Market Prognosis RUSSIA Q3 2010

IMS Market Prognosis Europe Russia Update 2010
IMS MARKET PROGNOSIS

EUROPE
2010-2014
Russia Update
© 2010 IMS Health Incorporated or its affiliates. All rights reserved.

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Published: September 2010

RUSSIA 2010 UPDATE
PRICE LEVELS
The values in this report are based on the new enhanced data for Russia for the retail
and hospital panels and the new Dopolnitel'noe Lekarstvennoe Obespechenie, DLO,
panel. This is a state-run restricted drug reimbursement programme introduced in 2005
to provide subsidised pharmaceuticals in the out-patient sector for the disabled, war
veterans, children under three years of age and families with three or more children.
Data for the retail and hospital panels are available from 2004 and the DLO from 2005.
Values in the hospital and retail sectors are shown at ex-manufacturer prices and in local
currency. Values in the DLO sector are shown at contract prices and in local currency.
The total market forecast is compiled from the retail, hospital and DLO panels, which
accounted for 92.7% of the total market in 2009.
The retail and hospital panels are based on all registered medicines and food
supplements and homeopathic products. The DLO panel is based on all registered
medicines in the DLO programme including expensive drugs for the seven life
threatening diseases.
Sales of the budget purchases are calculated historically using information from the
federal government.
Market Coverage (2010)
Market Share
Retail Sector 61.2%
Hospital Sector 10.8%
DLO Sector 20.7%
Budget Purchases 7.3%
FORECAST METHODOLOGY
The IMS Market Prognosis projections are based upon ten years of volume and price
quarterly sales data. Pharmaceutical volume and price data in each audited market
sector are independently analysed using both univariate time series models and multiple
regression based models incorporating macroeconomic variables. The macroeconomic
variables are provided to IMS Health by a third party, the Economist Intelligence Unit
(EIU).
The best model – univariate or macroeconomic - is selected based on forecasting

accuracy, modelling fit and robustness. Then demand (volume) and price equations are
developed and combined to give a baseline extrapolation of actual sales for each audited
market sector. Where an econometric model is selected, the demand and price equations
are used in combination with macroeconomic indicator forecasts provided by the EIU.
The macroeconomic indicator forecasts are tabulated below.
After the baseline projection has been optimised, events are applied to obtain a final
forecast for each audited market sector. This final forecast is also summarised below,
and the most important events described.
© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 1

FORECAST 2010 UPDATE
The forecasts below represent an update of the forecasts published in the IMS Market
Prognosis report in March 2010. Updated economic forecasts and IMS MIDAS data up to
Qtr I 2010 have been used to develop a new baseline forecast for each audited market
sector. Each event has been re-evaluated and, where necessary, events have been
added or deleted. The updated events have then been applied to the new baseline
forecasts to obtain a new final forecast for each audited market sector.
BASELINE EXTRAPOLATIONS
The following table reports the macroeconomic indicator forecasts.
Table 1: Key Macroeconomic Indicators
2010 2011 2012 2013 2014
Real GDP 2000 RUB (billion) 11673 12137 12668 13229 13792
Annual Growth 4.8% 4.0% 4.4% 4.4% 4.3%
Nominal GDP RUB (billion) 47006 51506 57186 63115 69628
Annual Growth 20.5% 9.6% 11.0% 10.4% 10.3%
Consumer Price Index 2000 = 100 323.8 344.8 366.9 389.6 413.1
Annual Growth 6.4% 6.5% 6.4% 6.2% 6.0%
Real Private Consumption 2000 RUB

7124 7431 7751 8077 8400
(billion)
Annual Growth 4.1% 4.3% 4.3% 4.2% 4.0%
Real Government Consumption 2000 RUB

1347 1381 1417 1456 1500
(billion)
Annual Growth 2.0% 2.5% 2.6% 2.8% 3.0%
Exchange Rate RUB : US$ 30.00 30.50 30.70 30.50 30.00
Annual Growth -5.5% 1.7% 0.7% -0.7% -1.6%

Source: Economist Intelligence Unit, Qtr II 2010

RETAIL PHARMACY SECTOR BASELINE EXTRAPOLATIONS
Table 2: Baseline Retail Sector (2009-2014)
Sales at Constant
Price Index** Sales at Actual Prices
Prices*
Year
RUB Annual Laspeyres Annual RUB Annual
(million) Growth Index Growth (million) Growth
2009† 237148 7.7% 98.7 13.4% 231780 30.4%
2010 249464 5.2% 105.3 6.7% 255138 10.1%
2011 266592 6.9% 114.3 8.6% 298696 17.1%
2012 282205 5.9% 120.8 5.7% 334452 12.0%
2013 298365 5.7% 127.9 5.8% 374037 11.8%
2014 314660 5.5% 134.9 5.5% 416455 11.3%

