The pharmaceutical industry is one of the key ones in the structure of the national economy and in the global market. The pharmaceutical industry is an important part of the global healthcare system, while it occupies a special position in the global economy.

Fig. 1. Dynamics of the global pharmaceutical market 2018-2022, USD billion.

Global Pharmaceutical market

By the end of 2022, the total turnover of the pharmaceutical industry – which is 2,300 of the world's largest manufacturers - reached $ 1.44 trillion, of which $ 555 billion was in the United States. Other major markets include Japanese, German, Chinese, French, Swiss and British. Each year, the market volume grew by an average of 2.8–3%.

The top three in terms of pharmaceutical market volumes include the USA, China and Japan, which account for about 60% of global sales.

The analysis of the above data shows that the main part, about 40%, of the global pharmaceutical industry belongs to the United States. The second significant player is China, which accounts for more than 22%, followed by India (13%), Japan and Germany with global market shares of 6.3 and 4.2%, respectively.

According to the results of 2022, Russia ranks only 9th in the global pharmaceutical market with a share of 2.2% after Italy and the UK. The contribution of the domestic pharmaceutical market to the global one is small – $ 16.2 billion in 2022, while its stable annual growth of an average of 1.2–2% can be traced. These figures confirm that the volumes of the global and domestic pharmaceutical market are steadily increasing.

Dynamics of the Russian pharmaceutical industry

In the current geopolitical situation, it cannot be said that the Russian pharmaceutical market is unable to cope with new challenges. On the contrary, the domestic pharmaceutical industry is developing dynamically.

Thus, the key tasks of the pharmaceutical industry in 2023 were the development of import substitution, including the production of substances, optimization of logistics chains, transition to production equipment of Russian manufacturers and reliable foreign suppliers.

The volume of the Russian pharmaceutical market in 2022 amounted to 2,573 billion rubles, which is 11.9% higher than in 2021. At the same time, the public procurement market grew by 6.9% - to 895.6 billion rubles, and the pharmacy market - by 15%, to 1.7 trillion rubles. By the way, if in 2020-2021 the main driver of the market was public procurement of medicines and preparations, then in 2022 the most active growth was demonstrated by sales of medicines in pharmacies. At the same time, the total growth of the pharmaceutical market over the past 5 years has amounted to about 53%, and the total market volume has grown by 890 billion rubles.

Fig. 2. Dynamics of the total volume of the Russian pharmaceutical market in volume and value in 2018-2022.

The market capacity in the study period maintains a steady downward trend: if 6.36 billion packages of medicines were sold in 2018, then by 2020 the indicator has decreased to almost 6 million units, by 2021 – to 5.6 million units, and by 2022 – to 5.2 million units. It is worth noting that in 2018-2020, the decrease in market capacity amounted to 5.4% or 345 million units, and in the last 2 years, there has been an increase in dynamics to reduce the capacity of the pharmaceutical market to 13% or 807 million units compared to the level of 2020. As a result, we can say that the last 2 years in the domestic pharmaceutical market are characterized by an inflationary increase in prices for medicinal products and a simultaneous decrease in sales.

The volume of production of medicines in Russia, including the production of medicines by foreign pharmaceutical companies on their own and contract sites, is increasing annually, and by the end of 2022 amounted to over 668.8 billion rubles. In the first half of 2023, pharmaceutical manufacturers that launched plants in Russia shipped almost 2 billion packages of medicines worth 343 billion rubles. However, the dynamics relative to the same period in 2022 was fixed at the level of -2.6%.

Fig.3. The volume of production of medicines in Russia for 2018- 1H2023 in volume and value

Key segments of the Russian pharmaceutical market

The pharmaceutical market is traditionally represented by 3 main segments: state and two commercial ones – medicines  and parapharmaceuticals. The estimation of sales volumes in the market in the context of these key segments in value terms shows a steady trend towards growth. At the same time, the highest rates in the last 5 years have been shown by the state segment – the volume of the sector has almost doubled from 452 to 896 billion rubles, which is due to the growth in public procurement volumes in the context of a pandemic and the modernization of healthcare.

