BMI View: If proven successful, the rolling out of a national drug insurance scheme across the various regions of Russia could provide a boost to pharmaceutical spending. Although we believe generic drugmakers will likely benefit from the programmes initially, we expect multinational drugmakers to either licence production locally or construct facilities in the country to gain preferential treatment. Given Russia's significant disease burden and ageing population, spending on medicines will be sustained for the long term.
In the Kirov region of Russia, a pilot programme for reimbursing specific patient groups is being rolled out. This is the second region to rollout a regional national drug insurance programme in Russia, and already the region is claiming that the programme has reduced deaths from cardiovascular diseases by 20% and reduced hospitalisation of patients with angina and other cardiovascular conditions. The local government in the Kirov region have also claimed significant savings in pharmaceutical expenditure on account of holding procurement auctions for medicines.
Currently these pilot schemes offer full or partial reimbursement to patients with cardiovascular diseases, for which there are an array of generic drugs available currently that offer significant benefits. Many efficacious drugs for treating cardiovascular diseases such as Liptior (atorvastatin) and Plavix (Clopidogrel) have come off patent, allowing regional governments to buy these drugs at a much lower price than before. As a result, patients are expected to pay between 0-10% of the cost of medicines, a considerably better situation than before. If the Ministry of Health rolls forward with plans to introduce generic prescribing, the continued rollout of the national drugs insurance programme will spell significant benefits for generic drugmakers operating in the country, although we do note that local drugmakers or drugmakers with local production capacity will receive preference over those that merely import in their products.
With the national programme expected to come online in 2015 or 2016 and coverage being extended to more patients, growth in pharmaceutical expenditure will be sustained for the long term. The Ministry of Health has planned for coverage to be introduced for hypertension and gastric ulcers in 2014. In 2016, the Ministry plans to extend coverage to more diseases such as bronchitis, liver disease and anaemia.
However, we expect the Russian state to preferably procure generic drugs where possible and resort to expensive patented drugs where no compelling alternative is available. Similarly, the Ministry of Health commoditisation of generics has meant that drug prices in government and regional procurement drives will go down over the long term. We expect the Ministry of Health to expand coverage of diseases as patents for key drugs expire. While biologics are expected to continue to be sold at premium prices, the possibility of the Russian state enabling biosimilars to enter state procurement is far from remote. Russian companies such as Biocad and Pharmstandard are currently able to produce both licenced and off-patent biologic copies of popular drugs for rheumatoid arthritis and hepatitis C.
|Long Term Growth In Pharmaceutical Expenditure|
In sum, we regard the rollout as a positive factor driving favourable conditions for drugmakers operating in Russia. We expect Russian pharmaceutical sales to grow by 10.8% in rouble terms and 12.8% in US dollar terms to RUB757bn (US$24.81bn). Over the long term, we forecast a ten year compound-annual growth rate of 10.3% in US dollar terms and 9.8% in rouble terms to a value of RUB1.74tn (US$58.4bn). Key growth drivers include national drug insurance, an ageing population and rising incomes, although we note that runaway spending may prompt further tightening on imports.