Photo source: SK-Pharmacia
The past turbulent year of 2022 has changed the balance of power in all major sectors of the economy, which traditionally include pharma. The changes were felt most seriously by the countries of Eurasian Economic Cooperation, particularly Kazakhstan. In the first six months of last year, the pharmaceutical industry of the Republic strengthened by an average of 4.9%. According to the reports of the international company IQVIA, the volume of the local market, at the end of the first three quarters of 2022, increased by 13% year-on-year to 587 billion tenge ($ 1.28 billion). Domestic manufacturers are noticeably gaining positions — the share of Kazakhstani drugs in the total structure of the pharmaceutical market has approached 20%. However, the influence of foreign manufacturers within country is still strong, and this could be a new growth driver for the industry. Viacheslav Lokshin, President of the Association of International Pharmaceutical Manufacturers of the Republic of Kazakhstan, told Adam Smith Conferences in an exclusive interview about the plans for the development of Kazakhstani pharma in the new year 2023.
The past turbulent year of 2022 has changed the balance of power in all major sectors of the economy, which traditionally include pharma. The changes were felt most seriously by the countries of Eurasian Economic Cooperation, particularly Kazakhstan. In the first six months of last year, the pharmaceutical industry of the Republic strengthened by an average of 4.9%. According to the reports of the international company IQVIA, the volume of the local market, at the end of the first three quarters of 2022, increased by 13% year-on-year to 587 billion tenge ($ 1.28 billion). Domestic manufacturers are noticeably gaining positions — the share of Kazakhstani drugs in the total structure of the pharmaceutical market has approached 20%. However, the influence of foreign manufacturers within country is still strong, and this could be a new growth driver for the industry. Viacheslav Lokshin, President of the Association of International Pharmaceutical Manufacturers of the Republic of Kazakhstan, told Adam Smith Conferences in an exclusive interview about the plans for the development of Kazakhstani pharma in the new year 2023.
— Viacheslav Notanovich, if we talk about the results of the past year — what were the main problems faced by the pharmaceutical industry of Kazakhstan?
It was in every sense quite a difficult period for Kazakhstan and for our region as a whole. It began with the events of January, which greatly changed our perception of what was going on, forced us to rethink achievements and prospects in all areas of the economy and life. All the changes that were taking place, including the new presidential election, people supported. After all, there is no economy without politics.
At the very beginning of 2022, we were still largely impacted by the covid pandemic — the active phase was over, but there were plenty of problems.
Also in 2022, changes to the Law on Compulsory Social Health Insurance came into force in Kazakhstan, and we also saw a number of new problems. Plus, a lot of things have become obsolete in healthcare by this point: both the equipment and our medical infrastructure, but the important thing is that the state kept its promises, in particular, the obligations on drug provision were fulfilled. $ 600 million were spent on it during that period — more than half of the total pharmaceutical market.
Another important milestone — in 2022, we launched the Public Fund QAZAQSTAN HALQYNA created by the President to solve problems in the field of health care, education and social support, which provided drug products for children with orphan diseases. This is a very important component. Where the state cannot help today, the foundation does.
— To what extent has the market situation in pharma changed within Kazakhstan itself? Which niches and drug products have shown the most growth?
We saw a really dramatic change in the situation during the covid pandemic. There was a roaring demand for the vaccine, related drug products like Fraxiparin, Xarelto, Rivaroxaban.
Now the trend is returning that the structure of the drug market again corresponds to the drug products of morbidity and mortality: I am talking about drug products for cancer, endocrine pathologies, cardiovascular and respiratory diseases. The situation is leveling off. We are returning from a military production structure to a planned one. Non-infectious diseases should still take the most serious power.
— Is the share of domestic drug products in the overall market structure high in the country?
About 20%.
— Is that a sufficient indicator, in your opinion?
This is an average indicator for the Eurasian space. Once upon a time, in the 90s this figure was only 3%. And in SK-pharmacy procurement it is more than 50% at all.
— Has the current environment affected the conduct of clinical trials in the country? Did you have to put any projects on hold?
On the contrary, Russian CRO agencies are going to come to us. It is hoped that the frequency of research will only increase.
— Are there any factors that now directly complicate and hinder the functioning of the unified Eurasian pharmaceutical market?
Yes, there are problems here. There are difficulties with the Eurasian registration of drug products — it is not active enough for manufacturers. Many players want to keep the national registration. The topic is now being actively debated. If, for example, a drug product leaves the Russian market, we do not want it to leave our market and the markets of other countries.
