes of Belgium have begun decreasing since 2009.

R&D PRODUCTIVITY Improving R&D productivity is a critical challenge for the pharmaceutical industry. Global

investment in pharmaceutical R&D by the top 500 pharmaceutical and biotech companies

reached an estimated USD 133 billion in 2011, a 93% increase from USD 69 billion in 2002.

Over the same period, the number of new drug launches per year in the US stayed broadly

the same. Increasing investment has not resulted in a sustained increase in output yet,

although the FDA approved 30 new drugs in 2011. At the same time, there appears to be a

shift away from regulatory submissions for broad primary care medicines to more specialist

drugs treating, for example, more complex diseases, together with orphan drugs for rare

medical conditions.

To ensure it delivers a sustainable return on its R&D investment, the industry is working to

increase its probability of success in developing commercially viable new drugs and moving

to a lower, more flexible cost base. It does so at a time when regulators and payers are

demanding more and better evidence of comparative effectiveness of compounds, which

lengthens development times and increases development costs.

Using the full range of innovative technologies, the industry is focused on two critical

milestones: proof of concept, which delivers candidate drugs with supporting data

demonstrating that the drug results in a clinical change with an acceptable endpoint or

surrogate in patients with the disease and, secondly, product approval.

Organizationally, companies are addressing productivity challenges in a variety of ways.

These include:



• focusing on a defined set of therapeutic areas and exiting those where success

has been poor;

• restructuring R&D organizations to create clearer accountabilities and smaller,

more entrepreneurial units;

• revamping decision making and governance, so that unsuccessful compounds

are identified early, before significant costs have been incurred;

• reducing costs and improving process efficiency, using lean business

improvement tools such as Six Sigma1 and outsourcing;

• a collaboration-centric business model that includes academic collaborations

and co-development agreements that provide for the sharing of development

risks and costs with third parties;

• looking externally for high quality science, technologies, targets, drug

candidates and/or entire drug pipelines.

REGULATORY REQUIREMENTS The pharmaceutical industry continues to be one of the most heavily regulated. This reflects

public interest in ensuring access to safe, effective and high quality medicines that are

responsibly promoted.

Efforts to harmonize regulations globally are ongoing, yet the number of regulations and

their impact continue to multiply. This is particularly evident in the conduct of clinical trials.

In order to support the registration of medical products in a given regulatory jurisdiction,

programs providing foreign clinical trial data must meet each individual health authority’s

requirements to ensure relevance to their population. Regulators also continue to redefine

their patient safety assessment processes. This includes the management of known and

emerging risks, both before and after product approval. In certain markets, additional safety

initiatives are developing locally which operate independently of already established

international standards, further increasing the complexity and disharmony of drug safety

monitoring and reporting. In addition, the growing complexity and globalization, of both

clinical studies and the manufacturing supply chain, has led to an increase in cross-regional

health authority collaborations and inspections in these areas.

1 Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes.

http://en.wikipedia.org/wiki/Statistical_dispersion

http://en.wikipedia.org/wiki/Manufacturing

http://en.wikipedia.org/wiki/Business_process


Public demand for access to data, especially clinical data, to understand how health

authorities arrive at their regulatory decisions, has resulted in numerous transparency

proposals worldwide. In some instances, policies have been implemented without

guidelines that define personal, private and proprietary information. Thus there can be no

assurance that the data will be safeguarded against public disclosure.

There is mounting pressure from both health technology assessors and payers to assess not

only the safety of our products but also their relative effectiveness and value. Consequently

there is a heightened interest by health authorities in both the comparative clinical

effectiveness and the ongoing benefit/risk assessment of pharmaceuticals after approval.

The regulatory landscape is evolving with an increased focus on incorporating validated

health outcome quality measures into clinical trials and developing clinical comparative

evidence.

In spite of the challenges, regulators are approving drugs that address unmet medical needs

when supported by strong data and compelling benefit/risk propositions. In addition, health

authorities are increasing their collaboration with external stakeholders to drive innovation,

define and clarify approval requirements for personalized healthcare and drug-diagnostic

combinations and to accelerate the development of treatments that address public health

priorities.

PRICING The pricing of medicaments depends on numerous factors including development costs,

research costs and similarities to other medical agents in market, improvement upon other

pharmaceuticals and who are buying them. Hospitals and government organizations, such

as the military and Medicaid are able to negotiate the lowest prices because of their power

and volume that they buy the goods. Medicaid supports an immense amount of low wage

workers in the US and as a result pays for nearly 20% of all drugs sold in the US.

Most pharmaceutical sales continue to be generated in highly regulated markets where

governments and private payers, such as insurance companies, exert various levels of

control on pricing and reimbursement. Cost containment in healthcare, including

containment of pharmaceutical spending, continues to be a focus and the global economic

downturn has enhanced this trend. As a consequence, the pricing and reimbursement

environments in many markets continue to be highly dynamic. It is increasingly important


for companies to work with governments to promote innovation, while ensuring they

achieve adequate commercial returns.

Pricing pressures have arisen in the pharmaceutical industry in a number of ways in recent

years, particularly through the implementation of a variety of regulatory drug price control

mechanisms and other reforms. For example, in Europe, mandatory discounts have been

applied in Italy. In Germany, Europe’s largest pharmaceutical market, there have been

freezes on permitted pharmaceutical prices. In addition, recent German healthcare reforms

have transformed the way in which new patent protected drugs are assessed. There is no

longer a free market for the pricing and reimbursement for such drugs. Instead, the law in

Germany now requires manufacturers to prove the additional benefit of their drugs over

existing alternatives and demonstrate their value to regulators and payers. Only by showing

additional benefit can create opportunities for the drug to be transferred to the German

reference pricing system, where, for each drug group, a single reimbursement level or

reference price is set.

China has experienced 26 rounds of cuts to the maximum permitted retail drug prices in the

last seven years and in Japan and South Korea biennial cuts are expected to continue. We

are also seeing the introduction of fixed hospital tariffs, which can act as a method of

controlling drug costs by incentivizing hospitals to choose cheaper generic alternatives.

In the US, the Affordable Care Act (Act) has already had a direct impact on healthcare

activities despite the fact that many of the healthcare coverage expansion provisions of the

Act do not take effect until 2014. For example, there has been an increase in drug rebates

and discounts. The pharmaceutical industry, including AstraZeneca, has continued to show

its commitment to expanding access to government healthcare programs through, for

example, helping to close the coverage gap in the Medicare Part D2 prescription drug

program and by paying an annual industry fee. The industry is working with policymakers

and regulators during the implementation of healthcare reform with a view to ensuring that

they strike a balance between containing costs, while also promoting an environment that

fosters medical innovation.

2 Medicare Part D, also called the Medicare prescription drug benefit, is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the US.

http://en.wikipedia.org/wiki/Subsidy

http://en.wikipedia.org/wiki/Prescription_drug

http://en.wikipedia.org/wiki/Medicare_(United_States)


PATENT EXPIRIES AND GENERICISATION Over the next few years some of the biggest selling drugs the industry has ever produced

face patent expiry. As a consequence, payers, physicians and patients in established markets

will have low price, generic alternatives in many important classes of primary care drugs. For

example, in the US, generics constitute 80% of the market by volume today and are

expected to be the single largest driver of value growth up to 2015.

Patents only protect pharmaceutical products for a finite period and the expiry or early loss

of patents may lead to the availability of generics. Generic versions of drugs are very

competitive with significantly lower pricing than the innovator equivalents. This is partly due

to lower investment by generic manufacturers in R&D and market development which

generic manufacturers do not need to recover. While generic competition has traditionally

occurred when patents expire, it can also occur where the validity of patents is disputed or

successfully challenged before expiry. Such early challenges by generics have increased with

generic companies increasingly willing to launch products “at risk”, for example, prior to

resolution of the relevant patent litigation. This trend is likely to continue, resulting in

significant market presence for the generic version during the period in which litigation

remains unresolved, even though the courts may subsequently rule that the innovative

product is properly protected by a valid patent. The unpredictable nature of patent litigation

has led innovators to seek to settle such challenges on terms acceptable to both innovator

and generic manufacturer. However, some competition authorities have sought to challenge

the scope or even availability of this type of settlement agreement.

Biologics have sustained longer life-cycles than traditional pharmaceuticals and have faced

less generic competition. This is due to a more complex manufacturing process for biologics

compared with small molecule medicines and the inherent difficulties in producing a copy of

a biologic, or biosimilar3, which is sufficiently similar to the innovator to meet regulatory

requirements. However, with regulatory authorities in Europe and the US continuing to

implement abbreviated approvals processes for biosimilar versions, biologics are becoming

subject to competition from biosimilars and other follow-on biologics.

3 Biosimilars are bio pharmaceuticals whose active drug substance are made by a living organism or derived from a living organism by means of recombinant DNA or controlled gene expression methods.


BUILDING TRUST The pharmaceutical industry faces a challenge in building and maintaining trust, particularly

with governments and regulators. The last 10 years have seen a significant increase in the

number of settlements between innovator companies and governmental and regulatory

authorities for violations of a variety of laws. These include breaches of sales and marketing

practices, inducements of physicians to administer a company’s products and breaches of

anti-trust legislation. For some audiences, there is a perception that pharmaceutical

companies place their commercial goals above the interests of patients, physicians and

payers. Companies are taking steps to change this perception by embedding a culture of

ethics and integrity, adopting higher standards of governance and improving relationships

with employees, shareholders and other stakeholders.

FORECAST The global pharmaceutical industry is expected to be worth more than USD 1 trillion in

2014, marking a 5% compound annual growth rate according to research from Urch

Publishing.

The pharmaceutical market worldwide, after experiencing a slump during the past 2-3 years,

is now in its recovery period, which will be followed by its growth. Decline in global

pharmaceutical market was largely due to the economic slowdown and further aggravated

by patent expiry of key blockbusters together with saturation in key pharmaceutical

markets, such as the US and Western Europe. Meanwhile, pharmaceutical markets in some

developing regions, like Asia and Latin America have been continuously witnessing robust

growth rate for the last few years on account of increasing prevalence of diseases, rising

healthcare spending and increasing affordability. Overall, these markets will enjoy good

growth potential in coming few years.

According to the latest research “Global Pharmaceutical Market Forecast to 2012”, global

pharmaceutical industry is projected to grow at a CAGR of around 6.5% during 2011-2013.

The growth will be driven by low cost factor, increasing prevalence of diseases worldwide,

and rising per capita income of consumers. The sales of generic drugs will emerge as the

most prominent segment of the pharmaceutical market during the forecast period,

indicating large opportunities for generics manufacturers to tap.

http://www.reportlinker.com/p0324841-summary/Pharmaceutical-Market-Trends--Key-market-forecasts-growth-opportunities-Edition.html




Some regional level analysis found that the pharmaceutical industry is growing at a rapid

rate in emerging countries, such as India, China, Brazil, Russia, while a slowdown in the

growth has been encountered in the US and Western European countries.

CONCLUSION The market for pharmaceutical goods is increasing due to an aging global population,

advances in drug-based treatment research, increased investment in healthcare and

consumer-driven private health coverage and rising numbers of patients suffering from

cardiovascular disease, cancer and degenerative diseases. Market growth faces particular

challenges such as price pressures, strict regulation, lawsuits and expiring patents.

Expiring patents are paving the way for generic drugs to produce cheaper versions of

blockbuster drugs, cutting into pharmaceutical company profits. Many leading drugs on the

market are to see their patents expire over the next 5 years. According to many industry

reports, the patents for 10 top selling drugs will expire by 2013; namely, they are Lipitor,

Plavix, Seroquel, Actos, Enbrel, Singulair, Levaquin, Zyprexa, Concerta and Protonix.

Despite showing rapid growth over the years, global pharmaceutical industry remained

highly concentrated in the developed countries, which dominate the global pharmaceutical

production, consumption and trade. Although some developing countries emerged as major

contributor, the share of developing countries in global pharmaceutical industry remained

very low.

To this end, the following related concluding remarks can be made:

• Pharmaceutical production requires skilled human resources like scientists,

pharmacists, biologists and lab technicians. For this very reason, the future

professionals and experts in medicine should be provided with appropriate knowledge

and skills.

• Pharmaceutical industry relies heavily on research and development (R&D) activities.

Hence proper R&D facilities should be built and researchers and technicians should be

provided with necessary financial resources to develop an innovative pharmaceutical

industry.


REFERENCES www.portal.euromonitor.com

http://www.imeche.org/knowledge/industries/process-industries/pharmaceuticals/facts-and-figures

http://www.businessvibes.com/blog/industry-insight-global-pharmaceutical-industry

http://topforeignstocks.com/2012/10/31/the-top-25-pharmaceutical-companies-by-2011-sales/

http://www.dsm.ru/content/file/1306924994.pdf

http://www.pharmexpert.ru/en/analytics/48/?y=2011

http://www.duke.edu/web/soc142/team2/political.html

http://www.researchandmarkets.com/reports/656457/global_pharmaceutical_market_forecast_to_2012

http://www.reportlinker.com/ci02257/Pharmaceutical.html

http://www.astrazeneca-annualreports.com/2011/our_strategy_and_performance/the_pharmaceutical_industry

http://www.foreign-trade.com/reference/hscode.cfm?cat=5




http://www.businessvibes.com/blog/industry-insight-global-pharmaceutical-industry

http://topforeignstocks.com/2012/10/31/the-top-25-pharmaceutical-companies-by-2011-sales/

http://www.pharmexpert.ru/en/analytics/48/?y=2011

http://www.duke.edu/web/soc142/team2/political.html



http://www.reportlinker.com/ci02257/Pharmaceutical.html



http://www.foreign-trade.com/reference/hscode.cfm?cat=5


PHARMACEUTICAL INDUSTRY IN RUSSIA

EXECUTIVE SUMMARY The Russian pharmaceutical market comprises 2 basic segments: commercial segment and

state segment. The commercial segment of pharmaceutical industry includes the sales of

ready-to-use medicinal agents and parapharmaceuticals4 excluding the sales within the

framework of state reimbursement program. The state segment of pharmaceutical industry

implies the sales of ready-to-use medicinal agents, parapharmaceuticals and the sales

through medioprophilactic institutions within the framework of state reimbursement

program.

The main trend in 2011 for Russia was the formation of a “pharmaceutical clusters”. This

process takes place in the framework of the Strategy for the Development of

pharmaceutical industry that must have been implemented by 2020. Another significant

event in 2011, which will soon be reflected in the pharmaceutical market, was the signing of

documents on Russia's accession to the WTO. Russian pharmaceutical market is among the

10 largest pharmaceutical markets in the world. In 2011, Russia took the 8th place. The

volume of the pharmaceutical market in Russia in 2011 amounted to RUR 824 billion (or

USD 28 billion) in retail prices including VAT. The figure for 2010 was 12% less than the one

in 2011.

The Russian pharmaceutical market is import-oriented. The 76% of medicaments (in money

terms) in the Russian market is imported. The importance of the wholesaling remains very

high due to the geographical features of Russia. Big distributors support numerous branch

networks and representative offices. Smaller wholesalers are beginning to create an 4 Parapharmaceuticals - biologically active additives on the basis of extracts of medicinal plants - used for disease prevention, adjuvant therapy and maintenance of the functional activity of organs and systems. Their properties are determined belonging to the plant organic acids and other substances. Their role is to enhance the adaptive capacities of the organism in extreme circumstances.


extensive network of warehouses (e.g., FC PULSE, Imperia Pharma). Leaders in the

distribution segment up to 2011 are “SIA International” and “Protek CV”. Their share in the

total market amounts to 33%. The distributors R-Pharm and Biotech are growing at high

growth rates.

2011 was marked as “business optimization” year for the pharmacies in the light of new

legislation and tax regulations. The largest deal of the year was the acquisition of the state

pharmacy network “Mosoblpharmacia”. The group of companies A5 and the investment

fund Hi Capital were the purchasers. As a result, the network of pharmacies was ranked 1st

by the number of drugstores (1,370 drugstores). The largest networks in turnover are

“36.6”, “Rigla”, “Impoziya” — their share amounts to 7.2%.

The drivers of market growth were inflation (+8.8%) and the transition to more expensive

drugs.

4.4 billion of packaged medicaments were sold in 2011. Almost the same amount was

consumed in 2010.

The parapharmaceutical segment has not recovered after the crisis yet. The capacity of this

segment in 2011 amounted to RUR 130 billion (or USD 4.4 billion). The figure for 2010 is

10% less than the 2011 one. Despite this phenomenon, the pharmacies continue to sell this

category of products under non-drug items.

In 2011, the public sector showed an increase of 7%. This is one of the most stable segments

of the pharmaceutical market because its development is based on state budget funds. At

the end of 2011 for the purchase of medicines for people entitled to benefits was spent 84.7

billion rubles. Increase compared to 2010 was about 4.7%.

MARKET OVERVIEW MARKET DATA The situation in the Russian pharmaceutical industry for 2011 can be

described as stable thanks to the stable economic situation and the lack of a strong

influence of external factors, such as abnormal weather conditions and the deterioration of

the epidemiological situation. Legislative initiatives as well have caused significant changes

in the organizational structure of the pharmaceutical market and its qualitative

development.

The growth of hospital medicaments’ share (14% or USD 4.57 billion over the previous year)

was also significant in 2011. Such dynamics is explained by the state funding in the


modernization program of healthcare. Financial means were assigned to purchase expensive

medicaments used in oncology, pulmonology, cardiology, etc. Taking into account that the

present program is planned to be executed within 2 years, its implementation progress in

hospital sector will be determined in 2012.

Macroeconomic stability is the basis for the development of all sectors of the

pharmaceutical market, and especially the ones that are dependent on public funding. The

increase in expenditure in hospital drugs improves not only the quality of medical care, but

also fosters the drug coverage and reimbursement and the development of the commercial

sector. This correlation is explained by the shift of funds from one segment to another. For

example, when there is insufficient funding for the purchase of medicines in hospital sector,

patients are forced to buy the necessary drugs on their own retail chain.

Regarding the drug coverage and reimbursement sector, it showed the lowest growth rate

— about 5% or USD 2.84 billion in 2011. This phenomenon took place due to the outflow of

the beneficiaries of the program. The substitution of domestic products with the imported

ones has also impacted on this process. The production of Russian origin oppressed the

imported ones in 2011 offering products for the treatment of hemophilia, multiple sclerosis,

pituitary dwarfism, etc.

Currently the Russian pharmaceutical market is developing steadily. According to

preliminary data, the following years will also end with growth in this sector.

The table below represents the volumes (in money terms).

Table 6. Pharmaceutical Market Sizes in Russia mln USD

SECTOR 2009 Growth (%) 2010 Growth (%) 2011

Commercial Sector 12054 11 13366 19 15964 Pharmacy Sector for Parapharmaceuticals 3649 7 3894 14 4438

Public Sector 6159 13 6944 11 7713 TOTAL 21862 11 24204 16 28116

Source: DSM Group. 9001:2008

The total pharmaceutical market sizes in Russia have the trend to grow. In 2011, the growth

amounted to 16% over the previous year.


PRODUCTION The production of pharmaceutical agents and medicinal chemicals in Russia

is represented in the table below.

