Global Insight Perspective | |
Significance | Kazakhstan's lower house of parliament has pledged to review by the end of September proposals to scrap registration of active pharmaceutical ingredients and to abolish VAT on pharmaceutical equipment. |
Implications | With the Kazakh pharma market seeing a 33% year-on-year (y/y) rise in value and a 43% y/y gain in volume, the new measures—if implemented—should provide greater investment incentives and trigger more market growth in years to come. |
Outlook | Funding for drug reimbursement remains limited in Kazakhstan, but plans to shift the focus of reimbursement to expensive drugs for chronic illnesses would prompt greater interest from foreign drug-makers. Combined with improved drug-quality legislation and a planned liberalisation of the pharma business environment, Kazakhstan's drugs sector should see strong growth over the medium-to-long term. |
Changes to the law governing pharmaceutical companies in Kazakhstan are due to be debated by the lower house of parliament by the end of September, as part of a wider reform of the country's healthcare sector. The government is hoping to liberalise the pharmaceutical market and make it more attractive both for domestic drug-makers and for foreign manufacturers looking to import their medicines into Kazakhstan, at a time when the market is growing at double-digit levels.
On the table is a proposed elimination of the requirement for pharma companies to register the active pharmaceutical ingredients (APIs) of their products with the Kazakh authorities prior to seeking marketing approval. This registration has long delayed the arrival of new treatments in Kazakhstan, and its abolition would be implemented immediately if parliament backs the proposal. Beyond this, the parliamentary working group tasked with drafting the reform has also suggested scrapping value-added tax (VAT) on all equipment used for development and production by the pharma industry. According to the Kazakhstan Pharmaceutical Herald, the VAT on pharma-industry equipment would be removed at the start of 2009 if the government agrees to implement the measure.
These potential legislative reforms come at a time when Kazakhstan's pharmaceutical market is booming. The first half of 2008 saw sales of retail medicines jump by 33% year-on-year (y/y) in value terms, reaching some US$388.3 million. This was outpaced in volume terms, with some 252.5 million boxes of medicines sold, representing a 43% y/y increase. Further evidence that growth is being mainly fuelled by volume and not by value came in the form of drug prices recorded during the period, with the average price for a pack of medicines contracting by 7% y/y and reaching US$1.54. There remains a fourfold gap in prices between locally produced and imported products, however. Pharma companies from the likes of Germany and France benefited from the highest value sales as a result.
Outlook and Implications
The latest proposals for reform of Kazakhstan's pharmaceutical sector follow on the heels of another plan to centralise the purchase of medicines, and are also being complemented by a potential skewing of existing funding for drug reimbursement away from hospital drugs and towards out-patient retail medicines. There is also talk of prioritising the reimbursement of more high-cost treatments at the expense of cheaper drugs, which represent the bulk of medicines currently subsidised in Kazakhstan. However, many of these changes—including the scrapping of API registration—were meant to be decided on in June, and the delays could quite easily persist beyond the end of September.
Following the publication of its State Pharmacopoeia last year (see Kazakhstan: 17 August 2007: Drug Exports from Kazakhstan Drop 22.3% in Q1 as State Publishes First-Ever Pharmacopoeia), Kazakhstan has been on the road to modernising and simplifying the workings of its pharmaceutical market, balancing the twin goals of more investment with greater affordability for patients. Despite a somewhat shaky past, per capita consumer spending power in Kazakhstan is expected to grow and stabilise from next year, creating greater demand for pharmaceuticals. Combined with comparatively limited constraints on drug pricing, moves towards national harmonisation with Good Manufacturing Practice (GMP) standards and planned liberalisation of the business environment, the medium-to-long-term prospects for the Kazakh pharmaceutical market appear bright indeed.