Kazakhstan Pharmaceuticals and Healthcare Report Q3 2009

June 23. PR-Inside

The report has downgraded its US dollar forecast for the Kazakhstani pharmaceutical market sharply, in light of a major deterioration of the tenge to US dollar exchange rate outlook for the period 2008 to 2013. The predicted US dollar compound annual growth rate (CAGR) for the total value of the pharmaceutical market during the forecast period now comes in at 5.04%, compared with 9.04% in our previous forecast.

Our tenge growth rate expectations remain largely unchanged, with a CAGR of 13.64%. Still, despite our lowered expectations and the likelihood of rough times ahead for the Kazakhstani economy, the country remains one of the least developed and most promising in the Emerging Europe coverage universe.

The local currency has suffered in part from the continued severe crisis in the country’s financial system, which was until recently considered one of the best developed in the CIS. Observers will look to see if the powerful state-backed Samruk Kazyna holding will be able to stabilise the country’s largest banks despite concerns over conflicts of interest and reported infighting among elite groups over who should run the fund. The success or failure of current attempts to right the banking system will have a direct impact on local manufacturers’ ability to modernise and consolidate. Economic stability and a return to growth in 2011 – after a punishing recession expected in 2009 and 2010 – will also be critical if the government is to achieve some of what it has set out to do under its current and (after 2010) next five-year healthcare development plans. Indeed, the government has set itself daunting targets, pledging to reform medical education and overhaul quality control and audit functions at 600 healthcare institutions in the country.

During the first four months of 2009, the Kazakhstani government has taken a range of emergency measures to address problems posed by the country’s weakening currency, and has aimed to stabilise both the Guaranteed Volume of Medical Provision (GOMB) – which includes state purchasing for hospitals and under certain target programmes – and the far larger private retail market. Voluntary pricing accords have been reached with manufacturers and suppliers covering both state-purchased medicines and around 100 essential medicines sold in the retail marketplace. Notably, a new ‘unified’ monopoly supplier of GOMB-financed medicines, SK Farmatsiya, which is 100% controlled by Samruk Kazyna, began operations in April.

While Health Minister Zhaksylyk Doskaliev acknowledged in March that most imported medicines would go up in price by 15-25% due to the devaluation, in April Prime Minister Karim Massimov ordered that prices for food and pharmaceuticals should not be increased. Few doubt that, manufacturers and suppliers will be under pressure to absorb price rises. Local players like Chimpharm and Romat should benefit at the expense of foreign players when it comes to many basic generics and over-the-counter (OTC). But the overall trend will continue to be of steeply increasing prices for the majority of medicines, a trend that will put more treatments out of reach for consumers, even as government focus and investment on the long-neglected healthcare sector is at an all-time high.