Expanding national production, promoting innovative research and increasing the export of medicinal products fivefold - the new development strategy for the Russian pharmaceutical industry up to 2030 sets ambitious goals. According to the authors of the draft strategy, Russia needs to become independent from the import of medications and ensure national security despite sanctions and possible conflicts. How can these goals be achieved and who could benefit from them?

There are different opinions on the topic. At the BIOTECHMED forum, which took place on October 4 and 5, 2021 in the Russian resort area of Gelendzhik, a new draft of the development strategy for the Russian pharmaceutical industry leading up to 2030 ("Pharma 2030") was presented. The strategy is to be finalized in December 2021, explained Vasily Osmakov, Deputy Minister of Industry and Trade of Russia. The project took into account experiences from the coronavirus pandemic, in particular the successful approval of the world's first vaccine against Covid-19 called "Sputnik V" in such a short time, as well as the approval of other drugs against the infection.

The development of the Russian pharmaceutical industry is characterized by Russia's national security

The common thread of the strategy is import substitution and national security. In a report by the news agency RBK with reference to the draft strategy, Russian pharmaceutical manufacturers must be able to guarantee the production and supply of strategically important medicinal products. To achieve this, the entire chain of production must be available domestically, including the development of active ingredients. Today, raw materials are mostly imported to Russia from abroad, primarily from China. However, for environmental and possibly other political reasons, the Chinese government is restricting production and exports, leading to price increases and considerable risks for the Russian pharmaceutical industry. According to the draft strategy, only 63.7% of pharmaceuticals sold in Russia were produced domestically in 2018 in terms of volume, or 30.6% in monetary terms. The aim is to increase the proportion of nationally produced medicines to 73.5% in volume terms and 61.6% in nominal terms by 2030. An additional aim is also to have at least 50% of reference standards produced in Russia by 2030.

Domestic pharmaceutical producers are preferred in Russia

The Russian government is also pursuing another goal: they aspire to make Russian pharmaceutical industry become more innovative in the future and to be able to offer medicines developed in Russia on  national and international markets. The production of generic medicine will become less and less profitable, as it will not be possible to keep up with manufacturers from South East Asia in this area. Today, brand-name drugs only account for approximately 5% of the market. According to the draft strategy, this figure is expected to at least triple by 2030. Administrative and economic measures are planned, e.g. the promotion of export production (reimbursement of costs and reduction of bureaucratic hurdles), support for specialist training and much more. In addition, the so-called "national before foreign" regulation (the literal translation of the Russian regulation "второй лишний" into English is "the second is superfluous") is planned. This would mean the following: In the event of participation by pharmaceutical manufacturers based in the EAEU area in tenders for state-funded contracts for the purchase of pharmaceuticals, all applications from foreign manufacturers will be compulsorily rejected. Whether such a protectionist measure would be sustainable for the Russian pharmaceutical market remains to be seen. On the one hand, the following phenomenon can often be observed in countries where the economy is strongly driven by politics and less by the market itself: If the "domestic" manufacturers are virtually guaranteed orders and competition is virtually eliminated, this comes at the cost of quality. On the other hand, it cannot be ruled out that products from foreign pharmaceutical manufacturers could also be taken into account when distributing government orders if they are produced in Russia or other EAEU states. In any case, the government is clearly prioritizing domestic producers and will provide them with incentives respectively.

However, there are further calls for protectionist measures from the business community. "In order to promote the research and development of new drugs, it must first be made clearer who can be considered a domestic manufacturer of active ingredients," says Aleksandr Semenov, President of the Russian joint stock company Aktivny Komponent. According to Semenov, Russian law allows companies to be classified as domestic active ingredient manufacturers that "merely carry out such steps as drying, weight loss through spillage, repackaging of foreign active ingredients" and adds: "In this respect, they are on a par with producers who invest a lot of money in the development and production of their own active ingredients."

"Pricing also needs to be optimized at the state level," believes Dmitry Kudlai, Chairman of the Board of the EAEU Association of Pharmaceutical Manufacturers, adding that currently, any foreign producer can get on the list of essential medicines by reducing the cost of an annual therapy by two to three percent. In many countries in the Middle East and Southeast Asia, Russian manufacturers have to reduce their prices by at least 25 percent to make it worthwhile for a foreign producer to be approved for these countries. To Mr. Kudlai's regret, however, there is no such regulation in Russia.

In the black, ambitious targets

The strategy has yet to be defined, but the Russian statistics authority Rosstat is already reporting a significant increase in pharmaceutical and medical production. According to the statistics, the Russian industrial production index in the field of medicinal products and materials for medical purposes grew by 16.5%  the period from January to August 2020 compared to the same period in 2019, and in the period from January to August 2021 - by 21% compared to the same period of the previous year. Russian exports of protective and medical products rose from 114.6 million USD in 2019 to 162.9 million USD in 2020 due to the increased demand for Russian protective products during the pandemic and the successful promotion of the Sputnik V vaccine. These are exports to the Latin American and Asian markets. Despite their best efforts, Russian pharmaceutical manufacturers have  still barely been able to establish themselves in the EU and the USA. The approval process for "Sputnik V" by the EMA has also been stalled repeatedly due to various organizational and political obstacles.

Overall, it seems as though the prospects for the Russian pharmaceutical industry are good. However, the draft strategy also mentions problems. According to the draft strategy, one of these is the lack of trust in Russian medicinal products on the part of patients and doctors. The population prefers foreign products to domestic ones because they are convinced of the higher quality of imported medicinal products compared to Russian ones. One proposal made by the authors of the draft is a large-scale information campaign to highlight the advantages of domestic medicinal products. Whether this will succeed remains to be seen: even the COVID-19 vaccine "Sputnik V", which was even reported on by the renowned scientific journal Lancet in which its high effectiveness against COVID-19 was highlighted, “Sputnik V" enjoys very little trust in its own country, which is also due to the low vaccination rate in Russia.

Image: Serge Kutuzov, unsplash.com