PHARMACEUTICALS IN TURKMENISTAN: PUBLIC,

UNCLAS SECTION 01 OF 03 ASHGABAT 000231

SIPDIS

SENSITIVE

STATE FOR SCA/CEN (PERRY),INR/REA (FEINBERG)

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD PREL TX
SUBJECT: PHARMACEUTICALS IN TURKMENISTAN: PUBLIC,
PRIVATE, BARTERED


Summary
--------------


1. A pharmaceuticals availability crisis in the mid-
1990's caused the GOTX to let private business into the
national medicine distribution system. Largely as a
result of the ensuing private-sector activity, supplies
soon reached near-saturation levels. Subsequently, the
GOTX began to secure a large portion of its
pharmaceuticals requirements from Ukraine as part-
payment for Turkmenistan's natural-gas exports. Private
pharmacies have now increasingly fallen prey to currency-
conversion barriers and unequal competition from state-
owned stores. Ukraine's in-kind payments for gas are
scheduled for abolition after mid-2006. The obvious
concern is that this may trigger an abrupt shortage of
drugs. However, various unofficial health-sector
contacts here predict other mechanisms will compensate
for the end of this particular source of supply. END
SUMMARY.

Market size
--------------


2. (U) Before the break-up of the Soviet Union,
Turkmenistan had about 400 pharmacies throughout the
country. The GOTX regulated the number of pharmacies
based on the old Soviet ratio of one pharmacy per 10,000
individuals (Turkmenistan's pre-1991 population was
around four million.). According to research conducted
by Atig, Bristol-Myers Squibb distributor in
Turkmenistan, there are now about 360 state-owned and
about 30 private pharmacies. Private sellers are
concentrated in Ashgabat, with few outlets in the
regions: two in Mary and one in Turkmenabat. Based on
an estimate by a private pharmacy owner, the average
annual turnover of a pharmacy is around $160,000,
bringing the total national market size to an estimated
$62 million.

Market Segmentation
--------------


3. (U) The number of listed pharmaceutical items is
around 3,500. Cheaper medicines from Russia, Ukraine,
India, Turkey and Pakistan dominate the market. West
European and American products are imported in much
smaller quantities. Among western manufacturers,
Bristol-Myers Squibb and Schering-Plough (U.S,),
Ferrosan A/C (Denmark),Gideon Richter A.O. (Hungary),
Roche (Switzerland) and Berlin-Chemie (Germany) have a
strong presence. Russian and Ukrainian pharmaceuticals
are imported in barter deals for Turkmenistan's natural
gas and sold at state-subsidized prices. Higher-quality
western pharmaceuticals are up to 25 times as expensive.


4. (U) The third segment of the market comprises
domestically manufactured pharmaceuticals.
Turkmendermansenagat Union (Turkmen Pharmaceutical
Industry) is an umbrella organization for the four local
factories including Ajanta Pharma, a Turkmen-Indian JV.
Ajanta medicines sell at very competitive prices, but
have a limited product range: antibiotics, saline
solution, respiratory diseases and blood circulation
medicines. The other factories include Saglyk, Buyan,
and Tenekar. These produce basic medicines like
aspirin, ointments and absorbent cotton. Last, but not
least, is the black-market segment, packed with unlisted
or even counterfeited pharmaceuticals.


5. (U) The Medial DP Ltd representative characterizes
the market as "very saturated, but very interesting."
Bristol-Myers Squibb, Ferrosan A/C and Schering-Plough
distributors told EconAsst on December 13 during the
Annual Healthcare Exhibition of Turkmenistan that the
market saturation forces them to analyze demand patterns
and concentrate on the niches where they have
competitive advantages: dissolvable cold remedies
Fervex, Efferalgan Upsa, Upsarin Upsa for Bristol-Myers
Squibb; multivitamins for Ferrosan A/C; and medical
shampoos, allergy pills and sprays, dermatological
creams, and asthma sprays for Schering-Plough.

