Pharmaceutical Market Trends in 2020 — 1H 2022

The Russian pharmaceutical market barely had time to adapt to COVID-19-related challenges as the market environment changed again: heightened political turbulence, sanctions imposed on Russia and counter-sanctions introduced by the Russian Government, voluntary self-restrictive measures taken by some foreign companies with respect to their operations in Russia (particularly, suspension of clinical research in Russia, investments in marketing and advertising). These developments significantly affected the market and, in the case of some drugs and medical devices, led to an increased cost due to higher logistics expenses, extended delivery time to the Russian Federation, or complete unavailability.

In addition to challenges in the domestic market, the industry participants have to respond to international pressures, such as record-high inflation in the major global markets (the US, UK and eurozone), as well as limited access to energy. In the future, this may mean higher prices on imported drugs or medical devices, and their lower availability to patients.

In 2021, the pharmaceutical market grew in rouble terms by 12.7 percent, but contracted in volume terms by 6 percent.

In 1H 2022, the pharmaceutical market continued to expand in cash terms (+21.1%), albeit stagnated in volume terms (+2,6%).

In our opinion, both in the short- and mid-term perspectives the market growth in cash terms most likely will be driven by increased total public healthcare expenditures. According to the draft of the federal budget for 2023 and plans for 2024−2025, the total public healthcare expenditures are expected to grow to RUB 6.7 trilllion and RUB 6.5 trillion (by 11,78% and 17,75%) in 2023 and 2024, respectively, compared to the plan for 2022.

In 2023−2024, the growth in the commercial segment of the market may be more modest compared to 2022 due to lower real disposable income of households.

In this context, in the short to medium term, pharmaceutical companies may opt for the strategy based on developing a product portfolio depending on the respective funding source for specific nosologies and programs for provision of drugs to households. A factor to consider is the growing competition from Russian players who both enjoy state support measures and increase investments in the development and production of drugs domestically.

In the past, the Russian pharmaceutical community had to cope with a variety of challenges and complex tasks, but the market has successfully addressed them and continued to move forward. There is no doubt that appropriate solutions will be developed this time, too. Hopefully, the experience and expertise of our experts will enable industry participants to find and implement such solutions.