Insights and Opportunities
Overview: Russia has instituted a comprehensive reform of its healthcare system, and healthcare is “Priority #1” in the government’s new national priority projects. Russia’s healthcare system is evolving rapidly and this is creating many promising areas for U.S. medical equipment exports. It is currently estimated that only one-fifth of the Russian population of 143 million has access to quality healthcare. The majority of hospitals and polyclinics are public and belong to federal, regional or local governments.
At the moment, the two major sources of public healthcare funding - mandatory insurance funds (30%) and spending supported by federal and regional budgets (70%) - do not cover all healthcare expenses. As a result, a significant portion of overall (public and private) health care spending (about 20%) is covered out of patients’ pockets. Voluntary healthcare insurance programs account for approximately one-third of the total private healthcare expenditures. According to long-term reform plans, mandatory insurance funds will serve as the main source of healthcare funding, providing transparency and control over cash flow within the system.
Strong demand for private healthcare services has, since the early 1990s, led to a significant growth in the number and size of private clinics as well as the volume of paid medical services. The most dynamic and transparent segment of the paid medical services market is services covered by voluntary insurance policies. The total volume of paid medical services is currently estimated at $6.5 billion, which accounts for one-fifth of the overall financial resources spent on healthcare in Russia.
The paid medical services market is growing by 20% to 30% annually. Most private clinics are specialized in such areas as dentistry, ophthalmology, cosmetology, urology, gynecology, and physiotherapy. Private clinics have opened not only in major cities like Moscow and St. Petersburg, but also all over key Russian regions, including the Volga Region, Urals, Siberia and the Far East. However, such fields as cardiology, oncology, orthopedics, nephrology and organ transplant are represented by public clinics that would not survive without significant state subsidies and funding. There are only a few multi-profile private clinics, mostly located in Moscow (AO Meditsina, Center for Endosurgery and Shock Wave Therapy, the European Medical Center, the American Medical Center and Family Doctor clinics).
The Russian medical equipment market is one of the fastest growing sectors of the economy. Currently, the total volume of medical equipment in Russia is estimated at about $3 billion. Imports of medical equipment have recently played a significant role, accounting for approximately 60% to 70% of the total market. This share could reach 80% in 2008. The top five foreign suppliers to the Russian healthcare market are Germany (29%), the U.S. (20%), Japan (15%), Italy (6%), and Switzerland (4%).
Almost two-thirds of the medical equipment and devices used in public clinics and hospitals are obsolete and need replacement. Russia does not produce many types of high-end medical equipment and must rely almost exclusively on imports. However, despite the ongoing healthcare reforms and significant increases in federal and regional budget allocations for healthcare, financing remains insufficient to address the needs of the industry. In developed countries, the healthcare system becomes a priority due to new demands of the population (the increasing number of old people, the appearance of new diseases, and others).
Total healthcare spending in Russia at all levels comprises, according to different estimates, only about 3.5% of GDP (including funds in National Health Project “Zdorovie”) in comparison to 6% to 8% in Western European countries. The countries of Central Europe, including Hungary, Poland, Slovakia, Slovenia, the Czech Republic, and Croatia are very close to these numbers. The average Russian citizen’s out-of-pocket expenses for pharmaceuticals, medical devices and services are equally low.
Some 90% of Russia’s domestic production is manufactured at 660 enterprises having federal licenses for the production of medical equipment and devices, including 220 plants which are primarily dedicated to the defense industry. The Ministry of Health has approved over 20,000 medical products and devices for use in treatment but only 12,000 of those are represented among the list of locally made products.
Russian medical equipment manufacturers are making some progress in several traditional and developing segments of medical equipment manufacturing, such as electrocardiographs, patient monitors, X-ray and fluorography devices, anesthesia, sterilization and pulmonary equipment, ultrasound scanners, devices and instruments for endoscopy and laparoscopy, and electrosurgical instruments. Stronger domestic positions were also achieved in emergency vehicles, operating lighting systems, surgical instruments, home healthcare products, orthopedic devices, ophthalmic products, test kits, polymeric and glass medical products, disposable syringes, IV solutions and sets and other disposables in 2008.
Best Products/Services: Modern computerized diagnostic equipment; Computer and X-ray Tomography, Angiography systems; Resuscitation and functional diagnostic equipment; Implants and prostheses; Surgical and Endoscopic equipment, surgical headlights; Robotics clinical laboratory systems for express microanalysis; Telemedicine complexes; Hospital equipment and supplies; Operating room equipment; Artificial kidney complex components (oxygenators and dialysis machines); Oxygen concentrators for hospitals; Hospital beds; Advanced home healthcare equipment and supplies; and Significant amounts of medical supplies and disposables, including polymeric packaging for IV solutions.
Opportunities: Recent reforms in healthcare have created opportunities for U.S. medical equipment suppliers. In September 2005, President Putin announced that healthcare is one of the four key national projects, along with education, housing and agriculture. Dmitry Medvedev, first Deputy Minister at that time, was in charge of those projects. The total federal budget allocated under the National Health Project “Zdorovie” in 2006 was $4 billion (excluding loans, and state guarantees), in 2007 - $5 billion, and in 2008 - $5 billion. At the end of December 2008, President Medvedev during the meeting of National Priority Projects and Demography Council, said that all national projects would be fully implemented.
The Ministry of Health Care and Social Development has developed a document called “Concepts of Health Care until 2020”. According to Minister Golikova, this document will be incorporated into a long-term strategy of social and economic development until 2020. It will also guarantee the population and various aspects connected with the system mandatory health insurance. In 2009 the National Health Project “Zdorovie” will be financed at $4.8 billion. Despite the impact of the current economic crisis on the government’s budget, Russia continues to fund this project aggressively: the increase in financial resources for 2009 will be 13% in ruble terms. Project “Zdorovie” was designed to significantly improve the Russian healthcare sector giving impetus to both pharmaceutical and medical equipment markets. The implementation of the project is supported by laws and regulations, which modify the healthcare system structure over the long term. Key laws and regulations include a law on state guarantees for medical assistance, a law on mandatory health insurance and a law on standards of medical assistance.
In 2009-2012, National Health Project “Zdorovie” will focus. on developing the following main areas: Healthy life style; Medical aid and preventive medicine; High-technology medicine including treatment of heart, blood, and vascular diseases ($100 million for both new equipment and other supplies for federal clinics); also, high emphasis will be put on blood donation centers; and Maternal care that will include construction of 24 delivery centers
Currently, only 15% to 25% of the total need for high technology medical assistance is satisfied. Despite increases in spending for medical equipment and services funded by federal funds, they remain insufficient to meet the growing needs of the healthcare system.
Despite recent breakthroughs and the fact that locally made medical equipment is two to four times cheaper than imported equipment, Russian production still lags behind the majority of developed countries. Thus, Russia is still dependent on imports for a significant number of medical equipment industry sub-sectors, especially those requiring large investments in R&D, innovative technologies, and automation.