The commercial sector of parapharmaceuticals grew by 16.3% to RUB 279 billion in the first 3 years, and by another 17.2% to RUB 327 billion in the last 2 years. The commercial sector of medicines is the largest in the structure of the pharmaceutical market and if in the base period its volume was 992 billion rubles, then in 2019 it exceeded 1 trillion rubles, and by 2022 it amounted to 1.35 trillion rubles, which is 36% higher than the level of the base period. The share of the commercial sector of medicines decreased from 59% to 52% due to the dynamic growth of the volume of the public sector of medicines from 27% to 35%. At the same time, the share of the commercial sector of parapharmaceuticals has practically not changed and is less than 15%.

In the context of the main segments of the pharmaceutical market, the volume of hospital purchases has almost halved in 5 years – by 948 to 550 million units, while a sharp decline was noted in 2022 compared to the level of the previous year – by 35%. In turn, in the sector of preferential drug provision, there is a general positive trend towards an increase in the number of packages from 158.2 million to 183.6 million by 2022, although the period 2020- 2021 is marked by a decline.

In the commercial sector of medicines, the general trend is a decrease in sales volumes: for example, in the base period, the indicator was 5219 million units, and by 2020 it decreased to 5002 million units, which indicates a decline of 4.2%. At the same time, already in 2021, sales in the commercial segment decreased by 9% to 4555 million units, and in 2022 – by another 2% to 4477 million units. At the same time, in the structure of sales in volume, the overwhelming share falls on the commercial segment – more than 80%, while the dynamics of an increase in the share of this segment to 86% remains. In turn, the share of hospital purchases decreased by 4% to 11%, and the share of preferential drug provision does not exceed 5%.

Table 1. Structure of the Russian pharmaceutical market by major segments in value and in volume in 2018-2022

  2018 2019 2020 2021 2022 2020 to 2018 2022 to 2020
Pharmaceutical market in value terms by main segments, billion rubles
Public sector of medicines 452 560 634 840 896 40,3 41,3
Commercial sector of parapharmaceuticals 240 262 279 289 327 16,3 17,2
Commercial sector of medicines 992 1021 1128 1166 1350 13,7 19,7
Share, %              
Public sector of medicines 27 30 31 37 35 4,2 3,8
Commercial sector of parapharmaceuticals 14 14 14 13 13 -0,6 -1,0
Commercial sector of medicines 59 55 55 51 52 -3,6 -2,8
Pharmaceutical market in volume terms by main segments, mln units
Hospital purchases 948 854 841 845 550 -11,3 -34,6
Preferential drug provision 158,2 195,4 175 163,6 183,6 10,6 4,9
Commercial sector of medicines 5219 5124 5002 4555 4477 -4,2 -10,5
Share, %              
Hospital purchases 15 14 14 15 11 -1 -3
Preferential drug provision 3 3 3 3 4 - 1
Commercial sector of medicines 83 83 83 82 86 1 3

In general, we can say that today, as before, the commercial segment occupies a central place in the pharmaceutical market both in value and in volume.

The structure of the pharmaceutical industry in Russia

In the structure of the pharmaceutical market according to the criterion of origin of medicines in value terms, until 2020, the strongly dominant position of imported medicines remained – their share exceeded 70%, while domestic accounted for no more than 30%. If in 2020, $ 10.6 billion worth of medicines were imported to Russia, then in 2022 – by 15.2 billion. However, already in 2020, the structure of the market has changed significantly: the share of imports has decreased to 56%, while domestic medicines have grown to 44%, which is due to the focus on import substitution in the field of drug supply. This was achieved due to the localization of imported industries in the country, as a result of which only those that are produced and imported as imports now belong to the category of imported.

But at the same time, medicines produced on the territory of the country, even by foreign companies, are now included in the statistics of locally produced medicines. As a result, in 2021-2022, the share of imported medicines varied between 55-56%, and the share of local medicines was 45-44%, but still lower than the share of imported ones.

Fig. 4. The structure of the Russian pharmaceutical market in terms of the origin of medicines in value in 2018-2022.

However, the overwhelming share of the packages sold is made up of domestic medicines, the share of which in 2018-2019 was 61%, and by 2020 it has grown to a maximum of 69%. If we talk about the import of medicines in the number of packages, in 2020 1,531.4 million units were imported to Russia, in 2021 – 1,798.5, which was 17% more. In 2022, fewer medicines were imported in quantitative terms – 1703.6 million packages.