†
The retail audit was improved and enhanced during 2009 with revised data made available from
January 2010. As the changes were made during 2009 this leads to a trend break between 2008
and 2009. The real growth for the retail panel in 2009 at trade prices was 17%.
*Qtr I 2010 Prices
**Qtr I 2010 = 100
Source: IMS Health
DLO SECTOR BASELINE EXTRAPOLATIONS
Table 3: Baseline DLO Sector (2009-2014)
Sales at Constant
Prices*
Year
2009 81384 6.0% 101.6 9.8% 80873 15.6%
2010 86148 5.9% 101.7 0.0% 87060 7.7%
2011 86147 0.0% 101.6 -0.1% 87542 0.6%
2012 86147 0.0% 101.5 0.0% 87492 -0.1%
2013 86147 0.0% 101.5 -0.1% 87442 -0.1%
2014 86147 0.0% 101.4 -0.1% 87390 -0.1%
*Qtr I 2010 Prices

**Qtr I 2010 = 100
Source: IMS Health

HOSPITAL SECTOR BASELINE EXTRAPOLATIONS
Table 4: Baseline Hospital Sector (2009-2014)
Sales at Constant
Prices*
Year
2009 45780 -8.3% 98.5 18.5% 43654 12.1%
2010 47452 3.7% 103.4 5.0% 47870 9.7%
2011 50168 5.7% 110.7 7.0% 54142 13.1%
2012 52698 5.0% 118.2 6.8% 60813 12.3%
2013 55348 5.0% 126.4 6.9% 68370 12.4%
2014 58258 5.3% 134.5 6.4% 76679 12.2%
*Qtr I 2010 Prices

**Qtr I 2010 = 100
Source: IMS Health

EVENTED FORECAST
EVENT ANALYSIS
This section contains an analysis of each of the events applied to the baseline forecasts,
based on IMS Health research.
Changes to prices of products not on the EDL: The new pricing mechanism on the
EDL will subject approximately 40% of the retail market to pricing controls. This is
expected to lead to, on average, a 10% reduction in price of the EDL products. Industry
analysts expect that this will result in an increase in prices for the remaining products on
the market as manufacturers seek to compensate from the loss of revenues from the
EDL products. See also: Pricing and Reimbursement
UPDATED EVENT: Upturn in OTC market: The OTC market experienced a slowdown
in growth from late 2008 to mid 2009 due to the financial crisis. The trend is similar to
that of the financial crisis at the end of the 1990s and the sector is expected to bounce
back again as the economy recovers. UPDATE: Economic recovery in the first quarter of
2010 was driven mainly by exports. Economic recovery is expected to continue
throughout 2010 and 2011 but consumer confidence is expected to lag behind and an
increase in spending in the OTC sector is now expected to begin in 2012. See also:
Pharmaceutical Business Environment
UPDATED EVENT: Purchasing power increases: Purchasing power is expected to

increase as the economy recovers from the financial crisis. Out-of-pocket payments for
pharmaceutical drugs are common and accounted for 83% of private expenditure in
2007. As drug prices experienced rapid growth in the early part of 2009 as a result of
high inflation and exchange rate fluctuations the trend of switching to more expensive
drugs slowed, especially in the retail sector. As the economy begins to recover from
2010 a return to previous purchasing patterns is expected, but this is expected to lag
behind the economy due to the high unemployment levels. Patients will switch back to
more expensive products driving volume and price growth in the retail market. UPDATE:
The Russian economy is expected to continue recovery throughout 2010 and 2011 with
GDP forecast at 4.8% and 4.0% respectively. The return to previous purchasing patterns
is now expected to commence from 2012. See also: Healthcare Provision,
UPDATED EVENT: Healthcare reform: Reform of the healthcare system began in

