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Last year, 2022, proved to be a pivotal year for the pharmaceutical market in Eurasia. Pandemic-related problems have been exacerbated: complicated logistics, inventory shortage, and component supply disruptions. How are the major players responding to these changes? Have they been able to adapt to the new reality? What business models and operating formats have proven to be most effective in a tough environment?
These and other questions will be discussed by participants in the Top Managers' strategic discussion on the sidelines of the 14th Eurasian Pharmaceutical Forum in Almaty. Lidiya Klyuchareva, Head of CIS Country Group, Bayer, shared her experience in an exclusive interview with Adam Smith Conferences.
Last year, 2022, proved to be a pivotal year for the pharmaceutical market in Eurasia. Pandemic-related problems have been exacerbated: complicated logistics, inventory shortage, and component supply disruptions. How are the major players responding to these changes? Have they been able to adapt to the new reality? What business models and operating formats have proven to be most effective in a tough environment?
These and other questions will be discussed by participants in the Top Managers' strategic discussion on the sidelines of the 14th Eurasian Pharmaceutical Forum in Almaty. Lidiya Klyuchareva, Head of CIS Country Group, Bayer, shared her experience in an exclusive interview with Adam Smith Conferences.
– Lidiya, how do you sum up the past 2022? What was it like for Bayer, for the CIS pharmaceutical market and for you personally as a manager?
Indeed, 2022 was a year of radical challenges, but the pandemic conditions were a catalyst for us to take the momentum of our work to the next level. Our level of readiness for change, willingness to adapt, focus on results, allowed us to successfully navigate through this difficult period.
It seems to me that in a situation of extreme tension and stress, the task of the pharmaceutical community is not to give in to emotions, but to unite more and work together to solve common problems. I am happy that we are able to do this, and despite all the problems and challenges, we manage to ensure the continuity of production and supply of our products to the CIS countries.
The CIS countries represent a dynamically developing region, especially in terms of the OTC market, where we operate. The market is evolving, having experienced double-digit growth rates for several years in a row.
2022 was no exception: according to IQVIA, the OTC market grew more than 20% in the 2020 pandemic year, by early 2022, but on a high base, we saw another 20% growth, with a further 10% increase at the end of 2022. Certainly, the growth has slowed down now, due to the end of high demand, primarily for the anti-cold products, but still, relative to the high base of previous years, maintaining high growth rates is a very good result.
Turning to Bayer Consumer Health, 2022 was another successful year for us. We continue to grow above our competitors, keep increasing our share in the CIS countries, and in our key markets we are expanding it quite significantly. For example, in 2022 we grew 3 times faster than our competitors in our focus markets of Uzbekistan, Georgia and Azerbaijan.
And for me personally, this period was the year of the highest stress, on the one hand, and the year of the greatest satisfaction from the high results we managed to achieve, on the other hand.
– You talk about double-digit growth rates, do you analyze which categories and groups drove that growth? What is now most prominently driving the market after the decline in covid trends?
Yes, sure, we analyze it, however, it is no secret that the market is mostly growing at the expense of price. Prices are unfortunately rising and will continue to rise, and price is still the primary driver.
If we look at product categories, trends are influenced by people's focus on healthy lifestyle. In particular, attention to the vitamin category. In EMEA (Europe, Middle East, Africa), which we are adjacent to, there is a big emphasis on prevention and it is part of some global trend. In the pre-covid era, the demand for anti-cold medicines was the highest worldwide; in the pandemic years, the demand lead was taken by the vitamin category.
The Stress & Sleep category is also developing dynamically – this is both a global trend and a trend specific to our region. I think these medications will continue to advance the growth of the entire OTC market. Bayer Consumer Health has a very strong vitamin portfolio. Moreover, we have had several major deals regarding these product lines in recent years, and we have new products to launch in the CIS countries.
– You mentioned imminent price increases – is that a consequence of the new more complicated logistics? Are large-scale anti-Russian sanctions to blame?