A rather painful problem also has to do with labeling. Unfortunately, we have dragged this issue out, and Russia has often been a brake on mutual recognition processes. In this sense, your processes are more bureaucratized, and it is understandable — the country is big. Many agreements that should have been reached by now, we still have not reached. This general Eurasian registration, for example, which was much talked about earlier, as a result, not as many applicants managed to pass it as we would have liked.
— Have sanctions changed the balance of power in the Eurasian pharmaceutical market?
That’s a pretty tricky question. Kazakhstan in the proposed conditions realizes that, on the one hand, there is the framework of the Eurasian Union, but on the other hand — there is the threat of secondary sanctions. Cooperation, given the international geopolitical situation, is of course becoming increasingly complex.
But, as our President emphasized earlier, Russia remains Kazakhstan’s priority partner in many areas of business, including pharmaceuticals. However, being today a transshipment base for, say, imported medicines, for substances, most likely, will not work to the fullest extent. This is now, for example, already evident in the cars that have begun to be bought and transported to Russia. Everyone realizes that if the volume of such deals becomes too visible, our partners will react negatively. While it is difficult to make long forecasts, I hope that market assessment will soon show us that maybe some drug products or substances will really leave the Russian market, and their sales in Kazakhstan, for example, will increase.
— How can difficulties with filing under the EAEU procedures be resolved?
The solution is to negotiate. It is necessary to look for opportunities for maximum mutually beneficial cooperation in the field of mutual trade in medicines, mutual registration of medicines, thus expanding the market for its own manufacturer. Remove unnecessary problems along the way. We have almost 7,000 kilometers of common land border with Russia, so we need to cooperate. And the processes of integration will undoubtedly develop.
In particular, this is what we will be talking about at the upcoming forum. We will discuss the market problems I mentioned here, we will seriously discuss ethical problems of competition between manufacturers, we will talk about medical ethics and the need to adopt a medical code of ethics for our health care workers, and our interaction with the Center for Registration of Drug Products will also be on the agenda. All of these things are extremely important right now.
— What tasks does the pharmaceutical industry of Kazakhstan set for itself in 2023?
There are serious plans for 2023. Just recently we had a board meeting of the Ministry of Health, where we discussed the fact that the financing of the industry will increase despite the devaluation processes.
The main direction in development is to expand the list of available medicines and expand the list of diseases for state provision of drug products. Further — this is, of course, support for the domestic pharmaceutical industry and an attempt to localize active international manufacturers as much as possible — for example, just recently we had the head of the board of the Swiss concern Roche Holding AG. Johnson & Johnson, Novo Nordisk and AstraZeneca have plans to expand their influence in Kazakhstan. It would also be desirable to move away as much as possible from the forced regulation of prices in the pharmacy segment.
It was in every sense quite a difficult period for Kazakhstan and for our region as a whole. It began with the events of January, which greatly changed our perception of what was going on, forced us to rethink achievements and prospects in all areas of the economy and life. All the changes that were taking place, including the new presidential election, people supported. After all, there is no economy without politics.
At the very beginning of 2022, we were still largely impacted by the covid pandemic — the active phase was over, but there were plenty of problems.
Also in 2022, changes to the Law on Compulsory Social Health Insurance came into force in Kazakhstan, and we also saw a number of new problems. Plus, a lot of things have become obsolete in healthcare by this point: both the equipment and our medical infrastructure, but the important thing is that the state kept its promises, in particular, the obligations on drug provision were fulfilled. $ 600 million were spent on it during that period — more than half of the total pharmaceutical market.
Another important milestone — in 2022, we launched the Public Fund QAZAQSTAN HALQYNA created by the President to solve problems in the field of health care, education and social support, which provided drug products for children with orphan diseases. This is a very important component. Where the state cannot help today, the foundation does.
— To what extent has the market situation in pharma changed within Kazakhstan itself? Which niches and drug products have shown the most growth?
We saw a really dramatic change in the situation during the covid pandemic. There was a roaring demand for the vaccine, related drug products like Fraxiparin, Xarelto, Rivaroxaban.
Now the trend is returning that the structure of the drug market again corresponds to the drug products of morbidity and mortality: I am talking about drug products for cancer, endocrine pathologies, cardiovascular and respiratory diseases. The situation is leveling off. We are returning from a military production structure to a planned one. Non-infectious diseases should still take the most serious power.
— Is the share of domestic drug products in the overall market structure high in the country?
About 20%.
— Is that a sufficient indicator, in your opinion?
This is an average indicator for the Eurasian space. Once upon a time, in the 90s this figure was only 3%. And in SK-pharmacy procurement it is more than 50% at all.
