Today, the pharmaceutical industry of Kazakhstan is developing at a dynamic pace and plays an important role in the country's economy. According to available statistics, over the past 10 years, the industry has been growing at an average of 12% per year. All this due to multilevel state support.
The pharmaceutical industry in Kazakhstan has been in a growth phase for the past 20 years. This was facilitated by a number of factors: a low production base in an unsaturated domestic market, the arrival of foreign investors with a large product line, the transition to new production standards, long-term contracts under the state order, as well as the launch of the EAEU common drug market. The pandemic also became a key moment, after which the realization of the importance of localizing the largest possible range of drugs came.
THE ORIGIN OF THE KAZAKHSTAN PHARMACEUTICAL MARKET
The origins of the formation of pharmacy organizations in our country date back to the beginning of the 19th century. During this period, as part of Russia in pre-revolutionary Kazakhstan, the pharmacy service was very weak. Merchants were engaged in the procurement and sale of medicines brought from Russia. The need for medicines was so great that county chiefs repeatedly mentioned in their reports the need to create pharmacies at hospitals.
Until the 50s of the 19th century, there was not a single free pharmacy in the entire territory of Kazakhstan. The first pharmacy for the paid distribution of medicines to the population was opened in Uralsk in 1842. It remained the only one in Kazakhstan for many years.
With an increase in the population of cities, from the second half of the 19th century, pharmacies were opened for paid dispensing of medicines to the population in Semipalatinsk and Petropavlovsk cities. The development of the network of pharmacies was extremely slow, and by 1875 there were only 6 pharmacies throughout Kazakhstan – in Uralsk, Semipalatinsk and Petropavlovsk cities. Thus, one pharmacy accounted for 248.8 thousand of the population. A quarter of a century later, the number of pharmacies reached 18.
Undoubtedly, the opening of the Shymkent santonin plant in 1884 had a great impact on the development of drug supply in pre-revolutionary Kazakhstan. It was founded by merchants N.I. Ivanov and N.P. Savinkov in the places where wild-growing wormwood grows in order to obtain santonin from it, a valuable anthelmintic agent.
Santonin at that time was the only medicinal product produced in Kazakhstan. The foundation of the Shymkent santonin plant played a progressive role in the development of pharmaceutical production in Kazakhstan.
From Shymkent, all santonin was sent to Hamburg at the disposal of the Weber and Zebel company. However, competition in the world market for santonin forced the plant management to act according to circumstances. For example, from 1889 to 1896 the plant did not work. According to the state regional archive, the plant was also engaged in the production of sugar, but then nevertheless returned to the production of profile products.
At the beginning of the 20th century pharmacies began to appear in resettlement villages, at railway stations or in densely populated areas. In 1907, private pharmacies were opened in the village of Fedorovka, Kostanay region, at the Chelkar station, in Kazalinsk, etc.
The number of pharmacists grew extremely slowly, increasing annually by an average of 2-3 people. If in 1890 there were 8 of them, then in 1915 this indicator reached 64. 17 people were pharmacists – the owners of pharmacies, and 47 were assistant pharmacists. There was no organized training of pharmaceutical personnel in pre-revolutionary Kazakhstan.
In 1922, Kirgosmedtorg and its local bodies were created, their tasks included supplying the pharmacy network and medical institutions with ready-made medicines. Within their capabilities, these organizations contributed to the expansion of the network of pharmacies, organized herbal production, procured and distributed medicines. By 1927, there were 127 pharmacy establishments in Kazakhstan.
In 1931 M.M. Chumbalov organized the first pharmaceutical school in Kazakhstan for the training of national pharmaceutical personnel in the city of Semipalatinsk and the Centralized Pharmacy Warehouse in Almaty. The Semipalatinsk School of Pharmacy graduated 13 pharmacists in 1933, and 18 in 1934.
During the war years, 47 pharmacies, 3 pharmacy warehouses and 58 pharmacy points were opened on the territory of Kazakhstan. During this period, many pharmaceutical plants were evacuated here from the territory of Ukraine, Russia, therefore, the pharmaceutical industry is developing rapidly in the republic. If in 1942 27 tons of galenic products were produced in Kazakhstan, in 1943 this point was already 40.
In total, during the war years, 5 workshops were organized and operated here, including the production of bandages and other dressings. They also began to produce gypsum, X-ray film, streptocide, sulfidine, ethyl alcohol, holosas, etc. Thus, in the conditions of difficult war period, Kazakhstan formed its own pharmaceutical industry. However, the number of pharmacy in regional centers during the war years decreased by 5 times.