Table 7. Production of Pharmaceuticals and Medicinal Chemicals in Russia

mln USD

2006 2007 2008 2009 2010 2011 3197.2 4164.8 5096.4 4940.6 6149.4 7254.0


The drop by circa 3% in 2009 vis-à-vis 2008 was compensated with about 24.5% growth in

2010 over the 2009 record. In 2011, the growth in production amounted to 18% over the

previous year.

SALES In 2011, the total sales of consumer health amounted to 16%. Over the counter

(OTC) pharmaceutical sales dominate over the sales of sports nutrition, vitamins and dietary

supplements, weight management medicaments, herbal/traditional products, the

medicaments for allergy care and the medical agents for pediatric consumer health. The

table below represents the sales of consumer health by category for 2006-2011.

Table 8. Sales of Consumer Health by Category in Russia mln USD

Category 2006 2007 2008 2009 2010 2011 Over the Counter (OTC) 1680.4 2178.5 2812.0 2523.7 2863.2 3302.0 Sports Nutrition 21.3 29.4 39.6 36.3 43.1 50.1

Vitamins and Dietary Supplements 755.5 992.8 1244.6 1093.2 1219.2 1428.3

Weight Management 153.8 191.0 239.2 214.5 220.2 258.5

Herbal/Traditional Products 337.3 437.6 573.1 512.2 595.9 704.5

Allergy Care 82.9 114.0 154.0 140.3 165.8 177.1 Pediatric Consumer Health 62.6 88.4 116.2 109.7 134.7 162.3

Consumer Health 2637.8 3427.6 4384.2 3910.5 4396.8 5102.1

Note: all the figures were given in mln RUB in Euromonitor. The conversions from RUB to USD have been made according to the average annual exchange rates of the appropriate year.


Source: www.1prime.ru

The sales of consumer health by cities are represented below.



http://www.1prime.ru/


Table 9. Sales of Consumer Health by City of Russia

mln USD

Category 2006 2007 2008 2009 2010 2011 Moscow 529.5 694.4 915.2 780.7 886.5 1026.5 St Petersburg 162.6 218.3 286.0 257.8 292.6 336.6

Russia 2637.8 3427.6 4384.2 3910.5 4396.8 5102.1 Note: all the figures were given in mln RUB in Euromonitor. The conversions from RUB to USD have

been made according to the average annual exchange rates of the appropriate year.



The sales of consumer health by distribution format are represented below. As shown in the

table, store-based retailing has dominated over the non-store retailing.

Table 10. Sales of Consumer Health by Distribution Format in Russia % retail value rsp

Category 2006 2007 2008 2009 2010 2011 Store-Based Retailing 91.5 91.6 91.8 92.0 92.0 91.6 Grocery Retailers 2.1 1.9 1.9 1.8 1.9 1.9 Discounters 0.0 0.0 0.0 0.0 0.0 0.0 Health Food Shops 0.0 0.0 0.0 0.0 0.0 0.0 Hypermarkets 0.1 0.2 0.2 0.2 0.2 0.3 Small Grocery Retailers 0.4 0.4 0.4 0.4 0.4 0.4 Supermarkets 0.7 0.7 0.7 0.8 0.8 0.8 Other Grocery Retailers 0.9 0.7 0.5 0.4 0.4 0.4 Non-Grocery Retailers 89.4 89.7 89.9 90.2 90.1 89.7 Health and Beauty Retailers 87.6 87.6 88.1 88.2 88.5 88.0 Chemists/Pharmacies 87.1 87.2 87.7 87.7 87.9 87.4 Parapharmacies/Drugstores 0.0 0.0 0.0 0.0 0.0 0.1 Other Healthcare Specialist Retailers 0.5 0.5 0.5 0.5 0.5 0.5 Mixed Retailers 0.0 0.0 0.0 0.0 0.0 0.0 Department Stores 0.0 0.0 0.0 0.0 0.0 0.0 Mass Merchandisers 0.0 0.0 0.0 0.0 0.0 0.0 Variety Stores 0.0 0.0 0.0 0.0 0.0 0.0 Warehouse Clubs 0.0 0.0 0.0 0.0 0.0 0.0 Other Non-Grocery Retailers 1.9 2.1 1.8 2.0 1.6 1.7 Non-Store Retailing 8.5 8.4 8.2 8.0 8.0 8.4 Vending 0.0 0.0 0.0 0.0 0.0 0.0 Home Shopping 1.0 1.0 0.9 0.8 0.8 0.9 Internet Retailing 2.0 2.1 2.2 2.3 2.4 2.7 Direct Selling 5.5 5.3 5.1 4.9 4.8 4.9

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Source: www.portal.euromonitor.com





The consumer expenditure on health goods and medical services in Russia is represented

below.

Table 11. Consumer Expenditure on Health Goods and Medical Services in Russia mln USD

Category 2006 2007 2008 2009 2010 2011

Pharmaceuticals, Medical Appliances and Equipment

8748.8 11908.7 15883.2 14591.8 17766.0 22227.1

Outpatient Services 6037.8 6982.6 9262.6 7508.3 8546.7 10232.0

Hospital Services 1646.7 2327.5 2526.2 2047.7 2330.9 2635.0

TOTAL 16433.3 21218.8 27672 24147.8 28643.6 35094.1 Source: www.portal.euromonitor.com

The consumer expenditure grew by 22.5% in 2011 vis-à-vis the previous year.

COMPETITION FIELD Pharmstandart, Novartis and Evalar are the top leaders in consumer

health company shares in Russia. Among these 3 companies, only Novartis is of Swiss origin.

The rest are Russian companies.

Table 12. Consumer Health Company Shares of Russia % retail value rsp

Company 2007 2008 2009 2010 2011 Pharmstandart OAO 5.6 5.6 5.1 5.2 5.8

Novartis Consumer Health OOO 4.3 5.2 5.5 4.7 4.8

Evalar ZAO 2.4 3.0 4.3 3.7 3.7 Sanofi-Aventis Russia 4.2 4.2 3.7 3.2 3.1

Sandoz ZAO 1.3 1.5 1.6 2.1 2.7 Berlin Chemie Russia 2.7 2.8 2.5 2.4 2.5

Johnson & Johnson OOO 1.2 1.3 1.5 1.7 2.3

Reckitt Benckiser Healthcare OOO 1.1 1.3 1.8 1.9 2.1

Nycomed Russia-CIS 1.6 1.7 1.8 1.7 1.8

Herbalife International RS OOO 1.1 1.2 1.1 1.4 1.8

Boehringer Ingelheim Pharma OOO 1.8 2.0 1.9 1.7 1.7

Unipharm Russia 1.5 1.6 1.6 1.6 1.7 Veropharm OAO 1.5 1.4 1.4 1.6 1.6

Amway OOO 1.1 1.3 1.7 1.6 1.5

GlaxoSmithKline Healthcare ZAO 3.0 2.5 1.8 1.6 1.5

Sagmel OOO 1.1 1.2 1.4 1.5 1.5



Ferrosan Consumer Health OOO 1.0 1.1 1.1 1.2 1.3

Ratiopharm Russia 1.0 1.1 1.2 1.1 1.1 Akrikhin OAO 1.1 1.2 1.2 1.1 1.1

Solvay Pharma 0.8 0.9 1.0 0.9 1.0 Diod OAO 0.7 1.5 1.4 1.0 1.0

Akvion ZAO 0.6 0.8 0.8 0.8 1.0 Egis AO 1.0 1.0 1.1 1.1 1.0

Nizhpharm OAO 0.9 0.9 0.9 0.9 0.9 Lek Pharmaceuticals dd 0.9 0.9 0.8 0.8 0.8

AnviLab OOO — — 0.5 0.5 0.8 Ivax Pharmaceuticals sro 1.1 1.0 0.8 0.8 0.8

Schering-Plough Central East AG 0.6 0.7 0.7 0.9 0.8

Warner-Lambert Russia 1.0 0.9 0.8 0.8 0.8 Krka Pharm OOO 0.8 0.8 0.7 0.8 0.7

Others 52.9 49.7 48.3 49.8 46.9 TOTAL 100.0 100.0 100.0 100.0 100.0


The following table represents the brand shares in Russia.

Table 13. Consumer Heath Brand Shares in Russia % retail value rsp

Brand Company 2008 2009 2010 2011

Theraflu Novartis Consumer Health OOO 2.3 2.4 2.1 1.9

Nurofen Reckitt Benckiser Healthcare OOO 1.0 1.5 1.6 1.8

Linex Sandoz ZAO 1.3 1.3 1.6 1.5 Pentalgin Pharmstandart OAO 1.8 1.7 1.4 1.5 Nutrilite Amway OOO 1.2 1.6 1.5 1.5 Mezym Berlin Chemie Russia 1.3 1.2 1.2 1.3

Lasolvan Boehringer Ingelheim Pharma OOO 1.3 1.3 1.2 1.2

Vitrum Unipharm Russia 1.0 1.0 1.1 1.1 Complivit Pharmstandart OAO 0.9 0.8 0.9 1.1 Eczoderil Sandoz ZAO 0.2 0.2 0.4 1.1

Herbalife Thermojetics Herbalife International RS OOO 0.7 0.6 0.9 1.0

No-spa Sanofi-Aventis Russia 1.2 1.2 0.9 1.0

Bifiform Ferrosan Consumer Health OOO 0.8 0.8 0.8 0.8

Terpinkod Pharmstandart OAO 1.3 0.8 0.8 0.8 Turboslim Evalar ZAO 0.8 1.0 0.7 0.8

Relief Sagmel OOO 0.5 0.7 0.7 0.7



Theraflu and Nurofen were the top leaders in 2011 despite the share of the first declined in

2011 vis-à-vis the 2010 figure. The brand share of Nurofen increases constantly. Linex,

Pentalgin and Nutrilite had the same share (1.5%) in 2011.

FOREIGN TRADE The table below shows the foreign trade of medicinal agents of Russia for 2000, 2005 and

2008-2010.

Table 14. Russia's Foreign Trade of Medicinal Agents mln USD

Category 2000 2005 2008 2009 2010

Total Exports of Medicinal Agents 103 162 258 260 289

Exports of Medicinal Agents to the CIS Countries 90.4 150 223 223 231

Exports of Medicinal Agents to Far Abroad 12.2 11.6 34.9 36.7 58.2

Total Imports of Medicinal Agents 1150 3865 7512 7136 9346

Imports of Medicinal Agents to the CIS Countries 59.2 47.9 65.3 75.0 106

Imports of Medicinal Agents to Far Abroad 1091 3817 7447 7061 9240

Afobazol Pharmstandart OAO 0.3 0.3 0.3 0.6 Halls Warner-Lambert Russia 0.7 0.6 0.6 0.6

Kodelak Pharmstandart OAO 0.6 0.7 0.7 0.6 Fastum Berlin Chemie Russia 0.9 0.8 0.6 0.6

Aqua Maris Jadran Galenski Laboratorij AO 0.4 0.5 0.6 0.6 Hylak Ratiopharm Russia 0.6 0.6 0.5 0.6

Antigrippin Anvi AnviLab OOO — 0.4 0.3 0.5 Hexoral Johnson & Johnson OOO 0.2 0.5 0.5 0.5

Herbalife Herbalife International RS OOO 0.4 0.3 0.4 0.5 Alphabet Akvion ZAO 0.3 0.3 0.4 0.5 Nasivin Nycomed Russia-CIS 0.5 0.6 0.5 0.5 Otrivin Novartis Consumer Health OOO 0.4 0.8 0.4 0.5

ACC Hexal AG 0.4 0.5 0.5 0.5 Ambrobene Ratiopharm Russia 0.4 0.5 0.5 0.5

Others — 76.3 74.3 75.4 73.1 TOTAL — 100.0 100.0 100.0 100.0




Source: www.gks.ru

The table shows that the volumes of the imported medicinal agents dominate over the

exported ones. For 2008-2010, the growth rate of exported medicinal agents totaled 6% on

average. In 2009, the volume of imported medicaments decreased by 5% against the

previous year and increased by 31% in 2010. The volumes of exports in medicinal agents to

the CIS countries dominate over the volumes of imports.

INVESTMENT The investment volumes in heath care in Russia for 2005, 2009 and 2010 are given in the

table below.

Table 15. Investment in Health Care in Russia

Year mln USD % of Total Investments

2005 3550.8 2.6 2009 5700.9 2.3 2010 6938.8 2.3

Note: the figures in money terms are converted from RUR to USD according to the average annual exchange rates of the appropriate

year.

Source: www.gks.ru


The table shows a constant growth of investment funds for 2005-2010. Despite the

investment volumes in money terms grew in 2010, the share in total investments stayed

constant (2.3%). In 2010, the investment in health care grew by up to 21.7% over the

previous year.

PRICES The rise in prices of medicaments can be mentioned as a structural change. The

development of the market was due to the increase in retail sector. This situation is

explained by an increase in the tax burden on pharmacies, leading to lower profits. In

general, the growth rate of commercial retail market by the end of last year was about 16%

and amounted to USD 15.4 billion. As predicted, this trend will continue in the first half of

2012. For further development of the pharmaceutical market needs new stimulating factors.

http://www.gks.ru/

http://www.gks.ru/



CITY KEY TRENDS MOSCOW Moscow accounts for a large share of sales in consumer health, accounting for

20% of overall value sales in the country in 2011. Its value share remained stable after the

economic situation in the city became better, with the labor market recovering and

disposable incomes growing after the depression seen in 2009-2010. It still has the highest

per capita consumption in the country for consumer health products, at RUR 2,584 (USD

87.9) in comparison with national per capita consumption of RUR 1,050 (USD 35.7).

Consumers in Moscow continue to be the most attractive target group, with the highest

incomes and a higher level of purchasing. At the same time consumers are more

sophisticated than in the country as a whole. Consequently, Moscow is a priority for

pharmacies and consumer health manufacturers. The city saw the strongest growth in new

pharmacies.

The pharmacies in the city try to offer higher value added products and a wider range of

products than in other regions. The Moscow labor market saw continuous recovery in 2011.

At the same time, uncertainty caused by global economic instability led to higher demands

from employers. Moscow is a business centre in Russia, and many of its citizens have to

work long hours. Manufacturers of vitamins and dietary supplements and consumer health

products promote them by targeting busy people with their marketing communications,

such as the advertisement for Afobazol, saying that the remedy helps consumers to deal

with constant stress, and helps to maintain high working efficiency. Working people do not

have enough time and use the opportunity to save valuable time by ordering healthcare

products online. Internet sales are growing in the whole of Russia and in the Moscow region

in particular. Besides convenience, internet pharmacies offer lower prices, which was an

additional stimulus for the development of the channel. The Moscow region saw strong


internet sales growth, benefiting from the high penetration of internet technology and

credit cards. Consumers became more sophisticated over the review period. Players in

pharmacies in Moscow realized that it was not enough to sell a customer a product; more

often people needed consultation and advice on the problem they had, not only the

presence of a particular product in stock. Along with the growing competition, the

atmosphere and service became increasingly important. Citizens in Moscow have higher

incomes than other Russians, and look for the most effective solutions to their problems.

This supports the sales of companies offering premium products. Companies such as

Amway, Herbalife, Nycomed and Novartis have a strong presence in the city.

Competition between pharmacies significantly increased in the Moscow market over the

review period. Many players started to consider new directions for business development,

differing from the traditional. Rebranding campaigns and new formats were announced. At

the end of the review period the Rigla pharmacy chain announced the launch of its new

format pharmacies “Bud’ Zdorov” (“Be Healthy”). The project was focused on the

development of pharmacy discounters and online sales. Over the review period in the

Moscow market there was a situation whereby wholesalers and pharmacies were motivated

to sell as expensive products as possible. This was due to tightening taxation, and control on

mark-ups for part of the pharmacy range. Domestic manufacturers with lower-priced

products were at a disadvantage, and were looking for ways to escape this trap. Many

domestic manufacturers developed motivation programs for pharmacies, reviewed their

portfolios of products and recruited company representatives to support sales. The largest

domestic manufacturer of dietary supplements, Evalar, started to develop its own pharmacy

retail chain in Moscow. Despite these moves, the share of domestic manufacturers in

Moscow did not increase in 2011.


During the review period the Moscow market showed stable development, although this is

expected to slow down during the forecast period. Growth in the Moscow market over the

forecast period is expected to be lower than the growth in Russia as a whole. Whilst Russia

as a whole is expected to see a 4% constant value CAGR, Moscow is expected to see just a

3% constant value CAGR. The Moscow market accounted for 20% of the total value of the

Russian market in 2011. This largest regional market is characterized by the most developed

infrastructure, which is expected to see further development, with the largest pharmacies

trying new formats in Moscow. The city will continue to be a target market for companies

launching new products, with manufacturing facilities developed in the area surrounding

Moscow. The population has higher disposable incomes than in other regions, and

consumers are more open-minded, willing to buy the best and the most efficient products,

not paying much attention to price. The dynamic pace of life requires people to be always

moving, not allowing them the time to be ill. All kinds of preventive medicines and drugs

aiming to improve quality of life are expected to see continuous development in the city

over the forecast period.

The end of the review period saw an increasing birth rate in Russia, although in Moscow this

dynamic was less obvious. 2010 was the first year when the birth rate was higher than the

death rate in Moscow. The implementation of supportive government programs is expected

to maintain the relatively high birth rate in the forecast period. This will support the

development of pediatric consumer health and vitamins and dietary supplements in

Moscow.

The forecast period is expected to see continuous growth in demand for healthier nutrition

and remedies made from natural ingredients. The improving quality and decreasing number

of counterfeit products will positively affect the image of herbal/traditional products. The


number of people taking active actions to fight excess weight is expected to support

demand for weight management products. This is expected to support a current value CAGR

of 5% in both categories in Moscow during the forecast period. Sports nutrition and

vitamins and dietary supplements will also see significant growth of 5% and 4% respectively

in constant value terms.

ST PETERSBURG St Petersburg is the second largest city in Russia, and the second largest

market for consumer health. The population of the city is highly educated. Widespread

consumption habits close to those observed in Western countries are determined by the

high rate of travelers amongst the population. These people often go to the closest

neighboring countries, and tend to live a European-like lifestyle. People spend relatively

large amounts of money on consumer health, with per capita consumption being twice as

high as the average per capita consumption seen in Russia. Slower growth was seen in 2011,

because the market in St Petersburg was already well-developed. Growth was stronger in

the regions, which led to the underperformance of the city against the general background.

Sales of consumer health products in St Petersburg accounted for 7% of value sales in

consumer health in the whole of Russia. Sales saw 11% current value growth in 2011, which

was lower than the overall current value growth of 12% in Russia.

Although the second largest market for consumer health in Russia after Moscow, St

Petersburg was the market with the most developed pharmacy retail chain. At the end of

the review period there were about 1,000 pharmacies in the city, with a ratio of one

pharmacy per 4,500 people. This ratio is close to the level seen in Western European

countries such as Germany.

During the review period consumers in St Petersburg became increasingly health-conscious.


Many categories showed a particularly strong performance, with health-enhancing products

and preventive medicines being amongst the leaders. Vitamins and dietary supplements

saw 12% growth and herbal/traditional products 11% current value growth in 2011 over the

previous year.