Fig. 5. The structure of the Russian pharmaceutical market in terms of the origin of medicines in volume in 2018-2022.

In the last 2 years, there has been a decrease in the indicator to 67-68%. It should be noted that the predominance of domestic medicines in the market structure in volume is due to their relative cheapness compared to imported ones, which generates higher demand and is especially relevant in conditions of declining real incomes of the population.

As for pharmaceutical substances, 16.6 and 16.8 million kilograms were imported in 2020 and 2021, respectively. In 2022, the import growth was 22% more – 20.5 million kilograms.

Researchers record a sharp increase in the number of pharmacies – almost 4 thousand new outlets in 2022. This is the biggest change in the market since 2015, similar dynamics were observed in the period from 2017 to 2018. In total, according to the study, there are 70,423 pharmacies in Russia. The main contribution to the increase in the number of outlets is made by federal pharmacy chains. On average, there are 48 pharmacies per 100 thousand people in the Russian Federation.

Thus, by the end of 2022, the Russian pharmaceutical market has maintained the trends of previous years associated with an increase in the value volume of the market to 2.57 trillion rubles, while the volume of the market has maintained a downward trend to 5.2 billion units. This is due to the inflationary rise in prices on the pharmaceutical market against the background of the economic crisis and pandemic, and the simultaneous decline in real incomes of the population, which leads to forced savings among the population, if possible. As before, the central link of the pharmaceutical market is the commercial segment, although the public procurement sector has shown a dynamic growth in value.

In general, there is a demand for high-quality equipment and substances in the Russian market today, there is no fierce competition with European brands. According to analysts' forecasts, the pharmaceutical market in Russia in 2023 may grow by 4-8% compared to 2022.

Results of key players in the Russian pharmaceutical market

In recent years, the main leading players in Russia have been foreign companies specializing not only in the field of commerce and promotion, but also in the development and production of pharmaceutical products: Otсpharm, Bayer, Stada, GlaxoSmithKline, Sanofi, etc. During the conflict in Ukraine, despite the fact that the sanctions against Russia did not formally affect the pharmaceutical industry, the import of medicines from "unfriendly" countries was accompanied by problems with logistics, payments and insurance. In addition, a number of global pharmaceutical manufacturers (Eli Lilly, GSK, Sanofi, Bayer, Abbott, Pfizer, MSD and others) refused to cooperate with the Russian Federation in the development and conduct of clinical trials on innovative medicines important for domestic healthcare.

Thus, according to the Association of International Pharmaceutical Manufacturers, foreign companies, as a rule, conducted the second and third phase of clinical trials in Russia – an assessment of the most effective dosages of drugs and methods of its administration. During such tests, the most modern and advanced medicines for the treatment of serious diseases were tested. Thus, in the first half of 2022, almost half of the previously planned clinical trials were suspended.

In this regard, analysts note a significant decline in sales, primarily from a number of foreign companies. Thus, the leader of the rating in terms of negative dynamics in the period April 2022 - April 2023 was Bayer, which showed negative dynamics by 47.1%. Stada sold 29.5% less products than last year. In the third place of the rating was the Russian Otсpharm with a decrease in sales by 34.1%. French Servier's volumes fell by 40.9%. Abbott from the USA is in fifth place (-37.7%). In the last five – KRKA (-32.7%), Sanofi (-41.2%), Teva (-31.6%), Novartis (-47.7%) and Gedeon Richter (-24.6%).

Since May 2023, a number of foreign companies are beginning to increase the volume of pharmaceutical production, including by increasing cooperation with foreign pharmaceutical companies.

Table 2. Top-10 pharmaceutical manufacturers on the Russian market in January-May 2023

Company Market share by sales volume, % Sales volume, billion rubles Change. % YoY
1 Stada 3,82 21,7 5
2 Bayer 3,72 21,15 -11
3 Otсpharm 3,33 18,92 -23
4 Abbott 3,14 17,86 -2
5 Servier 3,08 17,49 1
6 Novartis 2,83 16,07 -15
7 Teva 2,78 15,81 4
8 Sanofi 2,75 15,62 -10
9 Krka 2,72 15,47 6
10 Binnopharm Group 2,43 13,8 29

At the moment, cooperation continues to be carried out in standard commercial niches: the purchase and sale of medicines, as well as the receipt by Russian pharmaceutical companies of licenses from foreign copyright holders for the production and commercialization of their drugs. Indeed, most of the clinical trials have been discontinued, but some of them have only been suspended.

