Foreign drug producers continue to show interest in the Russian market, but import volumes remain below 1998 levels.

Last year, Russia's total imports of ready-to-use medicines were roughly $1.2 billion – higher than the corresponding figure for 1996 but just under the 1998 figure, which equaled $1.3 billion.

Although inflation has caused a sizable drop in the ruble's purchasing power, Russian consumers have shown a willingness to spend increasing sums of money on imported medicines.

But no matter how vital drug imports are for Russia's healthcare system, this is not the only line of business for foreign drug companies in the Russia market. Therefore, drug imports constitute only a small part of the leverage the major international drug companies may have ofnthe Russian economy.

Notwithstanding that, foreign drug suppliers prefer to work on the Russian market primarily by way of trade. Those few enterprises that have been set up by foreign companies in Russia are mainly limited to packaging or tableting of ready-to-use imported medicines.

Why? The business of trade does not require any long-term investments and many factors of Russia's general situation make trade, not strategic investing, the most attractive form of business.

But it is incorrect to say that foreign drug suppliers do not invest in Russia at all. However, these investments are aimed mainly on things like advertising, which increase demand for imported goods. In 2000, the advertising expenses of foreign drug suppliers showed a sizable increase.

Because of this, foreign drug suppliers enjoy a stable share of control of Russia's drug market. One of their advantages over domestic producers is that they can provide new drugs, which is because they have more money for research and development.

Another important advantage is brand recognition. Many domestic drug producers are facing difficulties selling similar medicines under their own names. This has forced them to sink their already-low prices.

Because of this, the business of importing drugs into Russia promptly recovered after the August 1998 crisis. The dynamics of drug imports for 2000, broken down by quarters, look almost similar to those of 1999 and 1997.

Last year, some 1,200 companies from 60 countries supplied drugs to Russia. A certain stabilization of Russia's political and economic situation has had an immediate effect on the activity of foreign players on the Russian drug market.

All the leading exporters to Russia have shown an increase in bringing drugs into the country. But four of them – Gedeon Richter, Sanofi and Novartis and, to a lesser extent, Aventisa – showed slower growth compared with overall growth of exports, which caused their shares of the market to decline.

Back in 1999, Indian companies constituted 50 percent of the total number of imported drugs. Now the picture is totally different.

The following countries have posted increases in their shares in the total volume of Russia's drug imports compared with 1999: Germany (+5.6 percent), Denmark (+nearly 40 percent), the United States (+27 percent), Great Britain (+25 percent) and Austria (+25 percent).

Regarding the geography of Russia's drug imports, back in 1996, the former members of Comecon accounted for some 30 percent of Russia's drug imports and now their share has fallen to 20 percent. The share of post-Soviet states was 6 percent in 1996 and dropped to 3 percent by 2000. At the same time, the share of the world's developed countries increased dramatically: from 53 percent in 1996 to 66 percent in 2000.

Now let's consider the structure of drug imports. The main trend is de-concentration, i.e. similar kinds of drugs are imported from different producers. In 2000, Russia imported more than 2,000 varieties of drugs.

The trend gives reasons to hope that Russia's drug imports will become more diversified in the future. The list of drugs showing the highest import volumes has not undergone any sizable changes, although the shares of such drugs such as drotaverin, vinpocetin, co-trimoxazol, diclofenac, pentoxyfillin, metronidazole and some others have declined.

This probably means that novelty is becoming increasingly important in Russia.

MRC Farmexpert