The Pharma-2030 Strategy: Promoting Globalization

03 October 2018

CIS GMP news Magazine, Autumn 2018

Until the end of the year, the Government of the Russian Federation should approve the program "Development of the Pharmaceutical Industry of the Russian Federation until 2030" CPharma-2030"), a document that will give the domestic pharmaceutical industry new directions for global development. While the goal of the previous "Pharma-2020" strategy program was the infrastructure development for pharmaceutical production, import substitution and stimulating innovations, in other words, laying the foundation for the domestic pharmaceutical industry, the new program is focused on large-scale market integration of domestic innovations in Russia, as well as export of drugs and technology transfer.

Public discussions of the new strategy began at the beginning of July, then the Ministry of Industry and Trade of the Russian Federation published this document in the federal information system 'Management', and ended at the beginning of August Within the next two months, the ministry should finalize the project, taking into account proposals and recommendations from the Chamber of Commerce and Industry of the Russian federation, the Russian Union of Industrialists and Entrepreneurs, industry associations and market participants, and submit it for approval to all relevant agencies after which it will be approved by the Government of the Russian Federation.

The new strategy will continue the course outlined in the previous document "Pharma-2020" but it has already set more ambitious goals. Denis Manturov, the Minister of Industry and Trade, stated that among the priorities of the strategy will be 'the breakthrough scientific and technological and socially oriented development of the pharmaceutical industry, the creation of a high-performance export-oriented pharmaceutical sector and, as a result, in the volume of exports of drugs at least four times compared to 2017 up to approximately $3 billion by 2024". The level of the basic infrastructure of the domestic pharmaceutical industry, formed within the framework of the 'Pharma-2020’ strategy, opens up the possibilities of the expansion into the international market.

The main objective of the previous strategy presented in 2009 and estimated at that time at 188 billion rubles was to overcome the crisis in with the domestic pharmaceutical industry was an that period. According to the Ministry of Industry and Trade, the share of consumption of the Russian drugs was a little more than 20% of the market In monetary terms, and no more than 6S% - in real terms. 'Domestic manufacturers of drugs lose in market competition not only to the world's largest pharmaceutical corporations developing innovative products, but also to manufacturers of reproduced drugs and raw materials for their production mainly from China and India', - the explanatory note to the 'Pharma-2020' program says. Even in spite of the growing consumption of pharmaceutical products by the population of the Russian Federation on the whole as a result of the Health national project, the growth in the consumption of Russian drugs had been reducing every year by 1-2%.

The mid-2000s federal programs, for example, 'federal program on prevention and control of socially significant diseases' (2007-2011),'National technological base' (2007-2011) were focused mainly on the development of new technologies in the respective segments, but did not propose systemic organizational mechanisms that could integrate research results into industrial production and ensure large-scale Introduction of Innovations in the pharmaceutical industry. At Use same time, one of the factors of the insufficiently high share of domestic drugs in the market was the low technological level of the production capacities of pharmaceutical plants, which lagged behind modern production standards, and did not meet the international standards of GMP. So there were two critical problems for the industry at that time: a significant lag of the pharmaceutical plants in terms of technological equipment, which impeded the establishment of a stable output of competitive domestic products, as well as a lack of a system of government measures to stimulate domestic pharmaceutical production.

Accordingly, the key direction of the 'Pharma-2020' strategy was the modernization of domestic pharmaceutical plants, their gradual transition to GMP standards, as well as the establishment of the domestic analogues of imported drugs (generic drugs) production and provision of conditions for the growth of domestic demand for Russian drugs. Even then, part of the strategy was the development of the scientific potential of the Russian pharmaceutical industry, as well as the development and launch of innovative domestic products. The tools of the program were a set of state measures, including government of technologies for the production of drugs according to the list of strategically important drugs, vital and essential drugs (VEDs), and drugs used for the prevention and treatment of the most common cancer, cardiovascular, and other diseases; government subsidies for foreign innovative drug development and pre-clinical and clinical research; public funding for re-equipment and construction of the pharmaceutical plants, creation of pharmaceutical clusters on the basis of high-tech plants, and much more.