St Petersburg is the demographically oldest city in Russia, with almost every fourth citizen

being a pensioner. The high number of older people supported demand for eye care and

adult mouth care products. These categories saw 15% and 12% current value growth

respectively in 2011. The low base results in high growth rates when demand for these

products increases.

Historically strong economic relations with Finland led to the presence in the city of a high

number of foreign manufacturers and retailers. Over the review period the city saw the

development of the pharmacy retail chain Zdorovie Liudy, controlled by Holland Holding,

and Finnish chain Universitetskaya Apteka. Both chains accounted for 6% of the number of

pharmacies in the city.

The review period saw the development of a pharmaceutical cluster on the outskirts of St

Petersburg. City and Leningrad region governors created positive conditions for the

development of pharmaceutical manufacturing. The existence of a scientific base and an

educational system able to train professionals to the required qualifications made the city

an attractive place for pharmaceutical companies. At the end of the review period Novartis

announced the start of construction of manufacturing facilities. The factory is due to be built

by 2014. Biokad ZAO announced plans to build manufacturing facilities in 5 years. Vertex is

building a second factory to double its production volumes by 2014.

International manufacturers have traditionally strong positions in the market, as people in

St Petersburg consider Western products to be of high quality and efficiency. However, the


financial instability seen during the review period and improvements shown by domestic

manufacturers led to an increase in the share of the largest domestic manufacturers in the

city. Companies such as Evalar, Pharmstandart, Ekomir and others widened their presence

in the market and strengthened their positions, offering high-quality, and efficient products

at competitive prices.

St Petersburg was the city with the highest percentage of chained pharmacies. Pharmacy

chains accounted for up to 90% of all pharmacies in the city. Chains such as Pharmakor and

Pervaya Pomosh reached a federal level and became competitors to the largest chains, such

as Rigla and 36.6. Rivalry amongst chains led to tighter pricing, with some players trying to

win share by lowering prices. This pattern negatively affected the whole market in the

review period. By the end of the review period price dumping became suicidal, with most

pharmacies struggling to survive, due to increased taxes and price mark-ups for products on

the Vital and Essential Drugs List.

Growth in consumer health in St Petersburg is expected to slow down in the forecast period

in comparison with the review period. The market is expected to see a 3% constant value

CAGR, in contrast with a 7% current value CAGR seen during the review period. The maturity

of many categories will increase over the forecast period. Increased competition amongst

pharmacies and the development of online sales will also lead to a slowdown in growth.

Increasing purchasing power and the widening demands of citizens in St Petersburg support

the positive expectations regarding growth in consumer health.

Large international players building factories in St Petersburg may lead to changes in market

balance at the end of the forecast period, when these factories will be opened. New

products are expected to be launched by the end of the forecast period. Novartis may

exploit the advantage of cheaper production and optimal logistics to increase its value share


in St Petersburg. Other international companies which do not yet have facilities in Russia

may consider St Petersburg as a feasible place for market expansion.

The strongest growth is expected to be seen in categories which offer solutions for people

taking care of their beauty and looking for complete nutrition. The number of sports

facilities in the city is expected to increase during the forecast period, with new swimming

pools, outdoor sports grounds, fitness halls and other sports facilities opening. An increasing

number of people taking up sport will result in growing demand for vitamins, dietary

supplements and sports nutrition products. Sports nutrition is expected to see a constant

value CAGR of 5% over the forecast period. Growth will be achieved due to the widening of

the consumer base.

Manufacturers of sports nutrition products will target new consumer groups, such as those

not into the heavy pumping of weights, but wanting to keep fit and pay attention to

balanced nutrition.

OTC REGISTRATION AND CLASSIFICATION The registration process for OTC products is complicated and often vague. Documents which

should be provided by producers include:

• Certificate of pharmaceutical product;

• Documents approving that the registration fee was paid;

• Good manufacturing practices certificate;

• Scheme of drug manufacturing technological process;

• Name of the medicine, including its international non-patent name if relevant and

name in Latin;

• Brand name of the medicine if registered as a trademark;

• List of ingredients and quantities;


• Instructions for use of medicines corresponding to Federal Law;

• Data on production;

• Methods of quality control;

• Results of clinical studies;

• Medicine samples for examination and equipment if this is required to test the

product;

• Primary and secondary packaging and labeling examples;

• Patient information leaflet.

In January 2007 the Federal Agency for the Supervision of Health Care and Social

Development introduced new legislation requiring imported medicines to obtain

registration in the name of a legal Russian entity under the name of its creator or a

representative with exclusive rights to the medicine. Consequently, it is necessary for all

foreign manufacturers to have a legal representative in Russia, with this representative

having all patents and rights to a trademark. The legislation also reserves the right to revoke

licenses if side effects are subsequently linked to the product. This legislation made it even

more difficult for multinationals to enter Russia.

At the end of the review period, control on sales of Rx medicines became stronger, with the

increased role of chained retailers and their low motivation to sell Rx products UTC. From

September 2010 a law regulating price registration for remedies on the Vital and Essential

Drugs List became applicable. Manufacturers producing drugs on the Vital and Essential

Drugs List became obliged to register prices on their production, and wholesalers with

distributors were not allowed to set mark-ups higher than the limited amount for the region

in which they operate. This regulation was in transition at the end of the review period, with

uncertainty remaining regarding the price registration procedure.


REIMBURSEMENT The reimbursement list of medicines is updated annually, and is based

on pharmaceutical-therapeutic classification groups. A number of consumer health products

are included on the reimbursement list, which includes over 1,600 pharmaceutical products

in all forms and dosages. Despite the Russian state offering support and preferential

conditions for domestic manufacturers of medicines, international producers continue to

dominate reimbursements.

About 14 million people in Russia receive free medicines or monetary compensation within

the state-run drug provision program. Pensioners are entitled to 50% reimbursement on

listed remedies. All remedies used in hospitals are also free of charge.

The budget for reimbursement of medicines is defined separately for each region. In some

regions, doctors have a limited prescription budget, and thus tend to prescribe cheaper and

locally-manufactured medicines, as well as those on the essential medicines list. At the end

of the review period, announcements regarding the review of the reimbursement budgets

were made. A gradual decrease in the number of people applying for reimbursement

programs was observed.

Every year the Ministry of Health publishes an updated list of essential medicines. Remedies

from the list include both Rx5 and OTC preparations, with these being exempt from taxation.

The Ministry of Health also registers the prices of medicines included on the list for daily

dosage units plus customs duties in rubles for locally-made and imported medicines. The

registered price is used as an upper limit for the selling price for these brands.

BIOEQUIVALENTS/GENERICS Pharmaceutical sales in Russia are dominated by generics,

for several reasons. These products have more affordable prices and are widely available.

The second reason is that the offer of original medicines is dragged by vague registration 5 “Rx” is often used as a short form for prescription drug in North America.


procedures and difficulties related to the launch of new remedies in the Russian market.

This makes generic pharmaceuticals popular both with consumers and the state. Generics

are widely produced in Russia, due to a lower initial investment being required for these

products in comparison with developing new brands.

Generics are also imported from other countries, with Slovenia and Hungary being notable

importers of generic healthcare products.

Only a small percentage of newly developed medicines are launched by domestic

companies, although this level continued to increase during the review period. Russian

pharmaceuticals players, however, remain relatively undeveloped in terms of research and

development in comparison with those in many other countries.

Newly-developed medicines are usually patented, however, and generics can only be

introduced after the patents expire. In Russia, generics must also be registered with the

state and undergo pre-clinical and clinical trials, as original drugs.

ADVERTISING In July 2006 stronger restrictions on pharmaceutical advertising were

introduced, with a ban on the advertising of Rx medicines. General advertising is only

allowed for OTC products, and it should not contain images of doctors or directly promise

perfect results. The advertising of prescription medicines is allowed only in specialized

publications targeting medical professionals and pharmacists. In addition, advertising is not

permitted for medicines and medical devices without authorization from the Ministry of

Healthcare.

Under the new restrictions, advertising for medicines in any printed media must show:

• The name of the medicine and the name of the manufacturer;

• Indications and contraindications.

Medicines advertised in the professional press should also show:


• Information on composition, side effects and dosage;

• Information on patent protection.

For television, radio and other recorded forms of advertising, the advertisement should

contain clearly visible text, “consult your doctor on contra-indications and side effects. Read

the leaflet carefully.” Not less than seven seconds of the advertisement should be devoted

to this text in written or spoken form.

PACKAGING AND LABELING In September 2010 Medicine Law of 1998 No. 86-FZ “on

medicines” expired. New Federal Law of 12 April 2010 No. 61-FZ “On the circulation of

drugs” came into force. In comparison with its predecessor it made obligatory previously

optional requirements to manufacturers concerning information on the packaging.

Packaging and labeling must carry the following information:

On the primary packaging:

• Clearly seen international unpatented name of remedy or chemical name or trade

mark in Russian language;

• Manufacturing series number;

• Production date (for immunobiological preparations);

• Expiry date;

• Dosage and drug form;

• Volume and dose number (for immunobiological preparations);

On the secondary (consumer) packaging:

• Clearly seen international unpatented name of remedy or chemical name or trade

mark in Russian language;

• Name of manufacturer;


• Series number;

• Release date (for immunobiological preparations);

• Registration certificate number;

• Expiry date;

• Usage;

• Dosage and number of doses;

• Drug form;

• Release conditions (Rx or OTC);

• Storage instructions;

• Caution instruction;

• Bar code.

Patient information leaflets, which should be included with every pack supplied, should

contain information such as:

• International non-proprietary name;

• Indications and contraindications;

• Side effects;

• Interaction with other medicines;

• Dosages;

• Information on drug use;

• Expiry date.

Product labeling must not use vague language such as “sore throat”, with this viewed as

making it difficult to communicate claims to patients. Packaging for serums preparations


and radiological agents should bear specific labeling, as well as transportation packaging not

seen by consumers.

VITAMINS AND DIETARY SUPPLEMENTS REGISTRATION AND CLASSIFICATION Vitamins and dietary supplements are considerably less regulated than other consumer

health products. The main Russian legislation covering vitamins and dietary supplements is

the Federal Order of Ministry of Health and Social Development RF No. 325 (07.2001)

entitled “About the Sanitary-epidemiological Expertise”, and a number of other orders and

letters regulating the registration of dietary supplements and requirements set for it. Under

this legislation, a wide range of natural extracts and vitamins can be classified as dietary

supplements, as long as the product’s overall contents do not exceed 600% of the

recommended daily rate of macro and microelements and vitamins consumed by a human

being.

Government control of the production and distribution of vitamins and dietary supplements

is therefore underdeveloped in Russia. There is an absence of strong legislation, precise

precautionary measures and efficient punishments for infringements. 2010 saw a spike of

interest from regulating bodies. Obligatory registration of every dietary supplement sold in

Russia was introduced. Since 2003, laboratory examinations of vitamins and dietary

supplements have been conducted by the Head Sanitary Inspector of the Russian Federation

under the ruling SanPiN 2 3 2 2351-08 Sanitary Norms of the Manufacturing and Distribution

of Dietary Supplements. From 2010 all manufacturers of dietary supplements were obliged

to get a Compliance Certificate according to the Russian Federation Government Resolution

of 1 December 2009 No. 982.

A Compliance Certificate can be issued by bodies possessing a license from Rosstandart

(Federal Agency on Technical Regulating and Metrology). Players can thus produce dietary


supplements only if they possess this Certificate. This document indicates that a product is

harmless to health and permitted for distribution.

At the end of the review period attempts to strengthen the regulation of vitamins and

dietary supplements were made.

PRODUCTS TO PREVENT SPECIFIC MEDICAL CONDITIONS During the review period

sales of dietary supplements were established, with many customers having knowledge of

these products and the benefits they can provide. However, at the end of the review period

the most popular dietary supplements were those aiming to generally support health.

Products supporting particular areas of the body, such as bones or eyes, also became very

popular. However, there were not many products preventing specific medical conditions,

and knowledge about these products was not widespread in the market.

VARIETY OF FLAVORS Most consumers buying vitamins and dietary supplements are first

aiming to support their health. Flavor as an important characteristic of a product is

secondary. No significant increase in the variety of flavors in dietary supplements was

observed during the review period.

COMBINATION PRODUCTS The value share of combination dietary supplements

increased during the review period, from 28% at the beginning of the review period to 33%

in 2011. This was mainly due to the consumers’ desire to address a complex issues taking

one dietary supplement. So manufacturers had to offer multi component products

addressing wider positioning. However, mono component products specifically aiming to

solve a particular problem remained popular.


Mono component products can be taken together without harmful effects on the body.

Dietary supplements are expected to see homogeneous balanced growth, with combination

products remaining popular due to their high efficacy and convenience for consumers.

ADVERTISING A special regulation covering the promotion of vitamins and dietary

supplements was issued at the beginning of the review period. Until it was issued many

players were often exaggerating the efficacy of these products. This meant that many

consumers regarded vitamins and dietary supplements as medical products, resulting in

disappointment.

In June 2006 the Federal Inspection of Consumer Rights’ Defense introduced new regulation

No. 0100/6272-06-32 “About Reinforcement of Control under Distribution of Dietary

Supplements”. Under the terms of this legislation, manufacturers and distributors of dietary

supplements may only indicate the efficiency of their products in advertising if they can

provide a Certificate of Conformance. This certification is received after a laboratory

examination according to SanPiN 2.3.2. 1290-03. Laboratory examinations are carried out on

a voluntary basis, however, and the Certificate of Conformance is not obligatory.

Advertising for vitamins and dietary supplements thus began to be more strictly controlled

in 2006. The new regulation also banned the use of images of doctors in advertising for

these products. Infringement of these advertising controls is punishable by a penalty of RUR

40,000-500,000 (circa USD 1,360-17,000).

PACKAGING AND LABELING If a retailer or independent inspector finds a difference

between packaging information for vitamins and dietary supplements and the information

provided by the Certificate of State Registration, the product is immediately withdrawn

from sale. Since 2010 every citizen can go online and check this information. Packaging may

also not make claims of the efficacy of products.


Labeling for vitamins and dietary supplements should include the following information:

• Brand name;

• Manufacturer (including name and address);

• Reference to legal and technical documentation;

• Ingredients;

• Main characteristics;

• Weight and volume of one package and product unit;

• Indications and contraindications;

• The reminder that, “dietary supplements are not medicines”;

• Date of issue;

• Expiry date;

• Storage conditions;

• Information about registration, showing number of registration certificate and issue

date.

DISTRIBUTION The sales of vitamins and dietary supplements are dominated by

chemists/pharmacies and direct selling. First strongly associated with the direct selling

distribution channel, now dietary supplements are increasingly distributed through

chemists/pharmacies. Many consumers prefer to purchase vitamins and dietary

supplements from this channel due to the negative perception of direct selling. However,

the distribution of vitamins and dietary supplements is less regulated than that of other

consumer health products. A limited range of vitamins and dietary supplements can thus be

found in larger grocery retailers and many other retail channels.


SELF-MEDICATION/SELF-CARE AND PREVENTATIVE MEDICINE The increasing pace of life in large cities led to the growing trend of self-medication, which

was traditionally strong before, but had been getting weaker in most developed cities of

Russia, along with the increasing popularity of insurance services covering medical

treatment. However, many consumers facing minor problems prefer to visit

chemists/pharmacies and seek advice from a pharmacist. Many consumers take into

account recommendations from their friends, or opt for brands with which they have had a

good experience, or for those which are strongly promoted.

Minor symptoms almost never become a reason to see a doctor, and consumers tend to

self-medicate.

They are, however, generally more reluctant to self-medicate for any ailments which seem

serious, particularly for children. During the review period there were concerns raised over

the popularity of self-medicating in Russia.

More dynamic than the self-medication trend was preventive medicine. Consumers became

more and more concerned with the inconvenience and costs caused by illness. Having the

opportunity to prevent the development of disease, many people started to use such a

means of reducing the frequency of sick leave and reducing spending on treatment. Thanks

to extensive media coverage, many consumers became increasingly aware of health and

wellness issues, and thus attempted to tailor their nutrition and lifestyles in order to

improve their long term health. In particular this was widespread amongst older people and

the female population, who more often watch health-dedicated television shows.

FORECAST The launch of new factories in Kaluga, St Petersburg and Yaroslavl will provide new jobs, and

lead to the development of suppliers and subcontractors in these regions. It will push down


the influence of the currency exchange rate on prices, and will decrease the dependence on

imports. Locally-produced drugs will have lower costs, which will allow manufacturers to

have more flexible pricing for their products.

Continuous implementation of GMP standards will help manufacturers to maintain the high

quality of medicines offered to the market. At the same time it is likely to affect unit prices,

which are expected to continue increasing to compensate for GMP investments made by

manufacturers. The implementation of GMP standards will positively affect the problem of

the spread of substandard raw materials in the market. Manufacturers will be allowed to

request suppliers prove the sources of their raw materials and storage conditions.

Laboratory tests will be conducted to prove the high quality of the raw materials. This will

lead to higher-quality products, which will positively affect the image of pharmacy products,

with more consumers relying on medicines rather than traditional remedies. Dietary

supplements are expected to be positively affected by decreasing volumes of counterfeit

products.

The development of technology transfer centers and educational programs is expected to

facilitate growth in the level of education of industry specialists. New innovative drugs are

expected to be launched by companies collaborating with science centers.

The ban will affect sales of the Pentalgin-N, Nurofen Plus, Kaffetin and Solpadeine brands,

with sales expected to drop by 40-70% after the implementation of the law. Manufacturers

are putting efforts into retaining the brand-loyalty of consumers by launching new formulae

under familiar well-known brands, and advertising the better features of the new products.

If these efforts are effective, sales will not drop as strongly after the switch. However, sales

figures indicating that codeine-free products combined only accounted for 20% of brand

sales in 2011 leads to expectations of a significant sales decline.


The pharmacy chains which are able to come through the tough situation are expected to

benefit due to the high level of business optimization caused by the turbulence. The most

dynamic players will remain in the market. New cost-efficient formats are likely to develop

in rural areas and areas where the population has lower incomes. Discounters and OTC

vending are expected to see development. In urban areas a significant share of the market

will be reached by modern pharmacy formats. Modern pharmacies with a self-service area

will see continuous growth, as this allows better merchandising of private label products,

sales of dietary supplements and other related products people may buy not as planned

purchases, but on impulse. Collaboration with retailers will result in the appearance of OTC

departments in most grocery retailers, and easer accessibility of pharmacy retail by

consumers.

Pharmacy retail consolidation is expected to continue in the forecast period. Another aspect

of mergers and acquisitions will be an increased rate of vertical integration. Pharmacies will

continue to integrate with wholesale companies, which will change competition patterns.

Products demanded by consumers with active lifestyle are expected to see further

development, with the launch of new brands and products. Mass media programs informing

the population of necessary elements in the diet, and the importance of a balanced diet, will

continue to drive demand for dietary supplements and vitamins as an affordable and

effective mean to fight any imbalance. Sports nutrition products will be demanded by an

increasing number of people taking part in sports. Products which help recovery after

training and provide energy during training will see growth.

