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LEGAL ALLIANCE, founded in 1995, is today one of the leading Ukrainian law firms specializing in legal support to pharmaceutical companies doing business in Ukraine and CIS countries.

OUR CLIENTS represent the following industries: pharmaceuticals, medical devices, consumer goods, medicine, cosmetics, para-pharmaceuticals, chemistry, biotechnology, agriculture and food products.

LEADING ASSOCIATIONS — AIPM Ukraine, APRaD as well as the EBA Healthcare Committee have chosen Legal Alliance as their legal advisor.

Cross-Regional Services for Pharmaceutical Business: Ukraine-Kazakhstan

Andrii Gorbatenko, Associated Partner, Legal Alliance Company

Evgenii Brovko, Partner, Business Consulting, UPharma Consulting LLC

Companies that provide professional services in the pharmaceutical industry, especially those known to world manufacturers, build their business processes in a way that best suits the client’s needs. This is valid not only for understanding of the specifics of the business, but also the specifics of the regional markets on which it is represented, as well as the processes taking place on a market.

Given that in most cases pharmaceutical business is transnational, and our clients, international pharmaceutical companies, need legal support not only in Ukraine, but also in other CIS countries, we have established a network of law firms, which enables us to track trends in state regulation of market in CIS countries, as well as successfully implement transnational projects for our clients, including the provision of centralized legal support in the CIS region and countries.

For the time being the network works in Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, the Russian Federation, Tajikistan, Turkmenistan and Uzbekistan.

Over the past five years, Legal Alliance has repeatedly participated in projects related to different jurisdictions in the CIS region. These are, first of all, projects in the field of establishment of representative offices, adaptation of domestic policies of pharmaceutical companies to local legislation and verification of counterparties. The labour issues, business issues, conclusion of contracts, taxation, development of the portfolio of intellectual property objects, management and protection thereof, advertising and promotion, issues of interaction with healthcare professionals, as well as peculiarities of the activities of representative offices remain urgent for inter-jurisdictional counselling.

Based on the growing number of requests from our clients related to the marketing of medicines in Kazakhstan, we can conclude that the market for medicines in this country is certainly one of the most attractive in the CIS region. First of all, such interest is due to its dynamic growth, as well as a relatively simple mechanism for bringing products to the market.

Nowadays we see a trend towards strengthening of state regulation of the market of medicines in Kazakhstan. Given our experience, we hope that such regulation will contribute to leveling the adverse economic phenomena that are currently observed in Kazakhstan and they will not negatively affect its economic attractiveness.

According to Remedium State Enterprise and UPharma Consulting, the pharmaceutical market of Kazakhstan is the largest and most structured in Central Asia, and also one of the most developed markets of the CIS countries. At the same time, its size and quality of the business environment are inferior to the markets of Central and Eastern Europe. However, we can see consolidation and development of local manufacturers, distributors and pharmacy organizations.

The main problem of local production of pharmaceuticals is a weak technological base. Due to this foreign companies have about 90% of the market in monetary terms.

Although there are three plants certified in accordance with international GMP standards (good manufacturing practices) in Kazakhstan, all of them are developed as projects of foreign investors. Santo, the leader of local production, was formed as a result of acquisition of Khimpharm plant by the international pharmaceutical group Polpharma in 2008. Investments of Turkish companies led to the creation of two other strategically important local producers - Nobel AFF and Abdi Ibrahim Global Pharm. French company Sanofi-Aventis is the leader in retail sales in the pharmaceutical market of Kazakhstan over the past few years. It owns more than 5% of the market in financial terms.

Table 1. Top 10 companies on the pharmaceutical market of Kazakhstan in sales terms in 2016 (Source: Vi-Ortis, UPharma Consulting)

2016

2015

Company

Sales, USD, million

Annual growth, %

Market share, %

1

1

Sanofi-Aventis

79.9

7

5.44

2

5

GlaxoSmithKline

62.1

-3

4.22

3

2

Santo

61.9

-11

4.21

4

3

Bayer

54.1

-21

3.68

5

4

Takeda

49.6

-27

3.37

6

7

Gedeon Richter

40.6

-20

2.76

7

12

Teva

36.3

-10

2.47

8

11

Nobel AFF

35.9

-15

2.44

9

6

Pfizer International Inc.

33.6

-37

2.29

10

8

F.Hoffmann La Roche AG

33.6

-32

2.29

The segment of inexpensive drugs (less than USD 1) in Kazakhstan traditionally belongs to local producers, while prices of foreign companies are much higher.

The pharmaceutical market in Kazakhstan began to grow rapidly since 2010 due to improved purchasing capacity of the population. But economic problems and depreciation of the national currency, which began in 2014, had a strong impact on pharmacy sales, as a result of which the market “dipped” in dollars by 16% in 2015 and by 10.5% in 2016. At the same time, in 2016, the number of sold packages grew (Source: Vi-Ortis, UPharma Consulting).

The retail segment, represented in Kazakhstan by almost 6,000 pharmacies, accounted for 64.6% of the total pharmaceutical market in 2016. Pharmacy chains in the country are mostly not large, however, there is a systematic increase in their shares in the segment and it is expected that by 2020 they will control about 80% of the commercial pharmaceutical market. The largest pharmaceutical distributor in Kazakhstan is Medservis Plus, which has 17 branches throughout the country.

State support is one of the key incentives for the growth of the pharmaceutical industry in Kazakhstan, since public procurement accounts for 35% of the total market. However, in 2014, due to the devaluation of the national currency, government spending on medicines began to decline and the hospital market decreased by 14% by the end of the year. In 2015, the decline reached 7.6%, and in 2016 almost 28%. A significant part of the hospital market in Kazakhstan (64.6% in money terms in 2016) belongs to SK-Pharmacy, which is the only distributor established in 2009 to procure drugs and medical equipment for its healthcare facilities within the guaranteed free medical care (Source: Vi-Ortis, UPharma Consulting).

Further development of market in Kazakhstan directly depends on stabilization of the economic situation in the country and implementation of measures by the government to improve this sector. The launch of a single market for medicines within the framework of the Eurasian Economic Union (EEMA), which is expected in 2017, also is very promising. Kazakh producers plan to increase the export of pharmaceutical products to the EAPP countries to USD360 million per year.

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