— Has the current environment affected the conduct of clinical trials in the country? Did you have to put any projects on hold?
On the contrary, Russian CRO agencies are going to come to us. It is hoped that the frequency of research will only increase.
— Are there any factors that now directly complicate and hinder the functioning of the unified Eurasian pharmaceutical market?
Yes, there are problems here. There are difficulties with the Eurasian registration of drug products — it is not active enough for manufacturers. Many players want to keep the national registration. The topic is now being actively debated. If, for example, a drug product leaves the Russian market, we do not want it to leave our market and the markets of other countries.
A rather painful problem also has to do with labeling. Unfortunately, we have dragged this issue out, and Russia has often been a brake on mutual recognition processes. In this sense, your processes are more bureaucratized, and it is understandable — the country is big. Many agreements that should have been reached by now, we still have not reached. This general Eurasian registration, for example, which was much talked about earlier, as a result, not as many applicants managed to pass it as we would have liked.
— Have sanctions changed the balance of power in the Eurasian pharmaceutical market?
That’s a pretty tricky question. Kazakhstan in the proposed conditions realizes that, on the one hand, there is the framework of the Eurasian Union, but on the other hand — there is the threat of secondary sanctions. Cooperation, given the international geopolitical situation, is of course becoming increasingly complex.
But, as our President emphasized earlier, Russia remains Kazakhstan’s priority partner in many areas of business, including pharmaceuticals. However, being today a transshipment base for, say, imported medicines, for substances, most likely, will not work to the fullest extent. This is now, for example, already evident in the cars that have begun to be bought and transported to Russia. Everyone realizes that if the volume of such deals becomes too visible, our partners will react negatively. While it is difficult to make long forecasts, I hope that market assessment will soon show us that maybe some drug products or substances will really leave the Russian market, and their sales in Kazakhstan, for example, will increase.
— How can difficulties with filing under the EAEU procedures be resolved?
The solution is to negotiate. It is necessary to look for opportunities for maximum mutually beneficial cooperation in the field of mutual trade in medicines, mutual registration of medicines, thus expanding the market for its own manufacturer. Remove unnecessary problems along the way. We have almost 7,000 kilometers of common land border with Russia, so we need to cooperate. And the processes of integration will undoubtedly develop.
In particular, this is what we will be talking about at the upcoming forum. We will discuss the market problems I mentioned here, we will seriously discuss ethical problems of competition between manufacturers, we will talk about medical ethics and the need to adopt a medical code of ethics for our health care workers, and our interaction with the Center for Registration of Drug Products will also be on the agenda. All of these things are extremely important right now.
— What tasks does the pharmaceutical industry of Kazakhstan set for itself in 2023?
There are serious plans for 2023. Just recently we had a board meeting of the Ministry of Health, where we discussed the fact that the financing of the industry will increase despite the devaluation processes.
The main direction in development is to expand the list of available medicines and expand the list of diseases for state provision of drug products. Further — this is, of course, support for the domestic pharmaceutical industry and an attempt to localize active international manufacturers as much as possible — for example, just recently we had the head of the board of the Swiss concern Roche Holding AG. Johnson & Johnson, Novo Nordisk and AstraZeneca have plans to expand their influence in Kazakhstan. It would also be desirable to move away as much as possible from the forced regulation of prices in the pharmacy segment.
Top 15 companies by share in the volume of Kazakhstan pharmaceutical market 2022, source: IQVIA
Problems, of course, always remain: lack of funding, the state is slow to register prices, sometimes it is because there are simply not enough resources. Decisions are sometimes quite slow - we all understand this, we are working on the issues of interaction. But most importantly, we have established interaction with our partners, with legislators.
There is another interesting fact: revenues to the National Fund of the Republic of Kazakhstan and tax revenues in 2022 increased almost 2.5 times. That means a lot of money was being diverted out of the country before that. Returns are now being made - this is also an important factor and trend. So the situation, from my point of view, is optimistic.
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Problems, of course, always remain: lack of funding, the state is slow to register prices, sometimes it is because there are simply not enough resources. Decisions are sometimes quite slow - we all understand this, we are working on the issues of interaction. But most importantly, we have established interaction with our partners, with legislators.
There is another interesting fact: revenues to the National Fund of the Republic of Kazakhstan and tax revenues in 2022 increased almost 2.5 times. That means a lot of money was being diverted out of the country before that. Returns are now being made - this is also an important factor and trend. So the situation, from my point of view, is optimistic.
Connect to stay in the know!