The increasing number of people playing football, basketball and other active sports may

lead to demand for elastic bandages and topical analgesics/anesthetic. Manufacturers will

make efforts to meet the demands of different consumer groups, offering new variations of


products in different pack sizes and at different prices. Recognition of the harmful effects of

busy urban lifestyles will support sales of supplements aiming to improve bone problems,

eye health and sexual health problems. The changing mentality of consumers, realizing that

spending on their health is worthwhile, will drive growth in other categories, such as

products preventing varicose veins, and products to help heart health and women’s health.

Specific attention is expected to be paid to pediatric products.

The table below represents the forecast sales of consumer health by category.

Table 16. Forecast Sales of Consumer Health by Category in Russia mln RUR

Category 2012 2013 2014 2015 2016 Over the Counter (OTC) 99923.7 102852.4 105802.0 108664.9 111481.1 Sports Nutrition 1561.2 1656.0 1765.9 1871.6 1977.7

Vitamins and Dietary Supplements 44466.0 47030.3 49643.4 52231.3 54682.0

Weight Management 8091.1 8557.0 9019.1 9532.9 10024.2

Herbal/Traditional Products 21794.4 23096.0 24500.3 25949.9 27366.0

Allergy Care 5281.7 5428.2 5609.8 5793.3 5956.5 Pediatric Consumer Health 5085.2 5362.3 5602.6 5828.8 6034.4

Consumer Health 156091.4 162417.4 168835.6 175197.2 181340.4 Source: www.portal.euromonitor.com

Consumer health is projected to have in average 4% growth year by year from 2012 to 2016.

This phenomenon can be explained with the growth of population since 2008. This is why all

the articles have a trend of growth.

The following table represents the forecast sales of consumer health by city.

Table 17. Forecast Sales of Consumer Health by City of Russia

mln RUR

Category 2012 2013 2014 2015 2016 Moscow 31187.2 32303.8 33331.8 34190.0 34993.4 St Petersburg 10262.3 10645.1 11007.2 11320.3 11635.8



Russia 156091.4 162417.4 168835.6 175197.2 181340.4


The forecast sales for Moscow and St Petersburg amount in average 3%.


www.gks.ru

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http://dsm.ru/content/file/dsm_11.pdf



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PHARMACEUTICAL INDUSTRY IN GEORGIA

EXECUTIVE SUMMARY Emerging markets are expected to drive growth in the global pharmaceutical market over

the coming decade and the industry is expected to undergo a shift toward localization of

production to accommodate for production and monitoring of biotechnologies, as well as a

trend towards consolidated, vertically integrated supply chains.

Georgian pharmaceutical market is relatively small — USD 200 million. Growth rates are

relatively low, making the total market growth in 2010 at only 3% in local currency. One of

the reasons for such a trend was the devaluation of national currency against the US dollar

— 7%. In Georgia, the per capita consumption of drugs is also small — USD 35.4, while in

Ukraine — USD 62.4 and in Russia — USD 99.4.

Local producers of medicaments control about 14.5% in values and in recent years their

share is increasing dramatically and in 2010 it amounted to 25% thanks to bulk and quality

production. Nevertheless, the upcoming trend is difficult to predict.

Nowadays, in Georgia there are 3 major manufacturers of medicaments — “Aversi”, “PSP”

and “GPS”. “Aversi” is a leader in the Georgian market and its production share is about

4.5%.

In 2010, the average household in Georgia spent 34% of its disposable income on health

care, with drugs accounting for 60% of health care expenditures, or about 20% of disposable

income. From 2007 to 2010, the increase in expenditures on pharmaceuticals exceeded the

increases for other goods and services, growing at a rate of 23.7% per year, according to a

consortium of health-care researchers.

The case of Georgia shows that health care sectors, especially those of small countries in

which the government seeks to leave the sector to privately owned companies, are highly

vulnerable to oligopolies that could misuse their market powers to drive up their profits and

keep competitors out, highlighting the need for effective anti-trust regulation and

appropriate oversight mechanisms.


MARKET OVERVIEW MARKET DATA The Georgian pharmaceutical market is one of the fastest growing markets

in the country. In fact, the Georgian pharmaceutical market has grown dramatically from

approximately USD 57 million in 2001 to USD 245 million in 2011, based on the value of

pharmaceutical imports plus the value of locally produced pharmaceuticals sold in Georgia.

2011 was marked by a minimal amount of new launches in consumer health. Before the

economic crisis, there was practically no category which went without new launches, but in

2011 it was only possible to allocate novelties in analgesics, digestive remedies, medicated

skin care, vitamins and dietary supplements and calming and sleeping. Even in the

aforementioned categories, new launches were insignificant as well as having little influence

on general sales. Manufacturers and distributors preferred to focus their attention on pre-

existing and well-known brands and products. Players not only abstained from new

launches, but also withdrew the less advertised and promoted brands.

PRODUCTION Among traditional pharmaceutical manufacturers (i.e., chemically based

drugs), none of the producers in Georgia, not even GM Pharmaceuticals and Aversi (as

noted above), are engaged in primary production (that is, production of active ingredients).

However, in the areas of natural and herbal medicines and phages, two pharmaceutical

areas niches where Georgia can be considered to have strong competitive advantages,

producers are engaged in primary production.

Also of note, out of the 70 producers in Georgia, only 20 are importing substances

(pharmaceutical ingredients). The others are either buying substances from companies

among these 20, or are producing biological or herbal medicines where active and non-

active ingredients are produced in Georgia. Among traditional pharmaceutical products

(i.e., other than herbal medicines and phages), production conducted in Georgia includes

secondary manufacture (mixing active ingredients with other ingredients) and primary and

secondary packaging.

Almost all packaging materials are imported, with the exception of outer paper packaging

and some other basic packaging. While some of these producers engage in secondary

manufacturing, some engage in primary and/or secondary packaging only. Some of the

companies engaged in secondary manufacturing do have their own dedicated small scale

R&D programs.


Over the review period, the share of local production of medicines gradually increased from

8-10% to 13-15% share of retail value sales. This applies both to Rx and over the counter

(OTC) drugs. As well as larger local players, small producers are also becoming active. This

trend touched vitamins and dietary supplements, especially dietary supplements. With the

growth of the Georgian economy, local players became stronger financially leading to the

manufacture of more medicines locally rather than importing. Previously, they did not have

sufficient resources for this activity, and of course, it is more profitable for them to

manufacture medicines themselves.

In Georgia by 2011, there were more than 20 local producers of consumer health. They use

old traditional recipes and offer products of herbal and natural origins in dietary

supplements. It is easier for them to produce these products, as it does not require such

high costs and the production experience of domestic, natural remedies is also an important

factor, as well as the factor of their price accessibility. On the other hand, a major local

producer GM Pharmaceuticals Ltd (GMP) (which also produces OTC products) gained half a

percentage point in value share of vitamins and dietary supplements in 2011.

In the future, this trend is expected to continue as herbal/traditional dietary supplements is

exactly the niche that small local producers can master. They have experience in the

manufacturing of such products; costs are not so high that allows offering low prices, and

this, in turn, allows them to maintain stable demand.

The growth in sales of domestic vitamins and dietary supplements will impact on the ratio of

local versus imported products. Local production accounts for 13-15% of consumer health as

a whole, but the local production of vitamins and dietary supplements is well below that

level. However, because of this trend, the share of local producers should gradually catch up

to the general level of consumer health. In general, local production will be much more

active over the forecast period than during the review period. Economic growth in the

country gives new financial opportunities to players. Thus, more new interesting launches

are expected throughout the forecast period.

The production of medical agents and medicinal chemicals in Georgia is represented in the

table below.


Table 18. Production of Pharmaceuticals and Medicinal Chemicals in Georgia

mln USD

2006 2007 2008 2009 2010 2011 12.4 22.7 33.2 42.7 57.9 84.5


The data above show that the production volumes of pharmaceuticals and medicinal

chemicals are rising at a high speed. In 2011, it rose by 46% (in money terms) over the 2010

record. In 2011, the production volumes grew almost 7 times in comparison with 2006 data.

Georgia offers a strategic base for production, with easy access to surrounding CIS countries

and other major emerging markets such as the Middle East. Georgia is a leader in the CIS

and emerging markets for the ease of its business environment and rooting out of

corruption, as demonstrated by Georgia’s ranking as #16 in the World Bank’s global Ease of

Doing Business report (2012). In addition to a favorable tax regime and a simple regulatory

environment, Georgia has an attractive and efficient customs regime that can give

pharmaceutical producers assurance about their ability to import active ingredients and

other ingredients from their preferred global suppliers.

The following types of pharmaceuticals were produced in Georgia in 2010:

• Tablets;

• Sprays;

• Syrups;

• Powders;

• Injections;

• Extracts;

• Capsules;

• Gels;

• Ingredients;

• Balms;

• Eye drops;

• Air drug forms;

• Granules.



The types of pharmaceuticals produced in Georgia by illness are listed below:

• Gastrointestinal tract;

• Cardiovascular system;

• Central nervous system;

• Pain and consciousness (analgesic drugs);

• Musculo-skeletal disorders;

• Eye;

• Ear, nose and throat;

• Respiratory system;

• Endocrine problems;

• Reproductive system or urinary system;

• Obstetrics and gynecology;

• Skin;

• Infectious diseases;

• Immune system;

• Allergic disorders;

• Oncologic diseases;

• Dietary supplements, herbal products, vitamins.

SALES The sales of consumer health by category in Georgia are represented in the table

below. According to Euromonitor data, the volumes (in money terms) of over the counter

(OTC) medicaments declined by circa 12% in 2009 over the 2008 record. Such tendency held

on in the following year as well: in 2010, the OTC volumes continued decreasing (by almost

4% over the previous year). Nevertheless, the data for 2011 indicate a considerable rise of

circa 16% over the previous year’s record. Like ups and falls occurred with the following

articles of consumer health: vitamins and dietary supplements, allergy care and pediatric

consumer health.


Table 19. Sales of Consumer Health by Category in Georgia

mln USD

Category 2006 2007 2008 2009 2010 2011 Over the Counter (OTC) 65.5 73.4 89.8 79.1 76.0 88.0 Sports Nutrition — — — — — 0.1

Vitamins and Dietary Supplements 18.0 20.3 24.8 21.6 20.8 24.9

Weight Management 0.2 0.2 0.5 0.4 0.4 0.5

Herbal/Traditional Products 7.2 8.0 9.6 8.7 9.3 10.9

Allergy Care 3.7 4.1 5.1 4.4 4.3 5.0

Pediatric Consumer Health 4.8 5.4 6.8 6.0 5.8 7.0

Consumer Health 83.7 93.9 115.1 101.1 97.6 114.4

Note: all the figures were given in mln GEL in Euromonitor. The conversions from GEL to USD have been made according to the average annual exchange rates of the appropriate year.


Source: www.geostat.ge The growth in sales of domestic vitamins and dietary supplements will impact on the ratio of

local versus imported products. Local production accounts for 13-15% of consumer health as

a whole, but the local production of vitamins and dietary supplements is well below that

level. However, because of this trend, the share of local producers should gradually catch up

to the general level of consumer health. In general, local production will be much more

active over the forecast period than during the review period. Economic growth in the

country gives new financial opportunities to players. Thus, more new interesting launches

are expected throughout the forecast period.

Over 2010-2011, the percentage of people interested in sports increased dramatically. In

general, with a population increase, so will the number of people supporting a healthy

lifestyle rise, especially among those on high incomes. Accordingly, 2011 marked the first

year of regular sales for this category. Therefore, in the short to mid-term, sports nutrition is

expected to show confident growth in both volume and value terms. Naturally, in the long-

term with the growth of popular products, this category’s assortment will expand.

Changes in legislation regarding the requirements for outlets selling drugs in 2010, allowed

the use of vending. The range of vending sales is quite wide and covers almost all categories

of consumer health. The number of machines across the country while remaining low is

installed in most public places (train stations, supermarkets). In 2010-2011, the culture of


http://www.geostat.ge/


using vending was still new, so the main consumers were young people, who are more open

to this type of channel.

The table below represents the sales of consumer health by distribution format. As shown in

the table, store-based retailing has dominated over the non-store retailing.

Table 20. Sales of Consumer Health by Distribution Format in Georgia

% retail value rsp

Category 2006 2007 2008 2009 2010 2011 Store-Based Retailing 99.9 98.2 97.8 97.8 97.4 97.2 Grocery Retailers 0.4 0.4 0.5 0.7 0.4 0.7 Discounters 0.0 0.0 0.0 0.0 0.0 0.0 Health Food Shops 0.0 0.0 0.0 0.0 0.0 0.0 Hypermarkets 0.0 0.0 0.0 0.1 0.1 0.2 Small Grocery Retailers 0.0 0.0 0.0 0.0 0.0 0.0 Supermarkets 0.0 0.0 0.0 0.0 0.0 0.2 Other Grocery Retailers 0.4 0.4 0.5 0.6 0.3 0.3 Non-Grocery Retailers 99.5 97.8 97.3 97.2 97.0 96.5 Health and Beauty Retailers 99.4 97.8 97.3 97.1 97.0 96.5 Chemists/Pharmacies 99.4 97.8 97.3 97.1 97.0 96.5 Parapharmacies/Drugstores 0.0 0.0 0.0 0.0 0.0 0.0 Other Healthcare Specialist Retailers 0.0 0.0 0.0 0.0 0.0 0.0 Mixed Retailers 0.0 0.0 0.0 0.0 0.0 0.0 Department Stores 0.0 0.0 0.0 0.0 0.0 0.0 Mass Merchandisers 0.0 0.0 0.0 0.0 0.0 0.0 Variety Stores 0.0 0.0 0.0 0.0 0.0 0.0 Warehouse Clubs 0.0 0.0 0.0 0.0 0.0 0.0 Other Non-Grocery Retailers 0.1 0.0 0.0 0.0 0.0 0.0 Non-Store Retailing 0.1 1.8 2.2 2.2 2.6 2.8 Vending 0.0 0.0 0.0 0.0 0.0 0.0 Home Shopping 0.0 0.0 0.0 0.0 0.0 0.0 Internet Retailing 0.1 1.8 2.1 2.1 2.4 2.5 Direct Selling 0.0 0.0 0.0 0.0 0.2 0.2


There are approximately 2,000 pharmaceutical retail companies in Georgia owning these

retail outlets (that is, chains and owners of individual shops), but only 46 have more than

two shops. The largest chains are Aversi and PSP, with a combined total of approximately

600 shops. The next two largest chains are GPC and ABC Pharmacia, which have a combined

total of 140 shops. The other six companies among the top ten largest chains (in terms of

number of shops) own and operate a range of approximately 20 and 40 retail outlets each.



Many of the larger, leading pharmaceutical retailers are also engaged in pharmaceutical

distribution in Georgia as well. There are also stand alone distributors not engaged in

wholesale. While statistics detailing the number of wholesalers and the overlap with

retailers is not available, statistics show that in 2010 there were 75 companies in Georgia

that imported pharmaceuticals on a commercial basis (as opposed to humanitarian and

state purchases). 44% of commercial imports in 2010 were imported by the leading

pharmacy companies PSP and Aversi (both operating as both retailers and wholesalers).

PSP, Aversi, and 8 additional companies accounted for 85% of imports in 2010 (see list of

top 10 importers above). Importers/wholesalers benefit from the presence of many

individually owned pharmacies in Georgia that are not in a position to import directly

(approximately 1,950 companies own two or less pharmacy outlets).

Over the past several years, the leading pharmacy chains in Georgia have become integrally

engaged in other parts of the healthcare system, including direct or indirect related

ownership of insurance companies, hospitals and medical clinics. Please refer to Section 6

of this report for an overview of Georgia’s healthcare system.

The table below represents the consumer expenditure on health goods and medicinal

services.

Table 21. Consumer Expenditure on Health Goods and Medical Services in Georgia mln USD

Category 2006 2007 2008 2009 2010 2011

Pharmaceuticals, Medical Appliances and Equipment 209.7 266.7 417.6 410.4 395.6 496.4

Outpatient Services 193.5 246.6 387.2 381.2 366.9 460.4

Hospital Services 88.8 108.2 163.2 155.1 144.1 172.8


The data in the table above show that the overall demand for pharmaceuticals, medical

appliances and equipment declined by 3.6% (in value) in 2010 over the 2009 record. In 2011,

it increased by 25% (in value) over the previous year.

COMPETITION FIELD The company shares for consumer health of Georgia is represented

below. GlaxoSmithKline, GM Pharmaceuticals and Novartis have been in a leading position

in company shares in Georgia since 2007. In 2011, their shares amounted to 4%, 3.9% and



3%, respectively. Despite the share of A Menarini Industrie Farmaceutiche Riunite Srl also

amounts to 3%, its share was bigger (3.4%) in the previous year. The share of

GlaxoSmithKline also declined (by 0.2%) in 2011 over the previous year, but this company

remains the leader by its shares in the Georgian pharmaceutical market.

Table 22. Consumer Health Company Shares of Georgia % retail value rsp

Company 2007 2008 2009 2010 2011 GlaxoSmithKline Plc 4.0 3.7 4.1 4.2 4.0

GM Pharmaceuticals Ltd (GMP) 1.5 1.7 1.8 2.4 3.9 Novartis AG 2.8 2.7 2.8 2.9 3.0

A Menarini Industrie Farmaceutiche Riunite Srl 3.0 2.9 3.0 3.4 3.0

Krka dd Novo Mesto 2.4 2.5 2.3 2.5 2.8 Lek Pharmaceuticals dd 1.8 1.8 1.9 2.2 2.3

Altayvitaminy CJSC 2.5 2.4 2.4 2.3 2.2 Sopharma AD 1.4 1.4 1.6 2.0 2.2

Angelini Group 1.0 1.5 2.3 1.4 1.9 Sagmel Inc 1.6 1.6 1.6 1.6 1.8 SSP Co Ltd 2.3 2.1 2.1 2.1 1.8

Aversi-Rational Ltd 0.2 0.3 0.4 1.2 1.6 Sanofi-Synthélabo France SA 1.7 1.6 1.6 1.6 1.5

Unipharm Inc 1.1 1.2 1.3 1.4 1.5 Ferrosan A/S 0.9 0.8 0.9 1.0 1.5

Nizhpharm OAO 1.1 0.9 0.9 1.3 1.5 Tbilkhimpharm 0.6 0.6 0.9 1.2 1.3

Egis Slovakia spol sro 0.9 0.9 0.9 1.0 1.2 Betasan AS 0.9 0.9 1.1 1.1 1.2

Bristol-Myers Squibb Co 1.5 1.4 1.4 1.6 1.1 Johnson & Johnson Inc 1.1 1.1 1.0 1.2 1.1 Richter Gedeon Nyrt 1.1 1.1 1.2 1.0 1.0

Marion Biotech Pvt Ltd — — 0.2 0.3 1.0 Darnitsa FF ZAT 1.0 1.0 1.2 1.0 1.0

Borisov Medical Preparations Plant OAO 0.7 0.7 0.7 0.7 0.9

Egyptian International Pharmaceutical Industries Co SAE

(EIPICO) 0.8 0.8 0.8 0.8 0.8

OOO NPF Materia Medica Holding — — 0.1 0.2 0.8

Sanofi-Aventis 0.6 0.6 0.7 0.7 0.8 Cipla Ltd 1.2 1.1 1.3 1.1 0.8

Aventis SA 1.1 1.0 1.0 0.7 0.8


Hyperion SA 1.0 0.9 — — —

Others 58.1 58.9 56.4 53.7 49.7 TOTAL 100.0 100.0 100.0 100.0 100.0


In 2011, Tantum Verde (1.7%), Vitrum (1.5%), Multi-Tabs (1.5%) and Ingalipt (1.5%) were

top 4 pharmaceutical brands in Georgia. The shares of the first three brands have a growing

trend.

