Russia's Bet on Biopharma - Pharmaceutical Executive


Russia's Bet on Biopharma

Pharmaceutical Executive

Leading from behind: Pharma 2020

Another concern is the seeming lack of coordination between the health plan and an equally ambitious program – known as Pharma 2020 – to restructure the provision of pharmaceuticals and build a stronger, internationally competitive Russian industry. "Our view is that the health plan should have preceded any program for pharmaceuticals so that the critical role of medicines in health care could be accentuated and made part of the whole," Vladimir Shipkov, Executive Director of the Association of International Pharmaceutical Manufacturers [AIPM], a key Moscow association representing the innovator segment of the industry, told Pharm Exec. "In fact, the reverse took place, which makes it more challenging to integrate the value our companies provide with the actual provision of care." The potential for added value is clearly there: despite a compound annual growth rate [CAGR] of 21 per cent between 2004 and 2012, drug consumption per capita in Russia is still much lower than in the US and other developed countries.

It is true that Pharma 2020 is more an industrial development plan than a health strategy. Adopted in 2009, it was the first formal government decree to focus on pharmaceuticals. There are two broad objectives:

1. Expand drug provision to cover essential medicines for key current and future unmet health needs; and

2. Reduce the country's dependence on foreign imported drugs by improving the international competitiveness of the Russian industry, particularly through support for new drug innovation.

The Ministry of Industry and Trade was the initial lead but now other branches of government are involved, including the ministries of Health, Economic Development, Education and Science as well as — interestingly — the Federal Anti-Monopoly Service. The program is also unique in having its own budget of approximately $4 billion to fund various projects through the year 2020.

The Push to Partner
Pharma 2020 envisions an industry overhaul in three phases. The first, which is now underway, is localization of drug manufacturing and development. The goal is to have at least 50 per cent local production by 2020, with a higher 90 per cent target set for 57 medicines deemed essential to public health and are eligible for public reimbursment. Another, less controversial objective is to encourage more international, multi-center clinical trials to be conducted in Russia through streamlined processing and approval under supervision of the Ministry of Health. In Russia, it is mandated for foreign companies to conduct some clinical trials to gain registration, and the government has pledged a target of 14 days in reviewing the protocols for these trials. Some 17 trial centers are being set up and staffed with government funds to facilitate Russian participation.

Foreigners exposed

The practical impact of the "go local" edict is that all foreign-based pharma majors that sell in Russia are being pressured to invest in local manufacturing facilities. As recently as 2011, only two such companies actually did manufacture, but the momentum is shifting – six companies [Novo-Nordisk, Takeda/Nycomed, Gedeon-Richter, Sanofi, GSK and Servier] are now producing some drugs locally, while Novartis, Teva and Astra-Zeneca are in the final building phase. Pfizer has taken a slightly different approach, offering a tech transfer for manufacture of its vaccine Prevnar to a local company, Petrovax Pharm.

The government has not been subtle. On government tenders, foreigners who manufacture locally get a 15 per cent price preference. There is confusion as to whether a packaging facility qualifies as local production – the government now says it does not, even though international customs agreements affirm the opposite. In addition, it is proposed that foreigners who do no local manufacturing be barred from local procurement when there are at least two drug alternatives from Russian sources.

And even when foreign companies are supporting the localization drive, they can still face regulatory action against their choice of suppliers and distributors – as Novo Nordisk recently did when the Anti-Monopoly Service imposed a fine on the company for what it claimed was discrimination and a lack of transparency in the awarding of supply contracts. "Expect to see pricing and procurement used as a wedge to push foreign producers to share their production skills and knowledge assets with Russia," says Andrey Novikov, a Partner in EY's Moscow practice. "It is also important to recognize that the policy is designed to help make drugs cheaper for the Russian consumer, to enable the government to support more patients and especially to those who lack any reimbursement assistance."

The second and third phases of the Pharma 2020 program address a more elusive goal: upgrading the innovative capacity of Russian companies. At present, the drug market is heavily biased toward generics, with the focus on non-proprietary INN drugs rather than so-called branded generics. It is estimated that at present less than five per cent of the innovative, patented segment of the market consists of products manufactured locally; the remainder is imported. The government recognizes that the ability to originate new medicines and raise the overall quality of supply will open the door to markets outside Russia, increasing exports and diversifying trade away from a dependence on the commodity boom and bust cycle. So by 2020, Russia wants to grow pharma exports to eight times the volume in 2008 – again, a very tough assignment.

There is much debate within the government on how to accelerate innovation, but the central concern right now is complementing localization with a domestic regime on good manufacturing practices [GMP]. This month, a new GMP rule is scheduled to take effect. It is based on the four relevant GMP Directives in force in the EU, but it is presented mainly as an interpretative document. "Our position is it's a semi-standard, which, while definitely an improvement, still falls short against the best practices embedded in the global GMP rules we find in Europe and the US," contends the AIPM's Shipkov. AIPM also wants assurances that resources will be available, particularly for site inspections. "Execution is critical," he says.

Beyond its regulatory agenda, Pharma 2020 provides seed money for capacity-building through partnerships linking academia, both in Russia and abroad; smaller Russian start-up companies; and the major drug multinationals. Skolkovo and ChemRar are prominent examples. Another, related example is Rusnano, a state-sponsored enterprise formed in 2007 and headed by the former post-communist privatization czar Anatoly Chubais. Its aim is to put Russia at the epicenter of global high-tech innovation by 2020, through selective investments in Russian and foreign companies, principally in the emerging field of nanotechnology – the science of the small – which has significant potential in medicine as a powerful new mechanism for drug discovery and delivery. Like ChemRar, Rusnano has opened a satellite operation in California to tap ideas and obtain access to venture capital.


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