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Ailing pharmaceuticals producers look for state support
Published: 14 September, 2009, 10:36
Edited: 02 March, 2010, 04:02
TAGS: Investment, Manufacturing, Markets, Russia and the global economy
The Russian government is trying to revive the domestic pharmaceutical industry with calls to reduce reliance on imports.
A cure for pharmaceutical industry. The income of domestic drug producers fell to just 21% of the $5.5-billion-dollar market in the first half of this year. The Russian government prescribes an import-substitution program.
If you count the “number of packs” – Russians producers are in the lead. They sold almost 70% of all medicines in the country. But that’s because they are much cheaper. The only way to make the industry profitable is to push foreigners out of the market.
But why do pharmacies and distributors prefer imported medicines? Experts such as Aleksandr Kuzin, General Director of DSM Group, say it’s just a matter of profitability.
“For a pharmacy it’s more gainful to buy expensive medicine – and it really doesn’t matter where it was produced. Expenses are the same, storehouses are the same, but the income is bigger.”
In the first half of 2009, 94% of the money from a state program to provide free medicine for needy citizens, was spent on foreign drugs.
Viktor Dmitriev, CEO, of Russian Pharmaceutical Manufacturers Association, blames unfair competition, bureaucratic barriers and lack of real state support.
“There should be replacement at the level of sales. The industry is available to replace most imported drugs, but we are waiting for state support.”
Experts say a state offer could be just a temporary measure. Aleksandr Kuzin says the remedy to revive the national pharmaceutical industry could come from abroad.
“I think we can’t create giants such as Pfizer or Novartis in our country. We should behave as we do with car makers – invite leading foreign companies to produce their medicines at our plants.”
However, there is one more recipe for producers to become profitable – to export drugs. So far, they have not risen to the challenge.
11.09.2009, 18:17
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There are some key strtegic industries for Russia, health is one of them and Pharmaceuticals is an essential part of that. We absolutely need save and deveop this industry, both as a stategic domestic asset and then in the future as an export potential. However, we need go step by step, and step one is saving. However, we will save nothing by throwing good money after bad, that means we must make sure that we really analyse the market (domestic first) and put in place a cutting edge industry to deliver the modern drugs we need in an efficient way. This actually may mean importing machinery and process in the short term, but that is all part of the analysis and action plan that needs to be drawn up. Basically we need this industry, and it will cost us money to set it up properly. This money has to come partlly from the state. The heatcare debate and taxation is a huge one. There is an over use of drugs, and there is no real requirement and need, that the sate should be the captive buyer for all drug output. A model that drives ever increasing taxation to cover the expense of it. But in my mind there is a need for universal emergency treatment for all, plus universal healthcare for children, provided by the state. So the state will inevitably have to be a smart buyer in these areas. for the rest there is a huge debate possible, part of which is happening in the US right now and is outside the scope of this comment. But hey RT, why don't you put something up on healtcare in Russia for the future. I want to debate it in a Russian context!
Before jumping to the level of exports --- let's go back couple of paces. It is almost unbelievable that Russia has not placed more emphasis on domestic production. All richest countries in the world subsidize quite heavily the research, development and market protection for domestic drug producers. For one, one has to keep in mind the costs to the public. Since the cost of the medication is passed down to the taxpayer, it is essential that the damage of counterproductive importing is reversed.
I don´t agree that Russia cannot have a "pfeizer" or a "novartis". After all, Switzerland is an small country and they have big corporations. Russia needs consolidation of its pharmaceutical industry and concentrate its resources and research in several innovative products where they can lead. If a consolidated Russian pharmaceutical company can do that then Russia will have its "novartis"...and then the Russian market could be completely open to foreign companies. For South Korea, Spain or France some "national champions" have been extremely successful while others (like Bull computers in France) have failed. Some Russian industrial corporations will succeed while others will fail.