According to Sergei Tsyb, the Deputy Minister of Industry and Trade, during the 'Pharma-2020' program, realization of more than 400 projects for the creation of new drugs were supported, more than 100 molecules entered the stage of clinical trials, and 30 new pharmaceutical plants were built according to the most advanced international standards. Foreign pharmaceutical manufacturers built 7 new plants in Russia, and 78 foreign manufacturers localized their production on local plants. In particular, in the period from 2011 to 2014, the program included 130 government contracts for the development of technology and organization of production of the drugs included in the list of VEDs, for which in 2011-2015, 4,5 billion rubles from the federal budget and 8,2 billion rubies of extra-budgetary investments were raised. As part of co-financing from the government programs of the Russian Federation, 60 Russian competitive drugs, including new molecules - elsul-favirin (HIV), nartaprevir (tuberculosis), gosogliptin (diabetes mellitus) have been registered since 2009. The production of Russian medicines in the last 5 years has grown 1,7 times, and by 2017, the volume of this market was estimated at 295 billion rubies.

The activities of the program led to significant changes in the market. According to the DSM Group the share of local drugs in the segment of public procurements in 2017 was already 30% in value terms, in hospital purchases in particular - 47% and in the commercial market -28,5%. According to the Ministry of Industry and Trade of Russia data on 1 August 2018, the share of domestic drugs in the nomenclature of the VEDs let reached 85,8% (in 2012 this figure was 63%).

A significant increase in the share of domestic drugs also occurred in the other segments: up to 36,65% in the 7 High-Cost Nosologies segment (10,2% in 2012), to 32,94% in the cancer segment (12,22% in 2012), to 29,66% in the HIV treatment segment (9,91% in 2012). According to the DSM Group, the increase in sales of local drugs in 2017 was significantly higher (7,4% in terms of value and 4,3% in real terms) than the increase in sales of imported drugs (6,1% in value terms and 2,3% in real terms). Thus, the act Cities of the 'Pharma-2020' program enabled to reverse the unfavorable trend in the development of the domestic pharmaceutical industry, and create a basis for its further growth.

The new 'Pharma-2030' strategy program, on the one hand, continues the course outlined in the previous document, on the other hand, it sets fundamentally new goals, especially with regard to the global development of the domestic pharmaceutical industry. The strategy for the domestic market is focused on strengthening the positions of domestic products, the symbiosis of science, production and the market, the integration of innovations into practice, linking pharmaceutical production and the healthcare system in a broad sense. Accordingly, the project assumes linking of the production, educational and scientific infrastructure, providing the industry with sufficient raw materials, chemical and biological synthesis products and other materials, as well as stimulating full cycle pharmaceuticals, including research laboratories and production lines.

According to the project of the strategy, these goals will be reached thanks to the new system of measures for regulating drug circulation in Russia. The document proposes, for instance, to establish a single regulator, 'responsible for the entire scope of powers related to the health care system and drugs', which would enable the state to achieve the most effective spending of budget funds. It is assumed that additional regulation will affect both public procurement and the commercial market of drugs. For example, the strategy proposes providing all pharmaceutical companies with a full cycle of a price preference of 25% for public procurement of drugs, which, according to the document, will attract additional investments of 50 billion rubies to this segment. In fact the new strategy is more 'patient-oriented' and focuses on bringing the innovations to the consumer.

The stimulation of the full-cycle pharmaceutical production is connected with another key point of the strategy: a significant increase in the volume of export of domestic pharmaceutical products to foreign markets, as well as the creation of joint ventures for the production of drugs in emerging markets. According to the document, although the Russian pharmaceutical industry as of 2017 had insufficient representation in international markets, local plants are now successfully increasing their export volumes. For example, in 2017 the volume of export of drugs reached $750 million, which is 16% more than in 2016. According to the Ministry of Industry and Trade of Russia, some of the Russian drugs are already registered in more than 60 countries, not only in the market of the Eurasian Economic Union, but also in South-East Asia, Africa and Latin America. Such international coverage should ensure a multiple increase in exports of Russian pharmaceuticals production by 2050.

According to the strategy, further export growth is possible, first of all. due to the development of Innovative drugs in narrow therapeutic niches. A specialized venture fund is considered as a possible financial mechanism for further support of technological and industrial innovations. The establishment of such fund is especially important as the existing development funds demonstrated their inefficiency and are not able to provide necessary level of financing.

