best practices and success stories towards effective growth strategies for the soaring russian...
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DESCRIPTIONYou Will Discover: The fundamentals of the Russian Healthcare industry continue to be strong. A large population base, growing middle-class consumers, underpenetrated sectors, and low installed base all point toward a lucrative market. Attendees will learn about challenges in this diverse marker and pitfalls to avoid; hear about best practices and success stories; and gain insights on effective strategies. Why Should You Attend: - Learn best practices and what works and does not from the trenches - Discover lessons to take from India and China and adopt to Russia - Assess specific market opportunities for growth
- 1.Best Practices and Success Stories towards Effective Growth Strategies for the Soaring Russian Healthcare Market Key lessons and best practices vital to reap rewards from the hidden opportunity in Russia Healthcare September 4, 2013 2013 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
2. 2 Todays Presenters 25 years of healthcare marketing consulting expertise, which includes engaging with global clients to develop and implement growth strategies. Extensive expertise in product launches, repositioning studies, pricing, due diligence and corporate strategy working with global top 25 companies across healthcare segments. Reenita Das, Partner Healthcare & Life Sciences USA Siddharth Saha, Research Director Healthcare United Kingdom Vitaliy Lehkvyy, Senior Consultant Moscow Dmitry Raspopov, Healthcare Analyst Moscow 15 years tracking healthcare industry trends in Europe and the emerging markets. Providing thought leadership and big picture business implications of research conclusions to commercial and executive teams within client organizations in the healthcare industry. 3 years of experience in market research and consulting in the healthcare markets. The core competencies include - industry strategic analysis, competitive analysis and benchmarking, country economy and policy analysis among other aspects of the healthcare industry. 5 years of research and consulting experience, with expertise in market assessment, competitive and policy analysis, product benchmarking. Experience base covering broad range of sectors: Healthcare, financial services, ICT, power generation and environment among others. 3. 3 Focus Points Covered in Todays Briefing An Outlook on the Russian Healthcare Markets Fundamentals of the Russian Healthcare Industry Continued Growth Across Healthcare Segments Top Opportunities in Life Sciences and Medical Technologies Notable Business Models in Russia 4. 4 Fundamentals of the Russian Healthcare Industry 5. 5 Why Does Russia Continue to be an Attractive Market? The Metrics are Improving Expenditure on healthcare as a segment of overall household consumption has nearly doubled in the past five years Quantum leap in public sector expenditure to improve infrastructure The Russian economy is forecasted to expand at a CAGR of 3.6% in 2012- 2017, however, healthcare expenditure as a % of GDP is below the OECD average of 9.6% Healthcare Development Program 2020 with budget allocated for specific programs Strategy for Drug Provision Technology Transfer and Commercialization Support Total Pharmaceuticals market ~ $25 billion, growing at 9.5% Medical Technologies segment valued at ~ $9 billion, growing at 13.9% Nearly 1 million more surgical procedures conducted as compared to 2000 Retail sales of drugs by ATC groups increased by 120 million packages for Cardiovascular, 79 million for rheumatology Source: Frost & Sullivan analysis. 6. 6 Why Does Russia Continue to be an Attractive Market? The Policies are Changing 2 Strategy for Drugs Provision until 2025 Looking to address the demand supply imbalance, distribution and access and reimbursement and last but not the least awareness and education 3 Strategy for Medical Science Development Looking to enable the transfer of innovation and technology to applied medicine right trough from infrastructure development to commercialization of products 1 Healthcare Development Program 2020 11 sub-programs with an outlay of $200 bn, addressing morbidity, mortality, education, health service provision, diagnostics and therapy and quality of human capital 4 Development of Pharma and Medical Devices Industry 2013-2020 Creation of competitive and innovative Russian Pharma and Devices Industry sub sectors in the long term 7. 7 Perseverance Needed to Deal with the Headwinds Timing, Positioning and Strategy are Key Source: Frost & Sullivan analysis. Leveraging on the opportunity does not come easy, with the complexities introduced due to mandates for localization & import restrictions as well as the rigid perceptions of clinicians and consumers alike Import restrictions on finished goods Mandate to increase the localisation content Restrictions on import of drugs Lengthy registration processes Will the 2020 plan actually pan out? Will the far flung areas in the Country realise the benefits of funding Will policy be consistent? Distribution challenges Budgets for procurement Switch criteria for end users Ideal local partner selection 8. 