Predicting the future with accuracy is complicated by the fact that the Russian market is in transition – and has been so
ever since the end of the Soviet era in 1990. The legacy of communism still exerts a subtle influence on the domestic industry,
which continues to be strong in manufacturing, packaging and other rote tasks suitable for a market characterized by inflexible
tendering and static demand. Through the 1990s and well into the last decade, much of the old Soviet system's bench strength
in fundamental research was destroyed, replaced by an emphasis on marketing to a middle class forced to purchase medicines
out-of-pocket as the government safety net disappeared.
Recent times are characterized by a return to aggressive government involvement in the sector, with a focus on import substitution
through localized drug production and the encouragement of cheap generics to address key areas of unmet medical need. Many
observers contend the business environment has become politicized, with continued domination of the market by the foreign
multinationals, as it has since the collapse of communism. Less than 20 per cent of annual sales of drugs in Russia come from
domestic producers; of the top 20 pharma companies in Russia, only one – Pharmstandard – is based in Russia [see table].
Top 20 Pharma Companies By Sales 2012
Predictably, the government has focused on subsidizing physical plant and trophy-like infrastructure rather than repairing
the less noticeable gaps in science and human capital created by several decades of political upheaval. "There are numerous
disconnects in the pathway from academic science to pre-clinical development and then commercialization. Nothing in Russia
today offers a complete way from the laboratory to the practicing clinician," said Alexander Bakhutashvili, lead scientist
for the Innovation and Technology Center at the Russian Academy of Sciences
Professor Alexander Sobolev, a fellow researcher at the Academy of Sciences Institute of Gene Biology, agrees, noting the
importance of a competitive, grant-based system for funding preclinical studies similar to the U.S. National Institutes of
Health [NIH]. In fact, Sobolev, who is also the first recipient of the Prix Galien Best Research in Russia award, attributes
this success to a NIH grant he obtained jointly with Duke University scientists on the application of nanotechnology to create
potent and effective drug delivery systems that attack cancer cells.
New health agenda
One important development is the evolving national consensus on investing in health. An Executive Order implementing a "2020
Healthcare Development Concept" was signed in May 2012 by Vladimir Putin as the first official act of his new term as President.
Long in coming, it is the embodiment of an earlier commitment by Putin in 2005 to make health care a national priority. By
2020, the program commits to stabilizing Russia's declining population at 145 million; raise average life expectancy at birth
to 74 years [the current average for men is 63 years, which puts Russia 144th among the 194 WHO member countries]; cut mortality
rates in half against the benchmark year 2007; and reduce the rate of smoking and alcohol use by 25 per cent and 9 liters
per capita, respectively. More important, it promises to improve the quality and availability of basic health services by
increasing national public health care expenditures to nearly $300 billion, or roughly quadruple the level of 2009.
Here, Russia is clearly in a catch up phase, given that total health spending is only six per cent of GDP, compared to the
OECD average of nearly 10 per cent. "What is still fundamental about health in Russia is that patients bear most of the cost
burden–two thirds of spending is out-of-pocket," notes Anton Artyomov, head of Aston Consulting, a Moscow-based market research,
analytics and intelligence firm. "Today, we have a much more commercialized system. What this means in practice is public
oversight is sporadic, transactions are not very transparent, it is hard to account for costs, and the quality of care and
professionalism outside major urban centers is quite low. "
Is the Health Concept plan on track? Most observers say it's hit or miss. Adds Artyomov, "the focus is always the next budgetary
cycle rather than incorporating any long-term perspective. In my view, the government is not interested in health as a social
policy priority." This is despite officially sponsored research that has established a direct link between increased mortality
and disability since the fall of communism and lower economic growth. In 2007, for example, health system failures affecting
the Russian population were estimated to have slashed GDP that year by nearly a fifth – or $270 billion.
Among the issues cited around the plan is sketchy execution due to inter-governmental rivalries and a lack of trained personnel.
More important, fiscal constraints caused by the global slump in commodity prices means that health financing has fallen below
target; government funds are also being siphoned off for other, largely political purposes.