EMeRG has announced the addition of “Russian Medical Device Market: Investment Opportunities, Growth Forecasts by Care Areas and Local Competitive Landscape 2015-2018” report to their offering. This comprehensive report provides in-depth understanding of the investment opportunities in the Russian medical device market, even as the country’s economy fights a major slowdown. Authored with innovative and concise representations, the report highlights the overall market metrics and growth forecasts by care areas. This includes medical devices for cardiology, critical care, dental, diagnostic radiology, dialysis, orthopedic, operating room as well as medical consumables. In the period between 2010 and 2013, favorable policies around tax and custom concessions, IP protection, and creation of industrial parks allowed FDI in Russia to grow by 83% in 2013. This also prompted global medical device companies to focus on localization strategies for production of various devices including diagnostic imaging, blood glucose monitors, dialysis equipment, wound management products etc. on Russian soil. However with the Ukraine crisis in 2014, there has been a negative perception within various industries towards doing business in Russia. With capital flight and trade restriction imposed on the country, the medical device market is expected to shrink for the next two years. Decline of ruble as well as restrictions on foreign manufactured medical devices to participate in public hospital tenders will prompt a negative growth rate till 2016. However with the Russian government looking to increase productivity, creating high-tech production facilities and steps to improve investors’ confidence, the economic environment for doing business is likely to improve in long term. The Russian medical devices market is expected to grow at a CAGR of 1.9% from 2015 to 2018. The report answers some of the following key questions: • What are the implications of restriction on imported medical device manufacturers in public tenders? • What is the silver lining for foreign investors looking to do business in Russia in the near future? • What are the various types of hospitals and healthcare facilities across Russia? • What are the key opportunities for medical device manufacturers by disease areas including cardiovascular, renal, cancer and other disease types? • What are the key opportunities in the Russian private health sector for various healthcare service providers? • What is the current market size for medical devices by various product categories? • How will the market projections be impacted by the current economic slowdown and restrictions on imported devices? • What are the opportunities for medical device manufacturers by various care areas including cardiology, critical care, operating room, diagnostic radiology, orthopedics, dialysis etc.?

1. Russian Medical Devices Market:
Investment Opportunities, Growth
Forecasts by Care Areas and Local
Competitive Landscape 2015-2018
EM03B
SAMPLE REPORT
2015-2018
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2. CHAPTER 2: EXECUTIVE SUMMARY
•The Russian government has made significant progress in creating a
favorable business environment for foreign investors in the recent years
even as the Ukraine crisis led to various trade restrictions
•With the country looking to become a technology oriented economy from
an oil and raw materials one, several steps including tax and custom
concessions, IP protection and creation of industrial parks and special
economic zones. While improving investor confidence, it helped FDI in
Russia to grow by 83% in 2013
•Following the Ukraine crisis, there has been a negative perception within
various industries towards doing business in Russia. Capital flight and
restrictions imposed by international community have dampened economic
growth
•EMeRG predicts a moderate decline in the economic growth of Russia in
short term (2015-2016). Restriction on imported medical device companies
from participating in public tenders will have a negative impact on the
market growth in short term. However, with the Russian government
looking to increase productivity, creating high-tech production facilities and
taking steps to improve investors’ confidence, the economic environment
for doing business is likely to improve in long term
Business Environment in Russia
Russian Healthcare and Hospital Industry in 2014-2015
•With over 61% of the healthcare expenditure being accounted for by the
government, the Russian healthcare system is primarily driven by the public
sector. However, it is faced with major challenges including inaccessible
healthcare in rural areas, inadequate primary care services, limited number
of specialists as well as overworked specialists
•There has been a significant reduction in the number of rural healthcare
facilities from 8249 in 2005 to 2085 in 2013
•The Russian private healthcare market is growing at about 12% per year.
However only about 7% of all hospitals and about 10% of the clinics in
Russia are private owned 2
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3. •The private healthcare providers market is being impeded by moderately
high market entry barriers including high capital investments, need for brand
reputation etc.
