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Although perhaps better known outside its borders these days for foreign policy moves, Russia has quietly become one of the most dynamic market access environments this year as President Vladimir Putin has sought to generate popular support via healthcare endeavors. Moreover, he’s sought to build up Russia’s domestic pharmaceutical manufacturing base to encourage self-sufficiency, and guard against currency volatility and sanctions.
Speaking at the Russian Popular Front’s forum for Quality and Affordable Medicine in September 2015, Putin reiterated Russia’s domestic manufacturing goals, as outlined in the Pharma 2020 strategy, and updated on the success of the strategy thus far. Pharma 2020, launched in 2009, asserted the development of a strong domestic pharmaceutical industry as a top political priority for Russia. The core goal of Pharma2020 is an ambitious desire to raise domestically produced drugs’ market share from 22% of sales in 2010 to 50% by 2020. Furthermore, drugs manufactured in Russia should account for at least 90% of drugs on the List of Vital and Essential Medicines (ZHNVLP). Lastly, the initiative aims to launch an import substitution policy that would see Russia producing highly innovative drugs that currently have no Russian-made equivalents. Basically, the goal is self-sufficiency for Russia.
The stark need for such a strategy was highlighted in recent years, as the oil crisis devalued the Russian ruble. The economic crisis saw some foreign manufacturers cut production of certain medications, as the ruble devaluation and strict state pricing eviscerated profit margins.
In order to achieve the goals of Pharma 2020, the strategy has been split into three phases. The first phase lasted from 2009-2012, and focused on the construction of new manufacturing facilities and investment in R&D. The current phase spans from 2012-2017 and is the focused on the domestic production of generics, the implementation of an import substitution policy and progress towards pharmaceutical self-sufficiency. The last phase, from 2018-2020, will see the strategy shift focus towards export growth.
Pharma 2020 came at a crucial time for Russia, but has it been successful? Putin certainly thinks so. At the Quality and Affordable Medicine forum, he informed the enraptured audience that Russia was on pace to localize 90% of medicines currently in use in Russia by 2018. The signs are positive for Russia’s domestic industry. The 2012 ZHNVLP list contained 567 drugs, with only 93 manufactured in Russia and 267 as joint ventures between Russian and foreign companies. The December 2014 list includes 608 drugs, 413 of which were locally manufactured.
Putin did reiterate that Russia’s competitiveness in its own pharmaceutical industry will not be achieved with harsh protectionist measures. Instead of banning or prohibiting certain medicines or devices, the government aims to achieve success via import substitution and fostering the nascent domestic industry, especially when it comes to innovative drugs. In January 2015, in part a response to the currency crisis and as part of the second phase of Pharma 2020, the Ministry of Health announced that plans were underway to set up domestic production for 12 drugs that were currently only available via import. Furthermore, they announced that plans were underway to create 10 domestic forms of oncology drugs to replace currently used foreign brands.
Evidently, the second phase of Pharma2020 has been ticking along nicely. A flurry of legislation has been introduced in recent years (details of which can be found in DRG’s GMAS Russia analysis). Legislation ranges from cash subsidies of up to 50% of the cost of production for companies manufacturing new drugs, to tighter definitions on what constitutes a Russian-made drug, to legislation obstructing the participation of foreign companies in public tendering.
Some consider Putin’s vision for the Russian pharmaceutical industry to be unrealistically ambitious, perhaps even unlikely. However, even if the pharmaceutical industry fails to meet the admittedly challenging targets, the government has clearly articulated its determination to expand domestic manufacturers’ shares of the Russian market, and will continue to do so beyond 2020.
Russia’s domestic focus certainly presents a challenge for foreign competitors, but they should not entirely dissuaded from the Russian market. Instead, foreign manufacturers should see this as an opportunity to invest more directly in Russia, as many have. Since the introduction of Pharma 2020, manufacturers – including the likes of Pfizer, Novartis, Roche and others – have announced plans to open manufacturing plants in Russia and to form partnerships with Russian companies. The Russian market presents a lucrative opportunity for pharmaceutical manufacturers, and foreign manufacturers are better off working within the system instead of eschewing it.
Additional information on market access in Russia and other countries can be found at Decision Resources Group’s Global Market Access Solution.