Russia: The Rise (and Fall) of Healthcare - Pharmaceutical Executive


Russia: The Rise (and Fall) of Healthcare

Pharmaceutical Executive

Developed World Players Buy In

Top-20 Manufacturers in 2006
After the azithromycin breakthrough, PLIVA changed its strategy to focus exclusively on its generics business. Barr Laboratories saw tremendous value in the company's long-standing presence in Central and Eastern Europe and acquired PLIVA in late 2006 to create the third-largest generic pharmaceutical company in the world, with revenues in excess of $2.5 billion. PLIVA will remain the name of Barr's generic business outside of the United States, and the company will continue to focus on Europe and Russia.

Alojz Pungarsek, PLIVA's country manager – representative office in Russia, is excited about the situation: "There is minimal overlap between the two companies, something very difficult to find in the industry," he says. "This is a pure synergy - it is one of the best acquisitions ever made in the history of pharmaceuticals." Pungarsek aims to move from top-25 status in Russia to the top-10 as a leading market in the combined group within five years, in part through the introduction of a broader range of value-added products from Barr.

Paying a Premium for Trusted Brands

Since the quality of drugs is a concern, Russia is a market where people will pay more for recognized brands and quality. Even though generic prescribing by international nonproprietary name (INN) is mandated by law, it is not fully applied. Tavinder Jit Singh Vasudeva, country head for Ranbaxy, forecasts: "The Russian market will stay brand-oriented for a minimum of five years, simply because medical professionals know more about brand names than INNs."

President Vladimir Putin (center) and Jerzy Starak(left), owner of Polpharma, during Putin's visit to Poland in 2002.
Pungarsek adds, "the concept of marketing in the branded generics industry is absolutely the same as it is in the innovative industry in Russia. From time to time, it happens that branded generic products are even more popular than the originals against which they compete."

"In Russia," says Pungarsek, "brand promotion and marketing policy are in fact the most important consideration, more even than a company's pricing policy. As a result," he says, "we will continue to invest heavily in PR and branding and promotion of the PLIVA name and products." This makes particular sense since many people believe that the price of branded generics in Russia, one of the few true premium-price markets left in the world across a wide range of consumables, is among the highest in the world.

Plus, the expectation that Russia will shift back to a commercially driven market in the next few years, especially as private insurance becomes more prevalent, certainly bodes well for concerted marketing efforts in Russia.

Buying Russian Market Share

Many international companies are intent on picking up a suitable local player as a way to gain a foothold in Russia. Most real interest has come from generics companies looking to be first to the Russian market with first-generation generics. Oleg Feldman, general manager of COMCON-Pharma, a leader in ad hoc studies, sees buying local manufacturing capacity as the equivalent of buying market share.

This year, Iceland's Actavis acquired ZiO Zdorovie, and Polpharma -Poland's largest producer of pharmaceutical substances-won the contentious bidding process for Akrihin. Many companies clearly believe that Russia's pending World Trade Organization (WTO) succession talks will not keep authorities from looking favorably upon domestic producers.


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Source: Pharmaceutical Executive,
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