Russian pharmaceutical market continues to attract foreign investors

14 February 2013

The Pharma Letter

The Russian pharmaceutical market will continue to attract foreign investors in the coming years, due to steady growth rates, which are significantly higher than those in the Western markets, and the existence of the state program for the development of the country’s pharmaceutical industry until 2020, which is known as Pharma 2020. Analysts estimate that, by 2020, the Russian pharmaceutical market is expected to reach a value of $60 billion, with an annual growth rates of at least 15%, which will be attractive for foreign investors.
 
 
It is expected that the majority of investment projects, which involve the participation of foreign investors, will be implemented in several regions of the country, mainly St Petersburg, Kursk, Kaluga, where local authorities have already developed a package of benefits for foreign investors. 

According to Inna Kiviniemi, a development director of IMCD in Russia and the CIS, a global distributor of innovative auxiliary substances for the pharmaceutical industry, one of the advantages of St Petersburg that is taken into account by foreign investors is the availability of skilled labor. At the same time, in general, Russia currently experiences a shortage of young qualified workers with higher education in the field of pharmaceutics. 

St Petersburg focussing on R&D activities 

According to Zakhar Golant, deputy chairman of the Committee for Economic Development, Industrial Policy and Trade of St Petersburg, the city has focused on the development in one of the most promising segments of the pharmaceutical industry and in particular R&D activities of and the development of medical technologies. This is reflected by the fact that, in recent years, it has already become a place for the establishment of R&D centers of such leading global pharmaceutical producers as AstraZeneca, Pfizer and a number of other large companies. 

At the same time, according to Leon Kogan, director of production development at the Russian subsidiary of Pfizer, in recent years the interest of Big Pharma to Russia has grown significantly, partly due to a clear state strategy, Pharma 2020, which aims at the innovative development of the domestic pharmaceutical industry, the establishment of production of high-quality drugs, as well as the promotion of Russia in the international pharmaceutical and biotech markets. 

The same position is shared by Irina Gushchina, head of public affairs of Abbott Russia, according to whom the company plans to further develop its business in Russia and is currently evaluating various investment opportunities. 

Developing partnerships with domestic drugmakers 

According to Leon Kogan, global companies are more interested in developing partnerships with local manufacturers, which production process is organized in line with international requirements and standards. 

Foreign investors often start to work in the Russian market with its Russian partner, which receives finished and just packs them, starting their further sales. Setting up joint ventures with local companies in recent years has also become very popular among the foreigners.
 
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