Drugs & pharmaceutical sales in Russia

Figure 1. Profit (loss) from sales from production or from wholesales or from retail sales of drugs and pharmaceutical products in Russia, 2009–2019

Figure 2. Goods of own production shipped (cost of goods shipped or released by way of sale, as well as direct exchange (under an exchange agreement), a credit of all goods of own production, work performed and services rendered on their own in actual selling (sales) prices (excluding VAT, excise taxes and similar mandatory payments), including the amount of reimbursement from budgets of all levels to cover benefits provided to certain categories of citizens.): production of pharmaceutical products in thousand rubles, 2009–2019

Russia is a net importer of medicines. Russia is one of the ten largest pharmaceutical markets, but in terms of sales per capita it takes only 30th place. According to gks.ru revenue (net) from the production of drugs and materials used for medical purposes (including pharmaceutical products) in Russia is growing by 13.6 % per year, with a maximum increase in 2019. Accordingly, revenue from the sale of wholesale pharmaceutical products (and medical goods, medical equipment and orthopedic products), as well as from the sale of retail drugs in specialized stores (pharmacies, and medical goods, cosmetic and perfumery goods) grows at an average rate of 18.3 % and 18.4 % per year respectively. Profit (loss) from sales according to financial statements from the production of drugs and materials used for medical purposes (pharmaceutical products) grows by 18 % per year in average and by 30 % — from the wholesale trade of pharmaceutical and medical goods, medical equipment and orthopedic products. However, in recent years there has been a decline in profits from sales of retail drugs in specialized stores (figure 1). By the way, market volume in terms of shipped goods of own production (pharmaceutical products) grows at an average rate of 19 % per year and could be described as exponential trend (figure 2). In 2019 shipped goods of own production (pharmaceutical products) made up to 514 816 107 thousand rubles. Weighted average profit per unit of shipped products (rubles) counts to 237 rubles. Market volume in terms of shipped goods of wholesale pharmaceutical products (and medical goods, medical equipment and orthopedic products) grows at an average rate of 36 % per year and average profit per unit counts 2,35 thousand rubles.

Two key drivers of growth of the domestic pharmaceutical market are the implemented Pharma-2030 strategy aimed at increasing the export of Russian drugs, as well as stimulating consumer spending on healthcare. Government purchases of pharmaceutical products will remain the main driver of market growth. Pharma-2030 strategy is aimed at increasing the volume of exports of Russian drugs, an increase in consumer spending on healthcare, as well as further import substitution.

On figure 3 you may see the growing level of profitability of pharmaceutical products during 2009–2019. However, for wholesalers there is a decrease of profitability. TOP-10 pharmacy chains account for 50 % of the total volume of commercial sales of pharmaceuticals (ASNA, Rigla, Erkafarm, 36.6, Neo-farm, Implosion, IRIS, April, Vita, Planet of health).

Figure 3. The level of profitability drugs & pharmaceutical products sales in Russia, 2009–2019

The biggest decrease we can see for profitability in retail trade (special stores). Moreover, advertising and auditing costs for drugs and materials in Russia average made up to 3.1 % of all production and sales costs and 45 % of all selling costs. We can also identify key players in market:
- Bayer, Sanofi, Novartis, Teva;
- OTCPharm;
- Pharmstandard;
- Valenta Farm etc.
TOP-8 manufacturers form an average of 45 % of the sales profit of the entire industry. Pharmstandard & Valenta & Biocad form an average of 30 % of the sales profit for the entire industry. The largest world players have invested in their own production facilities in the Russian Federation, and the leading positions in the localization of production in Russia are occupied by Merck (13.6 %) and Pfizer (10.5 %).