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Russia’s pharmaceutical market
By R-A Business staff | Published  12/23/2010 | Market analysis | Unrated
The market reached USD 8.6 billion this year.

The pharmaceutical market as a whole saw compound annual growth rates of 14.2 percent in the period of years from 2006 to 2010. The most profitable subsector on the pharmaceutical market was the “therapeutic treatment” category, where revenues stood at USD 4 billion, or about 46.9 percent of the total market size.

Analysts believe that the expansion of the market can soon accelerate, forecasting a compound annual growth rate of 20.9 percent for the next five years. Thus, the value of goods and services on the Russian pharmaceutical market is likely to reach USD 22.1 billion by 2016. 


The pharmaceutical industry in Russia has seen considerable expansion in the past several years, with double-digit growth rates. In view of recent developments, market researchers anticipate that the upward trend will continue at an even greater pace. As mentioned earlier, the size of the market was USD 8.6 billion in 2010, and the compound annual growth rate for the past four years was 14.2 percent. By comparison, the pharmaceutical markets in France and Germany had compound annual growth rates of only 1.8 percent and 3.4 percent from 2006 to 2010. While it is true that the size of those markets is larger than that of the Russian pharmaceuticals sector (USD 36 billion and USD 37.9 billion respectively), Russian pharmaceuticals manufacturers are making steady efforts to catch up with their European counterparts.

Pharmaceuticals in the “other therapeutic” treatment category represented the best-performing subsector with nearly USD 4 billion in sales. Alimentary and metabolism pharmaceuticals constituted the second-highest market segment, where revenues reached USD 1.5 billion in 2010. Thus, the “alimentary and metabolism” category accounted for 17.8 percent of the overall market size.  

While the Russian pharmaceutical market is forecast to grow at a compound annual growth rate of 20.9 percent in the next five years, the French and the German markets are estimated to grow at compound annual growth rates of 0.7 percent and 1.8 percent respectively over the same timeframe. Thus, when the Russian market reaches the value of USD 22.1 billion in 2016, the market of France will have the value of USD 37.7 billion, and the market of Germany USD 44.5 billion.

In 2010 alone, the Russian pharmaceutical market expanded by 17 percent.

Today, Russia accounts for 4.4 percent of the European pharmaceutical market. By comparison, Germany’s share of the European market is 17.8 percent.

Market participants

Novartis: 4.9 percent

Pharmstandard: 4.1 percent

Sanofi-Aventis: 3.8 percent

Bayer AG: 3.7 percent

Other: 83.6 percent


The largest participant on the Russian pharmaceutical market is Novartis. Its share of the Russian market is estimated at 4.9 percent. Novartis International AG is a multinational pharmaceutical company based in Basel, Switzerland, ranking number three in sales in the world-wide industry, with sales of 36.173 billion in 2008. The company recorded revenues of USD 44.267 billion in 2009. The company’s number one market was Europe, with revenues of USD 10.467 billion, or 37 percent of its sales.

The next biggest market player is Pharmstandard, with a market share of 4.1 percent. Pharmstandard has its headquarters in the city of Ufa. The company’s portfolio includes over 200 products used in the treatment of diabetes, growth hormone deficiency, cardiovascular diseases, gastroenterological and neurological disorders, infectious diseases, cancer, etc. Over 90 products offered by Pharmstandard are included on Russia’s List of Vital Pharmaceutical Products. The company has six manufacturing facilities located in Moscow, Ufa, Nizhny Novgorod, Kursk, Tomsk, and Tyumen. The company recorded revenues of RUR 24.095 billion (USD 756.1 million) in 2009 and RUR 14.336 billion (USD 449.9 million) in 2008.

Sanofi-Aventis, headquartered in Paris, France, is a multinational pharmaceutical company, the world’s fourth-largest by prescription sales. The company posted revenues of USD 40.750 billion in 2009. Its net income was USD 11.779 billion in 2009.

Bayer AG is a chemical and pharmaceutical company founded Germany in 1863. The company’s performance in the consumer health sector in 2009 improved significantly chiefly due to strong sales gains in Russia.


The Russian pharmaceutical industry is highly fragmented, and the largest four market participants taken together constitute only 16.4 percent of the market. The market participation of large international players does not change the dynamics of the industry. The market can be characterized by a high degree of rivalry.

The preponderance of customers ordering prescription medication comes from such categories as medium to big hospitals, managed care providers, state agencies, as well as private retailers. The market is considered to be high-risk and slow to penetrate. The high level of expenditures required for a company desiring to enter into the Russian pharmaceutical market is partially explained by difficult safety regulations. These factors represent formidable barriers to market entry. At the same time, state-ensured protection of proprietary information and patents permits market participants to profit from their exclusive position on the market and recover product development costs. 

Investments into product creation, coupled with considerable fixed costs, make for an intense competition among the companies on the market. Large market participants that are engaged in research and development are also placed at a disadvantage by manufacturers of generic medication and biosimilar products that receive automatic approval by virtue of their similarity to an already-tested type of medication.

Market segments

Market segments in the Russian pharmaceutical sector were distributed as follows: therapeutic purposes medication: 46.9 percent; alimentary/metabolism: 17.8 percent; central nervous system: 12.3 percent; respiratory: 11.5 percent, cardiovascular: 8.3 percent, oncology: 3.2 percent.

Shares by country comparison

Germany: 19.4 percent

France: 18.7 percent

United Kingdom: 13.4 percent

Russia: 4.4 percent

Rest of Europe: 44.2 percent



Most buyers of pharmaceuticals in Russia are actual providers of health care services, including hospitals, managed care organization, and state agencies. The second distinct group includes drug retailers. The wide spectrum of potential buyers reduces the leverage that each individual buyer can exert. At the same time, several buyers on the Russian market come from the ranks of large multinational corporations. In 2009, company Pfizer generated at a minimum 10 percent of its revenue from three wholesalers, namely McKesson, Cardinal Health, and AmerisourceBerge. These buyers have significant influence.

