Analysis of the Russian Pharmaceutical Market in 2020: Achievements and Growth Prospects
The year 2020 posed numerous challenges and tested the resilience of the pharmaceutical industry in Russia. The surge in demand for medicines, the growth of the national segment, and the rapid adoption of legislative proposals all had a significant impact on market dynamics and conditions. Adapting to this evolving environment became essential for all stakeholders.
One crucial legislative proposal implemented by the government was the introduction of a fast-track procedure for accelerated approval of medicines and medical products in emergency situations. This expedited process enabled domestic manufacturers to swiftly gain approval and introduce two medications, Favipiravir and Levilimab, for the treatment of COVID-19.
Furthermore, this accelerated approval process paved the way for the development and deployment of local COVID-19 vaccines, leading to the commencement of mass vaccination campaigns as early as January 2021.
Market Dynamics in 2020
The Russian pharmaceutical market witnessed a notable increase in value, surpassing 2,040 billion rubles, representing a growth of 9.8% compared to 2019. However, when evaluated in terms of dollars and euros, there was stagnation in 2020. The devaluation of the ruble in March resulted in the market’s capacity not experiencing significant growth when converted. Consequently, the market value in dollars reached 29 billion, a marginal increase of just 0.2% compared to the previous year. In euros, due to a higher exchange rate increase (11%), market dynamics showed a negative trend, declining by 1.6%.
Unpredictable Dynamics in the Commercial Segment of Medicines in 2020
The commercial segment of medicines in 2020 experienced unprecedented fluctuations, defying previously established trends. The notable surge in sales observed in March 2020 was one of the most significant in recent years. This panic-buying frenzy was fueled by the initial spread of the coronavirus disease and the worsening economic crisis. Russians rushed to stock up on medicines, anticipating price hikes due to exchange rate fluctuations and potential shortages caused by restrictive measures. However, after this initial surge, sales dynamics weakened and even turned negative in some months. It was only in December that the market began to regain growth rates similar to those seen in January and February before the pandemic.
The primary driver of growth, starting from April, was the demand for “anti-COVID drugs.” Although the composition of these drugs varied, their high demand contributed to overall positive dynamics in terms of value (+10.6% in rubles). However, in terms of package items, the market witnessed a decline of 2.3%.
By the end of 2020, imported medicines accounted for 56.3% of the market in terms of value and 31.4% in terms of package items. Both domestically produced (-4%) and foreign-made (-3%) drugs experienced negative growth in volume. However, in ruble value, domestically made medicines saw a 13% increase, while imported medicines experienced an 8% increase.
In terms of sales volume based on ATC (Anatomical Therapeutic Chemical) groups, Group A (Alimentary tract and metabolism) claimed the top spot with a market share of 15.09%. Group N (Nervous system) secured the second position with a market share of 14.34%, and Group R (Respiratory system) rounded out the top three with a share of 12.86%.
Foreign companies such as Sanofi, Novartis, and Bayer maintained their leading positions in the manufacturer’s ranking, while three domestic manufacturers—OTCPharm, Biocad, and Pharmstandard—made it into the top 20 list.
Impact of COVID-19 on Retail Demand for Medicines
The emergence of the new coronavirus disease drastically transformed the market landscape, triggering a surge in demand for specific drugs and causing shortages in pharmacies. Whenever a drug was identified for potential coronavirus treatment or prevention, it quickly became sought after and disappeared from store shelves. For instance, at the beginning of the pandemic, hydroxychloroquine, an antimalarial drug, was believed to hold promise against the virus. Consequently, monthly sales nearly doubled from April to December compared to pre-COVID levels (averaging around 35-40K package items per month versus 20K in 2019).
In 2020, the retail market for pharmaceuticals witnessed an absence of seasonal patterns and traditional market regularities. Antiviral drugs and antibiotics emerged as the frontrunners in customer demand during the pandemic. Remarkably, even during the summer months, sales in these categories remained significantly higher than in previous years. By the end of 2020, the retail market experienced an overall growth of 11% in value, but a decline of 2% in terms of package items. Consequently, approximately 5 billion package items of medicines, amounting to 1,128 billion rubles in retail prices, were sold in the retail sector.