8 Poll Question Healthcare Development Program 2020 The State has outlined an ambitious program to incentivize the development of the local medical devices and pharmaceuticals industry in Russia, improve infrastructure, skills, funding and access to care in the medium term. Qs. What in your opinion is the continuing challenge for medtech and pharma suppliers in Russia? Rank in decreasing order of impact: 1. Transparency with regard to rules of the road for international players 2. Ability of this program to influence medical care quality in far flung areas 3. Resources, both financial and human skills to support a self sustainable local industry 4. Opportunity for local Russian suppliers/ manufacturers to flourish 5. Realistic budgetary outlays under Federal or Regional quotas to enable care 9. 9 Growth Across Healthcare Segments 10. 10 Pharmaceutical Sector in Russia I 7th Largest Pharma Market Globally The total pharmaceutical market in Russia was valued at $24.9 billion in 2012 and is forecasted to expand at a CAGR of 9.5% till 2017. This in spite of mandates on prescription guidelines. Key therapeutic areas act as engines for this growth. 0 2 4 6 8 10 12 14 16 18 20 5.2 5.4 5.6 5.8 6 6.2 6.4 6.6 Attractiveness Russia Brazil India China Growthrate Size of the bubble represents relative pharma market size Source: Frost & Sullivan Analysis Can Russia replicate the success of China and India in the pharma sector? 11. 11 Pharmaceutical Sector in Russia - II The 2020 Pharmaceutical Development Programs major goal is to secure at least 50 per cent of drugs (in value terms) through domestic sources. Another notable milestone is the mandate that all domestic manufacturers comply with GMP standards by January 2014 20% 80% 50%50%2009 2020 Pharmaceuticals Market: Strategy Pharma 2020 Timeline 2018-2020: Development of export potential of the pharmaceutical industry 2013-2017: Development of domestic pharmaceutical market 2009-2012: Localization of manufacturing and development of drugs in Russia Growing Importance of Generics 12. 12 Pharmaceutical Sector in Russia III Cost-cutting measures being implemented in the pharma industry will favour generics penetration Pricing Current price controls apply to approx. one third of drugs sold. The Russian government has regulated the prices for essential medical products, and monitors (maximum) margins for all transactions throughout the supply chain. Separate regulations for factory price, wholesaler and pharmacy mark-ups. Reimbursement 2 National Reimbursement Programs: 7 Diseases: covers drugs for expensive treatments. ONLS (state reimbursement) provides necessary drugs to socially vulnerable groups MoH regulates the reimbursement process. High level of patient co-payment. Impact Ministry of Health is currently developing legislature to further link ZNVLS listed drugs with treatment standards, preferential drug provision and pharmaceutical procurement. Drug pricing will be more controlled with price regulation for ZNVLS-listed drugs. Manufacturers will be obliged to perform annual registrations of the maximum factory price calculated according to the Ministry of Healths methodology. The maximum selling price of a Russian manufacturer will be based on prices for similar (according to INN, form and dosage) pharmaceuticals in Russia. The maximum selling price of a foreign manufacturer will be based on the minimum price for a pharmaceutical drug applicable in the country of the manufacturers registration. ZNVLS would be a double-edged sword for pharmaceutical manufacturers, both ensuring stable sales via governmental contracts and at the same time driving profits margins down , particularly for generics manufacturers. 13. 13 Medical Devices Sector in Russia I Immense Addressable Market that is Untapped due to Low Procedure Volumes 4.1 4.6 5.3 6.0 6.9 7.8 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 2012 2013 2014 2015 2016 2017 RevenuesUSDbillion Total Medical Devices Market: Revenue Forecast Russia, 2012-2017 CAGR (13.9%) The Russian medical devices market was valued at $ 4.1 billion and is forecasted to grow at a CAGR 13.9% in the next 5 years Source: Frost & Sullivan analysis. 14. 14 Medical Devices Sector in Russia - II Underlying morbidity levels in the population, and the predicted increase in procedure volumes is seen to influence opportunities across segments - cardiovascular devices with 15% share, followed by ophthalmology (14%) and orthopedic devices (11%) are the largest segments among others. Along with the aim of increasing the share of domestic production of medical devices from 18% to 40% by 2020, the Development Strategy for the Medical Industry 2020 aims to increase the export share of domestic production to 25% Federal Quotas for the Following Specialities: Oncology, Urology, Gynaecology, Neuro Surgery, Cardio Vascular Surgery etc. 15. 15 Medical Imaging Sector in Russia - I Source: Frost & Sullivan analysis. The Medical Imaging market was valued at $ 1.2 billion and is forecasted to grow at a CAGR of 11.9% in the next 5 years. Technology transfer and localization requirements is resulting in MNCs partnering with local players and in some cases setting up manufacturing facili