High demand helps the Russian pharma market for the second year in a row

Russia’s pharma market has been growing in monetary terms since 2020, but is stagnating in natural units. The information on the factors behind the growth of the market and how and why the segment of public procurement changed is presented in the report by Delovyie Resheniia i Tekhnologii (Business Solutions and Technologies, formerly Deloitte).

In 2021, the pharma market continued to grow both in ruble terms and in dollar terms, while in natural units its downward trend continued. In 2021, growth in rubles even accelerated: in 2020, the market grew by 9.5%, and in 2021, by 12.7%. In dollar terms, the long volatility was replaced by a noticeable increase: in 2020, the growth rate was only 1%, and in 2021 as high as 9%.

The main stimulus for growth in 2020 was the commercial market of medicines (the market growth due to the commercial segment in rubles amounted to 5.8%), and in 2021, the growth was mainly due to the public sector (which accounted for 10.3% growth of the market).

The growth of the commercial segment in 2020 is due to the high demand for medicines amid the pandemic. Therefore, the main growth occurred due to drugs included in the recommended list for the treatment and prevention of COVID-19. Other growth factors were travel restrictions related to anti-COVID measures, as well as the expectation of an increase in drug prices due to the weakening of the ruble. All this encouraged the population to stock up on medicines.

In natural units, the trend of declining sales that began in 2019 continued: in 2020, the decline was 4%, in 2021 – another 6% (from 5917 million packages in 2020 to 5564 million in 2021).

The declining trend in the market in natural units is primarily explained by a drop in the real disposable incomes of Russians (by 3.5%), as well as supply problems due to the COVID-19 pandemic and larger packaging. The decline in 2021 accelerated due to the fact that people still had stocks left from 2020.

In the first half of 2022, the pharma market continued to grow in monetary terms, and the increase was significant: its growth rate doubled y-o-y (in the first six months of 2021 the growth was 10.5%, while in the same period of 2022 the indicator was already 21.1%).

In physical terms, however, the market growth is very modest: only 4.8%. This is explained by the increase in prices for some groups of imported non-VED drugs due to exchange rate fluctuations in February – April 2022 and increased inflation, as well as the more complicated and expensive logistics, which is caused by sanctions, among other things. The same factors led to the growth of the segment in kind: people stocked on drugs. But the growth continued, and in the first nine months of 2022 the segment grew 18% in ruble equivalent (1,253 billion rubles) y-o-y.

The public segment demonstrated significant growth in 2021, by 31.2%. This was primarily due to an increase in the cost of the procurement of drugs for the treatment and prevention of COVID-19, including vaccines. In the first half of 2022, the growth rate of the state segment decreased, amounting to 10.1%, which shows that public spending went back to normal after a sharp increase. The decline in segment growth continued (compared to the first nine months of 2021, by 4.4%) in line with the expected reduction in the federal budget for healthcare by 4.5% in 2022.