•Recent healthcare reforms have been aimed at transitioning Russia into a
health-insurance based system with focus on improved primary care, high-
end technologies, establishment of tertiary care specialized facilities
including cardiology centers, reduction of hospital capacity etc.
•The emphasis has shifted from inpatient to outpatient services as financial
viability is being sought. Day-care centers for outpatient diagnosis, surgery
and rehabilitation are being set up
•It is anticipated that the growth of single-specialty clinics will increase
across a majority of Russian cities. Multispecialty / multidisciplinary clinics
are anticipated to increase only in the large cities with a population of over
1Mn including Moscow, Saint Petersburg and Novosibirsk etc.
•There are limited number of pathology labs with immunohistochemistry
analysis capabilities for accurate cancer diagnosis. Most of these labs are
confined to Moscow and St. Petersburg where waiting lists may extend up to
2 months leading to delayed diagnosis
•High localization of specialist cancer care facilities in major cities is one of
the factors hindering early detection. Only 30% of cancer patients receive
radiation due to lack of equipment, training and financial resources
•Growing at a CAGR of 1.9% from 2015 to 2018, the Russian medical device
market is expected to be valued at $7.26Bn in 2018
•Owing to the economic slowdown, the medical devices market was
negatively impacted in 2014 as the market grew only by 0.8% over 2013. In
2015 too, the Russian medical device market is anticipated to shrink as the
government looks to prohibit imported items into public tenders. While the
current socio-economic factors may negatively impact market growth in
immediate future, medical device sales are expected to increase post 2016
Medical Device Market in Russia: 2014-2018
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4. •Russia has one of the strongest domestic markets for medical devices
primarily for low-end and mid-range devices. However, the products
manufactured within the country do not match the quality standards of
western companies
•It is expected that in future, foreign companies may enter into special
investment contracts with the government while localizing its manufacturing
facilities in Russia and creating job opportunities
•With the increasing cardiac disorders and arrhythmia prevalence, there has
been a rise in pacemaker implantation in Russia over the past 5 years. The
Russian pacemaker market is expected to grow at a CAGR of 2.7% from 2015
to 2018
•Lack of funds have severely hampered the growth of medical technologies
in the country. A large majority of the diagnostic imaging equipment
including CT scanners, MRI and digital radiography systems are not covered
under any form of service contract. The overall diagnostic radiology imaging
equipment and accessories market in Russia is expected to be valued at
$1354.2Mn in 2018
•There exists a moderately negative perception among senior radiologists
towards usage of contrast agents for radiological procedures. Many
radiologists believe that they can visualize the anatomy effectively without
the contrast agents
•With an increasing number of local manufacturers entering the market, the
affordability of various critical care equipment including patient monitors as
well as NICU devices has improved. However with dwindling exchange rates,
the overall critical care devices market is expected to grow at a CAGR of
0.9% from 2015 to 2018 in Russia
•The high cost of liquid Helium is one of the key hindrances towards
adoption of MRI. The liquid Helium costs about $25per liter, thus adding
about $75,000-$100,000 to the initial price tag.
•The key to successful sales of medical imaging accessories is to bundle a
majority of the items along with the capital equipment at point of sale,
typically as specified in the tender
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5. •There have been moderate changes to the medical device registration
process and various nomenclature associated. Average cost for the entire
process towards registration may include various overheads including
commissions charged by consultants and other costs. On an average,
registration of medical suppliers / consumables may cost about $3000-
$5000 while that of high-end equipment may cost over $10,000
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Competitive Landscape
•With a robust service and sales network, B.Braun has been successful in
Russia especially with its range of infusion pumps. However, the company’s
overall growth rate in Russia in 2014 was negatively impacted by the
Ukraine crisis and the dwindling investor confidence. B.Braun has also been
impacted by the increasing pro-local manufacturer outlook in public tender
evaluations
•In April 2015, Johnson & Johnson announced the signing of a memorandum
of cooperation with Russian pharmaceutical manufacturer –Pharmstandard.