ASHGABAT 00000231 002 OF 003




6. (U) However, according to dermatologist and STD
expert Kemal Goshlyev, in his area alone the undersupply
of vaccines, anti-virus and immune stimulation
medicines, and cancer-treatment aids is very visible.
For these medicines, he added, "It looks like one person
orders what pharmaceuticals are imported into
Turkmenistan. If a medicine is available at one store,
it is available everywhere, otherwise, it is not
available anywhere."

Distribution network
--------------


7. (U) Most pharmaceuticals are sold via the state-
owned pharmacies under the Turkmenpharmacia umbrella at
low-cost. The GOTX maintains a list of medicines that
are covered under the State Health Insurance Plan. The
plan allows patients to purchase prescribed drugs in
state-owned pharmacies at a 90% discount. The GOTX is
naturally not interested in increasing its financial
burden and prefers to receive lower-priced products,
including as payment for gas. As such, a state-
dominated system does not facilitate import of modern
pharmaceuticals.


8. (U) Black market pharmaceuticals are sold relatively
openly and in known back alley locations. DCM has been
approached by babushkas selling black-market antibiotics
and other medicines from Russia right in front of a
state run pharmacy. Likewise she and a local vet did a
tour of black market pharmaceutical outlets as the
latter looked for Russian-origin anesthetics and related
drugs to perform a simple dog-spaying procedure.
According to the vet, these pharmaceuticals were
prohibitively expensive to buy from the state-run stores
and frequently were unavailable.


9. (SBU) Western pharmaceutical manufacturers
distribute via sole, private-sector distributors.
These, however, encounter a number of barriers that
prevent them from meeting fully the market demand:

-- Barrier 1: Political agenda. The GOTX is infamous
for under-diagnosing a number of serious diseases such
as tuberculosis, hepatitis C, HIV/AIDS. This de facto
policy impedes pharmaceutical traders from listing and
subsequently selling medicines for such diseases.
Vaccination is the responsibility of the government;
private importers are discouraged from getting involved.

-- Barrier 2: High costs and risks. The GOTX stringently
regulates the market. Pharmaceutical businesses are
subject to licensing, and every imported pharmaceutical
item is required to be listed, at a cost of $1,400.
State-owned pharmacies do not have to obtain licenses.
In addition, transportation of certain medical
categories, including vaccines, requires special
conditions and is expensive. Individual private
pharmacies typically lack the size or scale to
participate in their commerce.

-- Barrier 3: Currency Conversion. Only the ingenious
can find their way around the GOTX's barriers to private
sector access to hard currency. Currency-conversion
problems left even Turkmenpharmacia and a former self-
financing division of the Ministry of Health Medical
Industry Inofarm with a debt of $10 million accumulated
from 1997-2002. Former representative of Schering-
Plough (1994-2002) and now owner of the private company
Dertdesh and sole distributor of Schering-Plough
medicines Murad Khalmukhamedov told EconAsst he pays
manats to a third offshore company that sells
Turkmenistani products overseas for USD. The dollar
revenue is used to settle accounts with Schering-Plough.

Comment
--------------


10. (SBU) The dominance of the state-owned distribution
channels, extensive subsidies for the sale of
pharmaceuticals at state prices, and the political

ASHGABAT 00000231 003 OF 003


agenda of the GOTX impedes private pharmaceutical sales
growth and restricts private sector decision making,
both directly and indirectly. Turkmenistan is supposed
to receive the last batch of in-kind payment for gas
from Ukraine in the first half of 2006. Health-care
specialists here tell us that perhaps half the medicines
in state pharmacies currently are made in Ukraine. It
might thus seem a likely presumption that the end of the
Ukraine barter arrangement will propel drastic shortages
of drugs, especially in light of the GOTX's consistently
dropping healthcare expenditures. However, most of
those same specialists actually do not seem to expect
such shortages to occur. They predict that various
other ingenious unofficial channels will arise for
obtaining and importing the same (large-scale but
limited) categories of medicines. End Comment.

JACOBSON