Russia Country Market
Insights and Opportunities
Medical Equipment Sector
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 20% of the Russian population of 142 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. 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.
The Ministry of Health and Social Development has developed a document called “Health Care Through 2020.” According to Health Minister Golikova, this document will be incorporated into a long-term strategy of social and economic development.
The Russian medical equipment and supplies market is one of the fastest growing sectors of the economy. Despite the severe economic contraction in 2009 the total volume of medical equipment and supplies in Russia grew 38% to reach $3.3 billion. This puts the market among the 20 fastest growing markets in the world, yet annual per capita spending is a very low $23. Industry experts predict that the market will grow at a rate of 5.5% per year, reaching $4.3 billion by 2014 or $31 per capita.
Almost two-thirds of the medical equipment and devices used in public clinics and hospitals are obsolete and need replacement. Russia itself does not produce much high-end medical equipment and must rely almost exclusively on imports. The Federal Service on Surveillance in Healthcare and Social Development of the Russian Federation (Rosdravnadzor) has approved over 20,000 medical products and devices for use in treatments, 60% of which are locally manufactured (appliances - 3,000, equipment - 1,000, instruments - 7,000, glass and polymer medical products - 700). About 1200 Russian enterprises, 90% privately held, manufacture an array of medical devices, including apparatus and appliances (45%), medical instruments 10%), medical equipment (9%), glass and polymer medical products (10%), other medical products (26%).
According to various sources, imported medical devices constitute 60% of the Russian market. The statistical data show that 40-45% of imports come from Germany, 20-25% from the U.S., 10% from Japan and 5% each from Italy and France. For the last three years, a growing number of cheap analogues from China and Pakistan have entered the Russian market in large volumes.
Russian medical equipment manufacturers are making some progress in several traditional and developing segments. First, most routine X-ray diagnostic procedures are done on Russian-made equipment. Apart from that, the Russian medical device market is well represented by monitors for various uses, including those for intensive therapy, surgical operations, pregnancy and at the patient’s bedside. Also, Russian companies manufacture certain models of electrocardiographs, encephalographs and rheographs.
A particular focus of Russian manufacturers (usually 15% of the products made at any given plant) is on producing surgical tables, lighting systems, sterilization equipment, cameras for disinfection, beds and medical furniture. The Russian manufacturer KB Vzlet developed the “Kosmea” apparatus used for cardiac artery bypass surgery that works without an artificial blood-circulation apparatus. “Trekpor Technology” Holdings developed an industrial magnetic-resonance accelerator for the production of membranes.
Opportunities: 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. The best prospects for medical equipment include: Computer tomographs; Blood pressure instruments and equipment; Respirators; Endoscopes; Ultrasound scanning equipment; Syringes, catheters, dental disposables, ophthalmological equipment; X-ray equipment for general medicine, surgery and veterinary; and Artificial kidney complex components (oxygenators and dialysis machines).
Due to the aspiration of the Russian government to increase domestic capacity, there is a developing trend of cooperation between Russian and U.S. medical equipment firms. For example, at the end of 2008, GE Healthcare and one of the leading local manufacturers, Medical Technologies Limited (MTL), announced a strategic partnership to make diagnostic imaging equipment in Russia. The Ural Optical and Mechanical plant bought a license from the German company Siemens to produce a computer tomograph (CT). Cooperation between the JSC Ural Priborostroitelny plant and Italian manufacturers resulted in production of an ultrasound scanning instrument that won one of the tenders for the National Health Project. Finally, the Izomed company successfully manufactures another ultrasound diagnostic instrument in cooperation with a Japanese company. Such joint cooperation can bring accessible, innovative and modern healthcare technologies to support Russian government projects modernizing healthcare in various disease areas.
Recent reforms in healthcare have created opportunities for U.S. medical equipment suppliers. In September 2005, President Putin announced that healthcare would be one of four key national projects, along with education, housing and agriculture. President Dmitry Medvedev (first Deputy Prime Minister beginning in November of that year) was in charge of these projects. The total federal budget allocated under the National Health Project in 2006 was $4 billion (excluding loans and state guarantees) and nearly $5 billion in each of the following years.
In 2010 the National Health Project will be financed at $4.8 billion. The Project is designed to significantly improve the Russian healthcare sector, giving impetus to both the pharmaceutical and medical equipment markets. The implementation of the project is supported by laws and regulations, which will modify the healthcare system structure over the long term. Key laws and regulations include laws on state guarantees for medical assistance, mandatory health insurance, and standards of medical assistance.
The National Health Project will focus on developing the following main areas in 2010, which should be of interest to U.S. manufacturers and exporters of medical equipment: Heart, blood and vascular diseases, including construction of medical centers in this field ($104 million); Preventive measures and treatment of tuberculosis ($133 million); Cancer ($167 million); Development of blood donation centers ($150 million); Maternal care that will include construction of birthing centers in St. Petersburg and other regional centers ($200 million); and development of programs for neonatal and audiologic screenings ($14.7 million for disposables and $6.3 for equipment).