The Russian Pharma 2020 strategy, set up by ex-President Vladimir Putin in 2009, aims to strengthen the local pharmaceutical industry with a series of protective measures including the ruling that at least 70% of all drugs must be manufactured on Russian soil.
Former Director of External Supply for GlaxoSmithKline, Jim Browne, said this, coupled with the Government's projected industry growth of a staggering 75% to $35bn by 2020, represents huge opportunities for local contract manufacturing organisations (CMOs) as international pharma firms attempt to get their products into the market.
Browne told delegates at the Global Pharmaceutical Contract manufacturing (GPCM) Conference in London, UK last month there are basically three ways foreign firms are dealing with the legislation:
“Either you license your product to someone who manufactures it themselves, you contract manufacture it or you build your own site.”
Cheaper Manufacturing Options?
The high costs associated with building your own facilities are further impaired by Pharma 2020’s “strict price referencing control,” Browne added. With Government controls applying to all products on the essential drug list as well as those products where generics are available, sale prices are not freely movable and return on investment may be an issue.
Therefore, Browne said, “many companies are wary of making big investments themselves,” and so the opportunity stands for local producers to offer their manufacturing services to a range of companies.
However, foreign companies need to be certain of Russia’s rules. “Pharma 2020 is not suitable for foreign companies,” Dr. Petr Denisov of Russian firm Synergy Research Group told this publication. “Manufacturing of any drugs locally in Russia does not bring the status ‘local manufacturer’” to the foreign firm.
A number of firms have responded to the regulations by creating joint ventures. GSK formed a 2011 local partnership deal with Moscow-based vaccine firm, Binnopharm, who manufacture GSK’s cervical cancer, rotavirus and pneumococcal vaccines for Russia.
In another example, Germany’s Bayer teamed up with local firm Medsintez in a deal that allows them market access.
Most of the foreign CMOs that have tried to enter the Russian market have also chosen the partnering route, In 2011 for example, Aurobindo created a joint venture with Russia's OJSC Diod to make OTC products explaining that the deal allowed it access to the “growing and challenging Russian market” and “fully complies with the priorities of the strategy for development of the Russian pharmaceutical industry.”
Building Your Own Doorway to Russia
Though requiring more capital, some Big Pharma firms have responded by building their own facilities in Russia. Novartis invested $500m into a new facility in St Petersburg in 2011, AstraZeneca invested $150m in a facility in the country’s Kaluga region in the same year and in 2012 Japanese firm Takeda entered the Russian market with a $96m facility of its own.
For others, the outright purchase of a Russian company can bring about access to this closed market. Polish firm Polpharma, for example, bought Russian firm Akrikhin.
External Manufacturing Manager Adrzej Hoczyk told Outsourcing-Pharma.com with the strict limitations imposed in Russia “one of the choices is to build a company there or to simply to buy it - as in our case - so you can cover this market.”