In Russia, just as in most countries, a prescription is necessary for purchasing specialized medication. As a consequence, the power of buyers is both directly and indirectly curtailed in the pharmaceutical industry. Thus, marketing campaigns designed to promote prescription medications should target doctors and other medical providers. While product substitution varies widely from one medical condition to another, there is generally more than only one treatment that can be applicable. In the absence of product differentiation, the power of buyers is strengthened as a result of these circumstances. Factors that can help differentiate one product from another are the effectiveness of medication, the ease with which the treatment can be applied, the presence of unwanted side effects, as well as costs. In situations where a generic product has entered the market, opportunities for differentiating one product from another become limited, and buyer power is fortified. These marketing strategies lent themselves fully to the Russian pharmaceutical market.     

At the same time, the creators of a new product will be able to benefit from initial protections under patents and the intellectual property law. Until patent protection ends as a result of the expiration of the patent or a successful legal challenge, the power of buyers is weak. Enhanced buyer power results in heightened sensitivity to price.

In view of the specifics of the Russian pharmaceutical market, market researchers estimate the power of buyers as moderate.


The suppliers working with the Russian pharmaceutical market include manufacturers of active ingredients used in the medication. These producers form a subsector of the chemical market sector. As such, a host of big pharmaceutical manufacturers in Russia invest in production facilities and enterprises that guarantee the creation of fine chemicals. These companies generally enjoy greater self-reliance. As a consequence, supplier power for these firms is reduced. The procurement of active ingredients for pharmaceutical manufacturers is performed under long-duration contracts. Thus, if businesses desire to relocate their place of operations to a venue where deliveries from their suppliers would be impossible, they would be confronted with the problem of bearing considerable switching expenses. Pharmaceutical firms use the services of sourcing managers that specialize in reducing the power of suppliers.   

The creation of new therapeutic medications always requires the procurement of new active ingredients. Manufacturers often charge higher prices to pharmaceutical companies looking to source new ingredients. At the same time, if the new drug comes to enjoy great popularity after it enters the market, the supplier of the active ingredient would stand to gain considerable profit.

In Russia, the general trend is that market participants source their materials from a large number of independent suppliers. This practice reduces the reliance of the manufacturers of pharmaceuticals on any particular supplier. Overall, the similarity of lab equipment and chemicals used in production reflects the small degree of differentiation from one supplier to another. Pharmaceutical companies enjoy the freedom to choose their suppliers, considering the cost-quality tradeoff.

At the same time, there are cases where special production platforms and rare raw materials are needed, such as in the instance of sterile bio-materials processing. Supplier power is significant in these instances. The forward integration of chemical companies into the pharmaceutical market itself occurs very seldom in Russia. Still, the ability of these companies to synthesize chemicals gives them an opportunity to become manufacturers of generic medication.

In the last several years, bigger market participants in the Russian pharmaceutical industry started focusing on creating their own departments specializing in chemical synthesis in an effort to reduce costs. Smaller companies without the resources needed to launch their own chemical divisions still rely on the manufacturers of active ingredients.

In summary, the power of suppliers on the Russian pharmaceutical market is moderate.


Market entry can be long, costly, and involve considerable risk. The ability of companies to sustain their operations and remain profitable is directly tied to their technical know-how. Competent employees are absolutely indispensible for successful market entry. The relatively high pay for skilled workers adds to the high fixed costs on the market. Access to innovative technologies and the ability of companies to commercialize their know-how determines whether a company will succeed or fail. Strict regulations regarding the safety and the potency of medication must be adhered to. In extreme cases, approval can take as long as 10 to 15 years. Furthermore, not all investments are guaranteed automatic approval.

In line with their goals of boosting revenue, a number of Russian market participants started looking at the expanding markets of Asia and the Pacific region. For Western investors some intellectual property protection in countries located in that region would be provided through the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property (TRIPS), which mandated for member-countries to amend their intellectual property laws to provide patent protection for pharmaceutical products by 2005, with an extension to 2016 granted for less-developed nations.

In all, the level of difficulty for market entry is moderate.

Recent developments

The market for ready-to-use drugs declined by 1.1 percent in October 2010 in relation to September. The volume of the market has been estimated at RUR 20.1 billion. Year-on-year growth in this segment was only 0.1 percent. The commercial market for drugs in general expanded by 3.6 percent on a year-on-year basis in the first ten months of 2010.

The actual prices on pharmaceutical products grew 4.4 percent. In October, the average price of drugs on the Russian market rose by 5.4 percent compared to September.

The structure of the market by price categories in October 2010 changed in comparison to September 2010. Sales of drugs priced from RUR 150 and upwards went up by 2.7 percent. The sales of drugs in other categories went down. Drugs in the price segment of RUR 50 to RUR 150 per drug unit now comprise 27.7 percent of the total market. Sales of drugs priced from RUR 150 to RUR 500 account for 40.9 percent of the market. The market share of drugs in the segment with prices below RUR 50 decreased by 0.7 percent in October.

Most drugs sold on the market in October by economic value (around 65 percent) were domestically-produced. Sales of domestically-produced pharmaceuticals comprised only 24 percent of the total market by sales revenue.

The share of Rx drugs on the Russian market totaled 53 percent in October 2010. Over-the-counter drugs accounted for 47 percent of the pharmaceutical market in Russia.

In October, Pharmstandard was the leader of sales by value, with Sanofi-Aventis coming in second place and Berlin-Chemie in third place.


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