BMI View: Kazakhstan continues to stand out among the pharmaceutical markets of Central Asia in terms of openness to foreign investment in the pharmaceutical industry. The country’s expected accession to the World Trade Organisation could come as early as the end of 2012 and this will continue to drive improved market regulation and intellectual property protections. The acquisitions of leading local players Chimpharm and Global Pharm by foreign players represent a positive assessment of the marketplace. The government has recently reiterated its commitment to producing 50% of all medicines domestically by 2014, a goal that appears very difficult to reach unless significant new capacity comes on line within the next 18 months. In macro terms, Kazakhstan’s primary weakness remains the apparent absence of a clear transition process for when President Nursultan Nazarbayev leaves office. Relatively small but significant bouts of social unrest and terrorism over the last 12-18 months hint at the potential for deeper problems in the future.
Headline Expenditure Projections ?? Pharmaceuticals: KZT195.8bn (US$1.34bn) in 2011 to KZT220.8bn (US$1.49bn) in 2012; up 12.7% in local currency terms and 11.7% in US dollar terms. US dollar forecast downgraded due to updated exchange-rate forecasts.
?? Healthcare: KZT1,043.5 (US$7.11bn) in 2011 to KZT1,182.2 in 2012; up 13.3% in local currency terms and 12.3% in US dollar terms. Forecast downgraded due to macroeconomic factors and lower exchange-rate projections.
?? Medical devices:KZT86.51bn (US$590mn) in 2011 to KZT94.51bn (US$639mn) in 2012; up 9.3% in local currency terms and 8.3% in US dollar terms. Forecast downgraded due to macroeconomic factors and lower exchange-rate projections.
Risk Reward Rating: Kazakhstan ranks 16th this quarter in BMI’s Risk Reward Ratings (RRR) for Central and Eastern Europe (CEE). Downsides for the market include its relatively small population and challenging geography, as well as political uncertainty and exposure to the commodity cycle. Corruption and, potentially, social tensions linked to inequality and uneven development remain major challenges.
Upsides include the country’s likely imminent WTO accession and major commitments to state spending on healthcare, as well as a clear commitment to long-term regulatory reform and harmonisation with key international standards and practices.
Key Trends And Developments ?? At the end of May 2012, GSK signed a cooperation agreement with the government of Kazakhstan that involves the local production of the company's vaccines and a number of oncology medicines. The financial details of the agreement have not been disclosed. Speaking with Russian industry journal Kursiv, Gamal Rezk, vice president of GSK's local vaccine department, said the company plans to double its share in the local market, which is currently around 3% of the pharmacy sector, primarily by expanding the range of medicines it supplies. It currently supplies around 100 products in the market. GSK will also be working with the minister of health to help fight against counterfeit medicines. An agreement has also been reached that will allow direct supply of medicines to what is expected to include public hospitals, thereby avoiding wholesalers.
?? In March, the Ministry of Healthcare re-affirmed its target of sourcing 50% of all medicines sold from the domestic market by 2014. If this target is to be achieved, it will be through the rapidly growing hospital market, which posted approximately 50% annual growth in volume terms, according to figures from Viortis, a local market research group, quoted in local media. The research group recorded that local medicines accounted for 53% of the hospital market, which in turn accounted for around 35% of the total pharmaceutical market. Local production accounted for just 25% of the retail market in volume terms.
?? Meanwhile, New capacity is due to come on line from large producers such as Chimpharm, owned by Poland’s Polpharma, which said it was on track to open a new ampoule filling line in 2013 as part of two large projects approved under the country’s Accelerated Industrial Development Programme adopted in 2010. BMI remains sceptical the 50% target will be met by 2014 and notes that the ministry claims a total 20 green- and brown-field projects are due to be completed, a seemingly overstated figure..
?? Local media in February reported that French giant Sanofi, already a market leader, has entered into talks with the Kazakhstani government to develop joint production of diabetes and oncology drugs. In our view, partnerships with large multinationals, such as previous collaborations between Eli Lilly and Chimpharm are key to Kazakhstan achieving real gains in import substitution, setting the country apart from other central states, such as Uzbekistan, that have sought aggressive policies in this area with little cooperation with major global players.
BMI Economic View: Kazakhstan's government will continue to run a consolidated budget surplus in the years ahead. The country's vast oil and mineral wealth, and robust growth trajectory will ensure that tax revenues remain high. However, we expect the government's commitment to improving socio-economic indicators to ensure that spending growth outpaces revenue growth over the coming decade. We forecast the consolidated budget surplus to narrow over the years, averaging 7.3% of GDP to the end of our forecast period to 2021.
BMI Political View: The question of who will succeed President Nazarbayev remains a key source of uncertainty for Kazakhstan’s political and economic development. The country’s parliamentary elections in January created some semblance of multi-party representation, but the key to any transition to a new president will be some real power sharing among the country’s clans and minority groups as well as moves to address gaping social inequality and other sources of domestic discontent.
BMI View: While the Turkish pharmaceutical industry has achieved some concessions following additional price cuts and public discounts announced in November 2011, the impact of the November decree remains negative. That aside, BMI emphasises that the number-one concern for drugmakers in 201 ... more
BMI View: On account of its unpredictable and unfavourable operating environment and limited funding
for and investment in healthcare and medicines, Zimbabwe’s pharmaceutical market will remain
unattractive to foreign companies for the foreseeable future. Poor healthcare provision and cover ... more
BMI View: It is vital the Tanzanian government assesses its medicine procurement systems. The expiry of medicines does not bode well for the state and its high reliance on donor funding for the healthcare sector, particularly as reports have highlighted the poor availability of essential me ... more