Table 23. Consumer Heath Brand Shares in Georgia % retail value rsp

Brand Company 2008 2009 2010 2011 Tantum Verde Angelini Group 1.3 2.1 1.3 1.7

Vitrum Unipharm Inc 1.1 1.2 1.3 1.5 Multi-Tabs Ferrosan A/S 0.8 0.9 1.0 1.5

Ingalipt Altayvitaminy CJSC 1.5 1.6 1.7 1.5

No-spa Sanofi-Synthélabo France SA 1.4 1.5 1.4 1.3

Salbutamol GM Pharmaceuticals Ltd (GMP) 0.1 0.1 0.1 1.2

Nolgripp Marion Biotech Pvt Ltd — 0.2 0.3 1.0 Lasolvan SSP Co Ltd 0.9 0.9 0.9 0.9 Coldrex GlaxoSmithKline Plc 0.8 0.8 0.9 0.9

TaiCold GM Pharmaceuticals Ltd (GMP) 0.6 0.7 0.8 0.9

Pikovit Krka dd Novo Mesto 0.6 0.7 0.8 0.9

Mezym A Menarini Industrie Farmaceutiche Riunite Srl 0.8 0.8 0.8 0.8

Polijen Egyptian International

Pharmaceutical Industries Co SAE (EIPICO)

0.8 0.8 0.8 0.8

Jungle Sagmel Inc 0.5 0.6 0.6 0.8

Anaferon OOO NPF Materia Medica Holding — 0.1 0.2 0.8

Fastum A Menarini Industrie Farmaceutiche Riunite Srl 0.5 0.6 0.9 0.8

Senade Cipla Ltd 1.1 1.3 1.1 0.8 Tabex Sopharma AD — — 0.4 0.8

Ketonal Lek Pharmaceuticals dd 0.5 0.6 0.7 0.7 Panangin Richter Gedeon Nyrt 0.7 0.7 0.7 0.7 Theraflu Novartis AG 0.5 0.5 0.7 0.7 Santavik Betasan AS 0.5 0.6 0.7 0.7 Valerian Tbilkhimpharm 0.2 0.4 0.5 0.6



Somna Ritz GM Pharmaceuticals Ltd (GMP) 0.2 0.2 0.5 0.6

Voltaren Novartis AG 0.5 0.5 0.5 0.6 Panadol GlaxoSmithKline Plc 0.4 0.4 0.5 0.5

Olfen Mepha Holding AG 0.5 0.5 0.6 0.5

Levomicetin Slavyanskaya Apteka OOO 0.4 0.4 0.5 0.5

Augmentin GlaxoSmithKline Plc 0.8 0.8 0.8 0.5 Noofen Aversi Aversi-Rational Ltd 0.1 0.1 0.4 0.5

Clotrimazol Hyperion SA 0.6 — — — Oxalin Warszawa ZF Polfa 0.6 — — — Others — 80.5 79.2 77.7 73.8 TOTAL — 100.0 100.0 100.0 100.0


The specificity of consumer health is that the brands under the same name may be

produced by different pharmaceutical companies. Consumers often do not know the

difference between one and the same products from different companies. Quite often,

consumers make their choice on the advice of consultants in chemists/pharmacies. A high

concentration of small brands shows that consumer health in 2011 was fragmented, which

is an indicator of consumer indifference to certain brand names.

FOREIGN TRADE EXPORTS The exports of medicinal and pharmaceutical products are represented in the

table below.

Table 24. Georgia's Exports of Medicinal and Pharmaceutical Products

mln USD

2006 2007 2008 2009 2010 2011 10.5 26.7 24.6 25.8 32.4 47.2


According to the Euromonitor data, in 2007, Georgia’s exports of medicinal and

pharmaceutical products rose almost 2.5 times (in money terms) over the previous year. In

2008, the export volumes declined by circa 8% over the previous year record. The volumes

of the following years were on the increase. In 2011, Georgia’s exports of medicinal and

pharmaceutical products increased by almost 45.7% over the previous year record.

Continued growth can be expected thanks to rising incomes and overall economic growth.




In 2011, Georgia exported locally produced pharmaceuticals to 16 countries. The bulk (93%)

of Georgia's exports go to the other Caucasus countries and Central Asia. 6% goes to other

CIS countries percent goes to other countries and 1% goes to other countries, mainly new

export markets in Africa, Asia and the Middle East.

The main export markets (established and growing) of Georgia are Uzbekistan, Armenia,

Tajikistan, Kyrgyzstan, Azerbaijan, Ukraine and Kazakhstan. Recently new export markets (in

past 2 years) are Moldova, Libya, Sierra Leone, Australia and India. And smaller export

markets (established and growing) are Turkmenistan, Belarus, Russia and Bulgaria.

IMPORTS Imports accounted for approximately 86% of local pharmaceutical sales in

Georgia in 2011, and imports of pharmaceuticals to Georgia have grown rapidly over the

past five years, at a rate of 15% per year from 2005 to 2011.

The imports of medicinal and pharmaceutical products are represented in the table below.

Table 25. Georgia's Imports of Medicinal and Pharmaceutical Products

mln USD

2006 2007 2008 2009 2010 2011 124.8 160.8 214.2 196.5 218.1 297.4


As to the Euromonitor data, the volumes of imported medicinal and pharmaceutical

products have been rising since 2006: only in 2009, the volumes declined due to the crisis. In

2010, the volumes for import grew by 11% (in money terms). In 2011, the growth amounted

to 36%.

The value of exports of pharmaceuticals from Georgia was equivalent to 37% of the value of

total production in Georgia in 2011, up from a range of roughly 20-25% over five years prior.

Like production, pharmaceutical exports from Georgia have grown at an extremely fast pace

over the past five years, with a compound annual growth rate estimated at 47% from 2005

to 2011. While growth was only an estimated 3% in 2009 likely due to the local and global

economic situation, growth in 2010 and 2011 was strong, at an estimated 48% and 57%,

respectively.

Imports are coming from a diverse range of countries, mainly from Western Europe, Eastern

Europe and the Middle East. In 2011 pharmaceuticals were imported to Georgia from 60

countries, and the leading importer was Turkey, accounting for 16% of imports based on



USD import amount, followed by Germany, Hungary, Switzerland, France and Ukraine with

10%, 7%, 6%, 6% and 5%, respectively.

In 2010, imports came from a total of 92 different foreign manufacturers (2011 data not yet

available), with no set of manufacturers dominating the market (the highest single

manufacturer market share was 10%). A number of these manufacturers have

representation established in Georgia, or have given permission to a Georgian company to

represent them in Georgia, to handle imports and/or to conduct brand marketing and

monitoring, 13 of which are members of the Association of Pharmaceutical Companies

Representative in Georgia (APCRG).

Sale of branded pharmaceuticals used to dominate the market in Georgia, due to limited

import supply channels and domination by branded, higher margin pharmaceuticals. In

recent years, however, sales between branded and generic pharmaceuticals are more

balanced. This is explained by a general growth of generics globally, as well as the result of

liberalized regulation in Georgia allowing for parallel imports putting downward pressure on

profit margins as a result of new competition, leading to a shift by some

importer/distributors to towards import of alternative products including generics.

INVESTMENT

Georgian National Investment Agency (GNIA) is a sole public agency responsible for

promoting and facilitating foreign direct investment in Georgia. As a moderator between

foreign investors and the Government the agency is ready to support investors every step

with assessing, entering and navigating in the local market, whether it be from a legal, tax,

regulatory, market or operational perspective.

The graph chart below represents the foreign direct investment in health and social work in

Georgia.


Source: www.geostat.ge

2011 was quite favorable for health and social work sector of Georgia: an increase for

almost 14 times (in money terms) over the previous year.

PRICES

The government has partially addressed concerns over a lack of competition in the

pharmaceutical sector by making it easier for companies to import drugs into the country.

As a consequence, prices for some popular brand-name drugs have gone down significantly,

while prices for about 75% of drugs have continued to rise.

OTC REGISTRATION AND CLASSIFICATION Prior to 2010, the state registration of medical products was controlled solely by the

Georgian Drug Agency. Only specified products or the owner of a trading license had the

right to obtain state registration for healthcare. The registration of healthcare products was

carried out under the law About Medicines and Pharmaceutical Activity. Under these terms,

each registration covered five years, with producers then forced to reapply for registration.

In 2010, there was however liberalization in the legislation covering healthcare registration.

This made it possible to import brands registered in the EU or in a number of other

developed countries without any additional registration in Georgia. This liberalization is

expected to lead to stronger competition and a decrease in unit prices.

2007 2008 2009 2010 2011

FDI in Health and Social Work 458.3 550.6 289.1 1182.4 16827.0

0

2000

4000

6000

8000

10000

12000

14000

16000

18000th

sd U

SD

Graph 1. FDI in Health and Social Work in Georgia



Bioequivalents/generics must meet all the same requirements as patented medicines in

terms of quality, active ingredients, efficiency and safety. According to trade sources, about

90% of OTC volume sales are accounted for by generics. Approximately half of all the

generics sold are termed usual generics, with these being low-priced generics that are

launched without an original brand name. Branded generics are meanwhile more expensive.

An estimated 13-15% of medicines sold in Georgia are manufactured locally. Imported

products are substantially more expensive, both within generics and patented products.

Volume sales of generics were boosted towards the end of the review period by rising state

charges for public health services, which encouraged consumers to opt for the cheapest

products. Meanwhile, the development of the Institute of Social Security and Insurance also

encouraged this trend, with consumers increasingly being subsidized for the purchase of

generic medicines. Taking into account the government’s aim to reduce healthcare

investment, manufacturers of cheaper products such as generics will continue to gain share

during the forecast period. In Georgia, the introduction of obligatory insurance is meanwhile

still in its initial stages of development.

Combination products in Georgia have a widespread appeal, with many regarding these as

being more effective than medicines with a single active ingredient. Combination products

thus accounted for 19% value share in sales of analgesics in 2011 and 24% share in cough,

cold and allergy (hay fever) remedies.

However, towards the end of the review period, there were negative media reports casting

doubt on the efficiency of combination products and even suggesting health rinks linked to

some products. These first began to appear in 2009. Sales began to recover once more in

2010 but these products continued to lose share in analgesics and cough, cold and allergy

(hay fever) remedies as a result.

Advertising for Rx medicine is forbidden in Georgia except within specialized magazines

targeting healthcare workers.

Advertising must prevent from misleading consumers or overstating the effect of a product.

There is a ban on advertising that suggests a product offers an equivalent or greater effect

than other medical treatments and advertisers are not permitted to claim a guaranteed

improvement to health immediately after taking any medicine.


Claims that not taking a medicine could lead to deterioration in health levels are also

forbidden, other than for the advertising of vaccinations. The mention of a number of

diseases is also forbidden, other than for the advertising of vaccinations, including

tuberculosis, venereal disease, chronic insomnia, diabetes, other metabolic diseases and

dangerous infectious diseases.

Endorsements by scientists, medical workers, celebrities or people with potentially

misleading well-known surnames are also banned, with the government keen to prevent

such endorsements encouraging the unnecessary consumption of medicines. The detailed

descriptions of symptoms that could lead to incorrect self-diagnosis are also forbidden.

Advertising must not equate medicines with food, cosmetics or other daily necessities or

guarantee its safety and efficiency on the grounds of its natural origin.

Overall, advertising should reflect the objective data confirmed by a medicine’s registration.

It should promote the rational and healthy use of medicines and meet the ethical criteria set

out by the Ministry of Labor, Health and Social Affairs of Georgia.

The distribution of OTC or Rx samples for promotional purposes is not permitted.

The text of OTC advertising must be agreed with the Georgian Drug Agency and as a rule

should contain the following information:

• Name of the medical product;

• List of active components;

• Indications;

• Safety measures;

• Side effects;

• Any other important warnings;

• Dosage Instructions;

• The person who is legally responsible for distribution of the product and their legal

address;

• Warning that the user should familiarize themselves with all usage instructions and

warnings before taking the medicine.

A wide range of channels are used to advertise medicines in Georgia, including magazines

and newspapers, radio and television. Advertising leaflets are also distributed by many


players, while in-store advertising is also used in chemists/pharmacies. Overall, consumer

health is one of best-advertised consumer goods industries in Georgia.

The range of medicines available in Georgia is wide, including a wide range of packaging

formats, sizes and usage methods. The most significant packaging format is however blister

packs containing 10-20 tablets and also plastic or glass tubes.

Packaging requirements are covered in the law About Medicines and Pharmaceutical

Activity and controlled by the Ministry of Labor, Health and Social Affairs. All information

that is legally required on primary medicine packaging must be printed in a precise, legible

and durable font in the Georgian language.

If primary packing takes the form of a blister pack, it must indicate shelf-life, registered

brand or product name, dosage and manufacturer details. Where primary packing is small

and cannot include all of this information, only the registered brand or product name must

be included, although the Ministry of Labor, Health and Social Affairs can require this

packaging to also show dosage, shelf-life, pack size and quantity of active ingredients per

dose as relevant.

Secondary packaging must show the following, if it is not shown on a product’s primary

packing:

• Registered brand name or generic name;

• Manufacturer’s name and address;

• Country of manufacture;

• Medicinal form;

• Quantity of active substances in each unit of medicine;

• Pack size;

• For ophthalmologic medicine and where relevant, all auxiliary substances should be

indicated;

• Usage method;

• Shelf life, specifying best before end date by month and year;

• Conditions of storage.

Packaging must also show the nature of ingredients in a number of cases, including

homeopathic medicine and that derived from blood or plasma.


The liberalization also resulted in the creation of a number of large and powerful

distribution companies by the end of the review period, with Aversi-Pharma, PSP and GPC

Prestige jointly dominating sales via health and beauty specialist retailers. These three

companies accounted for 70-75% value share in overall health and beauty specialist retailers

in 2011 and a higher share of sales in chemists/pharmacies. A number of smaller

distribution networks are also present.

New players continued to appear in chemists/pharmacies towards the end of the review

period. 2009 for example saw the entry of Pharmadepot, which operated five outlets in

Tbilisi by the end of 2010. This chain aims to offer European and Georgian medicines at

affordable prices, with its low prices attracting many consumers.

VITAMINS AND DIETARY SUPPLEMENTS REGISTRATION AND CLASSIFICATION Vitamins and dietary supplements, like all other healthcare products and medicines, is

regulated by the law About Medicines and Pharmaceutical Activity and controlled by the

Ministry of Labor, Health and Social Affairs. Only registered products may be sold within

vitamins and dietary supplements. However, unauthorized vitamins and dietary

supplements can be found in Georgia, especially in independent chemists/pharmacies.

There was little expansion in the range of registered vitamins and dietary supplements in

Georgia towards the end of the review period. Due to the global economic downturn,

players were reluctant to invest in the registration process, preferring to wait until times of

stronger economic growth.

The advertising of vitamins and dietary supplements is strictly regulated under Georgian

legislation, with this product area facing the same restrictions as OTC healthcare. There is

little advertising for vitamins and dietary supplements in the country, with this product area

receiving less advertising support in comparison to OTC products. Advertising for vitamins

and dietary supplements is dominated by in-store and in-clinic advertising, along with print

advertising in medical journals and magazines.

The main packaging formats used for vitamins and dietary supplements are blister and strip

packs, rigid plastic containers and glass.

Vitamins and dietary supplements must be labeled using a clear and durable font in the

Georgian language. Labeling must be authorized by the Ministry of Labor, Health and Social

Affairs of Georgia.


Vitamins and dietary supplements are distributed via chemists/pharmacies. Vitamins and

dietary supplements benefited from the development of larger chemists/pharmacies

offering a wider range of products, with this led by operators PSP and Aversi-Pharma during

the review period.

Internet retailing was also increasingly significant in vitamins and dietary supplements

towards the end of the review period, with direct selling also emerging. Increasing

competition encouraged the leading players to seek new distribution channels. In addition,

internet retailing became more significant due to the increasing household penetration of

both broadband computers and financial cards, alongside improved security for purchases

online.

SELF-MEDICATION/SELF-CARE AND PREVENTATIVE MEDICINE There was an increasingly proactive approach to health and wellness in Georgia during the

review period. This was mainly due to growing awareness, with the government investing

more in health education during the 2000s. The Georgian media also increased its focus on

health, while consumers gained more access to satellite television and the internet, thus

also learning more about health and nutrition from these channels. In addition, a growing

interest in health and wellness was driven by the country’s ageing population.

Consumers increasingly sought to treat their own symptoms, with many also seeking to

improve their health by improving nutrition and exercise levels or by taking vitamins and

dietary supplements.

The government also began to offer stronger healthcare provision, with this gradually being

introduced from 1994 onwards. The government notably improved healthcare provision for

pensioners, offering vaccinations and free medical consultations. However, healthcare

provision remains insufficient in the country, with many of those entitled to free care also

being unaware of this fact. Free healthcare provision continues to be dominated by

obligatory free vaccinations of children.

A growing focus on health and wellness and rising disposable income levels also resulted in

growing interest in insurance during the review period. A growing number of large local

companies began to offer medical insurance, with many focusing on specific groups of

workers such as teachers.


FORECAST Consumer health will see further development over the forecast period, as the economic

outlook for Georgia is positive. However, in the short and mid-term forecast period, until

the economy reaches pre-crisis level, Georgians will continue to be very price-sensitive. This

factor together with indifference to brand names will intensify private label development in

Georgia by 2016.

Demand for private label products is fuelled by the fact that they are cheaper than branded

alternatives. Successful realization of private label products in 2011 gives an incentive to

further expansion of such products within different consumer health categories. Private

label manufacturing may be a good option for business development of local producers,

which will receive orders for production of private label from various pharmaceutical chains.

The forecast sales of consumer health by category are represented below.

