The largest suppliers of drugs involved in price wars

In 2010, the price wars for the first time including suppliers of drugs from the top five, said the representative of the largest farmdistribyutora - "Protek". Causes - stagnating demand zatovarennost warehouses and high expectations. "In terms of price wars, the tenth year was perhaps the most ruthless of all I've ever seen" - says the top manager of one of the federal farmdistribyutorov. The results were disappointing year for everyone, he says: someone left at a loss, someone was able to stay in positive territory, but profits fell significantly. More proof - the results of the only public company in the sector of "Protek": in the first half of 2010, a distribution unit profit fell to 346.8 million rubles from 1.93 billion in the first half of 2009 (data reported by IFRS for the year the company has not disclosed ), falls profit of the group "Protek" for the same period to 489.6 million from 2.28 billion a year earlier. Turnover and Group, and its distribution business while growing up (distribution - from 36.8 billion rubles to 41.2 billion, the group - from 41.3 billion rubles to 45.5 billion). "According to the analytical agencies, market growth in 2010 amounted to about 6%. At the same time producing companies set goals for themselves in increased sales far in excess of this figure, "- explains CEO of CV" PROTEK "Igor Filatov. In order to carry out their plans, the producers tried to convince distributors to form higher inventories in the warehouses of the expected sales, he says. However, according to Filatov, with actual slight increase of the market "retailers have been forced to substantially reduce selling prices to bring their inventories in line with normative values" (in other words - sell cheaper to reduce the amount of drugs in stock). This had an impact on the profitability of operations in distribution and in retail. The situation was like this, although perhaps this can be blamed for producers who are always seeking to sell as much as possible, say respondents to "Finance" market participants. Influenza euphoria. The story, which led to "price wars" in 2010, began in late 2009 with an epidemic of "swine flu", says a former employee of a major supplier of drugs, who agreed to talk on condition of anonymity. In November 2009, the Russian pharmaceutical market has shown an unprecedented growth: according to "Pharmexpert", compared with November 2008, sales soared 53% in rubles - mainly due to antiviral drugs. The Russians were horrified by reports of deaths from influenza A/H1N1 and swept away from drugs pharmacy shelves. "Both manufacturers and distributors have begun euphoria - their annual plans overfulfilled at times. Bulk contracts that were signed with the producers about the same period, expected growth and insane in 2010, too - plus 20, 30, even 40% of the indicators of 2009 "- continues a former employee of the federal distributor. "Let's just say the producers, as might have encouraged suppliers to negotiate contracts in a significant growth", - says another employee of the supplier. But in early 2010 the situation changed dramatically: pharmaceutical stocks were "zatovarennymi" and the hysteria surrounding "swine flu" has gradually come to naught. Medicine in the quantities in which they are delivered to pharmacies at the end of 2009, were not needed. "January - no sales, February - no sales, March - sort of went a plus, but quite small. Not really wondered, frankly, and in March - says a former employee of the federal drug supplier. - Summer - all country houses, selling traditionally no. A product is in stock, it must be sold - have at any price. " Everyone was waiting for the fall and the flu epidemic, but it did not happen. By October it became clear that plans to perform in terms of sales, set at the end of 2009, almost unreal, but a bonus for the amount that producers had to pay up to 2010, with the beginning of the year were laid down in price. In the autumn fall of the margin for all market participants was evident, says a former employee of a major supplier company. Poured oil on the fire tougher state regulation of prices for drugs included in the list of vital and essential - the new rules came into force on 1 April 2010. "It is not only exaggerated the plans - every year the producers convince distributors to take on more and more goods, - the general director of Russia's third largest farmdistribyutora" Katren "(data" Pharmexpert, "2010.) Leonid Konobeev. - In 2008, distributors have worked on the verge of profitability and lost a lot on exchange, and in 2009 to compensate for the losses started to raise prices, so they are well developed and have made a profit. In 2010, increase the cost of drugs has failed - and, as the margin in this business is quite small, most companies immediately took a loss. " "Katren" remained profitable, says Konobeev. After a good growth performance in the pharmaceutical market crisis in 2009 (plus 22% in ruble terms in the commercial segment, the price index - plus 16% of the entire market as a result increased by 18%) were difficult to assume that the crisis will affect pharmaceutical industry in 2010, says CEO DSM Group, a market research drugs, Sergey Shulyak. "The possibility of such negative developments no one laid in even the most pessimistic forecasts," - he states. Ate tablets. The root cause of the price wars - an unprecedented low growth market in 2010, I am sure Shulyak. "Sales were not, because there was no demand for drugs, because of this, and began the history of dropping prices," - he says. Against the pharmaceutical market "worked" and the lack of seasonal diseases, and a general lowering of income. Thus, the greatest fall in DSM Group analysts saw in the categories where demand is most elastic - it vitamins and hormones. In April, after the relevant decision of the Government, the prices of essential medicines have been frozen, but the rise in prices for "not vital" range, which frightened analysts and market participants also did not happen. "Marketers are manufacturers and suppliers simply did not dare to increase their cost, fear of losing market share", - explains Shulyak. As a result, the price index for the year decreased by 1%, says Shuliak summer decline compared to the year 2009 came to minus 2%. Sale Price farmdistribyutorov in 2010 fell to confirm Valeria Solok, CEO of the pharmacy chain "36.6". The average reduction was about 5%. "The trend is particularly the case, the range of essential drugs - she says. - However, from our point of view, the price reduction was not related to price wars. We observed a fair competition where individual producers deliberately chose the tactics nepovysheniya prices. " The average cost of delivered packages dropped in "Rigla," agrees CEO Network "Rigla" Andrei Gusev. It will be easier. Since the beginning of 2011 vendors selling prices began to increase gradually, notes Valeria Solok of "36.6". They were followed by increased retail and - according to "36.6", at 2-3%. "The trend towards a slight increase in prices in the first months of the year actually marked" - confirms the representative of "Protek". The reason is, that have been indexed by the "frozen" prices for drugs from the list of essential, he explains. The main driver of market growth in 2011 will be just inflation, according to CEO "Rigla" Andrei Gusev. According to the forecast DSM Group, the Russian pharmaceutical market volume this year will grow by 12-14% in ruble terms. "It's not so much, but this is the path to recovery - Sergey Shulyak optimistic. - Most likely, we again see the trends that are observed prior to the crisis in 2008 - rising prices, the increase in the average cost of a package by the growth of the population, it is also possible small increase in the market in packs. " The "pre-crisis" growth pharmacists will be able to appear in 2012, he said: a year of market volume may increase by about 20%. However, Leonid Konobeev of "Katren" Surely a more "easy life" in 2011 farmdistribyutoram should not wait: they will survive only by improving the efficiency of operations.