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

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Russia: The Rise (and Fall) of Healthcare


Pharmaceutical Executive


Polpharma established Russian operations only five years ago with the objective of selling cardiovascular, gastroenterological and neurological branded generics and OTC products. When Marina Veldanova joined Polpharma Russia as managing director in July 2006, she arrived equipped with experience from AstraZeneca and OTC leader Berlin-Chemie Menarini. Polpharma owner Jerzy Starak split the CIS and Russia businesses, and Veldanova now reports directly to the new CEO. Russia might not be number-one based on current sales - since we account for 10% of all Polpharma sales with $20 million in sales in 2006 - but we are number-one based on ambition and market growth potential in a $350 million company, she claims.

According to Veldanova, it is possible to change both patient and doctor behavior towards a medication just by applying the proper marketing tools, mostly in the branded generic market. In line with this thinking, Veldanova has opted to focus on launching the first-ever OTC campaign in Russia with TV spots.

Her contention is that direct-to-consumer marketing guarantees sales. This - as well as a focus on less-crowded space like neurology - is the right strategy to prevail with a fairly small and unknown product portfolio, says Veldanova.

Any doubt of Polpharma's focus on the potential of Russia was removed in March, when the company outdid itself (and its 75thplace commercial market position in Russia as determined by DSM Group). They succeeded where other larger companies like Ranbaxy had failed in acquiring a majority stake in Akrihin, a top-five Russian pharmaceutical manufacturer that achieved a turnover of more than $60 million in 2006.

Neither Asian nor European

Constant adjustment of operations and strategies is characteristic of the unpredictable Russian market. The result is Russian managers have to be imaginative in shaping their companies' future.


Actavis and ZiO Zdorovie see the sky as the limit
According to Jonas Tryggvasson, Actavis' Russian-speaking executive vice president - Central/Eastern Europe and Asia, the recipe for success in Russia is as unique as the country, a proud nation that is neither Asian nor European and has its own soul. We have to put in the time to penetrate the cold façade of this kindhearted nation.

Tryggvasson pioneered development in the region for Actavis, and Russia is now the largest, most important and fastest-growing geographic area for the Icelandic generics powerhouse. Russian sales now exceed $70 million.

While its Russian representative office was only established in 1999, Actavis cemented its long-term interest in the region through the acquisition of a $60 million, 51% stake in ZiO Zdorovie in November 2006. Tryggvasson explains the move: This is the best company I've seen in Russia. They have built the site from scratch with Western European design and the most modern equipment. This may be the only ISO (International Standards Organization) and European GMP (Good Manufacturing Practice) certified facility in Russia.

After trying out the relationship through a secondary packaging of selected products for joint promotion starting in May 2006, Tryggvasson was pleased. It seemed that we were a very good fit-they have a good-quality production site, and we have a good quality product line and new product pipeline.

For Actavis, the move has opened doors to preferential sales opportunities with government-funded programs. We expect more pressure from the government to produce locally, says Tryggvasson. It's not only about basic job creation but also about security of supply, consistency and bringing high-tech jobs to Russia. You can find cheaper products in places like China and India, but Russia is not about that; it's about consistency, quality and going forward.

In a market that has one of the highest low-cost generic drug penetration rates in the world (70% by volume), Tryggvasson is taking aim at the more novel, more modern and higher-priced sector, "where price erosion has not caught up yet." He hopes to tap into recent global acquisitions that bring in advanced controlled-release products and cutting-edge oncology generics to create a unique market opportunity in Russia. "We want to play with everything that is advanced, good-quality, makes profits, and can be first to market or unique in some way."


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