Table 26. Forecast Sales of Consumer Health by Category in Georgia mln GEL

Category 2012 2013 2014 2015 2016 Over the Counter (OTC) 148.2 148.9 150.9 154.1 156.1 Sports Nutrition 0.1 0.1 0.1 0.1 0.1 Vitamins and Dietary Supplements 42.0 42.4 43.1 44.2 44.7 Weight Management 0.9 0.9 0.9 0.9 0.9 Herbal/Traditional Products 18.8 19.4 20.0 20.7 21.2 Allergy Care 8.4 8.4 8.5 8.7 8.8 Pediatric Consumer Health 11.8 12.0 12.2 12.5 12.7

Consumer Health 193.3 194.7 197.9 202.4 205.2 Source: www.portal.euromonitor.com

The sales of OTC pharmaceuticals are forecast to increase in average annual rate of 1.3% (in

money terms) since 2012.




www.geostat.ge

http://www.investingeorgia.org/upload/file/Opportunities_in_Georgias_Pharmaceutical_Sector.pdf

http://www.investingeorgia.org/upload/file/Pharmaceutical%20Sector%20Study-03.pdf

http://blog.transparency.org/2012/07/16/market-concentration-in-pharmaceutical-sector-drives-

up-prices/

http://www.georgiatoday.ge/article_details.php?id=9890

http://transparency.ge/sites/default/files/post_attachments/The%20Pharmaceutical%20Market%20

in%20Georgia_June%202012l_0.pdf

http://cispharma.blogspot.com/2011/06/georgia-pharmaceutical-market-trends-in.html

http://www.pharmaasia.com/article/pharmaceutical-industry-growing-in-georgia/9434

Komsa International Survey/Interviews



http://www.investingeorgia.org/upload/file/Opportunities_in_Georgias_Pharmaceutical_Sector.pdf

http://www.investingeorgia.org/upload/file/Pharmaceutical%20Sector%20Study-03.pdf

http://blog.transparency.org/2012/07/16/market-concentration-in-pharmaceutical-sector-drives-up-prices/

http://blog.transparency.org/2012/07/16/market-concentration-in-pharmaceutical-sector-drives-up-prices/

http://www.georgiatoday.ge/article_details.php?id=9890

http://transparency.ge/sites/default/files/post_attachments/The%20Pharmaceutical%20Market%20in%20Georgia_June%202012l_0.pdf

http://transparency.ge/sites/default/files/post_attachments/The%20Pharmaceutical%20Market%20in%20Georgia_June%202012l_0.pdf

http://cispharma.blogspot.com/2011/06/georgia-pharmaceutical-market-trends-in.html

http://www.pharmaasia.com/article/pharmaceutical-industry-growing-in-georgia/9434


PHARMACEUTICAL INDUSTRY IN UZBEKISTAN

EXECUTIVE SUMMARY Pharmaceutical industry is a development priority in Uzbekistan. There are prospects of

development of pharmaceutical industry as an important innovative dimension of the Uzbek

economy. Development of pharmaceutical industry enables Uzbekistan to address a number

of vital social objectives related to public health. The country features high natural

demographic growth rates, which total 1-1.5% per annum according to the projections.

Approximately 615,000 newborns are expected annually in the next 5 years, whereas

607,800 are expected annually in 2015-2020, and 596,700 annually in 2020-2025. Also

absolute growth of the number of the elderly is expected thanks to the improvement of

health services and better living standards. These factors lead to higher demand for

medications essential for treatment of pediatric diseases, mandatory vaccination of

newborns and children and treatment of diseases typical for the elderly – cardiovascular,

oncological and neurological diseases.

Today the pharmaceutical market of Uzbekistan totals approximately USD 500 million and

features quite high growth rates, approximately 10% per annum. Along with

aforementioned demographic factors, improving public welfare and changes in the

preferences, further sustainable development of the sector is expected. Taking into

consideration that the domestic demand grows 10-15% annually, the market may exceed

USD 1 billion in nearest future.

Today over 1,000 inpatient health institutions, 4,000 polyclinics and outpatient institutions,

501 rural outpatient posts, 2,606 rural health clinics (RHC) and other health institutions are

providing qualified public health services.

Thus, along with demographic growth, longer life expectancy and increasing aging of

population and advancement of public health system, the need for medical drugs is

increasing. Thus, the pharmaceutical sector has major development prospects.


MARKET OVERVIEW MARKET DATA By the end of 2009, 477,400,000 units of medical drugs and health

products for total amount of 98 billion Uzbekistani sums (UZS) (USD 66.9 million) were

produced in Uzbekistan. Output of medical drugs and health products totaled UZS 102.1

billion (USD 64.4 million) in 2010, facilitating 104.4% growth. Medical drugs in the amount

of UZS 92.9 billion (USD 58.6 million), bandaging materials worth UZS 2.4 billion (USD 1.5

million), auxiliary materials (vials and laminated tubes) – UZS 4.8 billion (USD 3.0 million)

and other products worth UZS 1.92 billion (USD 1.2 million) were produced enabling the

growth in the share of medical drugs up to 91% in 2010.

Source: www.undp.uz

The bar chart above shows that the total nationwide manufacturing of pharmaceutical

industry in Uzbekistan increased by 15.4% (in value) in 2009 over the previous year, and it

decreased by 3.6% (in value) in 2010 over the 2009 record.

The volume of pharmaceutical market in 2011 totaled more than USD 700 million. The share

of national producers accounted for 22% or USD 150 million.

PRODUCTION Currently following groups of products constitute the main range of

pharmaceutical products:

• Medical drugs, including injecting and infusion drugs, capsules, liquid medicines,

powders, pills, antibiotics, ointments;

2008 2009 2010

Total Nationwide 57.9 66.8 64.4

52

54

56

58

60

62

64

66

68

mln

USD

Bar Chart 2. Manufacturing Output of Pharmaceutical Industry in Uzbekistan

http://www.undp.uz/


• Health products, including bandages, absorbent and medical cotton wool,

suture materials, disposable syringes and drip-up systems;

• Other products, including glass tubes, polyethylene products, medicinal teas and

herbs, biologically active additives, disinfectants, bio preparations and

diagnostic sets.

The pharmaceutical market of Uzbekistan recently has demonstrated impressive trends:

average annual growth rate was approximately 25% in the last two years. Analysis of the

data pertinent to the results and projected indicators for upcoming several years

demonstrated the following.

By the end of 2009, the composition of all medical products produced by all companies of

industry looks as follows (in %):

Source: www.undp.uz

Higher output of main groups of products is projected in medium-term future. 5-7 fold

growth of production of medical drugs is projected, and 2.5-8-fold growth in the output of

health products and other pharmaceutical products is projected by 2015. Below are

analytical studies of existing composition of production of pharmaceutical products by all

companies in the sector and medium-term projections of change.

11%

10%

12%

26%

35%

2%

3%

1%

Pie Chart 2. Composition of Output of Main Medical Drugs in Uzbekistan for 2009

Injecting Drugs

Infusion Drugs

Liquid Medications

Tablets

Dry Powdered Antibiotics

Ointments

Capsuled Drugs

Suspensions and Other Drugs

http://www.undp.uz/


SALES In 2011, the total sales of consumer health amounted to USD 66.1 million which is

4% more than the previous year data. Over the counter (OTC) pharmaceutical sales

dominate over the sales of sports nutrition, vitamins and dietary supplements, weight

management medicaments, herbal/traditional products, the medicaments for allergy care

and the medical agents for pediatric consumer health. The table below represents the sales

of consumer health by category for 2006-2011.

Table 27. Sales of Consumer Health by Category in Uzbekistan mln USD

Category 2006 2007 2008 2009 2010 2011 Over the Counter (OTC) 38,3 41,2 44,1 44,3 46,2 47,9 Sports Nutrition — 0,0 0,0 0,0 0,0 0,0

Vitamins and Dietary Supplements 13,5 14,7 16,1 16,5 17,4 18,2

Weight Management 0,0 0,0 0,0 0,0 0,0 0,0

Herbal/Traditional Products 3,4 3,7 4,1 4,2 4,4 4,6

Allergy Care 1,4 1,5 1,6 1,6 1,6 1,6

Pediatric Consumer Health 4,4 4,7 5,1 5,2 5,4 5,7

Consumer Health 51,8 56,0 60,2 60,8 63,5 66,1

Note: all the figures were given in bln UZS in Euromonitor. The conversions from UZS to USD have been made according to the average annual exchange rates of the appropriate year.



table, store-based retailing has dominated over the non-store retailing over 2006-2011

period.

Table 28. Sales of Consumer Health by Distribution Format in Uzbekistan % retail value rsp

Category 2006 2007 2008 2009 2010 2011 Store-Based Retailing 100,0 99,9 99,9 99,9 99,9 99,9 Grocery Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Discounters 0,0 0,0 0,0 0,0 0,0 0,0 Healthfood Shops 0,0 0,0 0,0 0,0 0,0 0,0 Hypermarkets 0,0 0,0 0,0 0,0 0,0 0,0 Small Grocery Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Supermarkets 0,0 0,0 0,0 0,0 0,0 0,0 Other Grocery Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Non-Grocery Retailers 100,0 99,9 99,9 99,9 99,9 99,9 Health and Beauty Retailers 100,0 99,9 99,9 99,9 99,9 99,9


Chemists/Pharmacies 99,7 99,6 99,5 99,5 99,4 99,4 Parapharmacies/Drugstores 0,0 0,0 0,0 0,0 0,0 0,0 Other Healthcare Specialist Retailers 0,3 0,4 0,4 0,5 0,5 0,5 Mixed Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Department Stores 0,0 0,0 0,0 0,0 0,0 0,0 Mass Merchandisers 0,0 0,0 0,0 0,0 0,0 0,0 Variety Stores 0,0 0,0 0,0 0,0 0,0 0,0 Warehouse Clubs 0,0 0,0 0,0 0,0 0,0 0,0 Other Non-Grocery Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Non-Store Retailing 0,0 0,1 0,1 0,1 0,1 0,1 Vending 0,0 0,0 0,0 0,0 0,0 0,0 Homeshopping 0,0 0,0 0,0 0,0 0,0 0,0 Internet Retailing 0,0 0,0 0,0 0,0 0,0 0,0 Direct Selling 0,0 0,1 0,1 0,1 0,1 0,1

TOTAL 100,0 100,0 100,0 100,0 100,0 100,0 Source: www.portal.euromonitor.com

The consumer expenditure on health goods and medical services in Uzbekistan is

represented below.

Table 29. Consumer Expenditure on Health Goods and Medical Services in Uzbekistan

mln USD

Category 2006 2007 2008 2009 2010 2011

Pharmaceuticals, Medical Appliances and Equipment 160,4 216,3 245,3 309,4 369,7 436,2

Outpatient Services 80,7 115,4 139,0 175,3 210,1 248,5

Hospital Services 30,5 42,6 50,3 63,6 76,4 90,1



COMPETITION FIELD Berlin-Chemie AG, Sanofi and Nycomed Pharma AS are the top

leaders in consumer health company shares in Uzbekistan.

Table 30. Consumer Health Company Shares of Uzbekistan % retail value rsp

Company 2007 2008 2009 2010 2011 Berlin-Chemie AG 13,6 13,4 13,1 12,7 12,8

Sanofi 10,2 10,1 10,0 9,8 9,9 Nycomed Pharma AS 7,8 7,8 8,0 7,6 7,8 Krka dd Novo Mesto 6,4 6,4 6,5 6,7 6,9


Unipharm Inc 3,5 3,5 3,5 4,3 4,3 Novartis AG 3,1 3,1 3,2 3,5 3,7

GlaxoSmithKline Plc 3,4 3,3 3,3 3,6 3,7 Egis Pharmaceuticals Plc 3,6 3,5 3,4 3,4 3,3 Bristol-Myers Squibb Co 3,0 3,0 3,0 3,2 3,1

Radiks NPP 2,6 2,5 2,4 2,6 2,8 Galenika ad 2,6 2,5 2,5 2,5 2,5

Sarbontex JV 2,5 2,5 2,5 2,5 2,4 Uzhkhimpharm OAO 2,1 2,1 2,2 2,0 2,0

Ivax Corp 2,0 1,9 1,9 1,8 1,8 Eczacibasi Ilac Sanayi ve Ticaret AS 1,5 1,5 1,4 1,5 1,5

Johnson & Johnson Inc 1,1 1,0 1,1 1,1 1,1 Ferrosan A/S 0,9 0,9 0,9 0,9 0,9 Sagmel Inc 0,7 0,8 0,8 0,8 0,9

Biotiki MNPK OOO 0,8 0,8 0,8 0,7 0,8 Veropharm OAO 0,9 0,9 0,9 0,9 0,8 Nizhpharm OAO 0,9 0,8 0,8 0,8 0,8

Akvion ZAO 0,4 0,5 0,7 0,7 0,8 SSP Co Ltd 0,7 0,7 0,7 0,7 0,8

Unique Pharmaceutical Laboratories 0,6 0,6 0,6 0,7 0,7 Biostimulator AO 0,6 0,6 0,6 0,7 0,7 Tonus Elast OOO 0,7 0,7 0,7 0,6 0,6

Tehnokhimfarm PTF 0,6 0,6 0,7 0,6 0,6 Egis Slovakia spol sro 0,6 0,6 0,6 0,6 0,6

Polpharma SA 0,6 0,6 0,6 0,6 0,6 Solvay Pharma 0,4 0,4 0,4 0,4 0,5

Others 21,6 22,2 22,1 21,4 20,4 TOTAL 100,0 100,0 100,0 100,0 100,0


The following table represents the consumer brand shares in Uzbekistan for 2008-2011.

Table 31. Consumer Heath Brand Shares in Uzbekistan % retail value rsp

Brand Company 2008 2009 2010 2011 Nasivin Nycomed Pharma AS 7,7 7,8 7,4 7,5

Bromhexin Berlin-Chemie AG 4,9 4,7 4,5 4,4 Vitrum Unipharm Inc 3,5 3,5 4,3 4,3

Falimint Berlin-Chemie AG 3,2 3,1 2,9 2,7 Duovit Krka dd Novo Mesto 2,6 2,6 2,5 2,6 Mezym Berlin-Chemie AG 2,2 2,2 2,2 2,5 Festal Sanofi 2,4 2,4 2,3 2,5 Pikovit Krka dd Novo Mesto 2,3 2,4 2,4 2,4

Espumizan Berlin-Chemie AG 1,9 1,9 1,9 2,2


Suprastin Egis Pharmaceuticals Plc 1,9 2,0 2,0 2,1 Oligovit Galenika ad 2,1 2,1 1,9 2,0

Septolete Krka dd Novo Mesto 1,4 1,4 1,7 1,7 Sofradex Sanofi 1,8 1,8 1,9 1,7

Novo-Passit Ivax Corp 1,7 1,7 1,6 1,7 Essentiale-Forte N Sanofi 1,9 1,8 1,7 1,7

Dlyanos Novartis AG 1,2 1,3 1,4 1,5 Bronchicum Sanofi 1,4 1,4 1,4 1,3

Pipolfen Egis Pharmaceuticals Plc 1,6 1,4 1,4 1,3 Tavegil Novartis AG 0,9 0,9 1,0 1,2

Efferalgan Bristol-Myers Squibb Co 1,1 1,1 1,2 1,1 Telfast Sanofi 1,2 1,1 1,2 1,1 Fervex Bristol-Myers Squibb Co 1,0 1,0 1,1 1,1 Radiks Radiks NPP 1,0 1,0 1,0 1,0 Maalox Sanofi 0,9 0,9 0,9 1,0

Dimedrol Uzkhimpharm OAO 1,0 1,0 0,9 0,9 Jungle Sagmel Inc 0,8 0,8 0,8 0,9 Bemiks Eczacibasi Ilac Sanayi ve Ticaret AS 0,8 0,8 0,8 0,8 Glicin Biotiki MNPK OOO 0,8 0,8 0,7 0,8

Veropharm Veropharm OAO 0,9 0,9 0,9 0,8 Alphabet Akvion ZAO 0,5 0,7 0,7 0,8 Others — 43,2 43,3 43,3 42,6 TOTAL — 100,0 100,0 100,0 100,0


Nasivin, Bromhexin and Vitrum were the top leaders in 2011.

FOREIGN TRADE EXPORTS The key objective of development of the pharmaceutical industry is to support

domestic production, creation of competitive domestic production in the medium-run along

with facilitation of foreign investments, and exports of own products.

Domestic pharmaceutical sector is in the genesis of its development, existing manufacturing

capacity of operating pharmaceutical companies is approximately USD 100 million, of which

total exports of domestically produced medical drugs and substances totaled circa USD 3

million.

The currently exported medical drugs are produced in more than 15 forms distributed from

70 pharmaco-therapeutical groups.

Main export destination for Uzbek-made medical drugs is the CIS and Baltic countries with

annual 20% increase in the medium-run. With properly chosen development strategy, the


products of Uzbek pharmaceutical sector will be scaling up exports to the emerging markets

of CIS, Asia and some products and substances — to Europe.

IMPORTS In 2010 the imports of pharmaceutical products of the Uzbek companies totaled

USD 373.7 million, which was slightly lower than previous Year 2009 (USD 411.6 million).

Lower imports are explained by implementation of the number of projects for local

production of components to produce finished products.

Nearly 83% of pharmaceutical imports worth USD 309.8 million were designed for retail

sales. Finished medical drugs worth USD 204.6 million accounted for more than half —

54.7%.

Medical drugs containing antibiotics worth USD 37.7 million, alkaloids — USD 27.3 million,

vitamins worth USD 27.6 million, vaccines worth USD 17.2 million, and other preparations

are also imported. Imported drugs currently supply up to 67% up to 95% of the markets of

miscellaneous medical drugs from Uzbekistan. Uzbekistan imports drugs mostly from Russia,

Germany, Ukraine, India, China, and Hungary. Imports of medical drugs will be growing

annually by 21-22% in the next 4-5 years.

Most domestically manufactured medical drugs are generics, produced mostly from

imported substances. Original domestic drugs account for 1.9% of domestic production.

More than 86% of domestic medical drugs are manufactured fully (14%) or mostly (72%)

from imported substances, which currently makes domestic production of medications

utterly dependant on imports, their quality, and prices. Development of domestic

pharmaceutical sector will facilitate not only market saturation by domestic products but

also presents the prospects of technological development and increased use of domestic

inputs.

The data for imports of pharmaceutical products of Uzbekistan are represented below.

Table 32. Imports of Pharmaceutical Products of Uzbekistan

mln USD

Departure Countries 2010 2011 Germany 41,6 40,6 Hungary 30,5 34,8 Austria 24,0 30,6

Slovenia 22,9 24,3 China 12,6 12,5


France 9,9 9,6 Poland 7,4 10,7

Netherlands 5,8 9,4 Bulgaria 8,4 6,7

Czech Republic 5,2 7,5 Others 16,4 21,8 TOTAL 184,7 208,5

Source: www.trade.nosis.com

The imports increased by almost 13% in 2011 over the 2010 record. Uzbekistan imports

pharmaceutical products mainly from Germany, Hungary and Austria.

INVESTMENT Notably the priorities of the Government of Uzbekistan, focused on comprehensive

modernization of health system, the main consumer of the market of medical drugs and

health products unveil new opportunities for investing into this sector.

According to the international experts, the pharmaceutical market of Uzbekistan is amongst

most rapidly developing among the CIS and Eastern European countries. Establishment of

joint ventures became an important factor of positive developments of domestic

pharmaceutical industry. As of the end of 2010, 32 companies with foreign investments

from 14 countries were operating with total direct investments into generation of

authorized funds of USD 10.6 million. Insignificance of figures once again indicates high

market potential for bringing in foreign investments and inadequate study by foreign

companies.

As for location of the companies with foreign investments, most of them (circa 70%) operate

in Tashkent city and Tashkent oblast. A number of companies are located in Syrdarya,

Bukhara, and Namangan oblasts of Uzbekistan, and another one operates in Karakalpakstan.

According to the statistical data, 4 investments projects were implemented with

disbursement of USD 4.29 million in 2007, and 18 projects worth USD 6.37 million in 2008, 9

projects totaling USD 6.79 million in 2009, and 12 projects totaling USD 6,211,600 were

implemented in 2010, respectively, which enabled to install modern high-tech equipment at

the number of companies, and start production of new generation drugs. As a result, the

number of new medical drugs exceeded 24, drug substances 11, and production of 94

import-substitution drugs were launched in this period.