The agreement will help the companies improve local production of self-
monitoring blood glucose systems in Russia
•In 2014, Philips ventured into performance management consultancy
services for Russian hospitals. As part of the strategic partnership with
MEDSI – one of the largest private clinics networks in Russia, Philips will lend
its expertise in hospital management to facilities involved. This will include
optimization of infrastructure management, patient flows and processes, as
well as continuous training for the medical staff
•In 2014, Fresenius Kabi (the division dealing with drugs and technologies
for infusion, transfusion and clinical nutrition) entered into a joint venture
with Sistema JSFC and Zenitco Finance Management LLC to improve its
domestic manufacturing capabilities in Russia. Fresenius was impacted by
the Ukraine crisis in Russia leading to delays in various projects. This led to
an organic sales growth of 0% for the company in the same year
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6. Policy to phase out foreign
manufacturers from public
tenders
EMeRG rates Russia’s business attractiveness in 2015 (immediate
future) to be low as its current political unrest and negative
perception within global markets overshadows the economic
momentum gained in the past 3-4 years
•With imported goods consisting of over
77% of the Russian medical devices
market, there has been a sustained effort
by the government to encourage
domestic companies for all public
purchases
•With ruble’s recent 50% fall as compared
to the US Dollar, reliance on imports is
expected to cause further pressure on
the Russian healthcare system. As a
result, strict policies are being made to
reverse the import-export order
•As per a order published on the
government’s website in February 2015,
applications to tenders made by foreign
companies would be denied if two or
more entries are made by companies
from Russia, Armenia, Belarus and
Kazakhstan
•This would include over 40 items
including medical consumables and
clothing, hearing aids as well as blood
transfusion equipment
3.2 Russia: Business Environment in 2014-2015
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3.2.1 Business Environment in Russia: Overview
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7. 5762 Registered hospitals
9.1 Hospital beds per 1000 population
6.6% Percentage GDP spent on healthcare
61-39 Public-private split of healthcare expenditure
370 No. of private hospitals
Dissatisfactory
healthcare delivery
Steady depopulation
Rapidly aging population; low birth rates;
higher death rates; low fertility rates. If current
trend continues, Russia’s population may be
reduced to 107Mn by 2050
Ineffective health
insurance
Primarily driven through obligatory medical
insurance, there is a lack of market conditions
and competition within payers and / or
providers to deliver good quality and cost
effective healthcare
5.2 Public physicians per 1000 population
Figure 4: Russian Hospital and Healthcare Demographics, 2014
4.1 Russia: Health Demographics
Source: EMeRG Analysis
CHAPTER 4: RUSSIAN HEALTHCARE AND HOSPITAL
INDUSTRY IN 2014-2015
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Poor funds for public hospitals; bureaucracy;
low wages for doctors; inadequate
infrastructure and medical equipment leading
to overall dissatisfaction 7

8. Improving
Primary Care
Various pilots and efforts are being undertaken to
improve primary care delivery across various municipal
levels in Russia. Apart from improving the
infrastructure and medical equipment, there are efforts
to improve involvement of GPs ahead of terapevty;
improved coordination between GPs and specialists.
Growth of Day-
care Surgeries
There has been a strategic shift in the focus area for
healthcare reforms. Emphasis on shifting from
inpatient to outpatient services for financial viability is
being sought. Day-care centers for outpatient
diagnosis, surgery and rehabilitation are being set up. It
is expected that gradual investments will be made
towards procuring arthroscopic devices, laparoscopic
equipment and anesthesia machines for outpatient
surgeries.
Opportunities
in Health
Information
Systems
Gradual investments have been made on health
information systems to improve flow of financial and
clinical information across regions. While broadband
connections are being utilize to improve connectivity,
there is an anticipated increase in adoption of
electronic medical records across regional level
hospitals. It is also expected that telemedicine
networks will be increasingly utilized to improve
medical consultations, second opinions, and medical
training. There are over 300 different applications of
medical information systems and a majority being
developed by local companies. Key opportunities exist
in healthcare business process automation, medical
records, lab diagnostics and reporting, as well as
medication and workload management.
