Belarus Pharmaceuticals and Healthcare Report Q3 2010

Report Summary

Belarus came through the global economic crisis far more smoothly than neighbours such as Russia and Ukraine, a measure of the country’s disengagement from the broader European and global economies. In 2010, however, the country’s pharmaceutical market will be one of the few in the Commonwealth of Independent States (CIS) to decline in value in US dollar terms, according to BMI’s forecast. This is largely attributable to the anticipated depreciation of the Belarusian ruble. Despite these short-term pressures, we nevertheless forecast that the Belarusian pharmaceutical market will grow by a compound annual growth rate (CAGR) of 11.41% between 2009 and 2014, with the market growing in US dollar terms from US$597mn to US$1.05bn.

As always, BMI’s headline forecast cannot comprehensively convey Belarus’s very specific risks. The country is isolated from its EU neighbours to the West, including on-and-off tensions with Poland over Belarus’s harsh treatment of ethnic Polish activists. Belarus’s quixotic president, Alexander Lukashenko, has also managed to alienate many of his closest CIS allies. The country looks set to crash out of the longplanned Customs Union with Russia and Kazakhstan after citing unacceptable conditions and complaining about, among other things, the treatment of Belarusian pharmaceutical products. As this report was being finalised, the country was also on the verge of having its gas supplies cut off by Russia over a payment dispute. The greatest risk remains the hardest to predict, namely that the country’s largely unreformed and undermanaged economy will finally begin to come apart.

In the pharmaceutical sector, as in much of the rest of the economy, the greatest risk is state meddling and a lack of public consultation or transparency in decision-making. The country’s domestic and foreign pharmaceutical producers are bound by a renewed voluntary pricing accord extending price freezes from 2009 to the end of 2011. Pharmacies are subject to margin controls. Rather implausibly, the government claimed an audit of 700 pharmacies reported in the state-run media in May, failed to find any violations. Meanwhile, the head of the country’s employers’ union publicly called for tax breaks and other incentives to develop the voluntary private health insurance market and relieve the pressure on the public sector. Perhaps more predictably, President Lukashenko repeated state ‘instructions’ that the pharmaceutical sector should produce 50% of domestically-consumed medicines, cover more therapeutic areas and prime ‘disappointing’ exports. Belarus's development strategy for the pharmaceutical industry through to 2020 is focused on the development of generic drugs for the domestic and other emerging markets. Increasing output for both domestic use and exports will require additional technology and investment. In May 2010, the country announced a deal to develop cancer drugs with Cuba. However, after a raft of announcements, primarily involving state-controlled producer Belbiopharm in late 2009, no new major production deals have been announced. Meeting the president’s goals will require the completion of projects in the pipeline as well as additional joint-venture investments.