2005 with the national health project, Zdorovie, with the aim of boosting primary care
and developing disease awareness initiatives and broadening access to high-tech medical
care. In 2008, the government announced the Health Development Concept 2020 plan
which built on the original plans and included concrete reform goals and targeted
outcomes. One of the main goals of the 2020 programme is to increase average life
expectancy to 75 within the next ten years. It is an ambitious goal, but as long as key
parts of the reform continue to progress, life expectancy will increase. The economic
crisis in 2009 impacted the building of new high-tech centres, with only three facilities up
and running by the beginning of 2010, instead of the planned 12. A national network of
health centres was established as planned in 2009, and by upgrading existing facilities is
due to consist of 1500 centres by the end of 2010, which are targeting disease
prevention and diagnosis. An improved primary care sector, combined with disease
prevention initiatives has the potential to significantly improve the health status of many
patients in Russia. Early detection of diseases will lead to an increase in the number of
patients being treated and this will also ease the burden on the hospital sector as more
patients are treated in the primary care setting. UPDATE: In April 2010 Prime Minister
Putin announced that investment in the national project, Zdorovie, would continue. The
aims of the project are to increase life expectancy, reduce mortality, high blood

pressure, cholesterol, smoking and traffic injuries and to promote a healthy lifestyle.
See also: Healthcare Provision
Innovative new products: The launch of innovative drugs will drive growth in the
market. See also: Pharmaceutical Business Environment
Expansion of indications on the DLO: Introduced in 2005, the DLO system provides a
formal scheme for the reimbursement of outpatient drugs. The DLO system barely
survived the first couple of years due to mismanagement and corruption across the
board. Its finances have stabilised in recent years due to tighter administrative controls
and a restructuring in 2008 when the scheme was split into two. The current programme
comprises the expensive drugs for the treatment of seven rare, life threatening diseases
and a broader range of essential drugs (the ONLS). Expansion of the DLO remains a
possibility, including the incorporation of diabetes drugs in the seven diseases sector.
However, this is not expected until at least 2012 as the government finances recover
following the crisis. See also: Healthcare Provision.
UPDATED EVENT: Introduction of health insurance: The Health Development

Concept 2020 calls for the development of a health insurance scheme which would offer
patients a free choice of both payer and provider and which would be capable of
financing a universal outpatient drug benefit programme. A pilot version of a new health
insurance system was due to commence in 2010, but this looks unlikely in the wake of
the financial crisis. President Medvedev has signed off budgets for a three-fold increase
in spending on the FFOMS by 2012, reflecting his commitment to continue with the
original plan. Original plans for the scheme were to use the DLO programme as a
starting point and then expand to the wider population. It is now thought that the EDL
will form the basis of a new reimbursement list and that reimbursement will be extended
on a gradual basis, although this is not expected in the short to medium term. It is
thought that patient co-payments would be introduced, and introduction of a reference
pricing mechanism is widely anticipated, which would limit government spending whilst
at the same time offering patients access to more expensive branded versions of multi-
source products. The introduction of an insurance system would lead to an increased
demand in drugs and tighter control on prices. A full scale roll-out of a new insurance
system does however remain a distant prospect and this is reflected in the starting date
and probabilities assigned to the event. UPDATE: The draft Compulsory Medical
Insurance bill outlines the government’s intention to introduce health insurance across
Russia entitling policy holders to free healthcare. Key initiatives in the bill include:
citizens will be able to choose healthcare organisations and doctors and will have the
right to receive healthcare in any healthcare organisation that operates within the
compulsory health insurance; policy holders will be able to seek compensation as a
result of non-fulfilment or improper fulfilment of the provision of medical existence; and
the insurance fund will be funded by increased contributions by employers and by the
executive administrative regions. The new system will be funded by an increase in the
insurance contribution from employers, increasing from 3.1% to 5.1% from 2011. The
Compulsory Health Insurance bill will fund investment in healthcare with funding of RUB
136 billion allocated to provision of medicines, finance diagnostic services and pay
healthcare personnel wages, RUB 24 billion will be allocated to IT in healthcare and
patient records and RUB 300 billion dedicated to the modernisation of equipment in
hospitals and polyclinics. Under the new insurance bill emergency medical assistance will
be included from 2013 and high tech assistance from beginning of 2015 providing a
boost to healthcare coverage. The introduction of health insurance could have a
significant impact on healthcare across Russia, especially if it is combined with a
reimbursement system. As of mid-2010 the bill had passed the first reading in the State
Duma. See also: Healthcare Provision
Demographic event: The population growth over the 2010-2014 period will increase
compared to the previous five-year period. See also: Economic Environment