4.4 Why Invest in Russian Healthcare
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9. Opportunities
in Radiology
and Medical
Imaging
Equipment
(1/2)
While the current market for medical imaging
equipment in Russia indicates late-stage growth, there
are significant opportunities to be tapped in the
coming years. The current installed base of radiology
equipment needs replacement even as servicing and
maintenance may continue to dominate revenue
growth.
Table 1: Installed Base Estimates of CT
Scanners in Russia, 2014
CT Scanner Type
% of Installed
Base
Non MDCT 24%
<16 Slice CT 22%
16 Slice CT 29%
32-64 Slice CT 21%
>64 Slice CT 4%
Total 100%
Source: EMeRG Analysis
EMeRG estimates the number of CT scanner
installations in Russia to be around 1310. A majority of
them are non MDCT as well as lower than 16 slice CT.
This renders them less suitable for cardiac CT scans. In
addition, there has been a significant resistance in
usage of contrast media / contrast agents within
Russian radiologists. However, with the increase in
cardiovascular diseases, the need for accurate
diagnosis, patient safety and satisfaction is expected to
drive the demand for high-end CT scanners in the
coming years.
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10. Table 3: Cancer Demographics, Russia, 2014
Parameter Value
Age standardized incidence of cancer* 204.3
Risk of getting cancer before age 75 (%) 21.50%
Age standardized mortality rate from cancer 122.6
Risk of dying from cancer before age 75 (%) 13.70%
Mortality to incidence ratio 0.6
5 year cancer prevalence (thousands) 1087.9
Number of clinical trails in progress for cancer 445
Financial burden per patient with cancer ($) 3784
* *Defined as the age-standardized incidence or mortality per 100 000 people per year
Source: EMeRG Analysis
•There are limited number of pathology labs with immunohistochemistry
analysis capabilities for accurate cancer diagnosis. Most of these labs are
confined to Moscow and St. Petersburg where waiting lists may extend up to
2 months leading to delayed diagnosis
•While radiation oncology is a designated medical specialty in the country,
there exist no established training programme or licensure procedure for
radiation oncologists
•Opportunities are anticipated in early diagnosis (especially mammography
and other diagnostic and pathology services) through partnerships with the
government to create chain of diagnostic centers and high-end pathology
labs with immunohistochemistry and cytological analysis. Opportunities are
also anticipated in radiation therapy equipment across tertiary care centers
in Russia
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11. Figure X represents a few key facts about private healthcare in Russia
Figure 9: Key Facts and Statistics, Private Health Centers in Russia,
2014
1% Number of Private in-patient hospitals
80% Number of Russians who use Private dentistry
<10% Number of Private health clinics in Russia
~5% Market share for Private Healthcare Institutes (% patients visiting)
•The onset of the private sector in Russian healthcare system was marked by
the introduction of voluntary medical insurance and private clinics. Moscow
and St. Petersburg had the first multifunctional private clinics followed by
other major cities in 1999
•Currently, only about 7% of all hospitals in Russia are privately owned
•The largest representation of the private sector is observed in dental care
where a large majority of the dental clinics are private owned
•There has been moderate growth in the private sector in the recent years.
Some of it is attributed to the fact that patient’s expectations may not have
been sufficiently met in these facilities for the prices being charged. Private
healthcare providers also believe that there is unfair competition with public
hospitals where paid services may be offered at much lower rates. Public
hospitals may only charge for direct cost of staff and medication / supply.