Below is a list of key Russian manufacturers of the pharmaceutical industry, which over the past three years have increased sales of pharmaceutical products, increasing revenue and net profit.

  • R-Pharm
  • Biocad
  • Generium
  • Valenta Pharm
  • Pharm-Sintez
  • Pharmstandard-UfaVITA
  • Akrikhin
  • Altay Vitamin
  • Evalar

Table 3. Top 5 Russian pharmaceutical manufacturers by the end of 2022

Company Revenue, billion rubles Profit, billion rubles
2020 2021 2022 2020 2021 2022
1 R-Pharm 120,5 183,1 162,1 18,1 29,5 28,4
2 Biocad 33,5 93,6 128,4 12,2 43,6 72,9
3 Generium 19,2 118,5 138,2 10,3 64,5 74,8
4 Valenta Pharm 18,6 16,5 48,4 5,5 4,9 11,9
5 Pharm-Sintez 20,3 28,3 NA 1,4 2,9 NA

According to the results of 2022, the leading manufacturers of pharmaceutical products are R-Pharm Generium and Biocad.

Table 4. TOP-5 corporations in terms of sales of domestic medicines in the pharmaceutical market in 2022

Corporation Market share in 2022, % Market share occupied among domestic medicines in 2022, % Sales dynamics in 2022/2021, %
Otcpharm 2,57 6,12 5
Pharmstandard 2,03 4,83 16
The National Research Center for Epidemiology and Microbiology N.F. Gamaleya 1,89 4,50 -71
Biocad 1,77 4,19 -12
OzonPharm 1,59 3,79 19

According to the results of 2022, "Pulse" retained its leading position among the main suppliers of medicines. The distributor "Protek" moved to the second line of the rating. In third place is the company "Katren".

Table 5. Rating of the largest suppliers of medicines for 2022

Rank Supplier Value, bln rubles Growth Share
1 Pulse 311,6 7% 14,4%
2 Protek 292,1 17% 13,3%
3 Katren 288,1 12% 13,1%
4 R-Pharm 180,4 -10% 8,2%
5 Grand Capital 135,5 22% 6,2%
6 BSS 98,1 28% 4,5%
7 Pharmcomplect 90 -8% 4,1%
8 Irwin 2 71,9 4% 3,3%
9 Pharmimex 57,9 26% 2,6%
10 Profitmed 56,8 -4% 2,6%
11 Lancet 50,6 29% 2,3%
12 Association "Asfadis" 50,5 10% 2,3%
13 Avesta Pharmaceuticals 43,5 5% 2,0%
14 Agroresources 37,9 12% 1,7%
15 GDP Group 34,8 5% 1,6%
16 Magnit 23,8 0% 1,1%
17 Zdravservice 22,5 8% 1,0%
18 Euroservice 20,1 5% 0,9%
19 Farmru 19,5 -9% 0,9%
20 Primapharm 16,3 35% 0,7%
21 Pharmservice 15,8% -1% 0,7%
22 Severo-Zapad 14,3 14% 0,7%
23 Medipal 14,1 25% 0,6%
24 Medintorg 11,0 23% 0,5%
25 Trading house BF 4,7 -7% 0,2%
26 ArchiMed 4,5 3% 0,2%
27 VolgaPharm 2,8 -43% 0,1%

It should also be noted that in July 2023, the three largest suppliers of medicines by state order became known following the results of the first half of 2023: R-Pharm, Nanolek and Pharmstandard.

In particular, Pharmstandard, as in 2022, is the leader in the production of medicines with an indicator of 38.34 billion rubles, nevertheless reducing supplies by 17.47% compared to the first half of last year. The second largest supplier was R-Pharm, whose sales decreased by 17.69% this year, namely, to 27.12 billion rubles. The third place is occupied by the company "Nanolek", which increased deliveries by state order for 6 months of 2023 by 2.7 times, to 16.61 billion rubles.

The top ten largest suppliers of medicines by state order in the first half of 2023, in addition to the top three, also included Irwin 2, Pharmcomplex, BSS, Medipal-Onco, Inteltrade and Primafarm.

