The novel coronavirus pandemic has shaken the world. The familiar order has collapsed, while a new one has not yet emerged. Analysts propose multiple scenarios for various spheres of our lives. In this context, what is going to happen to the domestic pharmaceutical market seems to be a very relevant question. Will companies put new drugs on the market? Will prices go up or down? How will the pharmacy business fare in the changing environment? We tried to keep a cool head and consider some of these problems.
Who will rally to go to war?
So what problems has the pharmaceutical market exposed, when faced with a new virus? It appears pharmaceutical production facilities are far from ready to reorganize for wartime operation and fight the coronavirus. Our pharmaceutical companies continue to produce those same molecules they had been making before – smooth operation, no risks. They see no point in boosting production either. At the same time, everyone understands that with this new pandemic, the drugs now available are of no use. They do not help.
As is known, development of innovative drugs is an extremely slow process. So, companies often opt for offering existing molecules as something ‘new.’ Few of them can afford the so-called researching development. And, apparently, they have no money for development now.
At any rate, there have been no public statements from either Nanolek or Pharmsynthez or other Russian pharmaceutical companies. It is very likely that they don’t have full understanding of where to move in the current circumstances. Launching an anti-viral drug to defeat the new pandemic requires astronomical investment.
Will the West help us?
Western pharmaceutical giants are operating in our country only within the boundaries of their product portfolios. Everything is well-oiled and running smoothly. New anti-viral medication is not their niche. Import and licensing of a newly developed coronavirus drug will take up to three years. Who will be brave enough to get into this long-haul game? It is most likely that when the pandemic is over and we return to normal life nothing will change but the prices on almost all drugs. Everybody understands that: the prices will go up due to the foreign currency growth (Western drugs will get significantly more expensive).
Global pharmaceutical companies will perhaps be working on new vaccines or anti-viral drugs in their local markets. Once again, they will only reach us in two or three years. Right now, time is an important and irreplaceable resource.
Postponing mass shutdown
Even today, we can fairly confidently make the following prognosis:
- New players in the pharmaceutical market will come from China. They will be ready to shower our markets with face masks, tests, ventilators and anti-viral drugs. The question is: will all this be provided through state procurement or will patients themselves be forced to make their own purchase decisions and order via some foreign marketplaces such as AliExpress?
- The Healthcare Ministry and large local players on the pharmaceutical market will have to join efforts in search for innovations, technological developments and new formulas. The coronavirus pandemic has made many people contemplate the idea that more viruses will appear, mutate and become more harmful. The market will have to change, invest in research and look for new ideas and biotech startups.
- It can already be said for sure that the virus will postpone the global shutdown of pharmacies, which we have forecast for the near future. As of today, the monthly growth of sales of various disinfectants, masks and antiviral drugs is some 250-500%. It will help businesses postpone bankruptcy and closure. The pandemic provided them with cushion time.
But when life gets back to normal, pharmacies will again face a struggle to survive.
Adapt or leave
All epidemics, even the largest ones, come to an end. Life returns to normal and demands new approaches. Pharmacies will soon have to join the digital labeling system, and pharmaceutical companies will soon face the need to consider their readiness to use new technologies. The state intends to limit slotting fees, and this will inevitably result in a price hike.
When the pandemic ends, we will actually enter a new reality. Currently, pharmacies’ turnover is at all-time high; given the increased pries, the demand for medications will most probably decrease to a minimum. This will only be aggravated by the economic situation, reduced investments in import substitution as well as those by western companies, and distributors’ policy. This could push minor players, who have failed to adapt to a new digital reality, out of the market. Preliminary forecasts say that 15-20% of pharmacy stores will have to close down – and this will take place in depressed areas that face medicine supply difficulties.
Pharmacies will most probably have to switch to operating as service companies. Business restructuring will be the sole key to survival, with a growing amount of online medication sales and services as well as an increasing role of pharmacists, who will once again become consultants rather than simply operate as sellers.
Brief summary
The threats that SMEs are facing – such as labeling, reduction in marketing investments by pharmaceutical companies, a narrower range of products, a shorter deferment period for distributor payments, and government regulation – will ultimately lead to price equalization in pharmacies. Offering services is the sole approach that could help them attract customers, with pharmacists’ knowledge and competence to come to the fore.
By Tatyana Khodanovich, CEO of Pharmedu