Risks, reforms and rewards: the evolving Russian healthcare market

The Russian healthcare sector is still shaped by the legacy of the Soviet Union and the decade of economic turmoil that followed. While reforms introduced in the past two decades have brought stability and sought to address some of the structure issues, problems remain.

For example, in theory all Russian citizens are entitled to state funded care, which includes the provision of pharmaceuticals free-of-charge. But, in practice, access to healthcare and the quality of the service are largely determined by socioeconomic status, location and other external factors.

For the pharmaceutical industry, the Russia healthcare sector presents both opportunities and challenges. The country’s large, albeit declining, population and its expanding middle class has resulted in an increasing demand for medicines. However, efforts to increase state control of drug pricing and pressure to manufacture medicines locally could prove a challenge for international drug companies.

A less than positive review

Last April, ex-Prime Minister Dmitry Medvedev, who is currently Deputy Chairman of the Security Council of Russia, gave the Russian healthcare sector a less than positive review, telling the Duma access remains a major challenge.

“Everyone needs treatment from good doctors, preferably close to where they live, as well as inexpensive and high-quality medicine, but not counterfeit medicine and, of course, regular medical examinations.

“Unfortunately, even in major cities the situation is not good and it is even worse in small villages and towns. Often people living in rural areas have to go dozens or even hundreds of kilometres to visit a doctor in a city or a district centre. Many people do not do this, because it is not possible.”

Medvedev’s comments are in keeping with other assessments. In 2018, a Pitt Political review suggested the Russian healthcare sector was in crisis and raised questions about its ability to cope with disease outbreaks.

More recently Deutsche Welle reported that many healthcare staff working in state-run hospitals have second jobs, while others have decided to give up their medical careers.

Russian state healthcare

The modern Russian healthcare system has its roots in the early 1990s and the collapse of the Soviet Union. The constitution of the Russian Federation, which was adopted in 1993, gave citizens the right to state-funded healthcare. The constitution also introduced a number of changes to how state healthcare in Russia was managed and paid for.

The idea was to replace the centrally funded Soviet era Semashko model, which was a multitiered network of service providers connected by a referral network, with a system of compulsory insurance. The compulsory insurance system was funded through payroll taxes and budgetary contributions from regional and local government.

The financing reforms coincided with a decade of economic instability that saw healthcare spending decline. The period also saw male life expectancy fall, various diseases re-emerge and the suspension of immunisation programmes in various parts of the country.

The next decade saw the introduction of a number of reforms designed to address these problems. In 2006, the Government introduced the National Priority Project – Health (NPPH) in a bid to tweak the system through improved funding and infrastructure.

Measures included the provision of funding for medical equipment for clinics and hospitals, the construction of medical centres and the relaunch of vaccination programmes halted during the economic turmoil of the 1990s.

Recovery and reforms

Such reforms, combined with wider economic recovery, provided resources to restore and increase health expenditure. The increased spending had a positive impact on health metrics. By 2009, for example, life expectancy had nearly recovered to its 1990 level.

The reforms have continued. In 2010, Federal Law No. 326-FZ on Compulsory Medical Insurance in the Russian Federation was introduced and November 2011 saw the introduction of Federal Law No. 323-FZ on the Basics of Health Protection of Citizens in the Russian Federation, also known as ‘the healthcare law’.

Contemporary healthcare system

Healthcare in Russia is composed of four systems: public, parallel, private and NGO. The public system is the biggest, with federal, regional and municipal authorities managing polyclinics, hospitals and research centres.

The parallel system, which is operated separately, is for ministerial personnel and their families as well as those covered by voluntary insurance. It is also available to the public on a paid access basis.

The private system is small and is primarily concentrated in urban areas. Likewise, there is a voluntary health insurance system, which operates in large cities, that is purchased mainly by employers and provides access to top level facilities.

The NGO system primarily focuses on advocacy, however it also plays a role in direct care in collaboration with the Government and international organisations including the Global Fund To Fight AIDS, Tuberculosis and Malaria.

The Russian pharmaceutical reimbursement system consists of several programmes, including the ‘vital and essential drugs list’, which includes products whose price is fixed at the federal level, and the Seven Nosologies Program for expensive medicines.

Value of the market

The Russian pharmaceutical market was worth 1,682bn roubles in 2018, which is 2.6% higher than the previous year, according to analysis by DSM Group.

Growth was driven by the private sector, with public spending on pharmaceuticals remaining flat. State spending on pharmaceuticals, which includes medicines bought by hospitals, ‘high cost drugs’ under the ICD programme, drugs on the essential drugs list and those purchased by regional authorities, was flat at 451bn roubles.

In contrast, the value of medicines bought by the commercial or private healthcare sector was 991bn roubles in 2018, up from 948bn the previous year.

Just under 40% of the pharmaceuticals used in Russia were imported, representing 70.2% of the market in value terms. The leading suppliers were Sanofi, Novartis and Bayer. However, as the authors noted, the Russian manufacturers OTCharm, Pharmstandard and Biocad were among the top 20 suppliers in revenue terms.

The Russian market is dominated by generic drugs. Only 14.4% of medicines sold in the country in 2018 were ‘original drugs’, equivalent to 38.7% of the total market value.

Genetic research

Last year also saw Russia establish a federal research programme for the development of genetic technologies that is likely to encourage the use of such technologies in medicine. The aim of the programme is to ‘to implement a comprehensive solution to the task of the accelerated development of genetic technologies, including genetic editing, and to establish scientific and technological groundwork for medicine, agriculture and industry’.

Improving access

In 2018, Presidential Decree No. 204 established the National Healthcare Project (NHP), which is designed to ensure ‘sustainable natural growth of the population of the Russian Federation and increasing life expectancy to 78 years by 2024, and 80 years by 2030’.

Within the NHP there are various subprojects that focus on healthcare. These include the provision of a budget to develop primary healthcare, as well as programmes focused on cancer, cardiovascular disease and children’s medicine. Other projects are focused on increasing healthcare staffing levels and the introduction of innovative technologies, and last year the Government added 24 products to the vital and essential drugs list.

Online pharmaceutical sales may also be a factor in Russia in the next few years. In 2018, politicians started discussing draft laws designed to govern the retail sale of medicines by ‘remote means’.

According to DSM Group: “Market experts agree that the online sale of over-the-counter drugs should be legalised, but there should be a clear definition of control over trading platforms.” Discussions are ongoing.

Looking forward, healthcare in Russia looks set to continue to evolve as it strives to improve access, develop primary healthcare and increase healthcare staffing levels.