Search for suppliers for pharmaceutical production

The sanctions, first of all, directly had a significant impact on the production of medicines in Russia. Analysts note that domestic pharmaceutical manufacturers had to solve a number of problems related to the complexity of logistics: create new transport routes, change suppliers and promptly purchase the necessary components in third countries for the uninterrupted production of medicines.

Thus, the ban on air traffic between Russia, the EU and the USA, the refusal to book sea container lines, the ban on access of Russian and Belarusian road carriers to the EU led to the fact that manufacturers had to look not only for alternative ways of supplying medicines and substances to Russia, but also to change suppliers of the necessary components for the production of medicines.

Today, major pharmaceutical manufacturers in Russia see the future of domestic pharmaceuticals in cooperation with companies from Asia. In particular, the representative of JSC "Pharmasynthesis" believes that suppliers from Europe and the USA are pursuing a more closed commercial policy. Asian suppliers are willing to share their technologies, rather than companies from Europe and the USA. In general, the approach to cooperation of companies from Asia is more flexible.

It should be said that most of the substances for the Russian pharmaceutical market – actual substances of drugs – are imported. All countries of the world, including Europe and the USA, buy such raw materials in India and China. That is, the basis of imported and domestic medicines overwhelmingly originates in these two countries.

In particular, by the end of 2022, India has achieved extraordinary growth in the pharmaceutical industry, its share in the global market has reached 13%. The main segments of the Indian pharmaceutical industry include generics, over-the-counter drugs, non-packaged drugs, vaccines, contract research and manufacturing, biosimilars and biologics. India is a world leader in the supply of DPT vaccines. India is one of the largest suppliers of inexpensive vaccines in the world. India accounts for 60% of global vaccine production, which provides 40 to 70% of WHO's need for vaccines against diphtheria, tetanus and pertussis (DPT) and Calmette-Guerin bacillus (BCG) and 90% of WHO's need for measles vaccine. The country is the largest supplier of generic medicines in the world, holding a 20% share in global supplies by volume, and is the leading manufacturer of vaccines in the world. India's pharmaceutical industry is expected to reach $65 billion by 2024 and $130 billion by 2030.

In general, India managed to provide its own population with high-quality medicines, which made it possible to assert itself on the world market. Russia has been buying pharmaceutical products in India for a long time, and against the background of difficulties with supplies from Europe and the United States, the need for such goods has increased dramatically. From the very beginning of the sanctions, Indian companies announced their readiness to master part of the Russian pharmaceutical market. In addition, Indian manufacturers receive licenses from Western companies to manufacture medicines on significantly better terms than are available to Russian pharmaceutical companies. All these factors lead to the fact that the cost of production of Indian companies and, accordingly, the selling price may be noticeably less.

In 2022 alone, the volume of sales of drugs from India increased by 3%, which is about 7.5 million packages. In value terms, imports increased by 17% and amounted to 10 billion rubles. Among the key areas of cooperation between the pharmaceutical industry of Russia and India, experts note investments in the construction of new plants and contract production in the territory of the Russian Federation, as well as the creation of a system of wholesale sales of Indian pharmaceutical substances to Russian manufacturers.

Measures of state support for the pharmaceutical industry

Over the past 9 years, 62 pharmaceutical production sites have been opened in Russia, 16 factories have been launched, and more than 500 pharmaceutical industry enterprises are currently operating, which ensure stable production of medicines under sanctions. The growth rates of the pharmaceutical industry in 2022 were not just maintained, but increased, this trend continues today.

In 2022 alone, 9 new production sites were put into operation, and in the first quarter of 2023 – 4 more plants. Such results have been achieved, inter alia, by improving state support measures, among which, in particular:

  • preferential loans of the Industrial Development Fund
  • support of drug development and laboratory scaling of their production due to the capabilities of the venture fund "PharMedInnovation"
  • special Investment contracts (SPIC)
  • preferential investment loans for the creation of full-cycle production facilities and the production of pharmaceutical substances within the framework of the "Cluster Investment Platform".

In addition, the "Products on the shelf" mechanism has been developed, which includes support for registration and organization of production of Russian analogues of foreign drugs under patent protection. However, this is not enough for the development of competition and it is necessary to conduct an industrial policy aimed at the development of the pharmaceutical market.

In the current situation, it is extremely important that the state creates opportunities and measures to support the domestic pharmaceutical industry, and the development of measures already taken continues.

