01 December 2020
On November 24-25, the Adam Smith Institute held a very important event for the Russian pharmaceutical industry, the Russian Pharmaceutical Forum 2020. Because of the pandemic, the Forum had been postponed twice, first to June and then to November, and even moved from Saint Petersburg to Moscow in an attempt to do everything possible to gather the pharma community offline. In the end, only the speakers participated offline, with some of them connecting online with their reports. Even though the mix of online and offline formats is far inferior to the habitual offline event with its sidelines, speakers and participants expressed warm feelings about the Forum, and everyone was understanding of the situation – the event can be deemed a success.
One of the most important Forum panels, PHARMACEUTICS OF THE FUTURE IN RUSSIA AND THE WORLD: GLOBAL VIEW OF THE INDUSTRY TRANSFORMATION, was moderated by the Director General of NovaMedica Elena LITVINOVA. Elena shared with us her thoughts on the discussion and on the industry problems revealed at the Pharmaceutical Forum.
At several Forum panels at once experts talked about the need for speedy launch of the Pharma 2030 strategy. The catch is that not everyone clearly understands what this program is about, what its contents and its goals are, who is working on it, and who its owner is. The industry does not have a complete picture of the ingredients of that pie, and this is, of course, the omission of its owner. At the same time, discussions of the strategy have become such an integral part of the industry landscape that many would be embarrassed to confess their ignorance – everyone talks, but not everyone knows what they are talking about.
The key message conveyed by Zakhar GOLANT, Chairman of the Board of the Union of Pharmaceutical Clusters of Russia, who spoke during our discussion, was that the strategy should be adopted as soon as possible at the high level, and the tactics of the program implementation can be improved thereafter. He called for prompt launch of the work on updating the document to take into account the lessons that we learned during the pandemic. This should not be delayed. Indeed, it is important now to quickly make a decision on launching the strategy and leave more time for implementation of the program. Of course, the strategy requires improvement, but if one gives in to perfectionism one can revise it to the point of exhaustion and not arrive at anything. I do not think that we will get Pharma 2030 in 2020, but it would be good to see it in the first half of 2021. In my opinion, it would be ideal to present it at the next Pharmaceutical Forum in May 2021 in Saint Petersburg.
Our panel was not only useful to those who are deeply integrated in our market, but to those who still feel like newcomers as well. Russia faces the same challenges as many other countries. Doesn’t the US have problems with drug prices? They do, they also have difficulties. It is just that every country is moving forward with its own degree of ‘extremism’ in pharmaceutical regulation. Some countries, like Russia, have introduced the ‘third one out’ rule against foreigners, and you have to either localize or lose the market. I call this rule regulatory ‘extremism’. It was probably worth it at a certain stage to launch the localization mechanism. On the other hand, many Russian companies can now produce products that are in demand, but this is as unprofitable for them as it is for foreign companies. Local companies say: We do not want to produce loss-making products. So, it turns out that the state, using preferences, has done everything to provide a market for them, but this is not working, because it has become objectively unprofitable to manufacture drugs in Russia. And it does not matter anymore what you are, local or foreign. The situation now is the result of that ‘extremism’. Essential products are disappearing from pharmacies, giving rise to distress and pain for doctors and patients. It is time to loosen the screws to prevent more serious consequences.
I would like to give credit to the expatriates participating in our panel for their bold remarks. Global experience takes special value in difficult times. The important comments of Ugur GUNAYDIN, CEO of Amgen Russia and CIS, were on the topic of pricing – he encouraged us to look for best foreign practices in this sphere. Ugur talked about the innovative pricing models used in developed countries. The importance of paying heed to global trends was also stressed by Adlan SUDANI, CEO of Ipsen Russia and CIS. And the CEO of Merck Russia and CIS Matthias WERNICKE expressed concern about the fact that we take too long to make decisions and do not leave enough time for implementation of programs. He pointed out that the regulatory process is very lengthy, and decisions take such a long time to make that this stultifies any efforts of global companies and makes them less competitive in the Russian market.
It is true that the interests of manufacturers are not always taken into account in Russia – there are very strict pricing rules that make even the local companies suffer. Prices are spiraling down – each new auction must be cheaper than the previous one. One can move in this direction, but not for long. When a manufacturer does not receive profit, it struggles to c
over its current expenses, which means that it does not have anything to re-invest in innovation, in modernization of facilities and in improvement of quality. So, in the short term, the state gets drug products at better prices, but in the long term, it will have to finance everything that the companies’ own profits will not cover: development of necessary products, modernization and upscaling of facilities. Ivan POLYAK, CEO of Veropharm, in his address spoke at length about the team, about competences and professionalism. He has a lot to do in Russia, because Veropharm is now at the frontlines in all state programs, including the federal oncology program. Veropharm’s portfolio includes many EDL products. So, let us wish them good luck!
Everything said by the CEO of the analytical agency Alpha Research & Marketing Anna ERMOLAEVA in her address was very valuable. Fresh analytics from the agency’s experts show a change in the motivation of patients buying drug products in spring vs. now. The November sales peak demonstrated heightened demand for specific products used in the treatment and prevention of the coronavirus infection and its complications. Unlike in spring, no lockdown was introduced in autumn, which is why people are not as impulsively stocking up on drugs against chronic diseases. This is easy to explain – pharmacies are open, and drug products can even be ordered online with home delivery.
The analytical study also suggests that the market is growing through hospital segment products and, in many respects, through state financing. This is an inevitable trend. In developed markets, out-of-pocket products account for only one third of the turnover, while two thirds are paid for by the state. In Russia, for now the situation is, unfortunately, the opposite. Even though we have started moving toward a more adequate distribution of expenses on drug products, we still have a lot to do in this regard, and there are many challenges ahead.
****** Analytical report by AlphaRM. Pharmaceutical market, YTD’9 2020 can be downloaded via the link in the end of the publication.
At the same time, transformation of the Russian pharmaceutical market is going ahead full speed, and we are moving toward development, and not degradation. The basis for this development was created by the implemented strategy Pharma 2020. All speakers of the Forum agreed that it had laid the foundation for approaching really creative challenges: working with more interesting and important products, developing R&D projects, testing innovative pricing in certain product categories. We are definitely moving forward and in the right direction. If only the pace could be quicker…
As for the targets… Pharma 2030 says the right things, but they are not working yet. This is why we all need to expand and improve this strategy as soon as possible, upgrade it with the new data that appeared during the last months of struggle and survival, and then promptly adopt and start implementing it. Delegates of the Forum expressed their support for this decision in the special survey that we held in the very beginning of our session: 73% of the audience voted “for”. Many speakers are willing to help in word and in deed with the work on this most crucial document for development of the industry.
Let’s make it happen!
19 January 2022
19 January 2022
18 January 2022
18 January 2022