VZCZCXRO7629
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHAH #0231/01 0551108
ZNR UUUUU ZZH
R 241108Z FEB 06
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 7031
INFO RUCNCIS/CIS COLLECTIVE
RHMFIUU/CDR USCENTCOM MACDILL AFB FL//CCJ2/HSE/CCJ5//
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC//J5/RUE//
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC

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