By a resolution of 1954, it was decided to build 4 pharmacy warehouses in Almaty, Akmolinsk, Karaganda and Ust-Kamenogorsk, and in 1960 – the construction of a pharmaceutical factory in Almaty.
In 1975, the first congress of pharmacists of the Kazakh SSR was held in Almaty city. The second congress was held in 1981 in Shymkent, and the third – in 1987 in Kostanay.
STAGES OF DEVELOPMENT IN A MARKET ECONOMY
FORMATION OF THE KAZAKHSTAN PHARMACEUTICAL MARKET
The formation of the Kazakhstan’s pharmaceutical market began in the mid-90s. Back in 1994, drug supply to the population and public health was carried out centrally through the Pharmacy State Joint-Stock Holding Company, which had 1,832 pharmacies.
After the demonopolization of the Pharmacy holding and the privatization of pharmacy institutions, the centralized drug supply system was destroyed. During this period, the Kazakhstan’s model of drug provision underwent a severe transformation from centralized distribution to a system based on the principles of a market economy.
By the middle of 1996, the entire drug supply system had completely changed. To a certain extent, the deficit has been overcome and intensity with various types of finished medicines and medical products has been ensured. A culture of service has grown. Changes are taking place in the distribution, manufacturing and retail sectors. Modern marketing technologies are being introduced.
In 1997, the Government of the Republic of Kazakhstan adopted the State Program for the Development of the Pharmaceutical Industry, where domestic production of medicines and medical preparations becomes a priority.
In the early 2000s, the industry began to recover from the crisis. Several enterprises appear on the market at once: the Nobel APF project and the Global Pharm JV are launched. High growth rates will continue until 2008.
The next point of investment activity falls on 2011-12, when the Polish Polpharma buys the Shymkent site of Chimpharm JSC, and the Turkish Abdi Ibrahim comes to Global Pharm as a partner of the Lancaster group.
According to the Center for Trade Policy Development JSC, from 2009 to 2013 there was an increase in the production of pharmaceutical products, which annually amounted to 16%. Despite the positive dynamics of production volumes, the contribution of the pharmaceutical industry to Kazakhstan's GDP remained rather low.
MARKET PARTICIPANTS
To date, the pharmaceutical industry is represented in Kazakhstan by over 100 enterprises – foreign and local manufacturers of pharmaceutical products, including small manufacturers of medical products. Domestic enterprises: Chimpharm JSC, Global Pharm JV, Nobel APF JSC, pharmaceutical companies Romat and Dospharm are full-cycle enterprises, including the development and implementation of technological processes, production of finished dosage forms, sales to medical institutions and consumers through distribution and pharmacy networks. For medical equipment, Aktyubrentgen JSC is an enterprise with a full production cycle.
There are three types of business involved in drug supply organization:
THE SINGLE DISTRIBUTOR
In Kazakhstan, the state plays an important role in the supply of medicines, acting through the established single distributor. In February 2009, the Government of the Republic of Kazakhstan decided to establish the SK-Pharmacy company in the structure of the Samruk-Kazyna National Welfare Fund JSC. In May 2013, the rights to own and use a 100% stake in SK-Pharmacy LLP were transferred to the Ministry of Health of the Republic of Kazakhstan.
The Single Distributor System was created to provide medicines to the population within the guaranteed volume of free medical care, increase the stability and competitiveness of the pharmaceutical industry in Kazakhstan, and develop the pharmaceutical industry by consolidating public procurement of medicines.
Since 2011, in accordance with the Decree of the Government of the Republic of Kazakhstan, SK-Pharmacy has been the organizer of the procurement of medical equipment purchased at the expense of the republican budget, as well as for further transfer to healthcare organizations on a financial lease basis.
With the transfer of the function of centralized procurement of medical equipment, SK-Pharmacy LLP was tasked with reducing its cost by centralizing procurement within the republic and using two-stage tender procedures, further improving the quality of the procured equipment and ensuring its uninterrupted operation.
The procurement is made on a tender basis by selecting suppliers only within the list, annually developed and approved by the authorized body, indicating the maximum price for each product name. The main criterion for selecting a potential supplier by the Single Distributor is whether the supplier has the status of a manufacturer or an official representative of a pharmaceutical manufacturer. One of the procurement principles is the support of domestic producers.
Thus, at the end of 2021, the volume of the Kazakhstani pharmaceutical market amounted to 765 billion tenge. Currently, there are 88 domestic manufacturers in the pharmaceutical market of Kazakhstan. 32 companies produce medicines. Today, domestic entrepreneurs produce about 900 types of medicines and more than 1,000 types of medical devices. In the first half of 2022, the pharmaceutical industry grew by 4.9%.
