Insufficient funding and structural deficiencies are likely to be insurmountable obstacles in the realisation of Russia's Pharma 2020 strategy goals.
IHS Global Insight Perspective | |
Significance | The realisation of the goals in Russia's Pharma 2020 strategy is being put under threat by insufficient funding and ongoing structural issues in the country. |
Implications | The Russian authorities are impatient and want to reverse the trend of Russia's reliance on foreign imports of pharmaceuticals, but this is unlikely to be achieved without deeper changes in the country. |
Outlook | Imported pharmaceuticals look likely to remain dominant on the Russian market beyond 2020, while the issues of insufficient funding for the development of new innovative products and the wider structural challenges in the country remain insufficiently addressed. |
Pharma 2020 Strategy Too Ambitious
The Russian government's "Pharma 2020" strategy to develop the domestic pharmaceutical industry, with its stated aim of facilitating the development of at least 20 new innovative pharmaceutical products by domestic producers by 2020, is unlikely to be fulfilled, according to experts quoted by Russian business news source Ekonomika i Vremya.
Ekonomika i Vremya reports that experts on the Russian pharmaceutical industry are questioning the ability of the domestic industry to realise the ambitious goal from the Pharma 2020 strategy of developing 20 wholly original new medicines by 2020. Considering the fact that originally, only USD3.5 billion was made available for this purpose, and that as the source reports, the cost of developing a new medicine is likely to reach around USD1 billion in the near future, there is a significant financial obstacle to the strategy's realisation.
Domestic Producers Concerned About Marketing Costs
Notwithstanding the costs of developing new originator medicines, Russian pharmaceutical companies are also reported to be worried about the costs of marketing any new drugs they might develop; this is in view of the very strong position of international companies' products on the Russian market. Furthermore, there are reported to be additional obstacles; Dmitry Morozov, chairman of the board of directors of Russian biotechnology company Biocad, is reported by the source as saying that according to information revealed by the Russian Federal Antimonopoly Service, around 1,500 Russian doctors are on the payroll of large pharmaceutical companies, meaning that they are unlikely to prescribe other companies' products.
More Concerns About Pharma 2020
Although there has been progress in the implementation of the Pharma 2020 strategy, there remains some considerable scepticism on the part of analysts, reports the source. The authorities in St Petersburg have been among the most active in attracting new investors to the city's pharmaceutical cluster, which offers reduced tax rates (13.5% instead of 18%) and an exemption from property tax. The two largest Russian pharmaceutical companies—Pharmstandard and Veropharm—have not opted to become involved in Pharma 2020 though. Furthermore, according to Sergey Shulyak, the director of Russian pharmaceutical market analysts DSM Group, quoted by Ekonomika i Vremya, regional leaders responsible for choosing participants in the Pharma 2020 strategy have most likely been guided by financial opportunities rather than the sound, scientific basis of the projects proposed.
Wider Problems
Igor Kamenev, the director-general of Russian plant-based medicine producer Narodnaya Medicina, is quoted by the source as saying that the problem the Russian pharmaceutical industry faces is much greater than simply a financial one, pointing to the fact that copyright protection in the country is weak, which means anyone with a new product that they would like to patent would be inclined to leave Russia in order to do so. He is reported as saying that the entire environment surrounding scientific innovation needs to change alongside the investment that is taking place.
Outlook and Implications
Russian prime minister Vladimir Putin announced in December 2010 that the amount to be made available for the development of new innovative medicines in Russia would be increased to USD4 billion (see Russia: 9 December 2010: PM Promises Up to US$4 Bil. for Russian Pharmaceutical Modernisation). In spite of the large amount being committed by the state, however, as well as the not inconsiderable sums being put up by local authorities and private investors, and even bearing in mind that the costs of drug development would be considerably lower in Russia than in the West, it is unlikely that the timescale for the completion of these projects to develop innovative drugs will be adhered to.
Russia's authorities are keen to reverse the trend of imported pharmaceuticals accounting for a vast majority of the country's market. Under the Pharma 2020 programme, the first phase—from 2009 to 2012—is set to involve the localisation of drug manufacturing and development in Russia. This is progressing well, with many international companies announcing the construction of production facilities or the launching of joint development projects with Russian partners. The second phase of the strategy, which runs from 2013 until 2017, is set to involve the boosting of the production of pharmaceuticals—both generic and innovative—by domestic companies. Various companies and institutions have announced projects to develop many new drugs during this period, which precedes the final phase, in 2018–20, when Russian pharmaceutical companies are due to start a new phase of pharmaceutical exports.
As the above report shows, however, the chances of the strategy being fulfilled are certainly diminished by the relatively small amount of money being made available and the underlying structural challenges that remain to be addressed sufficiently.