Pharmaceutical Industry: Kazakhstan market overview
We present to your attention a publication from a series of analytical reviews of the Single Distributor of "SK-Pharmacy" LLP within the framework of the National Project "Health of the Nation".
The announcement of the coronavirus pandemic and its first wave, which played out in Kazakhstan last summer, had a significant impact on the overall picture of the domestic pharmaceutical market. Thus, according to the international analytical company "IQVIA", the value volume of the Kazakhstan pharmaceutical market, taking into account retail sales and purchases for GVFMC, increased by 22% in the first 11 months of 2020 compared to the same period of the previous year. At the same time, the volume of sales of pharmaceutical products in the retail segment increased by 18%.
The main factors of the positive dynamics of the market in 2020 were a sharp increase in demand for medicines, an increase in their cost and the emergence of new drugs. Due to the coronavirus pandemic, many new drugs appeared on the market that helped in the prevention and control of the consequences of the coronavirus. In normal times, new drugs take a long time to appear on the market, but in the context of the pandemic, the time frame has been significantly reduced, which has affected the cost of medicines.
If in 2019 the share of domestic producers in monetary terms was 14%, then by the end of 2020 this indicator increased to 16% of the total pharmaceutical market of the Republic of Kazakhstan. There is an increase in the production of DP by 39% in value terms compared to 2019 (the growth of the budget segment by 48%, retail - 28%).
In the structure of drug consumption in RK in the context of drug groups, where the Group of drugs from 1 to 14 positions have stable sales in Kazakhstan and are always included in the group of TOP-15 sales. Topping this list are antibiotics, anti-inflammatory and anti-cold medications, analgesics, and so on.
Diseases of the respiratory system, circulatory system, genitourinary system, digestive system, and pregnancy complications are included in the TOP 5 diseases in the structure of morbidity of the population of RK by disease classes. At the same time, it should be noted that in the dynamics of three years (2017-2019), there is an increase in the incidence of a number of nosologies by an average of 4%.
According to the results of 2019 in the world ranking of pharmaceutical exporting countries (https://www.worldstopexports.com), Kazakhstan took the 72nd place out of 116 countries, which indicates a low export orientation of domestic producers. Nevertheless, thanks to the active policy of the state to support the entrepreneurial initiative in the field of production of medicines, there is an increase in volumes from local manufacturers, where about 70% of all products are sold through the state channel. Guarantees of the state for the volume produced, allows DP to expand its production and develop new wounds. This is evidenced by the increase in the average volume of exports over the past 5 years, which amounted to more than 34 million US dollars, where 80% of exports are accounted for by the Russian Federation.
However, in 2019, there was a 16-fold decrease in the export of medical devices compared to 2018, while the export of medical equipment increased by 1.2 times during this period.
At the same time, the share of import consumption in the market of Kazakhstan for five years remains within 80%, amounting to 1.1 billion US dollars. According to the results of 2019, Germany became the main importer of medicines. The largest volume of imports is accounted for by:
• Drugs containing hormones or steroids,
• Immunological products
At the same time, in 2019, there is a decrease in the imported volume of medical products by 20%, which is associated with the launch of new production facilities and state support in the form of an increase in the range of medical products for purchase within the state volume of free medical care and medical care in the system of compulsory social health insurance.
To date, 96 enterprises are employed in the domestic pharmaceutical industry, 33 of which produce medicines, 41 - medical devices and 22 enterprises produce medical equipment. In 2020, domestic enterprises increased production by 34.1%, or 81.5 billion tenge (2019 - 57.6 billion tenge). Investments in the industry increased by 5.2% and amounted to 4.1 billion tenge (2019 – 4.09 billion tenge).
According to the international analytical agency IQVIA, the total Kazakhstan pharmaceutical market is projected to grow by 10% until 2024. At the same time, the growth of the budget segment is expected to reach 13% due to an increase in purchases of expensive products in the outpatient sector, in particular drugs for the treatment of oncology and diabetes. The retail sector is expected to grow by up to 9%, mainly due to the demand for expensive original drugs.
In general, at the end of 2020, one of the main drivers of economic growth in Kazakhstan was pharmaceuticals (47%), along with construction (+11.2%) and manufacturing (+3.9%), whose growth was provided by the automotive industry (52.5%). At the same time, the share of the pharmaceutical industry in GDP was 0.45%.
In turn, a Single Distributor ("SK-Pharmacy" LLP) plays an important role in increasing the production volumes of the domestic pharmaceutical industry, since the development of domestic producers and business initiatives is one of the main priorities of the Single Distributor. Over the 10-year period since the introduction of unified distribution in Kazakhstan, the volume of purchases in monetary terms has increased by 8 times. Due to the centralization of procurement, high-quality medicines and medical devices at an equal price are provided annually to about 2 million dispensary patients and 2 thousand medical organizations throughout the country, regardless of administrative and territorial affiliation.
The number of items purchased from a Single Distributor increased from 804 items in 2010 to 1,439 items in 2021, representing an increase of 1.8 times. According to the results of the procurement procedures in the current year, the first place in terms of the share in the total volume of purchases was taken by domestic products, the second - by German products.