At the close of 2020, the share of domestically produced drugs increased from 2.3% to 44.2% in terms of value, while decreasing by 0.2% to 65.7% in package items. Locally made medicines exhibited higher growth dynamics (+16.5% in rubles compared to 2019) than imported ones (+6.3%).
This shift towards domestically produced medicines was primarily driven by Russian antivirals such as Arbidol (+353.9% in value and +257.4% in volume) and Ingavirin (+110.9% in rubles and +63.0% in package items).
The trend of increasing market share for locally made medicines has been ongoing for several years. Since 2012, this share has grown from 36% to 44%. However, the increase in package items has been less significant, with only a 1.6% rise over the past eight years.
Although the number of Russian and foreign manufacturers in the market is roughly equal (around 540 and 560 companies, respectively), foreign medicine brands dominate the shelves of pharmacies, accounting for approximately 3,368 brands (9,053 SKU). In contrast, domestic drugs have around 36% fewer brands, totaling 2,480 (8,615 SKU). Hence, it is evident that foreign manufacturers offer a higher number of “unique” units, including original medicines and branded generics, while Russian medicines are predominantly available as non-branded generics from several companies simultaneously.
In terms of volume, the leading ATC group in medicine retail sales in 2020 was Group A: Alimentary tract and metabolism (788.4 million package items). The groups with the most significant sales growth in both package items and value were Group L: Antineoplastic and immunomodulating agents (+30.9% in package items, +40.8% in total worth) and Group J: Antiinfectives for systemic use (+22.5% in package items, +48.1% in total worth).
Top Medicine Manufacturers in the Retail Market
In 2020, the Russian pharmaceutical market saw the presence of over 1,100 players. The combined market share of the top 20 companies accounted for 53.2% of total medicine sales value. Compared to 2019, the top 20’s overall share increased by 0.7%. Bayer, a perennial leader in the pharmacy segment, retained its position at the end of the year with a 4.6% share in rubles. The German corporation experienced an 18.1% growth in pharma sales and offered a portfolio of 68 brands available in drugstores. Among Bayer’s top-selling brands, the antacid Rennie demonstrated the highest sales volume gain (+40.7% compared to 2019).
Novartis secured the second spot with a 4.2% share in the market. Several of the company’s leading medicines experienced significant sales growth, including Broncho-munal (+156.8% compared to 2019), ACC (+54.3%), and Amoksiklav (+35.7%).
OTCPharm, a Russian manufacturer, climbed to the third position in the ranking, moving up four spots. It held a slight 0.6% difference in share compared to the leader in rubles. OTCPharm’s sales in 2020 increased by 37.1% compared to the previous year. The company offers 37 brands that are sold in Russian drugstores. Notably, there was remarkable demand growth for their antiviral medications, Arbidol (+353.9%) and Amixin (+104.7%).
Trend in the Development of Online Sales
In April, the State Duma passed a law allowing the distance selling of medicines. Initially, the regulations covered over-the-counter medications, but in the event of an emergency and the spread of a dangerous disease, the government has the authority to temporarily permit online sales of specific prescription drugs as well.
Despite the emergence of the “new” online sales channel, pharmacy chains remain the main participants in this space. As a result, the majority of online trade volume is still captured by pharmacy retail. In 2020, the total value of online pharmacy sales, including both medicines and parapharmaceuticals, reached approximately 93.2 billion rubles, accounting for 6.6% of the pharmaceutical market’s capacity. By January of the following year, this figure had already risen to 8.2%. While the overall market sales dynamics were around 10%, online turnover increased by 62% compared to 2019.
Traditionally, pharmaceutical brands have favored TV advertisements, but in the new reality, online advertising has shown significant progress. In the first half of 2020, the online advertising market for medications experienced a growth of 43%.