NW RUSSIA PHARMACEUTICALS MARKET: PERIOD OF  STABILIZATION.

JUNE 1999

AUTHOR: MIKHAIL MINKEVICH, COMMERCIAL ASSISTANT, FOREIGN COMMERCIAL SERVICE (FCS), US CONSULATE ST. PETERSBURG. APPROVING OFFICER: STUART SCHAAG, COMMERCIAL OFFICER (FCS) , US CONSULSATE ST. PTETERSBURG.

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND THE U.S. DEPARTMENT OF STATE, 1999.  ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

1. SUMMARY.  As local magazine "Competition and Market" reports, St. Petersburg's wholesale pharmaceuticals market has been successfully established.  Currently, the market is characterized by a limited number of small wholesalers.  Competition among large companies has become much stronger since they offer practically the same assortment of drugs (over 3,000 items) and at the same prices.  The market is also characterized by a high level of service. End of summary.

2. The local pharmaceuticals market is represented by drugs produced by St. Petersburg manufacturers such as "ICN  Oktyabr" (the leader in terms of production volumes and assortment of drugs), "Farmakor", "Pharmaceutical Factory", "Farmavit", and "St. Petersburg Enterprise for Production of Bacterial Preparations under Pasteur Research Institute of Epidemiology and Microbiology SE."  The major share of the local market (about 80 percent) is occupied by imported drugs and drugs produced in other cities of Russia by such companies as "Akrikhin", "Ferein", "Moskhimfarmpreparaty" (Moscow), "Nizhnenovgorodsky KHMZ" (Nizhny Novgorod), "Tomsky KHMZ" (Tomsk), and Kursky pharmaceuticals factory (Kursk).  The share of imported drugs in 1996-1998 amounted to 60 percent of the total local market.  However, after the August crisis of 1998, which resulted in an increase in prices for all imported products, the demand for imported drugs dramatically decreased.

3. Currently, there are 209 state-owned and 145 private drug stores in St. Petersburg.  After the crisis, about one third of state-owned pharmacies went bankrupt, and the City Property Committee will determine in the nearest future whether these drug stores will continue to be subsidized from the city budget or will be privatized.  There are several drug stores in each part of the city which are selected by the City Health Committee on a competition basis for sale of pharmaceuticals to people who are entitled to discounted drugs and pharmaceuticals (veterans, pensioners, invalids, and other categories).  Such pharmacies are provided by the city government with a 10 percent discount on rent.  They also receive funds from the city budget amounting to 5 percent of the total cost of imported drugs and 10 percent of the total cost of domestically produced drugs sold by this pharmacy.

4. The major end-users of pharmaceuticals continue to be government and municipal medical entities, including clinics and hospitals.  However, given scarce funding from the federal and municipal budgets, these consumers are unable to pay their bills for medical products.  Delayed payments for drugs sold through local pharmacies is another factor which negatively affects the local market.  The major distributors and wholesalers of drugs and pharmaceuticals in St. Petersburg are: "ICN Octyabr" , "Pharm Tamada 77", Hiton, Pharmakor, Protek, "Central Pharmbaza", Ekohelp, HS-Petersburg, "Multipharma SPb", and Petromed.

According to "Competition and Market" magazine, the total size of St. Petersburg's market in 1997 was estimated to be 926 million RUR (about USD 150 million).  Although, the total size of the drugs and pharmaceuticals market is currently less compared to other countries, it has stabilized, and local experts estimate future annual growth of 13 percent.