Yes, the situation that happened last year has certainly affected our company, and yes, we are already actively changing our business model for the CIS countries. I am confident that the change of business model will allow us not only to reduce existing risks and maintain our presence in the CIS countries, but will also give us additional impetus and new opportunities for development in the region.
As for prices: unfortunately, as I said, prices are going to rise, and there is every reason for that. This is the most pressing issue for all industries, countries and companies, and for us as consumers. This is not surprising given the global manufacturing and logistics crisis we are facing: the cost of production is increasing due to the rising cost of both active ingredients, energy, packaging and new logistics. Obviously, all market participants and we, as a company, being forced to raise prices, are aware of how detrimental this may be to consumption in the future. This is why in recent years, and now in particular, we have been focusing on our pricing strategy. We try to take a very comprehensive, balanced approach, to target each category, all factors, and we hope that our competitors and the industry as a whole are now doing the same, as everyone understands that price growth cannot be endless.
– You mentioned the transition to a new business model for the CIS countries: what is it? Is it localization of production facilities in the countries of the region, rearranged logistics?
Yes, our logistical and financial flows will come directly from Europe, previously they went through Russia. As for the transfer of production facilities, it is a much longer process, these are usually very long-term projects, so for now we are only talking about logistical and financial flows.
– Lidiya, at the upcoming Eurasian Forum you will take part in a strategic session with top managers of major international manufacturers. What issues would you like to discuss?
The pricing aspect is very important to us. For the last few years we have been observing a rather alarming tendency in a number of the CIS countries to regulate prices for all groups of medications, including most of the OTC drugs. In Kazakhstan, the market is fully regulated from 2019, in Uzbekistan – from 2021, in Azerbaijan, it is the same trend, and this is quite a unique story, because there are few countries in the world that still regulate drug prices. In Germany, for example, such measures were abandoned back in 2004.
It is understandable when prices are regulated for life-saving medications, but OTC drugs represent a fairly competitive market. And here any restrictions affect prices rather negatively. For competitive segments, this is quite a detrimental practice. We would very much like to be in constant dialogue with regulators to optimize and improve these relatively new and not yet perfect procedures. This is important for the entire market.
– What recommendations would you now give to your colleagues, international pharmaceutical companies? What is important for the big players to keep in mind right now?
I would like to address my colleagues in the market with a wish to actively develop the potential of the CIS countries, which is still underutilized, but represents a great number of opportunities.
It is also important to promote the topic of health literacy and related educational projects in the region, as this will support local communities and create a sustainable environment for our common development. We are actively cultivating and promoting the topic of responsible self-medication. I believe that such projects will be valuable for consumers, governments and pharmaceutical manufacturers alike.
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Indeed, 2022 was a year of radical challenges, but the pandemic conditions were a catalyst for us to take the momentum of our work to the next level. Our level of readiness for change, willingness to adapt, focus on results, allowed us to successfully navigate through this difficult period.
It seems to me that in a situation of extreme tension and stress, the task of the pharmaceutical community is not to give in to emotions, but to unite more and work together to solve common problems. I am happy that we are able to do this, and despite all the problems and challenges, we manage to ensure the continuity of production and supply of our products to the CIS countries.
The CIS countries represent a dynamically developing region, especially in terms of the OTC market, where we operate. The market is evolving, having experienced double-digit growth rates for several years in a row.
2022 was no exception: according to IQVIA, the OTC market grew more than 20% in the 2020 pandemic year, by early 2022, but on a high base, we saw another 20% growth, with a further 10% increase at the end of 2022. Certainly, the growth has slowed down now, due to the end of high demand, primarily for the anti-cold products, but still, relative to the high base of previous years, maintaining high growth rates is a very good result.
Turning to Bayer Consumer Health, 2022 was another successful year for us. We continue to grow above our competitors, keep increasing our share in the CIS countries, and in our key markets we are expanding it quite significantly. For example, in 2022 we grew 3 times faster than our competitors in our focus markets of Uzbekistan, Georgia and Azerbaijan.
