Kazakhstan’s pharmaceutical paradox: policy vs. reality

Kazakhstan’s pharmaceutical sector has found itself caught in a systemic contradiction. The government demands greater contributions from business, speaks of large-scale import substitution, and sets ambitious goals: by 2029, local manufacturers should account for at least 50% of the domestic market. Yet in practice, the support mechanisms often work the opposite way. Tools meant to encourage growth turn into instruments of pressure, while audit findings deepen the contradictions and erode investor trust.

The numbers paint a paradox. In monetary terms, domestic companies hold just 15% of the market (₸171.6 billion), but in physical volume their share is close to 30%. Most of the medicines and medical products produced in Kazakhstan are in the low-cost segment. Imports dominate the higher-priced categories, effectively shaping the market structure.

Half of the pharmaceutical market runs through public procurement. Here, local producers hold about 30% by value (₸146.5 billion) and 70% by packaging volume. That sounds impressive. But the catch is that their share is locked in the lowest-value segment. Producers generate volume, but they cannot compete in price and income structure.

The President’s target of 50% by 2029 was meant to drive change. It reflects national security concerns, especially after the pandemic, when Kazakhstan realized how dependent it was on foreign supplies. But instead of consistent support, the reality is a system where stated ambitions and real actions don’t align.

The main support mechanism is long-term contracts under the “market in exchange for investment” model. In theory, it’s a win-win: businesses build factories, modernize production, purchase equipment and raw materials, while the state guarantees sales. But in practice, contradictions emerge.

Auditors reported that in 2024, only 16.4% of domestic manufacturers (34 companies) secured such contracts. Oversight through SK-Pharmacy, the state distributor, was found ineffective: inspections are irregular and mechanisms don’t work. Moreover, 14 producers were cited for violations, leading to contract terminations.

At first glance, the conclusion seems straightforward: low coverage, weak oversight, unfulfilled obligations. But this view is one-sided. It focuses only on business while ignoring the state’s role.

Analysis by the Association “PharmMedIndustry of Kazakhstan” shows most delays stem from regulatory procedures. Of 8 long-term contracts covering 7 producers and 75 product positions (12 medicines and 63 medical devices), the breakdown was: 42% of delays due to registering maximum prices, 38% to product registration, 7% to clarifying specifications, 7% to absence from the distributor’s list, and 6% to extensions of patents for original drugs.

The critical point: producers fulfilled their obligations. Factories were built, equipment installed, raw materials purchased, and production capacity prepared. But delays happened at the bureaucratic stage. Yet the audit almost completely overlooked the government’s responsibility for these disruptions.

This creates a paradox. The audit points to low contract coverage and risks of missing targets, but at the same time supports terminating contracts-even when delays were caused not by producers, but by state procedures. Businesses invest billions, meet their commitments, and then lose their contracts.

According to producers, total investment under these contracts has reached about ₸8 billion. These are real investments in facilities, equipment, production lines, and raw materials. All of this is jeopardized when the state fails to fulfill its side of the bargain.

Another consequence: once a contract is terminated and re-tendered, domestic products won’t hit the market within a year but rather in 4–5 years, the time it takes for new entrants to build, equip, and certify their plants. Until then-import continues to fill the gap.

As a result, the “market for investment” model, designed to stimulate growth, turns into a source of uncertainty. For business, it threatens return on investment. For the state, it risks losing the trust of both local and foreign investors.

If this approach continues, the 50% market share target by 2029 will remain out of reach. Kazakhstan will stay dependent on imports and, in times of crisis, risk shortages of essential drugs. The pandemic already showed how vulnerable this dependence can be.

Investor confidence is also at stake. Companies that have already invested see that even fulfilled commitments don’t guarantee stability. For investors, this is a clear signal: the rules of the game in Kazakhstan can change at any moment. And without trust, there will be no new money for facilities, technologies, or skilled labor.

In the end, stated goals and actual actions contradict one another. The government declares its intent to expand local production, yet cancels contracts with the very producers that make this possible. Businesses build factories, import equipment, and stock raw materials, but find themselves trapped by regulatory delays. The audit records the facts but looks only at one side.

Unless actions are aligned with objectives, Kazakhstan risks repeating past mistakes. Import dependence will persist, investor trust will erode, and the ambitious 2029 target will remain just words. For the country, this is more than an economic problem-it is a matter of national security.