Health and medical to Russia
(Last updated: 3 Feb 2012)
Trends and opportunities
The market
The Russian system of medical care is based on a system of compulsory state insurance provided via the state healthcare system. Insufficient financing has seriously affected the quality and volume of medical services available to the population under free care programs. The Russian healthcare system is based on municipal clinics, federal clinics and private clinics. Though the number of state hospitals and clinics is huge, and medical personnel are highly qualified, the quality of public services is very low due to inadequate funding and obsolete medical equipment. Private hospitals account for only four per cent of 6,200 hospitals in Russia. However there was a significant number increase from 192 hospitals in 2008 to 248 in 2010 (Source: Frost & Sullivan), which shows a significant potential for the private healthcare sector development.
In 2008 the Russian Government implemented a drug reimbursement program to encourage greater preventative healthcare through subsidies for the purchase of pharmaceuticals (distributed via state insurance funds). However over 80 per cent of health consumers pay the cost of medical services (including drug purchase) by themselves, despite official state provision of free items set out in a list of ‘essential medical drugs’. Medicines bought from household budgets make up to 30 per cent of country-wide healthcare expenditure.
Despite funding difficulties, the dynamic growth of the Russian economy since 2000 led to positive changes in the healthcare sector. A new Russian federal law on public health came into the effect on 1 January 2012. The Russian Government plans to increase budget expenditures in the health sector to 5.5 cent of GDP by allocating more than US$10 billion to modernise the healthcare system (Source: Frost and Sullivan) through to 2020. Targets are set to significantly reduce the infant and maternal mortality levels, decrease consumption of alcohol and tobacco, increase life expectancy to 70 years and reverse the population decline.
Pharmaceutical sector
Since 2000, sales of pharmaceutical products in Russia have grown rapidly. Sales were boosted by the 2008 Pharmaceuticals Allowance Act, which provides state budget allocations for individual citizens with cash compensation for certain pharmaceuticals. Russia’s pharmaceutical market reached US$16 billion in 2010. Sales growth is expected to continue for the foreseeable future.
The Russian Government regulates the official maximum allowable prices for more than 5,000 medical drugs. A proposed reference price system regulates the compensation scheme for patients. Pharmacological manufacturers must register all medical preparations with the Federal Service for Supervision of Public Health and Social Development (Roszdravtekhnadzor), a regulatory body under the Ministry of Health and Social Policy. The government annually approves a list of vital and essential medicines (‘ZhNVLS’ list). In 2012 this list comprises 567 drugs. Foreign manufacturers supply 36 per cent (207 drugs manufactures only by international companies), Russian drug makers produce 16 per cent (93 items) and remaining 47 per cent (267 items) are produced by both Russian and foreign pharmaceutical companies.
The new law simplifies Russia’s complicated regulatory system. Whilst it was opposed by many local industry specialists, the law modernises state control over drug prices, distribution and clinical trials. It has set up provisions for reforms in state pharmacopeia and legislation relating to the drugs’ import and export. Better quality control and labelling requirement were introduced.
The persistent level of counterfeit medicines in the Russian market also complicates the government’s task of encouraging the development of more quality Russian-made generic medicines. However, Russia’s accession to WTO should ease the market entry and improve regulation of IP rights over time.
Medical devices and equipment
Domestic manufacture of medical devices is very small in Russia and generally restricted to products with limited technological parameters. Thus, Russia is highly dependent on the import of high technology medical devices and equipment. Growing prosperity and improved economic conditions have promoted the population’s interest in the quality of medical services, stimulating further demand for imported devices.
Imported medical devices by 2010 accounted for nearly 89 per cent of all devices sold. The total volume of products sold reached US$3.27 billion dollars in 2010 showing a significant 25 per cent growth from 2009 (Source: Frost and Sullivan). However, the import of foreign medical devices is complicated by stringent regulatory requirements, which require the re-certification of devices that already have CE or FDA marking.
The market penetration of foreign manufacturers traditionally begins from participation in specialised exhibitions and conferences. A large number of foreign companies have established their own subsidiaries in Russia to address issues of product licensing, registration, importation and customs procedures, which are often non-transparent and demand a lot of time and management resources.
The Russian government is concerned about the country’s import dependence in this sector and has developed a program stimulated investment in localisation of the production of medical devices, introduction of new technologies to support development of the Russia’s strong healthcare system.
Opportunities for Australian exporters and investors
Key growth areas include:
- Local production of pharmaceuticals, mainly generics, the demand for which is driven by their relatively low cost
- Branded drugs – since many customers still prefer to buy branded pharmaceuticals trying to avoid counterfeit drugs
- Over-the-counter (OTC) non-prescription treatments: with a large population of 140 million and a growing middle class, Russia is an attractive market
- Clinical trials in Russia, driven by:
- Cost advantage – significantly less expensive (up to 50 per cent cheaper than Western countries)
- Large population
- Centralised healthcare system, featuring large hospitals with strong scientific base across Russia
- High-end medical devices: Russia remains highly dependent on imported hi-tech healthcare devices because of the country’s modest local production base
- Government support of health sector as part of the 10-year infrastructure and rebuilding program. According to the country’s healthcare modernisation plan a substantial investment will be injected into the construction of new hospitals and clinics
- IT solutions for healthcare industry
The Russian Government’s Priority National Program on Health, with a corresponding action plan to the year 2020, has allocated significant funding for the rehabilitation of existing medical infrastructure and the construction of new medical facilities. The National Program for Biotechnology Development aims to enhance the biotechnology sector by encouraging investment in this sector. Bio-security, bio-diversity, renewable and bio-catalysis, bio-nanotechnology and systems biology are amongst most attractive sub sectors in the regard.
Links and industry contacts
Hospital (International Medical Technology Exhibition) – www.hospital.primexpo.com
Ministry of Health and Social Development – www.minzdravsoc.ru
PharmeTech (Int'l Trade Fair of Pharmaceutical and Cosmetic Manufacturing) – www.pharmtech-expo.ru
World Health Organization – www.unrussia.ru/en/institutions/who.html
Zdravookhraneniye (International Trade Fair for Healthcare, Medical Engineering and Pharmaceuticals) – www.zdravo-expo.ru
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Contact details
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