Priorities for the development of the pharmaceutical industry

Thus, the Government has made changes to the state program "Development of the pharmaceutical and medical industry". The corresponding resolution No. 2544 is published on the official Internet portal of legal information. The program was approved in 2014 with a period of implementation first until 2020, then the period was extended until 2024. Back in 2018, the government began to develop a new version of the program with a period until 2030.

The main thing is the development and production of domestic innovative products. However, the structure of the program differs from the previous version. it includes only generalized tasks that need to be solved by 2030.

The priorities of the state policy in the field of program implementation are formulated as follows:

  • import dependence (including substances, preparations of the list of strategically important medicines) in order to ensure the drug safety of the Russian Federation;
  • ensuring the necessary growth of production capacities of the pharmaceutical and medical industries to achieve the goal of the state program, including through targeted financing of construction at the expense of the federal budget;
  • development of the institute for quality assurance of medicines and medical devices for the national health system;
  • creation and improvement of conditions for the development of innovative medicines and medical devices.

The main goal of the state program is to increase the volume of production of domestic medicines and medical devices in value terms by two times by 2030 compared to 2021 - up to 1.5 trillion rubles. It is planned to be implemented through the creation of scientific, technological and production potential of the pharmaceutical and medical industries.

Another course of development of the state program is the production of pharmaceutical substances. Thus, by the end of 2030, it is planned to increase the share of strategically important medicines, the production of which is carried out according to the full production cycle in Russia, to 90%.

Another measure of support for the pharmaceutical industry undertaken by the state is the provision of bank guarantees with a preferential commission rate to the fundamental Russian pharmaceutical industry enterprises, as well as distributors of domestic products and pharmacy chains. For enterprises, it will be 1%, and banks will be compensated up to 2% at the expense of the state. Thus, pharmaceutical companies that cannot fulfill their obligations under contracts will be able to use a bank guarantee, which will significantly improve their position in the current economic conditions.

The reduction in the presence of foreign companies on the Russian market forced lawmakers to recall the mechanism of compulsory licensing of medicines – a government measure that allows a local company to produce a patented drug without the consent of the patent owner. Russia has already used the mechanism of compulsory licensing before – during the COVID-19 pandemic. In 2020, the company "Pharmasintez" received the right to produce the anticovid drug "Remdesevir".

In June 2023, the Government of the Russian Federation approved the Strategy for the Development of the Pharmaceutical Industry of the Russian Federation for the period up to 2030 (Decree of the Government of the Russian Federation No. 1495-r dated 07.06.2023). Russian pharmaceutical manufacturers now produce less than half - about 45% - of medicines sold in the country, but by 2030 their share should be two-thirds of the market. Currently, the main accents of the development of the pharmaceutical industry are the local production of medicines on a full cycle, including substances, the creation of original and innovative drugs, the active inclusion in the general process of related industries, such as chemistry, biotechnology, microbiology, instrumentation and machine tool construction. All this is reflected in the strategy. In general, the Pharma-2030 strategy sets tasks for the market to increase Russian exports of medicines and expand the network of new production facilities in the regions of the Russian Federation.

Rating of the largest investment projects in the pharmaceutical industry

Currently, dozens of investment projects aimed at import substitution in medicine and pharmaceuticals are being implemented in Russia. The largest investor in such projects is the state, and the largest project is implemented by Rosatom.

At the beginning of 2023, the state Corporation laid the foundation for the construction of an isotope production plant in Obninsk. A wide range of radiopharmaceuticals and active pharmaceutical substances will be produced on the basis of the Rosatom plant in Obninsk.

The second most expensive project is implemented by the resident of the special economic zone "Dubna" company "PSK Pharma". This investment project involves the development of technology and the production of pharmaceutical products for the treatment of respiratory diseases, as well as drugs against cancer.

The third most important investment project, the Lonopharm LLC project, involves the construction of a research and production complex in the special economic zone of St. Petersburg for the development and serial production of medicines and medical products of various pharmacotherapeutic groups.

Thus, a new stage in the development of the domestic pharmaceutical industry will be the launch of a full cycle of pharmaceutical products, including the production of substances. The driver for this will be the rule: the state in public procurement will give preference to drugs that are fully synthesized and produced domestically.