NEW EVENT: Implementation of Drug Circulation Law: The Drug Circulation Law
came into force on 1 September 2010. The new law builds on the existing law and
makes recent market developments official. The key components of the law are as
follows. Drug registration will be harmonised with the EU and full registration will take a
maximum of 210 days. The law will allow for drugs to be sold in out-patient clinics, by
GPs and medical assistance offices if no drugstore is in place. It also provides for drug
safety monitoring and will standardise the state regulation of the EDL. Orphan drug
regulation will be defined to allow access for treatment for rare diseases and a new
regulatory agency will be set up comprising a merger between Roszdravnadzor and
Rospotrebnadzor. The date for implementation of GMP has been set to 1 January 2014.
Inspections of plants will be made up to the deadline and a decision will be made as to
whether the factory will close or be modernised. If some plants comply with Russian GMP
and not international GMP they will most probably be allowed to remain open. Clinical
trials will not be required in Russia if the country of the drug of origin has mutually
recognised results of trials or if Russia took part in multi-centre trials. If trials are
conducted outside of Russia then the manufacturer will have to produce phase II/III
trials which can be combined. This should lead to an increase in trials in Russia and
should also help boost access to new medicines. The new law marks an important step in
the development of the Russian pharmaceutical market. It should lead to improved drug
registration and to a more transparent system. As the new law builds on existing market
rules it will have a limited impact on the pharmaceutical market. Access to medicines for
patients living in the rural areas will improve and could provide a small increase in
volume growth.
UPDATED EVENT: Revision of the Essential Drug List: The revised Essential Drug
List was much anticipated throughout 2009 and a draft for consultation was finally
released and finalised at the end of that year. The final list contains 500 international
non-proprietary names (INN) of which 75 are old ‘Soviet’ drugs that are not
manufactured elsewhere, 261 are available as generics and the remainder are supplied
exclusively in imported form. Some multinationals were unhappy with the revised list
and will lobby the government in an attempt to add more products, such as cancer and
cardiovascular drugs, to the list. The list will be at the heart of cost-containment efforts
over the prognosis period due to the new maximum price calculation and control on
mark-ups (see Introduction of pricing controls on the EDL event). The EDL provides the
basis for hospital purchasing and could be extended to the outpatient and primary care
sector if the mandatory health insurance system develops. In the short term the revised
list will have serious implications for manufacturers which have seen their key products
removed from the list. However, in the longer term, lower prices could lead to an
increase in demand for pharmaceutical products, and if the EDL is used as a starting
point for a reimbursement programme then this could significantly impact growth in the
market, although such a development is not expected until late in the prognosis period
(see Introduction of health insurance event). UPDATE: Revision of the EDL has had a
minimal impact at the total market level, but some manufacturers have been more
impacted than others as they revised their product portfolios as a result of the changes.
Some manufacturers chose not to register their products following the introduction of the
EDL, but they have the choice of doing so in 2011 as the products have to be re-
registered each year. The impact of this event has been reduced to zero as the expected
impact was not seen at the total market level. This event does however remain an issue
at manufacturer level as products have to be registered each year for inclusion in the
EDL. See also: Prescribing and Dispensing, Pricing and Reimbursement
NEW EVENT: New packaging requirements: The Drug Circulation Law that came into
force on 1 September 2010 changes the drug packaging requirements in Russia. From 1
September 2010 the internal packaging must show the form of packaging whilst the box
must show the registered certificate number - both of which are currently provided on
the patient information leaflet. If a product is produced in Russia or imported before the
1 September with the old packaging it can be sold on the market until stock run out; any

products (domestic and imported) entering the market after this date will have to have
the new packaging. Most manufacturers do not have time to make the changes to the
packing before the September deadline and so wholesalers and distributors are stocking
up on products in order to maintain delivery until manufacturers are able to revise the
packaging. IMS Health anticipates that this will result in a short-term decrease in sales of
some products until the end of 2010.
NEW EVENT: Government investigation into hospital expenditure: The

government has set up a special investigation into how the government budget is spent
in hospitals. During the investigation the government will review the amount of
expenditure on pharmaceuticals and it is expected that this will lead to a decrease in the
purchasing price of medicines in the hospital tenders.
UPDATED EVENT: Drive in increase domestic production: The government