However no charges may apply for medical equipment or facility services
used
4.6.1 Understanding Private Healthcare Facilities
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Source: EMeRG Analysis
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12. N=$7.41Bn
Figure 11: Revenue Splits, Russian Medical Device Market,
2014 (%)
Source: EMeRG Analysis
5.1.2 Revenue Forecasts: 2015-2018
Figure 12: Revenue Forecasts, Russian Medical Device Market,
2014-2018 ($Mn)
2014 2015E 2016E 2017E 2018E
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Cardiology Devices Market
Critical Care Devices Market
Dental Devices
Diagnostic Radiology
Equipment Market
Dialysis Machines Market
Medical Consumables Market
Operating Room Devices
Market
Orthopedic Devices Market
Other Medical Devices Market
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Source: EMeRG Analysis
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13. •With over 1.2Mn deaths per year due to cardiovascular
diseases, the health and socioeconomic burden of CVD is high in
Russia
•Standardized mortality rate due to CVD in Russia is about two
to three times higher than developed nations
•Coronary heart disease and cerebrovascular disease are the
key reasons of mortality. A majority of CVD related deaths occur
in the working age groups in Russia
CARDIOLOGY
DEVICES
MARKET
5.2 Understanding the Russian Cardiology Devices
Market
5.2.1 Need Gaps in the Russian Cardiology Devices Market
Pacemaker
ECG
Blood Pressure
Monitor
Interventional
Cardiology Devices
Other Cardiology
Devices Market
Figure 17: Revenue Splits, Russian Cardiology
Devices Market by Product Categories, 2014
Source: EMeRG Analysis
N=$XX.6MnX
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14. Pacemaker Market
Market Value in 2014: $30.1Mn
Forecasted Market Size in 2018: $34.9Mn
CAGR, 2015-2018: 4.0%
Market Age: Late growth
Adequacy of installed base: n/a
Key Differentiators: Light weight, small form factor,
durability and battery life
CARDIOLOGY
DEVICES
MARKET
5.2.3 Cardiovascular Devices Market in Russia: Key
Opportunities
Figure 18: Pacemaker Market in Russia – Market
Metrics, 2014
Source: EMeRG Analysis
With the increasing cardiac disorders and arrhythmia
prevalence, there has been a rise in pacemaker implantation in
Russia over the past 5 years. Pacemakers are now implanted
across 100 clinics in the country. It is estimated that the annual
need of pacemaker implants is about 70,000 in the country.
With the need for telemetry to keep a track of the patient as
well as the device performance, there have been various
technological upgrades in the new generation of pacemakers in
Russia.
While still being dominated by foreign manufacturers, there
has been an increasing reliance on domestic pacemaker
brands. Pacemakers sold under the Baikal brand have strong
penetration. In addition, a large majority of the pacing leads
implanted are manufactured by the Russian firm Elestim- 14
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15. Private clinics to open general practitioner’s offices in St. Petersburg:
Private clinics are anticipated to open offices of general practitioners in St
Petersburg by 2015. This will increase the number of such general
practitioner offices to 25. These will be created through public private
partnerships to improve access to healthcare and provide medical assistance
in residential areas and to decrease the rates of hospitalization. These
general practitioners will perform their primary healthcare duties such as
diagnosis and prescribing while conducting some research or patient
referrals to the city healthcare centres.
CHAPTER 7: HOSPITAL AND MEDICAL DEVICE
NEWS IN RUSSIA, 2014
7.1 Hospital News: New Launches, M&As and Deals
JP Morgan Russia’s buys stocks of MD Medical : JP Morgan Chase & Co
purchased stocks of MD Medical Group Investments Plc – one of the largest
maternity center chains in Russia. This helped MD Medical recover from its
losses and increase its market value which was around $620Mn.
600 Bed Hospital to treat Infectious diseases to be opened: As per an
announcement made in December, 2014; a new 600 bed hospital will be
shortly opened in St. Petersburg. It will treat infectious diseases as well as
general illnesses in separate wings, and will be one of the largest hospitals in
the area. The hospital will be installed with high-end equipment; most of
which have already been purchased.
Cancer Diagnostic centre opened for women in Moscow: A new cancer
diagnostic centre - White Rose was opened in March 2015 by the
Foundation Social and Cultural Initiative. It is expected to offer services free
of cost while accommodating about 100 women per day and about 30,000
patients per year.
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