Russia expected to increase pharma spending
But risk of lower consumer expenditure as healthcare funding moves from central budget to contribution and insurance-based system
Russia's pharmaceutical market continues to be one of the most attractive in the emerging Europe region, primarily due to its sheer size, growing economy and increasing government investment in healthcare, says a new report by Business Monitor.
Key drivers of growth in the region include programmes to fund medicines for specific segments and disease groups, as well as a universal medicines insurance system that is expected to be established later this decade.
The report, entitled Russia Pharmaceuticals and Healthcare, predicts that Russia's recent joining of the World Trade Organization will drive improvements in the country's intellectual property (IP) environment, and enforcement in particular, which has been conspicuously lacking. But in the short term, a deteriorating macroeconomic picture will moderate growth as consumer spending is expected to slow.
The study predicts that over the longer term, Russia's ageing population and significant disease burden will accelerate pharmaceutical expenditure.
Spending on pharmaceuticals is expected to increase from RUB689.95bn (US$22.22bn) in 2012 to RUB765.80bn ($24.29bn) in 2013, a rise of 11% in local currency terms and 9.3% in US dollars.
Healthcare spending will increase by 12.1% in local currency terms (10.4% in US dollars) to RUB4,111.5bn ($130.40bn) in 2013, up from RUB3669.26bn ($118.16bn) in 2012.
Russia's ageing population and significant disease burden will accelerate pharmaceutical expenditure
Currency sell-offs across emerging markets threaten to have an impact on revenues and earnings of subsidiaries of foreign companies operating in Russia and although pharmaceutical sales remain strong, Business Monitor notes that there is a downside risk to growth over the short term as private consumption cools.
Statements by senior officials in the first quarter of 2013 indicated that the Russian government would seek to shift more of the burden of healthcare funding from the central budget to a contribution and insurance-based system. From 2014, higher-earning Russians, who contribute part of their salary to the compulsory health insurance programme (OMS), will be forced to pay more into the fund.
Russians earning more than RUB512,000 ($16,670) annually will be forced to pay an additional 5.1% on any income above the threshold. According to the Ministry of Healthcare, this will raise an additional RUB102bn ($3.32bn) in 2014, and RUB113bn ($3.68bn) in 2015.
At the same time, new regulations have increased contributions from the government to the State Insurance Fund. In 2013, the fund could have revenues of RUB1.06trn ($31.8bn). By 2015, it is expected to have total revenues of RUB1.44trn ($43.2bn). Essentially, the move will reduce the amount of funding directed through the Ministry of Healthcare. While the move is logical in terms of setting up a theoretically more means tested and ring-fenced funding mechanism for costly medical programmes, Business Monitor fears that past corruption problems in the healthcare insurance system could reoccur.