Among completed projects experts note production of pills and injected drugs at Nobel

Farmsanoat foreign enterprise, technical modernization of production of polyethylene vials

at Nasa private firm, production of preparations in vials and antibiotics of penicillin line in

vials at Jurabek Laboratories JV, and modernization of pill factory at Remedy JV. The cost of

technical retooling at these companies totaled USD 1,484,000. Based on the plans to expand

the range of products, the number of new pharmaceutical companies, which produce

import-substituting medical drugs and products, is increasing.

As a result, against the projections of inflows of USD 3.85 million in investments in the 1st

quarter, 2011, actual inflows totaled USD 13.21 million (343.6%), and with projected

investments of USD 3.75 million, actually USD 11.65 million was disbursed (311.1%).

As for additional investments (equity and other sources), with projections of disbursement

of USD 0.83 million, actually USD 8.52 million (1,026.4%) was disbursed in the reporting

period, and with projected USD 0.93 million of investment inflows, actual inflow was USD

9.66 million (1,038.2%).

Research and development efforts of the domestic scholars to produce new

pharmacological groups may facilitate rapid growth of inflow of foreign investments and

technologies. So far the domestic research institutions have studied biological activity of the

number of compounds with anti-arythmic, cholinestherasis, adaptogenic, estrogenic,

hypotensive, anti-inflammatory, hepatoprotective, anti-oxidant, atherosclerotic,

antimicrobial, anti-viral, and other activities.

OTC REGISTRATION AND CLASSIFICATION All pharmaceutical activities, including production, sales, import and distribution in

Uzbekistan, are regulated by the Law issued on 24 April 1997, “Regulation of Pharmaceutical

Activities (Law on Pharmaceutical Activity)”. The Ministry of Healthcare of the Republic of

Uzbekistan determines the rules and procedures for the registration of pharmaceutical

products, and issues the state formatted certificate for each type of medical product, after

carrying out analysis into the safety and correspondence of products to standard

requirements. The normal period for registration starts from three months, depending on

the type of product and available normative documents.


The law obliges the registration and certification of the following:

• Medicinal, prophylactic, diagnostic drugs, products for clinical nutrition/diet therapy;

• Pharmaceutical substances and biologically active (bioactive) supporting substances

used in the production of medicines;

• New combinations of registered drugs;

• Drugs in new dosage forms and compositions or produced by new technology;

• Generics;

• Goods for medicinal purposes.

Chemists/pharmacies are licensed by the Ministry of Healthcare of the Republic of

Uzbekistan for selling pharmaceuticals. They are obliged to sell only products registered by

the Ministry. Each medicine sold must include a description of the medicine and its effects,

along with the Ministry Certification number. The government also recommends the price of

first aid products, which generates profit margins of 5-10%.

Chemists/pharmacies which violate the accepted rules are fined USD 25,000, with the

possibility of having their license revoked. The leading retailers and dealers try not to sell

unregistered products, since revoking their license would impact not only one outlet in the

chain, but the whole chain, whilst obtaining a license in the first place is extremely difficult.

Imports from CIS countries enjoy more favorable treatment, due to inter-governmental

free-trade agreements. Products with CIS origination can be registered for USD 400, whilst

non-CIS products are registered for USD 1,000 per imported batch.

The pharmaceutical committee classifies medical goods in accordance with their purpose, as

prescribed in the normative documents and government accepted standards (GOST).

There are no strict regulations concerning advertising, which would limit advertising and

promotional activities for these products. Promotional activities are carried out in

accordance with the existing advertising laws and information distribution, and normal rules

of ethics. Sales are greatly driven by these advertisements, and in fact consumer health

represents one the most development categories in overall advertising in Uzbekistan.

There are strict requirements for product packaging for both domestic and international

brands. Both are required to provide a translation of the product name and producer visibly

on the products. International brands normally use small white stickers on which the name


of the product and the producer is written. Products must also have a description certified

by the pharmaceutical committee under the Healthcare Ministry of Uzbekistan.

The distribution of products is carried out through authorized dealers or brand

representative offices in the region. Domestic brands prefer to work with dealers and

directly with the leading chemists/pharmacies, whilst international brands prefer to set up

representative offices.

VITAMINS AND DIETARY SUPPLEMENTS REGISTRATION AND CLASSIFICATION There is no specific regulation/registration for vitamins and dietary supplements under the

Pharmaceutical Law of the Republic of Uzbekistan. As other medical products, vitamins and

dietary supplements are regulated by Pharmaceutical Law and respective instructions and

orders of the Ministry of Healthcare of the Republic of Uzbekistan. The category is

monitored by the Pharmaceutical Committee of Uzbekistan under the Ministry of

Healthcare.

In terms of vitamins and dietary supplements, in general sales are increasing. This is mainly

thanks to growing consumer awareness about such non-traditional products. In particular,

vitamins are popular amongst pregnant women and children. Nevertheless, vitamins and

dietary supplements are consumed mainly based on medical prescription, and are targeted

towards improving general health and strengthening the immune system, and at certain

stages of life, such as during pregnancy and in childhood.

In terms of varieties, a wide range of vitamins and dietary supplements is already present.

Existing vitamins already enjoy strong consumer loyalty, and new products with newer

flavors face a very strong challenge from competing veterans.

The share of combination vitamins is increasing, as this is being widely used as a marketing

tool to attract consumers. In particular, “complex” and “multi” claims are widely used in

advertising. Nevertheless, single vitamins continue to have potential and maintain sales

thanks to their competitive prices.

Since there are no specific advertising requirements, vitamins and dietary supplements are

advertised under the general rules of Advertising Law of the Republic of Uzbekistan. The

same applies to packaging, labeling and distribution, with the same rules as applied to


general consumer health products, since there are no regulations specific to vitamins and

dietary supplements.

SELF-MEDICATION/SELF-CARE AND PREVENTATIVE MEDICINE Traditionally, self-medication is an indispensable part of healthcare in families. Typically,

elderly, more experienced people take on the role of family therapist. Tabibs6 are also

becoming more popular due to the use of homeopathic and other products for treatment,

although the area of treatment is limited.

Self-medication or medication not through modern medical establishments is supported by

an ever-growing number of women attending courses in home nursing at elementary

college. Having a medical encyclopedia at home is also a habit amongst housewives. These

courses in fact teach attendees to provide first aid, necessary injections and other first aid

tasks.

Normally, self-medication is for treating family members or children above the age of five.

Younger children are entrusted to specialists at medical centers.

It is a well-known fact that it is better to prevent health problems rather than curing them.

This message is being actively promoted through various means. Flu has become a challenge

for the pharmaceutical industry and the nation’s development. Anti-flu vaccinations are

actively promoted through television and other forms of media, whilst leading a healthy

lifestyle through eating well and good hygiene are also promoted. Therefore, the number of

people who prefer to prevent problems rather than curing them is increasing. This is mainly

achieved due to diffusion of information amongst the population.

FORECAST In near future substantial expansion of the range and list of medical drugs is projected:

while there were 10 products in the main list in 2009, there will be 16 groups of products by

2015, including production of suppositories, eye drops, probiotics, vaccines, insulin,

substances.

6 Tabib — traditional healers, focusing on traditional ways of medical treatment using various self-made and non-industrial traditional remedies.


Total output will be 468 billion sums thanks to implementation and start of production of

new medications. Increased output of probiotics, vaccines, insulin, substances is expected to

reach 81.2 billion sums, while the percentage of pills and injecting preparations will increase

from 26% and 11.3% in 2009 up to 30% and 13.5%, respectively, by 2015.


Table 33. Forecast Sales of Consumer Health by Category in Uzbekistan bln UZS

Category 2012 2013 2014 2015 2016 Over the Counter (OTC) 83,0 84,1 85,3 86,5 87,8 Sports Nutrition 0,0 0,0 0,0 0,0 0,0 Vitamins and Dietary Supplements 31,8 32,7 33,8 35,0 36,5 Weight Management 0,0 0,0 0,0 0,0 0,0 Herbal/Traditional Products 8,1 8,3 8,5 8,7 8,9 Allergy Care 2,7 2,7 2,7 2,7 2,8 Pediatric Consumer Health 10,1 10,3 10,5 10,7 11,0

Consumer Health 114,8 116,8 119,0 121,6 124,4 Source: www.portal.euromonitor.com

Consumer health is projected to record on average 2% growth year by year from 2012 to

2016. OTC medicaments, vitamins and dietary supplements, herbal products and pediatric

health medical agents have a trend of growth within this period.


www.undp.uz

www.aucconline.com/uploads/files/filepath_51.ppt

http://trade.nosis.com/en/Comex/Import-Export/Uzbekistan/Productos-farmaceuticos/UZ/30


http://www.undp.uz/

http://www.aucconline.com/uploads/files/filepath_51.ppt

http://trade.nosis.com/en/Comex/Import-Export/Uzbekistan/Productos-farmaceuticos/UZ/30


PHARMACEUTICAL INDUSTRY IN KAZAKHSTAN

EXECUTIVE SUMMARY Kazakhstan's pharmaceutical market remains the most accessible, transparent and, from a

legislative point of view, progressive in Central Asia. In terms of market size, its potential is

limited by its relatively small population (15 million) and logistical challenges. In the short

term, Kazakhstan's market development is driven by a balanced policy of import

substitution and integration into regional (Customs Union) and global (World Trade

Organization) systems. Over the longer term, the country could leverage its favorable

business environment and regional ties to supply neighboring states, such as Uzbekistan,

Kyrgyzstan, Turkmenistan and Tajikistan, all of which have growing populations and lack

domestic production capacity. The country's government is in the middle of implementing

an industrial development policy for pharmaceuticals and three of the top five producers —

Chimpharm, Nobel and Global Pharm — are now controlled by foreign investors. The

primary threat to the industry and foreign investment is the specter of political instability

(and consequent economic instability) that may occur when President Nursultan

Nararbayev, who has led the country since Soviet times, leaves the scene. This is especially

relevant as no heir is yet in place.

MARKET OVERVIEW MARKET DATA Kazakhstan has several pharmaceutical plants including Santo in Shymkent,

Karaganda Pharmaceutical Plant, Almaty Pharmaceutical Plant nd etc. For the development

of pharmaceutical industry and in order to increase the competitiveness and sustainability

of local producers, Kazakhstan created SK-Pharma. One of the prerogatives of SK-Pharma is

to organize state purchases of pharmaceutical products and some services in the framework

of guarantee capacity of free medicare through public tenders. The tenders are opened for

participation for local well as foreign producers/suppliers, however the local produces have

a preferably.


PRODUCTION In January-October of 2009, 87.4% of drugs were imported while the local

production was 12.6% only. The local production does not cover the state demand for

pharmaceutical products.

The production volumes (in money terms) of pharmaceuticals and medicinal chemicals in

Kazakhstan are represented below.

Table 34. Production of Pharmaceuticals and Medicinal Chemicals in Kazakhstan

mln USD

2006 2007 2008 2009 2010 2011 69,5 89,3 93,6 101,0 144,7 169,6


The production of pharmaceuticals and medicinal chemicals in Kazakhstan amounted to USD

111.3 million on average for 2006-2011 period. In 2011, the production volumes increased

by 17.2% (in value) over the 2010 record.

SALES Consumer health in Kazakhstan recorded a double-digit current value growth rate in

2011, which was also stronger compared to the review period as a whole. Growth returned

in line with increasing purchasing power and a rebound in confident consumer spending

after the global economic crisis. Growth was also boosted by a strong self-medication trend.

However, the growth rate in 2011 was also exaggerated by the inflation rate and currency

fluctuations which increased the price of imported products towards the end of the review

period.

The table below represents the sales of consumer health by category for 2006-2011.

Table 35. Sales of Consumer Health by Category in Kazakhstan mln USD

Category 2006 2007 2008 2009 2010 2011 Over the Counter (OTC) 214,8 232,5 249,3 215,5 228,9 253,3 Sports Nutrition 0,2 0,3 0,3 0,3 0,3 0,3 Vitamins and Dietary Supplements 43,2 49,9 57,0 50,0 54,5 60,5 Weight Management 14,0 16,4 18,4 16,3 18,2 19,8 Herbal/Traditional Products 22,6 26,0 27,6 26,2 29,1 32,9 Allergy Care 10,3 7,5 6,6 5,0 5,1 5,2

Paediatric Consumer Health 9,5 10,8 10,7 9,0 10,0 11,1

Consumer Health 273,0 300,0 326,0 283,0 302,9 335,2

Note: all the figures were given in mln KZT in the Euromonitor. The convertions from KZT to USD have been made according to the average annual exchange rates of the appropriate year.




table, store-based retailing has dominated over the non-store retailing over 2006-2011

period.

Table 36. Sales of Consumer Health by Distribution Format in Kazakhstan % retail value rsp

Category 2006 2007 2008 2009 2010 2011 Store-Based Retailing 99,6 99,6 99,6 99,6 99,6 99,5 Grocery Retailers 0,0 0,0 0,0 0,0 0,1 0,1 Discounters 0,0 0,0 0,0 0,0 0,0 0,0 Healthfood Shops 0,0 0,0 0,0 0,0 0,0 0,0 Hypermarkets 0,0 0,0 0,0 0,0 0,0 0,0 Small Grocery Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Supermarkets 0,0 0,0 0,0 0,0 0,0 0,0 Other Grocery Retailers 0,0 0,0 0,0 0,0 0,1 0,1 Non-Grocery Retailers 99,6 99,6 99,5 99,5 99,5 99,5 Health and Beauty Retailers 99,6 99,6 99,5 99,5 99,5 99,5 Chemists/Pharmacies 98,8 98,7 98,6 98,4 98,3 98,2 Parapharmacies/Drugstores 0,8 0,9 0,9 1,1 1,2 1,3 Other Healthcare Specialist Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Mixed Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Department Stores 0,0 0,0 0,0 0,0 0,0 0,0 Mass Merchandisers 0,0 0,0 0,0 0,0 0,0 0,0 Variety Stores 0,0 0,0 0,0 0,0 0,0 0,0 Warehouse Clubs 0,0 0,0 0,0 0,0 0,0 0,0 Other Non-Grocery Retailers 0,0 0,0 0,0 0,0 0,0 0,0 Non-Store Retailing 0,4 0,4 0,4 0,4 0,4 0,5 Vending 0,0 0,0 0,0 0,0 0,0 0,0 Homeshopping 0,0 0,0 0,0 0,0 0,0 0,0 Internet Retailing 0,0 0,0 0,0 0,0 0,0 0,0 Direct Selling 0,4 0,4 0,4 0,4 0,4 0,5


Most products are sold via chemists, with such stores consequently accounting for the

majority of value sales towards the end of the review period. As a result, the presence of

parapharmacies in the country remains low. No OTC products are available through other

channels such as supermarkets, small groceries and the internet. Consumers still appreciate

the role of professional advice from a pharmacist. However, the distribution sales share of


this chain declined in recent years due to the development of parapharmacies. Convenience

and time-saving are the key factors that drive parapharmacies/drugstore, as consumers

have a chance to purchase toiletries, cosmetics and other personal hygiene products

alongside medicinal products.

Sales of goods, particularly those with lower retail mark-ups, such as analgesics, digestive

remedies, cold and cough remedies, vitamins and dietary supplements often result in

narrow profit margins and even losses for pharmaceutical retailers in Kazakhstan.

International pharmaceutical manufacturers are more affected by these regulations as their

products are on average more expensive than locally-produced ones. Despite the difficulties

that international manufacturers experience in the country, they often allow their

representatives in the country to offer additional discounts in order to maintain their sales

shares. Within the governmental regulation, the government of Kazakhstan also maintains a

firm grasp on the distribution of all pharmaceutical goods, with sales being limited to

chemists/pharmacies. No pharmaceutical products are available through other channels

such as supermarkets and only qualified pharmacists may sell health goods in Kazakhstan.

The consumer expenditure on health goods and medical services in Kazakhstan is

represented below.

Table 37. Consumer Expenditure on Health Goods and Medical Services in Kazakhstan

mln USD

Category 2006 2007 2008 2009 2010 2011

Pharmaceuticals, Medical Appliances and Equipment 602,6 721,4 970,2 1009,5 1385,1 1651,2

Outpatient Services 224,0 330,7 412,9 421,8 580,6 704,6

Hospital Services 107,1 161,4 202,8 204,4 269,6 318,8



COMPETITION FIELD GlaxoSmithKline, Berlin-Chemie AG and Lek Pharmaceuticals are the

top leaders in consumer health company shares in Kazakhstan.


Table 38. Consumer Health Company Shares of Kazakhstan % retail value rsp

Company 2007 2008 2009 2010 2011 GlaxoSmithKline Plc 3,1 3,2 3,5 3,6 3,5 Berlin-Chemie AG 2,5 2,5 2,7 2,9 2,9

Lek Pharmaceuticals dd 2,8 2,7 2,9 2,9 2,9 Unipharm Inc 1,8 1,9 2,6 2,7 2,7

Sanofi-Aventis Kazakhstan TOO 3,0 2,9 2,8 2,7 2,5 Ratiopharm GmbH 2,4 2,1 2,3 2,3 2,3

Bayer AG 1,8 2,2 2,3 2,3 2,2 Solvay Pharma 1,6 1,8 1,9 2,2 2,1

Laboratory Vitarmonil 1,9 1,9 1,8 1,9 1,8 Nycomed Pharma AS 1,7 1,8 1,8 1,9 1,8

Novartis AG 1,6 1,8 1,7 1,7 1,7 Nycomed Austria GmbH 1,7 1,8 1,8 1,7 1,6

Himpharm AO 1,4 1,3 1,3 1,6 1,5 Nizhpharm OAO 1,3 1,4 1,5 1,6 1,5

Boehringer Ingelheim Pharma GmbH & Co KG 1,0 1,1 1,3 1,5 1,5

Bristol-Myers Squibb Co 1,9 1,7 1,7 1,6 1,5 Unique Pharmaceutical Laboratories 1,2 1,0 1,2 1,4 1,4

Borisovskiy Zavod Medpreparatov RUP 1,3 1,3 1,4 1,3 1,3

Roche Holding AG 1,3 1,1 1,2 1,3 1,2 Boots Co Plc, The 1,2 1,2 1,2 1,2 1,1

Krka dd Novo Mesto 1,1 1,1 1,1 1,1 1,0 Novartis GEM 0,9 0,9 0,9 0,9 0,9

Ivax Corp 1,0 1,0 0,9 0,9 0,8 Janssen Pharmaceutica NV 0,9 0,9 0,9 0,9 0,8

Evalar ZAO 0,5 0,6 0,7 0,8 0,8 Actavis Group 0,9 0,9 0,9 0,9 0,8

Naturwaren Ohg Dr Peter Theiss 1,0 0,9 0,9 0,8 0,8 Ipsen Pharma SA 0,5 0,5 0,6 0,7 0,7

Plethico Pharmaceuticals Ltd 0,6 0,7 0,8 0,7 0,7 Jadran Co 0,7 0,7 0,6 0,7 0,6

Others 55,5 55,1 52,5 51,1 52,8 TOTAL 100,0 100,0 100,0 100,0 100,0


The following table represents the consumer brand shares in Kazakhstan for 2008-2011.

