Russia Report: Build and Create: The Reinvention of a Screwdriver Assembly Industry

Nov 01, 2011

Artwork by Vladimir Chaika provided by Boehringer Ingelheim.
Gennady Shirshov, executive director of the Society of Professional Pharmaceutical Organizations (SPFO), was recently a guest on a national television program. "You might know," he starts, "that many such programs are strictly controlled by the government."

Shirshov continues: "All of a sudden, in the middle of the session—and it was live!—they started asking these ugly questions about integrity; about why a government official would promote a specific drug, and things of that nature. I could not believe it. And the fact that it was being spoken about, live, on a government-controlled program, is a great sign of where we are heading."

Russia is a country of insistent vicissitudes—in fits and starts, through monetary crises, oil surpluses, shifts in geopolitical trade policies, corruption scandals, seasons of animated economic development, and over and again. When asked how much has changed since 2007—when Focus Reports produced its first overview of the Russian pharmaceutical market—managers, coy, simper widely. Where, really, to begin?

For investors, the central indicator should perhaps be attitudinal. The general manager of Pierre Fabre in Russia, Pavel Chistyakov, offers simple words: "Do not be afraid of the Russian market." It is an invitation, a reassurance, a solicitation, and—even this—a warning. No aspirational multinational, nor hitherto self-effacing domestic player, can afford to be bearish about Russia. Not anymore.

Andrew Somers, AmCham President & CEO
And is there anyone now afraid of the Russian market? International industries are veritably jostling for position here. Russians themselves are upending their image problem; the country is "on the verge of breaking away from its past and entering the global economy with full sail," maintains the president of the American Chamber of Commerce in Russia, Andrew Somers.

There are caveats; Somers goes on: "Russia is the largest market not yet in the WTO, which can intensify certain trends towards 'over-nationalism' and isolation. And moving forward, the country needs to diversify its economy and one of the priorities needs to be the pharmaceutical and healthcare sector."

Gennady Shirshov, SPFO Executive Director
Pharmaceuticals and healthcare, indeed, are starting to enjoy the very highest of priority. Both President Medvedev and Prime Minister Putin are regularly seen, across all forums and media, speaking with impassioned gravel about improving the state of the healthcare system, and boosting the productivity of the domestic pharmaceutical industry.

As Frank Schauff, CEO of the Association of European Businesses (AEB), notes, there is no other choice. "This industry is a political priority here, and rightly so. When you consider the demographic situation in Russia, the statistics with regard to healthcare, and the pharmaceutical environment, the circumstances are quite disconcerting. In a country where life expectancy is very low in comparison to European neighbors, and where we are still battling communicable disease on a wide scale, things have to be done."

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