And for me personally, this period was the year of the highest stress, on the one hand, and the year of the greatest satisfaction from the high results we managed to achieve, on the other hand.
– You talk about double-digit growth rates, do you analyze which categories and groups drove that growth? What is now most prominently driving the market after the decline in covid trends?
Yes, sure, we analyze it, however, it is no secret that the market is mostly growing at the expense of price. Prices are unfortunately rising and will continue to rise, and price is still the primary driver.
If we look at product categories, trends are influenced by people's focus on healthy lifestyle. In particular, attention to the vitamin category. In EMEA (Europe, Middle East, Africa), which we are adjacent to, there is a big emphasis on prevention and it is part of some global trend. In the pre-covid era, the demand for anti-cold medicines was the highest worldwide; in the pandemic years, the demand lead was taken by the vitamin category.
The Stress & Sleep category is also developing dynamically – this is both a global trend and a trend specific to our region. I think these medications will continue to advance the growth of the entire OTC market. Bayer Consumer Health has a very strong vitamin portfolio. Moreover, we have had several major deals regarding these product lines in recent years, and we have new products to launch in the CIS countries.
– You mentioned imminent price increases – is that a consequence of the new more complicated logistics? Are large-scale anti-Russian sanctions to blame?
Yes, the situation that happened last year has certainly affected our company, and yes, we are already actively changing our business model for the CIS countries. I am confident that the change of business model will allow us not only to reduce existing risks and maintain our presence in the CIS countries, but will also give us additional impetus and new opportunities for development in the region.
As for prices: unfortunately, as I said, prices are going to rise, and there is every reason for that. This is the most pressing issue for all industries, countries and companies, and for us as consumers. This is not surprising given the global manufacturing and logistics crisis we are facing: the cost of production is increasing due to the rising cost of both active ingredients, energy, packaging and new logistics. Obviously, all market participants and we, as a company, being forced to raise prices, are aware of how detrimental this may be to consumption in the future. This is why in recent years, and now in particular, we have been focusing on our pricing strategy. We try to take a very comprehensive, balanced approach, to target each category, all factors, and we hope that our competitors and the industry as a whole are now doing the same, as everyone understands that price growth cannot be endless.
– You mentioned the transition to a new business model for the CIS countries: what is it? Is it localization of production facilities in the countries of the region, rearranged logistics?
Yes, our logistical and financial flows will come directly from Europe, previously they went through Russia. As for the transfer of production facilities, it is a much longer process, these are usually very long-term projects, so for now we are only talking about logistical and financial flows.
– Lidiya, at the upcoming Eurasian Forum you will take part in a strategic session with top managers of major international manufacturers. What issues would you like to discuss?
The pricing aspect is very important to us. For the last few years we have been observing a rather alarming tendency in a number of the CIS countries to regulate prices for all groups of medications, including most of the OTC drugs. In Kazakhstan, the market is fully regulated from 2019, in Uzbekistan – from 2021, in Azerbaijan, it is the same trend, and this is quite a unique story, because there are few countries in the world that still regulate drug prices. In Germany, for example, such measures were abandoned back in 2004.
It is understandable when prices are regulated for life-saving medications, but OTC drugs represent a fairly competitive market. And here any restrictions affect prices rather negatively. For competitive segments, this is quite a detrimental practice. We would very much like to be in constant dialogue with regulators to optimize and improve these relatively new and not yet perfect procedures. This is important for the entire market.
– What recommendations would you now give to your colleagues, international pharmaceutical companies? What is important for the big players to keep in mind right now?
I would like to address my colleagues in the market with a wish to actively develop the potential of the CIS countries, which is still underutilized, but represents a great number of opportunities.
It is also important to promote the topic of health literacy and related educational projects in the region, as this will support local communities and create a sustainable environment for our common development. We are actively cultivating and promoting the topic of responsible self-medication. I believe that such projects will be valuable for consumers, governments and pharmaceutical manufacturers alike.
Connect to stay up to date!