Kazakhstan Pharmaceuticals and Healthcare Report

BMI maintains its conservative five-year forecast for the Kazakhstani pharmaceutical market in view of the country's continued macroeconomic challenges as well as growing protectionism in the pharmaceutical sector. Still, barring further devaluation of the tenge vis-? -vis the US dollar in 2009, or a significant further deterioration in the financial sector, the market will continue to grow in dollar terms at a compound annual growth rate (CAGR) of 4.06% and a local currency rate of 13.83% to 2013. In our view, the market retains huge growth potential and the government has considerable scope for investing its hydrocarbon windfall in a modern healthcare system - providing it manages substantial political and economic risks over the forecast period and beyond.

Contrary to government forecasts, BMI sees Kazakhstan's economy shrinking by 1.9% in 2009 before returning to growth in 2010. According to official statistics, real GDP fell by 2.2% in Q109. The state has pumped some US$25bn into the financial system to shore up banks as the country deals with the hangover from a credit-fuelled boom turned bust, particularly evident in the property sector. At the same time, the situation seems to stabilising, with the Central Bank stating in late July that a further devaluation of the tenge in 2009 was off the cards - offering a degree of pricing stability for the marketplace.

A key area for reform is the expansion of the provision of medicines and healthcare services under Kazakhstan's guaranteed free healthcare scheme (GOBMP) as the government aims to introduce a 'single healthcare system' by 2010. A briefing from the Ministry of Health in June 2009 outlined increased funding for the regional projects and the establishment of new disease prevention and treatment programmes. For 2009 the GOBMP has been budgeted KZT286.3bn (US$1.9bn) - an increase of 20.4% on the funding provided in 2008, which itself was a 14% increase on the 2007 figure. Meanwhile, the outbreak of the A (H1N1) flu virus in July will test both the ability of the healthcare system to monitor and treat cases, as well as the efficacy of price controls imposed on a range of medicines from Tamiflu (oseltamivir) to certain paracetamol formulations.

A flurry of announcements of manufacturing projects have emerged in recent months - following a May pledge by President Nursultan Nazarbaev to increase the share of local products on the market to 50% in just five years. In June, the Health Ministry announced plans for three pharmaceutical plants in Astana, which would represent a total investment of at least US$200mn, should they be implemented. Israeli company InspireMD will build a plant for manufacturing cardiovascular stents. Leading local manufacturer Chimfarm announced a new factory for injections, infusion substances, powdered antibiotics and pill and capsule formulations. In addition, the Ministry of Health is reportedly seeking a contractor to build a new blood plasma plant. Outside of the capital, there are reports of plans to build a new plant in Pavlodar for modern drugs for tuberculosis and diabetes, ointments, gels and biological additives.