For 2019, within the framework of outpatient drug supply to the population, a Single distributor purchased medicines and medical devices for 45 nosologies (according to the GVFMC) in the amount of 114.6 billion tenge. Since January 1, 2020, Kazakhstan has introduced a medical insurance system (CSHI), which allowed to additionally cover 105 nosologies in the amount of 27.2 billion tenge, and within the GVFMC - 32 nosologies in the amount of 130.3 billion tenge. Thus, an expansion of the coverage of nosologies under the GVFMC and CSHI was achieved 3 times from 45 to 137 nosologies.
In the total volume of purchases through the Single distribution system, there is an increase in the volume of DP in monetary terms by 15.2 times. The main incentive for the growth of domestic pharmaceutical production is the program for concluding long-term contracts for up to 10 years.
The share of domestic products from all purchased medicines and medical products was 37%, today there are 89 long-term contracts concluded with 35 domestic producers for the supply of 4,886 names of medicines and medical devices. Among them, 42 long-term contracts were concluded for medicines and 47 long-term contracts were concluded for medical devices. 37 long-term contracts with 21 domestic producers have been implemented and partially implemented, and 664 names of medicines and medical devices are being delivered according to the list of a Single Distributor for 2021.
The growth of the share of DP in the total purchase volume of a Single Distributor over the ten-year period of operation increased from 15% to 30% and continues to grow steadily. According to preliminary forecasts, by 2025, the share of domestic pharmaceutical products will occupy 50% of the Kazakhstan market due to the localization of production and interaction with multinational pharmaceutical companies.
In this regard, in order to support Kazakhstan's pharmaceutical manufacturers in 2020, the procedures for the examination and registration of domestic medicines and medical devices were accelerated, as well as the processes of conducting an assessment of the safety and quality of domestic medicines were accelerated.
In this regard, in order to prioritize the production of popular drugs purchased through the single distribution system, SK-Pharmacy has identified a number of names of medicines that generate the greatest demand and cost. From the 367 names of medicines and medical devices uncovered by local manufacturers under long-term supply contracts with a Single distributor, 41 names generate the highest value.
That is, the ratio of price and volume of such drugs as vaccines, blood factors, antidiabetic, anti-oncological drugs is the greatest benefit for sale through state channels and can be the most attractive for potential investors.
An important factor in the development of the industry is its scientific and human potential. To date, the human resources of the pharmaceutical industry in Kazakhstan number two and a half thousand pharmacists, however, the current production is experiencing a shortage of narrow-profile specialists. At the same time, there is no interaction between science and pharmaceutical production, there is a shortage of specialists engaged in the development and production of pharmaceutical products.
Thus, state support in the form of long-term contracts for 10 years allowed to increase the volume of purchases from DP by 15.2 times. The growth in the share of DP is associated with the launch of new production facilities and modernization, and an increase in the range of products. However, there is no production of pharmaceutical substances in the country and there is a low level of export of finished products.
At the same time, despite the ongoing policy of supporting domestic production, the share of DP in the total Kazakhstan market was 17% in value terms, which characterizes the portfolio of our manufacturers as low-profitable and represented mainly by generic drugs, while in order to ensure the national drug safety of the country, according to the WHO recommendation, this indicator should be at least 30% in value terms. It is worth noting that the leaders of sales in Kazakhstan were drugs for the treatment of oncology, diabetes and autoimmune diseases.
As it was noted earlier, the key problems of import dependence of the domestic pharmaceutical market are the weak integration of science, production and education, the low degree of commercialization and practice-oriented domestic scientific developments, the shortage of highly specialized narrow-profile specialists, and so on.
The SWOT-ANALYSIS we conducted indicates that:
The strengths of the domestic pharmaceutical industry are state support for the development of DP as an organization of procurement procedures through the system of a Single Distributor and the formation of a stable network of leaders in the domestic production of pharmaceuticals, which provide 87.4% of the total state order. However, the low export potential of Kazakhstan's manufacturers and the lack of established cooperation between science and production represent the weaknesses of the domestic pharmaceutical market.
Nevertheless, the formation of a single pharmaceutical market within the EAEU, opening up great opportunities for our pharmaceutical industry, causes certain threats in view of the fierce competition among the member countries of the Eurasian space, coupled with the high volatility of the national currency.
In this regard, in accordance with the instructions of the Head of State Kassym-Zhomart Tokayev to increase the share of domestic drugs in the local market to 50% by 2025, the Government is taking systematic measures to develop the pharmaceutical industry in Kazakhstan.
To date, the Comprehensive Plan for the Development of the Pharmaceutical and Medical Industry until 2025, which is aimed at solving the current problems associated with the pandemic, has entered into force since 2020.
At the same time, as the analysis of global trends and international experience in the development of the pharmaceutical industry shows, we need to apply hybrid solutions that were proposed in the framework of the "Training of industry managers in Change Management" of the Academy of Elbasy from 25.11.2020.
As a resource plan, systematic approaches were proposed by transforming the existing Comprehensive Plan and State Program for the Development of Healthcare into the National Project "HEALTHY NATION" for 2021-2025, where the 3rd direction will be "Domestic Pharmaceutical Industry of Kazakhstan".
The main objectives of this direction will be to build up the scientific and human potential, develop the domestic production of pharmaceuticals and increase the export potential of domestic pharmaceutical and medical devices.
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