produced a health development concept paper in 2008 which called for the proportion of
demand met by local production to reach 50% by 2020, and policies are being framed in
such a way as to encourage more widespread purchasing of domestic products. The
government is in the process of developing regulations that will govern preferential
purchasing of locally manufactured goods for supply to the public sector. Regional
purchasing organisations have already been encouraged to substitute imported drugs
with locally produced equivalents. The definition of locally produced products still has to
be confirmed by the government and this is causing some companies to postpone
investment in Russia. Alongside this the government has produced a list of 15 molecules
for which local companies are to start manufacturing, but only when the product patent
expires. To support this, the government has handed out grants to local industry to help
manufacturers service interest payments on loans taken out to upgrade plants. Boosting
production of locally-manufactured generics will eventually lead to cost savings for the
government, but progress will be slow as the industry adjusts to the new regulations and
the local industry restructures in the wake of the financial crisis. Domestic production is
unlikely to reach 50% by 2020, but the use of cheap locally-manufactured generics will
increase in a bid to limit future spending on more substantive reimbursement schemes.
UPDATE: In July 2010 it was reported that medicines manufactured abroad but
packaged locally would not be considered locally produced. The Health and Social
Development Ministry, the FAS and the Economic Development Ministry ruled that
stavudine, packaged at the Russian pharmaceutical company Makiz Pharma belonging to
Stada, a foreign firm, and distributed by Alliance Healthcare Russia, was an import and
reduced the contract price by 15%. However, although the decision was made in this
case, the definition of a domestic product still needs to be made. Multinationals are
continuing their investment in Russia by building local production facilities. Discussions
are still ongoing but it is anticipated that multinationals will be allowed to package
pharmaceuticals (that are made abroad) in Russia for up to three years and the products
will be considered as domestic. After the initial three-year period the government will
expect the multinationals to then manufacture the medicines in Russia for them to
maintain their domestic classification. In order to boost production in Russia the
government has identified 57 strategically important drugs that it wants to have
produced locally by 2015. By increasing domestic production the government wants the
ratio of innovative drugs in local producers portfolio to be 60% and would like to
increase exports eight-fold over their 2008 level. The list of products covers oncology
drugs, cardiovascular drugs, hepatitis B and C, Gaucher’s disease and multiple sclerosis.
A special programme will provide incentives for Russian manufacturers to produce these
drugs and it also aims to bring investment, including foreign investors who are ready to
manufacture in Russia. See also: Healthcare Provision, Regulatory Environment,
UPDATED EVENT: Introduction of pricing controls on the EDL: Following a year of

economic uncertainty and increasing drug prices the government published a new pricing
system in December 2009, which is due to come into effect in April 2010. The

government intends to create a more stable pricing environment and remove the
uncertainty caused by exchange rate fluctuations. Once the pricing system is stabilised,
Roszdravnadzor, the federal agency for healthcare surveillance, will develop and
maintain a pricing database and could use this as a means of introducing price controls.
The new price controls differ for multinational and domestic products and apply to drugs
on the Essential Drug List. The maximum price for an imported product will be based on
the custom price declared by importing countries. These must be in line with the
minimum price of the product in the country of origin, and the average price under which
the medicines were imported into Russia previously. From January 2011 all imported
products maximum sales prices will be registered in roubles. All products on the EDL
have to be re-registered with Roszdravnadzor by the end of March 2010, after which
they will trade at their new prices. In addition to the price controls, the government has
introduced a new method to standardise the calculation of pharmacy and wholesaler
mark ups across Russia in order to control price growth at the pharmacy level. The main
intention of the new pricing controls is to stabilise prices across the Russian
pharmaceutical market. During the first three months of 2010 companies were in the
process of re-registering their products and the full effect of the changes will be seen on
the market during the second quarter. Although the intention is to stabilise prices, IMS
Health estimates that this will lead to a reduction in price for products on the EDL across
all sectors. Local producers will also revise their product portfolios and remove cheap
and unprofitable products and review their API providers in order to reduce costs.
Foreign manufacturers will also review their investment strategies in Russia. UPDATE:
According to Roszdravnadzor, by 12 May 2010, 6778 essential medicines had applied for
price registration and 6379 medicines had had their prices registered. IMS Health data
show that the pricing controls have been effective in reducing inflation in trade prices for
EDL products, with a small effect at the total retail market level. At the retail price level,
price inflation increased for the non-EDL products in Q1 2010 and declined by 4% for
EDL products. Although the EDL has had the desired effect on prices the government is
investigating claims that some companies have put in higher prices than they should
have done whilst registering the drugs. The next stage of the plan is to transfer
responsibility to the regions which will then supervise the prices of products on the EDL
and ensure that the medicines are provided in the pharmacies. From 1 September 2010
prices of products not on the EDL will no longer be controlled by the regions, but the FAS
is expected to monitor the prices and review any increases. Roszdravnadzor will maintain
a supervisory role. See also: Healthcare Provision, Pricing and Reimbursement

Table 5: Events Impacting the Market (2010-2014)
Hospital Market Impact (volume)
Hospital Market Impact (price)

Retail Market Impact (volume)
DLO Market Impact (volume)
Retail Market Impact (price)
DLO Market Impact (price)

Probability (medium term)
Time to impact (months)

Probability (short term)
Probability (long term)