The main share of pharmaceutical production is accounted for by large enterprises: Chimpharm JSC, Nobel Almaty Pharmaceutical Factory JSC, Abdi Ibrahim Global Farm LLP, Kelun-Kazpharm LLP and Karaganda Pharmaceutical Complex LLP.
The key mechanism for supporting domestic manufacturers is the conclusion of long-term contracts for the supply of medicines and medical devices for up to 10 years. The Single Distributor has concluded 92 long-term contracts, under which it is planned to supply more than 804 items of new medicines and 3944 items of medical devices by 2025. Under existing long-term contracts, the production of 316 types of medicines and 428 types of medical devices has been established.
The President of the country instructed to expand the volume and range of off-take contracts with domestic producers. These areas are open for investment, and such projects will receive full support from the state.
At the moment, 3 cluster zones are being considered in Aktobe, Astana and Shymkent.
WORLD GIANTS IN THE KAZAKHSTAN MARKET
On January 11, 2022, during a meeting of the Mazhilis, Head of the State Kassym-Jomart Tokayev noted that Kazakhstan is interested in maintaining a favorable investment climate. The President also said that at this stage, a new concept of investment policy is needed to increase the attractiveness of the country in the face of increased ESG requirements for the global energy and technological transition.
Thus, the Single Distributor, together with Kazakh Invest, prepared a guide for potential investors who are ready to localize their production in the territory of the Republic of Kazakhstan - INVESTMENT GUIDE BOOK. The document is intended, according to the one-stop principle, to provide a platform for entry into the country of large drug brands from packaging to the full production cycle.
The Single Distributor managed to hold meetings on readiness for localization of production in the territory of the Republic of Kazakhstan with representatives of BigPharm, who laid a solid foundation for further cooperation with such giants as PFIZER, ATABAI, Johnson Johnson, ERG, Astra-Zeneca, ABBVIE, Novartis, ROCHE, Sandoz, Takeda Pharmaceutical.
With the arrival of foreign partners, production sites certified according to international GMP standards began to appear in Kazakhstan. At the moment, 9 domestic pharmaceutical companies have received GMP certificates. It should be noted that most of them are enterprises with foreign participation. The presence of GMP certificates for certain industries should help increase the output of manufactured products and contribute to a freer promotion of domestic drugs to foreign markets.
In general, the Kazakhstan’s pharmaceutical market is relatively young, however, over the years of its existence, tremendous work has been done to develop domestic pharmaceuticals. If in the past the number of pharmacies in the country could be counted on the fingers, now Kazakhstan is one of the dynamically developing manufacturing industries, which has leading indicators both in the Central Asian region and within the single market of the EAEU.
Producers in Kazakhstan are successfully mastering the market of Kyrgyzstan, Russia, Slovenia, Turkey and Uzbekistan. The growth of investments in the industry gave an impetus to the improvement of the export performance of pharmaceutical products. Thus, in January-March 2021, deliveries abroad amounted to about $18.7 million, which is 48% more than in the same period in 2020.
The strategy for the development of the pharmaceutical industry sets ambitious goals, including breakthrough scientific, technological and socially oriented development of the pharmaceutical industry, the creation of a highly productive export-oriented sector and, as a result, an increase in the volume of exports of medicines. The strategic objectives are to form and maintain a close relationship between science, education and the current pharmaceutical industry, which will give impetus to the development of fundamental science and strengthen the scientific heritage of Kazakhstan.
The opening of a new plant gives a new impetus to the development of domestic production, demonstrates the readiness of our manufacturers for the deep localization of innovative drugs, which will not only increase the degree of commercialization and practical orientation of scientific developments, but also increase the share of exports of Kazakhstani products in the near future.
The health of citizens has always been a key factor in the well-being of society. With the constant increase in production and the deterioration of the environment, the problem of the evolution of diseases and their effective treatment is becoming increasingly important. Therefore, the dynamic development of the pharmaceutical market is determined by its life priority, since humanity needs the constant consumption of medicines.
All the results that we have today have been achieved through hard work and due to state support. In the further development of the industry, it is very important to know the history of its origin, since there is no future without the past. This will make it possible not to repeat the mistakes made before in the field of the pharmaceutical industry. The developed pharmaceutical industry of the country is considered an indicator of the high innovativeness of its economy.
With the same dynamic progress of Kazakhstan's pharmacy as in the last 30 years, there is no doubt that Kazakhstan will take a leading position in all aspects of pharmaceuticals. And this, in turn, shows the economic and social development of the country, the level of well-being of the population, and, accordingly, the pharmaceutical market is an important sector of the economy.
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