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The Russian Biopharmaceuticals and Biomedicine Market : From Import Substitution to Innovation

  • December 2014
  • -
  • Frost & Sullivan
  • -
  • 89 pages

Summary

Table of Contents

Executive Summary

•The Russian biopharmaceuticals market was valued at $ x billion in 2013 and is projected to grow at a CAGR of x % till 2018.
•The ageing population and increasing disease burden are key long-term growth factors for the biotech industry. By 2025, almost a quarter of the Russian population will be aged 60 years or more.
•The most sizable segments of the Russian biopharmaceuticals market include cytokines (interferons, erythropoietins), hormones, coagulants, protein kinase inhibitors, monoclonal antibodies (mAbs), vaccines, antibiotics, and bacteriophages.
•Key challenges for the biotech industry are associated with expected budget constraints as drug procurement moves to one-channel financing from the Federal Obligatory Medical Insurance Fund (FOMS).
•Russian companies, with the support of the government, are actively launching biosimilars, including monoclonal antibodies (mAbs), cytokines, and hormones. BIOCAD, R-Pharm, Generium, and Human Stem Cells Institute are emerging as national leaders in biopharmaceuticals and biomedicine.
•Biotechnology, nanotechnology, and Information Technology (IT), were prioritized by the Russian Government for the modernization of the Russian economy. The key focus is on import substitution of drugs from the List of Vital and Essential Drugs (ZHNVLP) and localization of manufacturing.
•Federal and regional authorities are creating a favorable environment for multinational corporations (MNCs) that localize production in Russia. In the biotech clusters, technoparks, and industrial parks that have been created, these companies can benefit from tax incentives and infrastructure access.
•The government has created a wide network of development institutions such as the Skolkovo Foundation, Russian Venture Company (RVC), and RUSNANO to support innovation, provide financing to biotech startups, and assist in transfer of technology from abroad.
•A network of scientific institutes of the Russian Academy of Sciences (RAS) and the Russian Academy of Medical Sciences (RAMS) concentrated in Moscow, St. Petersburg, and Novosibirsk are engaged in breakthrough research in the field of post-genomic technologies, bioinformatics, and new tools for diagnostics such as biochips and biosensors.
•The public-private partnership initiative—Technology Platform “Medicine of the Future”—is becoming an essential part in uniting academia and business efforts to launch innovative products in the Russian market.

Key Segments Include:

•Biopharmaceuticals (cytokines, hormones, coagulants, protein kinase inhibitors, monoclonal antibodies, vaccines, antibiotics, and bacteriophages);
•Biomedicine (cell technologies, gene therapy and regenerative medicine, nanomedicine and targeted drug delivery, biocompatible and biodegradable medical materials, diagnostic tools, biochips and biosensors, systems biology, post-genomic technologies, and bioinformatics).
•This study is mostly based on secondary research and is the result of a joint collaboration between Frost & Sullivan, Russian Venture Company, and the Moscow Exchange to increase investor awareness about the Russian biotechnology market.
•The key focus of research is to show the latest developments in Russian biotech, define key segments and emerging leaders, and outline government policies and support mechanisms.
•Due to the significant depreciation of the Russian currency in 2014 (particularly, September to November), market size and forecast estimations are defined in US Dollars (USD) and are based on the average USD to Russian Ruble (RUB) exchange rate of 2013, which is x rubles per dollar.
•Factors taken into consideration during forecasting include the ageing population, the dynamics of government spending on healthcare, investment by Russian and foreign companies, as well as an assumption that the share of biotechnology drugs in the total pharmaceutical market will increase, in line with global trends.
•The base year for the study is 2013 with a forecast period of 2014 to 2018.

Russian Economy Overview

•The general macroeconomic environment in Russia has continuously deteriorated in 2013–2014. Government attempts to diversify the economy have had little success. As a result, the Gross Domestic Product (GDP) growth is forecast to be within the x % to x % range in the next x years.
•The two major short-term factors that have a negative impact on the economy are political instability in Ukraine and sanctions imposed on Russia by western governments. This has already led to higher inflation expectations and depreciation of the Ruble against the Dollar and the Euro by x % and x %, respectively, in 2014 alone (as of end of October 2014).
•Though the official inflation and unemployment rates are relatively low, real indicators are considerably higher. Consumers are refraining from increasing consumption and have started to save, thus, leading to a negative impact on the entire economy.
•A decline in oil prices, as has been witnessed recently, could also severely impact the government budget and its obligations to maintain the level of healthcare financing it had reached before the financial crists of 2008.

Healthcare Market Overview

•At the end of September 2014, the government submitted a draft federal budget for 2015 and for a planned period of 2016–2017 to the State Duma (legislative branch). This is the first time that the budget considered the new territory of Crimea, as well as such factors as decreasing oil prices and possible consequences of sanctions imposed by the US and the European Union (EU) on Russia.
•The general federal spending on healthcare will decrease by x % in 2015 alone; however, this should be offset by the increase of financial inflow to the Federal Fund for the Obligatory Medical Insurance (FOMS) from employers’ contributions.
•In 2015, the FOMS budget is slated to increase by RUB x billion, in 2016 by RUB x billion, and in 2017 by RUB x billion. Total FOMS expenditure will constitute RUB x billion in 2015 ($ x billion), RUB x billion in 2016, and RUB x billion in 2017.
•The Ministry of Finance has proposed to eliminate contribution limits, starting in 2015. Currently employers pay x % of the payroll fund, not exceeding x ($ x ), for each employee per annum. The suggested reform seeks to remove this limit, thereby, taking into account every employee’s salary irrespective of what they earn.
•However, there is a major concern that in current economic conditions, employers will not be raising salaries; therefore, this could lead to a more widespread practice of under-the-table payments, which in turn, will result in an actual decrease in healthcare spending.
•It is worth noting that decreasing federal financing of healthcare is a long-term goal of the government in order to move to one-channel financing (from FOMS) and this is expected to give more autonomy to regional authorities and regional obligatory medical insurance funds.

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