Event Title
Start Month
Start Year
Changes to
prices of
4 2010 90% 90% 90% 2 1.0% 0.0% 0.0% 5.0% 0.0% 0.0%
products not on
the EDL
UPDATED
EVENT: Upturn 1 2012 55% 75% 95% 12 5.0% 0.0% 0.0% 1.5% 0.0% 0.0%
in OTC market
UPDATED
EVENT:
Purchasing 1 2012 75% 85% 95% 24 3.0% 0.0% 0.0% 1.5% 0.0% 0.0%
power
increases
UPDATED
EVENT:
4 2010 35% 55% 75% 57 5.0% 0.0% 2.0% 0.0% 0.0% 0.0%
Healthcare
reform
Innovative new
4 2010 95% 95% 95% 57 0.2% 0.2% 0.2% 0.5% 0.5% 0.5%
products
Expansion of
indications on 1 2013 50% 50% 50% 24 0.0% 10.0% 0.0% 0.0% 5.0% 0.0%
the DLO
UPDATED
EVENT:
Introduction of 1 2013 25% 45% 55% 24 5.0% 0.0% 5.0% -2.0% 0.0% -2.0%
health
insurance
Demographic
4 2010 90% 90% 90% 57 0.2% 0.2% 0.2% 0.0% 0.0% 0.0%
event
NEW EVENT:
Implementation
9 2010 65% 85% 95% 52 0.1% 0.0% 0.1% 0.0% 0.0% 0.0%
of Drug
Circulation Law
UPDATED
EVENT:
Revision of the 4 2010 99% 99% 99% 9 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Essential Drug
List
NEW EVENT:
New packaging 7 2010 90% 90% 90% 3 -0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
requirements
NEW EVENT:
Government
investigation 4 2010 75% 85% 95% 57 0.0% 0.0% 0.0% 0.0% 0.0% -2.0%
into hospital
expenditure
UPDATED
EVENT: Drive
1 2011 25% 35% 45% 48 0.0% 0.0% 0.0% -2.0% -2.0% -2.0%
in increase
domestic

EVENT:
UPDATED
production
on the EDL
Event Title
Introduction of
pricing controls
4
Start Month
Start Year
2010
IMS Market Prognosis Europe
Probability (short term)
99%
Probability (medium term)
99%
Probability (long term)
99%
6
Time to impact (months)
Retail Market Impact (volume)

-4.0%
DLO Market Impact (volume)

-2.0%

Hospital Market Impact (volume)
-5.0%
Retail Market Impact (price)

-5.0%
DLO Market Impact (price)

-2.0%
Russia Update 2010
11
Hospital Market Impact (price)
-6.0%
RETAIL SECTOR EVENTED FORECAST
Table 6: Forecast Retail Sector (2009-2014)
Sales at Constant
Prices*
Year
2009 237148 7.7% 98.7 13.4% 231780 30.4%
2010 245128 3.4% 104.9 6.3% 251315 8.4%
2011 259900 6.0% 113.8 8.5% 290066 15.4%
2012 283914 9.2% 122.0 7.1% 338150 16.6%
2013 311242 9.6% 129.7 6.3% 395065 16.8%
2014 337077 8.3% 136.5 5.2% 452001 14.4%
*Qtr I 2010 Prices

**Qtr I 2010 = 100
Source: IMS Health
Forecast Retail Sector Sales at Constant Prices
400000
350000
RUB (million)
300000
250000
200000 Baseline forecast
150000 Evented forecast

100000
50000
0
2009 2010 2011 2012 2013 2014

Forecast Retail Sector Price Index
160.0
140.0
120.0
100.0
80.0 Baseline forecast
60.0 Evented forecast

40.0
20.0
0.0
2009 2010 2011 2012 2013 2014
Forecast Retail Sector Sales at Actual Prices
500000
450000
400000
RUB (million)
350000
300000
200000
Evented forecast
150000
100000
50000
0
2009 2010 2011 2012 2013 2014

DLO SECTOR EVENTED FORECAST
Table 7: Forecast DLO Sector (2009-2014)
Sales at Constant
Prices*
Year
2009 81384 6.0% 101.6 9.8% 80873 15.6%
2010 85223 4.7% 99.7 -1.9% 85204 5.4%
2011 84526 -0.8% 99.6 -0.1% 84246 -1.1%
2012 84590 0.1% 99.5 -0.1% 84233 0.0%
2013 85879 1.5% 100.7 1.1% 86028 2.1%
2014 88097 2.6% 101.7 1.1% 89222 3.7%
*Qtr I 2010 Prices

**Qtr I 2010 = 100
Source: IMS Health
Forecast DLO Sector Sales at Constant Prices
100000
90000
80000
RUB (million)
70000
60000
40000
Evented forecast
30000
20000
10000
0
2009 2010 2011 2012 2013 2014