Table 39. Consumer Heath Brand Shares in Kazakhstan % retail value rsp


Brand Company 2008 2009 2010 2011 Vitrum Unipharm Inc 1,3 2,0 2,1 2,1 Mezym Berlin-Chemie AG 1,6 1,8 1,9 1,9

AcvaLine Laboratory Vitarmonil 1,9 1,8 1,9 1,8 Linex Lek Pharmaceuticals dd 1,6 1,7 1,8 1,8

Calcium D3 Nycomed Nycomed Pharma AS 1,5 1,6 1,6 1,5 Kreon Solvay Pharma 1,2 1,3 1,5 1,4

Theraflu Novartis AG 1,4 1,4 1,3 1,3 Coldrex GlaxoSmithKline Plc 1,4 1,4 1,2 1,2

Doktor Mom Unique Pharmaceutical Laboratories 0,8 1,0 1,2 1,2

Hilak Forte Ratiopharm GmbH 1,0 1,1 1,1 1,2 Strepsils Boots Co Plc, The 1,2 1,2 1,2 1,1

Ambrobene Ratiopharm GmbH 1,0 1,2 1,2 1,1 No Shpa Sanofi-Aventis Kazakhstan TOO 1,2 1,3 1,2 1,1

Lasolvan Boehringer Ingelheim Pharma GmbH & Co Kg 0,9 1,0 1,1 1,1

Elevit Pronatal Roche Holding AG 0,8 0,9 1,0 0,9 Neo Penotran Bayer AG 0,7 0,8 1,0 0,9

Xymelin Nycomed Austria GmbH 0,9 1,0 0,9 0,8 Fervex Bristol-Myers Squibb Co 0,9 0,9 0,9 0,8 Rennie Bayer AG 0,8 0,8 0,8 0,8

Pentalgin P Himpharm AO 0,6 0,6 0,8 0,8 Nasivin Nycomed Austria GmbH 0,9 0,9 0,9 0,8

Turboslim Evalar ZAO 0,6 0,7 0,8 0,8 Angi-Sept Naturwaren Ohg Dr Peter Theiss 0,9 0,9 0,8 0,8

Travisil Plethico Pharmaceuticals Ltd 0,7 0,8 0,7 0,7 Duphalac Solvay Pharma 0,6 0,7 0,7 0,7

Acetylsalicylic Acid Borisovskiy Zavod Medpreparatov RUP 0,7 0,7 0,7 0,7

Spazmalgon Actavis Group 0,7 0,7 0,7 0,6

Fastum A Menarini Industrie Farmaceutiche Riunite Srl 0,6 0,6 0,6 0,6

Nafazolin DF Dospharm TOO 0,6 0,6 0,6 0,6 Novo-Passit Ivax Corp 0,7 0,6 0,6 0,6

Others — 70,4 68,2 67,1 68,1 TOTAL — 100,0 100,0 100,0 100,0


Vitrum, Mezym and AcvaLine were the top leaders in 2011.


FOREIGN TRADE EXPORTS The data for exports of pharmaceutical products of Kazakhstan for 2006-2011 are

represented below.

Table 40. Exports of Medicinal and Pharmaceutical Products in Kazakhstan

mln USD

2006 2007 2008 2009 2010 2011 12,2 16,7 20,2 16,5 18,1 26,6


The exports of pharmaceutical products of Kazakhstan totaled USD 18.1 million in 2010 and

USD 26.6 million in 2011, which is 47% more than the 2010 record.

IMPORTS In January-October of 2009, 87.4% of drugs were imported while the local

production was 12.6% only. The imports of pharmaceutical products for the same period

were 89.6%, while the local production 10.4% out of 100. In January-December of 2009,

Germany was the main import source of the given products with a share in Kazakhstani

import of pharmaceuticals 17.1%. Next came France with 10.1% out of 100, Russian

Federation with 8.4%, Austria 7.4% and India 5.6%. Total Kazakhstani import of

pharmaceutical products for January-December of 2009 was USD 759,625.4 million.

The data for imports of pharmaceutical products of Kazakhstan for 2006-2011 are

represented below.

Table 41. Imports of Medicinal and Pharmaceutical Products in

Kazakhstan

mln USD

2006 2007 2008 2009 2010 2011 511,0 629,8 734,5 770,1 1216,5 1486,3


The imports of pharmaceutical products of Kazakhstan totaled USD 1216.5 million in 2010

and USD 1486.3 million in 2011, which is 22% more than the 2010 record.

INVESTMENT At present, there are 5 large pharmaceutical plants — “Chimpharm”, “Global Pharm”,

“Nobel”, “Romat” and “Karaganda Pharmaceutical Complex” that already have a strategic


investor with the volume of attracted investments of approximately USD 180 million. The

aforementioned companies are going to build new plants because the reconstruction of old

plants and their transfer to the standard GMP (Good Manufacturing Practice) in many cases

not possible and would be more expensive.

In mid-November 2012, Turkey's Abdi Ibrahim announced it would build a new

pharmaceutical plant as a part of its tie-up with Kazakh generics producer “Global Pharm”.

According to media reports, the plant represents a USD 60 million investment and Abdi

Ibrahim is to have a controlling stake. Initial news of the project was announced in October

during a visit by the Kazakh president to Turkey in October. As BMI has previously reported,

it appears Abdi Ibrahim took a stake in “Global Pharm” in early 2012. The local firm has

sought in recent years to raise finance to build a new, GMP-compliant generics production

plant in the outskirts of commercial capital Almaty, where it operates an existing plant. The

project was reportedly part of the “Roadmap” document for the development of the

industry approved by the government in early 2010 as part of its Accelerated Industrial

Development Program.

In October, Czech pharmaceutical plant and “turnkey” GMP solutions provider FAVEA

announced it had signed deals worth EUR 36.5 million to build production facilities for

Kazakh players “Romat” and “Pavlodar Pharmaceutical Plant”, which is part of the “Romat”

group. The deals represent additional signs of progress in implementing the government's

“Roadmap”, although we are awaiting more details about the scope of these projects.

PRICES Consumer health in 2011 encountered a unit price increase in Kazakhstan, largely

due to the inflationary pressure and a dependence mostly on imports by international

companies. However, despite this, manufacturers and retailers intended to keep price

increases to a minimum. They were cautious of losing volume growth due to the strong

influence of under-the-counter and prescription sales to non-prescription medicines and

existence of traditional remedies across the country.

OTC REGISTRATION AND CLASSIFICATION Medical products produced in or imported into Kazakhstan are subject to state registration.

After the expiry date of state registration, medical products are subject to re-registration,

which is valid for one to five years. State registration, re-registration and amendments to

registrations are made by the Pharmacy Committee.


OTC healthcare state registration or re-registration is conducted on the basis of a statement

presented to the Pharmacy Committee. This statement is supplied with a registration folder,

medical product samples, reference standards, and standard samples of medical substances

and adulterants. The registration folder has four parts:

• Part I – general documentation;

• Part II – chemical, pharmaceutical and biological documentation;

• Part III – pharmacological and toxicological documentation;

• Part IV – clinical documentation.

For the registration of a new OTC healthcare treatment, three complete packages of the

registration folder (parts I-IV) are required to be presented. For the re-registration of a

product, parts I (general documentation) and II (chemical, pharmaceutical and biological

documentation) of the registration folder, should be presented. Assessment of a product is

arranged and held by the National Centre of Medical Products Expertise.

Analytical and clinical tests are conducted in accredited testing laboratories and clinical

bases. A list of approved laboratories and bases is issued by the Pharmacy Committee.

When a medical product is registered, the Pharmacy Committee issues a registration

certificate and approved therapeutic drug management instructions for specialists and

users, in both the Russian and Kazakh languages.

A Registration Certificate is issued for a period of three to five years. During this period, an

applicant should present a report to the Pharmacy Committee indicating the safety and

effectiveness of the medical product once every six months in the first two years after state

registration, followed by annually in the following three years. This report must then be

submitted once every five years after the subsequent re-registration of the medical product.

The registration of a new drug in the form of a spray in three kinds of concentrations (for

infants, children and older people, for example) plus substance costs which is more than KZT

254,000. This cost is not as significant for large multinationals as for local manufacturers,

although it will lead to some increases in prices of imported products.

The Pharmacy Committee may decide temporarily to prohibit the medical use of a

registered medical product or recall the registration certificate in the following cases:

• The discovery of dangerous features or side-effects previously unknown;


• Inadequate quality of imported medical products compared with the samples

presented at the time of state registration;

• Lack of conformity with technical documentation requirements.

The applicant has the right to apply for re-registration until the expiry date of the

registration certificate.

The Pharmacy Committee will refuse state registration or re-registration of a medical

product in the following cases:

• The registration folder is not presented after 30 days of issue;

• The safety and effectiveness of the medical product is lower than that previously

registered;

• The product contains ingredients prohibited in the Republic of Kazakhstan;

• The applicant presents incorrect information;

• The applicant refuses to hold tests as required;

• Negative results occur during clinical and other trials.

• De-listing or de-reimbursement

The Pharmacy Committee can decide temporarily to prohibit the use of a registered OTC

drug or to recall registration certificates in the following circumstances:

• Discovery of a previously unknown dangerous quality or side-effect related to the

drug;

• Non-conformance with the quality of the imported samples of the drug presented

during the state registration process, or non-conformance with the requirements of

normative and technical documentation.

The National Centre of Remedies Expertise may refuse re-registration on the grounds of

absence of necessary conditions, such as safety, efficiency and quality of the drug.

It is prohibited to extend the expiry time of drugs. Drugs which are out of date counterfeit

or expired and those that do not conform to the requirements of the government are

prohibited for use for medical purposes. Disposal should be carried out by retailers in the

distribution chain responsible for the drug.

BIOEQUIVALENTS/GENERICS Kazakh pharmaceutical sales are dominated by generics for

several reasons. These products carry more affordable prices and are widely available. The

range of original medicines is hampered by long-awaiting registration procedures and


difficulties related to the launch of new remedies in the Kazakh market. This makes generic

pharmaceuticals popular both with consumers and the state. Generics are also widely

produced in the country, due to a lower initial investment being required for these products

in comparison with developing new brands, and those account for the bulk of their sales due

to their affordable prices. Generics are also imported from other countries, Russia, Ukraine,

Slovenia and Hungary, being notable importers of generic healthcare.

The state does not interfere with which medication a doctor can prescribe, whether

generics or branded. Pharmacists in chemists/pharmacies, meanwhile, generally select

generics rather than more expensive brands, usually at the customer’s request.

ADVERTISING/PROMOTION According to Law #522-II on Medical Treatments (13 January

2004), the advertising of medical treatments can occur only with agreement issued by the

National Centre of Remedies Expertise. The text of advertisements must contain

information about the number and date of licenses or agreements.

Advertisements for non-OTC medical treatments, such as psychotropic substances, can be

published only in specialist publications, primarily for medical professionals and

pharmaceutical company employees.

The following are prohibited:

• Advertising of medical treatments that are not registered in Kazakhstan;

• Advertising of medical treatments which are not related to OTC healthcare products;

• Advertising targeting children or using images or voices of children, except for child-

specific products;

• Advertising of medical treatments on public transport or in organizations that are

not related to pharmaceutical activities;

• External advertising using posters, stands, billboards, light boards, and headers.

PACKAGING AND LABELING All information on packaging must be in Kazakh and Russian.

Medical products must show the following information, in an easily readable form, on the

external and internal packaging:

• The name of the medical product and its international non-proprietary name;

• The name of the manufacturer;

• The number of series and date of manufacture;

• Dosage and quantity of doses in the package;


• Application time;

• Storage conditions;

• Safety measures for the application of medical products;

• The instruction that the medical product should not used after its expiration date;

• A caution that the medical product should be stored in places not accessible to

children.

The following inscriptions are obligatory on the packaging of a medical product in specific

cases:

• “For children”, on medical products for children;

• “Homoeopathic” on homoeopathic medical products;

• “Production has passed radiation controls and is safe”, on medicinal vegetable raw

material that has passed radiation controls and is considered safe according to

government legislation;

• “Preparation has passed control and is safe concerning viruses due to parental

transfer, including human immunodeficiency viruses (first and second types) and

hepatitis B and C”, on medical products produced from blood, plasma and also

bodies and tissues of a person, which have passed controls and are considered safe

according to government legislation.

Medical products should contain application instructions for experts and consumers

approved by the state body, in both Kazakh and Russian.

If the packaging of a preparation changes, any changes should be indicated in the

registration file of the preparation. Under the controls of the Committee of Pharmacy, the

simultaneous sale of the medical product in old and new packing is authorized for a period

of no more than six months.

VITAMINS AND DIETARY SUPPLEMENTS REGISTRATION AND CLASSIFICATION According to the legislation bill #567, of 11 June 2003 concerning improvements to

statistical data and exchange of statistical information, all vitamins and dietary supplements

are classified under three trade codes: 3004, 2106 and 2936. The change in the vitamins

number from 3004 to 2106 switched the medical treatment with biologically active

supplements (BADs) and medical substances of petroleum jelly – to cosmetic products. It


means that the 2106 trade code will be related to biological active substances and products

of petroleum jelly.

The change in the status of vitamins to BADs resulted in vitamins being subject to additional

payments related to VAT and customs duty. According to statistical data from the Ministry

of Health, vitamins and BADs account for no more than 8-10% of total sales of medical

treatments.

Vitamins also suffer from import problems due to discrepancies between the

pharmaceutical classification and the customs code classification.

In the Eurasian Economic Community’s foreign trade nomenclature of goods, vitamins are

placed in three trade categories:

• 3004: medical products (vitamins for intravenous induction);

• 2106: food products (vitamin mineral complexes);

• 2936: pro-vitamins and vitamins (vitamins for intramuscular and intrajejunal

administration).

Medical products are free from VAT and customs duties. Vitamins registered as medical

products but included in group 2106 are not considered to be medical products and are thus

liable to a customs duty of 10% and VAT at a rate of 15%. According to the state list of

medical products, vitamins fall under the definition of medical products, but this is not

generally applied in retail, and consumers pay much more for vitamins.

Two laws of the Republic of Kazakhstan regulate the distribution of dietary supplements:

#522-II on Medical Products (13 January 2004) and #543-II on the Quality and Safety of

Foodstuffs (8 April 2004). According to this legislation, parapharmaceutical dietary

supplements are treated as medical products and nutraceutical dietary supplements as

foodstuffs.

The obligatory state registration of dietary supplements manufactured in or imported to

Kazakhstan includes the examination of documents presented by the manufacturer or

supplier, the testing of production and the product’s inclusion in the public register. State

supervision and control of the maintenance of quality and safety for dietary supplements is

carried out by authorized government bodies in the field of sanitary and epidemiological

welfare of the population, and through standardization, good methodology and

certification.


The import, manufacture and sales of parapharmaceutical dietary supplements are under

constant observation and control by the government’s public health service regulatory

bodies. With there being serious gaps in this regulatory system, however, controls are less

consistent for nutraceutical dietary supplements.

SELF-MEDICATION/SELF-CARE AND PREVENTATIVE MEDICINE Many Kazakh people practice self-medication by using hundreds of traditional herbs,

especially in rural areas. These herbs can be taken as a form of preventative healthcare, or

used to treat minor ailments. Applying warmed-up salt to areas of the body that hurt, for

example, is known to reduce the pain. Most of the population tends first to try their hand at

healing through rubbing and massages, which are used as relief from mild pain. However, if

the ailment lasts for more than a couple of days, they usually consult a doctor or a

chemist/pharmacist.

On the other hand, there is an increasing amount of medical information available on the

internet which has made many consumers more educated, as they can research their own

complaints and gain a great deal of information regarding possible remedies. More dynamic

than the self-medication trend was the spread of preventative medicine. Consumers

became more concerned about the inconvenience and the costs involved when suffering

illness or diseases. Having opportunities to prevent the development of disease many

people started using such means thereby reducing frequency of sick-leave and reducing

their expenditure on medical treatments.

Kazakhs are expected to have less time available to visit a physician and to have wider

access to information via the internet, as well as being increasingly exposed to advertising

that spells out the benefits of using OTC healthcare products to treat common complaints,

such as a coughs, colds or headaches. Towards the end of the review period, Euromonitor

International research also did not reveal any tangible trend of Kazakh people tending to

change their consumption patterns with regard to preventative medicine. There is certainly

an overlap with vitamins and dietary supplements, which are bought as a means to prevent

illnesses by a number of consumers, but otherwise little innovation and demand is seen for

products aimed to prevent specific ailments, like coughs, colds or digestive problems.


FORECAST In constant value terms, consumer health in Kazakhstan is predicted to record a higher

growth rate compared to that achieved during the review period. Healthcare in the country

has more scope for value as opposed to volume growth due to rising unit prices and high

dependence on imports. The ongoing health and wellness trend in the country and self-

medication tendency are both expected to have a positive impact on consumer health in the

long-term. On the other hand, prescription sales of consumer health remain strong. As the

economy improves and disposable income levels rise, many are expected to trade up to

prescription pharmaceuticals, believing these to offer a stronger or more rapid effect.


Table 42. Forecast Sales of Consumer Health by Category in Kazakhstan mln KZT

Category 2012 2013 2014 2015 2016 Over the Counter (OTC) 37584,5 38038,8 38674,7 39553,3 40244,0 Sports Nutrition 50,5 51,6 52,5 53,4 54,6 Vitamins and Dietary Supplements 9004,1 9178,7 9359,4 9530,6 9648,4

Weight Management 2970,4 3050,5 3143,2 3247,2 3328,0

Herbal/Traditional Products 5093,0 5407,0 5766,6 6170,2 6501,6

Allergy Care 768,9 773,7 773,0 778,7 784,3

Paediatric Consumer Health 1649,5 1679,6 1701,5 1726,3 1747,5

Consumer Health 49815,3 50552,4 51487,8 52662,5 53580,6 Source: www.portal.euromonitor.com

Consumer health is projected to record on average 2% growth year by year from 2012 to

2016. OTC medicaments, vitamins and dietary supplements, herbal products and pediatric

health medical agents have a trend of growth within this period.


http://trade.nosis.com/en/Comex/Import-Export/Kazakhstan/Productos-farmaceuticos/KZ/30

http://www.norvegia.kz/PageFiles/410690/DB2.pdf


http://trade.nosis.com/en/Comex/Import-Export/Kazakhstan/Productos-farmaceuticos/KZ/30

http://www.norvegia.kz/PageFiles/410690/DB2.pdf


http://www.chemrar.ru/i-news/index.php?ELEMENT_ID=15058

www.kursiv.kz

http://www.newsfiber.com/p/s/h?v=E%2FM5DDjpJ%2FfQ%3D+Q4F0sCIGuGw%3D

http://www.marketresearch.com/Business-Monitor-International-v304/Kazakhstan-Pharmaceuticals-Healthcare-Q1-7288118/

http://www.chemrar.ru/i-news/index.php?ELEMENT_ID=15058

http://www.kursiv.kz/

http://www.newsfiber.com/p/s/h?v=E%2FM5DDjpJ%2FfQ%3D+Q4F0sCIGuGw%3D



Armenian Development Agency

2012