Forecast DLO Sector Price Index
120.0
100.0
80.0
20.0
0.0
2009 2010 2011 2012 2013 2014
Forecast DLO Sector Sales at Actual Prices
100000
90000
80000
RUB (million)
70000
60000
40000
Evented forecast
30000
20000
10000
0
2009 2010 2011 2012 2013 2014

HOSPITAL SECTOR EVENTED FORECAST
Table 8: Forecast Hospital Sector (2009-2014)
Sales at Constant
Prices*
Year
2009 45780 -8.3% 98.5 18.5% 43654 12.1%
2010 45929 0.3% 97.1 -1.4% 44460 1.8%
2011 47847 4.2% 103.6 6.6% 48370 8.8%
2012 50418 5.4% 110.1 6.3% 54276 12.2%
2013 53372 5.9% 116.8 6.1% 61102 12.6%
2014 56833 6.5% 123.1 5.4% 68732 12.5%
*Qtr I 2010 Prices

**Qtr I 2010 = 100
Source: IMS Health
Forecast Hospital Sector Sales at Constant Prices
70000
60000
RUB (million)
50000
40000
Baseline forecast
30000
Evented forecast
20000
10000
0
2009 2010 2011 2012 2013 2014

Forecast Hospital Sector Price Index
160.0
140.0
120.0
100.0

40.0
20.0
0.0
2009 2010 2011 2012 2013 2014
Forecast Hospital Sector Sales at Actual Prices
90000
80000
70000
RUB (million)
60000
50000
Baseline forecast
40000
30000 Evented forecast
20000
10000
0
2009 2010 2011 2012 2013 2014

TOTAL MARKET FORECASTS
Table 9: Total Audited Market Forecast (2009-2014)
Sales at Constant
Prices*
Year
2009 364313 5.0% 99.3 13.2% 356307 24.3%
2010 376280 3.3% 102.8 3.5% 380978 6.9%
2011 392273 4.3% 109.5 6.6% 422682 10.9%
2012 418922 6.8% 116.0 5.9% 476660 12.8%
2013 450493 7.5% 122.6 5.7% 542195 13.7%
2014 482007 7.0% 128.6 4.8% 609955 12.5%
*Qtr I 2010 Prices

**Qtr I 2010 = 100
Source: IMS Health
SUMMARY OF THE PROGNOSIS 2010-2014
The prognosis for the Russian Federation has been revised upwards. Forecasts for
economic growth (GDP and consumer expenditure) have been revised upwards for 2010
and inflation and government consumption forecasts have been revised downwards. US$
exchange rate forecasts are lower in 2010 but higher for the medium term.
The outlook for 2010 remains relatively unchanged from the previous forecast; however
recovery from 2011 is expected to be slightly lower than previously expected due to slow
recovery in the economy. The introduction of pricing controls on the EDL led to a 4%
decline in price for these products in Q1 2010, whilst an increase was seen for products
not on the EDL. The new pricing controls have led to a standardisation of drug prices
across Russia and from January 2011 all drug prices will be registered in roubles.
Combined, these measures should result in a more stable pricing environment over the
prognosis period.
Healthcare reform is expected to continue over the prognosis period and will boost
volume in the retail and hospital sectors.
The government has taken the first step in introducing a mandatory health insurance
scheme which will provide free healthcare to citizens across Russia. As of September
2010 the first draft of the bill had passed through the State Duma. The bill is expected to
boost demand in the retail and hospital sectors, and if combined with a reimbursement
system, could lead to pressure on price growth, although this is not expected until the
latter part of the prognosis period.
The final prognosis is based on the forecasts of Tables 6, 7 and 8. IMS Health captures
92.7% of the total pharmaceutical market.
The prognosis contains a projection of the DLO sector. The budget for the DLO in 2010 is
estimated to be in the range of RUB 83-88 billion. The future of the DLO as it currently
stands is uncertain. The forecast assumes that the government will continue funding the
DLO and exert strict control over prices. The government may also add new indications
to the programme, such as diabetes or cancer.

The prognosis incorporates an estimate of the value of the Budget Purchases sector and
assumes that this will grow in line with the rest of the market and hold a 7.3% share
during the forecast period.
The total pharmaceutical market is expected to grow at a compound annual growth rate
(CAGR) of 11.4% in terms of roubles and 12.6% in terms of US$ during the period
2009-2014.
Table 10: Total Market Sales at Actual Prices (2009-2014) RUB (million)
2009 2010 2011 2012 2013 2014
Retail Sector 231780 251315 290066 338150 395065 452001
DLO Sector* 80873 85204 84246 84233 86028 89222
Hospital Sector 43654 44460 48370 54276 61102 68732
Budget Purchases* 27923 29856 33125 37355 42491 47801
Total Market 384230 410835 455806 514015 584686 657756
Annual Growth 24.1% 6.9% 10.9% 12.8% 13.7% 12.5%

*Contract Prices
Source: IMS Health
Table 11: Total Market Sales at Actual Prices (2009-2014) US$* (million)
2009 2010 2011 2012 2013 2014
Retail Sector 7302 8377 9510 11015 12953 15067
DLO Sector** 2548 2840 2762 2744 2821 2974
Hospital Sector 1375 1482 1586 1768 2003 2291
Budget Purchases** 880 995 1086 1217 1393 1593
Total Market 12105 13694 14944 16743 19170 21925
Annual Growth -2.8% 13.1% 9.1% 12.0% 14.5% 14.4%
*Using forecast exchange rates

**Contract Prices
Source: IMS Health

Market Prognosis RUSSIA Q3 2010

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IMS Market Prognosis Europe Russia Update 2010

IMS MARKET PROGNOSIS

© 2010 IMS Health Incorporated or its affiliates. All rights reserved.

© 2010 IMS Health Incorporated or its affiliates. All rights reserved.

Published: September 2010

© 2010 IMS Health Incorporated or its affiliates. All rights reserved.

RUSSIA 2010 UPDATE

Market Coverage (2010)

Retail Sector 61.2%

Hospital Sector 10.8%

DLO Sector 20.7%

Budget Purchases 7.3%

The best model – univariate or macroeconomic - is selected based on forecasting

© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 1

FORECAST 2010 UPDATE

The following table reports the macroeconomic indicator forecasts.

Table 1: Key Macroeconomic Indicators

2010 2011 2012 2013 2014

Annual Growth 4.8% 4.0% 4.4% 4.4% 4.3%

Nominal GDP RUB (billion) 47006 51506 57186 63115 69628

Annual Growth 20.5% 9.6% 11.0% 10.4% 10.3%

Annual Growth 6.4% 6.5% 6.4% 6.2% 6.0%

Real Private Consumption 2000 RUB

Annual Growth 4.1% 4.3% 4.3% 4.2% 4.0%

Real Government Consumption 2000 RUB

Annual Growth 2.0% 2.5% 2.6% 2.8% 3.0%

Exchange Rate RUB : US$ 30.00 30.50 30.70 30.50 30.00

Annual Growth -5.5% 1.7% 0.7% -0.7% -1.6%

© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 2

RETAIL PHARMACY SECTOR BASELINE EXTRAPOLATIONS

Table 2: Baseline Retail Sector (2009-2014)

2009† 237148 7.7% 98.7 13.4% 231780 30.4%

2010 249464 5.2% 105.3 6.7% 255138 10.1%

2011 266592 6.9% 114.3 8.6% 298696 17.1%

2012 282205 5.9% 120.8 5.7% 334452 12.0%

2013 298365 5.7% 127.9 5.8% 374037 11.8%

2014 314660 5.5% 134.9 5.5% 416455 11.3%

DLO SECTOR BASELINE EXTRAPOLATIONS

Table 3: Baseline DLO Sector (2009-2014)

2009 81384 6.0% 101.6 9.8% 80873 15.6%

2010 86148 5.9% 101.7 0.0% 87060 7.7%

2011 86147 0.0% 101.6 -0.1% 87542 0.6%

2012 86147 0.0% 101.5 0.0% 87492 -0.1%

2013 86147 0.0% 101.5 -0.1% 87442 -0.1%

2014 86147 0.0% 101.4 -0.1% 87390 -0.1%

*Qtr I 2010 Prices

© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 3

HOSPITAL SECTOR BASELINE EXTRAPOLATIONS

Table 4: Baseline Hospital Sector (2009-2014)

2009 45780 -8.3% 98.5 18.5% 43654 12.1%

2010 47452 3.7% 103.4 5.0% 47870 9.7%

2011 50168 5.7% 110.7 7.0% 54142 13.1%

2012 52698 5.0% 118.2 6.8% 60813 12.3%

2013 55348 5.0% 126.4 6.9% 68370 12.4%

2014 58258 5.3% 134.5 6.4% 76679 12.2%

*Qtr I 2010 Prices

© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 4

UPDATED EVENT: Purchasing power increases: Purchasing power is expected to

UPDATED EVENT: Healthcare reform: Reform of the healthcare system began in

© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 5

UPDATED EVENT: Introduction of health insurance: The Health Development

© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 6

© 2010 IMS Health Incorporated or its affiliates. All rights reserved. 7