The ambitious task of Increasing the export of local products should, of course, be accompanied by Russia's large-scale integration into the international pharmaceutical community, for example, by participating in the International Conference Harmonization (ICH), so that exported local drugs can be included in relevant registers and validated abroad. In addition, according to the strategy, the export development is impossible without the protection system of drugs as objects of intellectual property when entering foreign markets. This task also should be in the focus of attention for the government program of pharmaceutical industry development in case of implementation of all proposed measures of government support the volume of local drugs export as it is said in the strategy, will increase significantly. Taking into account the goals set by the President of Russia in May 2018 to develop non-primary non-energy exports. and additional support measures being developed within the framework of the national project international Cooperation and Export', the fourfold growth in exports of local drugs is becoming more than real.

Interview

The pharmaceutical market has been actively discussing Pharma-2030 Strategy, which is currently being developed. The opinions and assessments that we hear are often quite different, if not diametrically opposite. The concept of the program must incorporate the interests of all market participants, including manufacturers, who must understand the general trend, the goals and objectives for further development, and the resources they have available for that work.

We asked Alexander Kuzin, General Director of NovaMedica Company, to share his opinion of the program as a representative of the manufacturing sector.

"The main priority behind the Pharma 2020 program was localization and import substitution, and its main goal was to develop the pharmaceutical industry of Russia and to bring it to a higher level. We could call it the 'first level: And now that we have, in essence, successfully completed the first level, we are entering the second level, the Pharma 2030 program. Its objectives are far more complex We can define several priority areas for the next stage. These priority areas will include development of ft&O capabilities, increase of export, and stimulating production of own APIs; these are the tasks that we could not set before us 10 years ago; now this work is possible and the goal is achievable.

It is too early to say if Pharma 2050 will be able to solve these issues within this period of time. First and foremost because this is just a draft and the discussion is underway with market participants and inside the government. When we consider the opinions and interests of all market participants, and after we discuss the project strategy we will be able to come to a common understanding of the overall picture; it is then that we will be able to predict how much of the program is doable and in what timeframe these ends could be achieved.

But the overall picture also needs a frame: the rules that regulatory agencies establish. In the opinion of the market, as this strategy is amended, its authors will need to interact with the Ministry of Industry and Trade and other departments who will be setting the corresponding rules. These will include the Ministry of Health, the Federal Anti-Monopoly Service, the Ministry of Economic Development and the Ministry of Finance. Without setting these boundaries that will define the route for implementing the program, we will be unable to understand the full picture. Speaking mathematically, this system of equations can only be solved when we determine the limiting conditions. As of today, the market is lacking this information, and we have no clear understanding of the rules of the game. Can a team score five goals? Perhaps, but we need to know if we will be playing hockey or football.

And now. to turn this document into an actionable program. the authorities will have to interact with the market. The pharmaceutical community has already provided feedback to

the Ministry of Industry and Trade, and included a number of critical comments and suggestions. This is a very normal, natural process. It »s excellent that the feedback in our industry is working, and that it has been of use. You cannot achieve the ideal result in just one go; it is therefore important that different participants of the process share their perspectives, and that everyone's interests are taken into account This is exactly what is happening now. Michelangelo had famously said that to create his masterpieces he had to take a slab of marble, and carve away what is extra. Metaphorically speaking, we have not carved the David of our industry yet; we are still in the process of creating it.

In essence, Pharma-2030 must be a logical continuation of Pharma-2020. For instance, whereas our previous goal was to localize production and guarantee import substitution, now the deeper form of localization w*B be the localization of R&D projects. Therefore, within the framework of the new strategy, it becomes important to take the next step and establish the regulatory process so as to create such an eco-system that will allow R&O activities in this country to become economically feasible and financially profitable. Moreover, it should appear lucrative to the global market as well. This is what, in my opinion, the 2030 program should focus on.

Now when it comes to preferences for Russian manufacturers. and in order to develop the export component I believe the authors of the Pharma-2030 program must consider how much influence one has on the other, and diligently search for a balance point I understand that Russian pharmaceutical companies would love to get the maximum protection and work under conditions of minimal competition inside the country, but they must understand that as a result their global competitiveness will suffer. The competitiveness of our enterprises must take root inside the country; this is where it should start on its way to becoming stronger globally. Creating excessive preferences inside the country - what I would call 'overprotection* - will do a poor service for Russian manufacturers in terms of developing their export potential In such overprotective conditions, we will not be able to stand our ground against the aggressive external competitive environment or develop our capabilities more intensively. It is just like keeping a child away from bacteria: when parents keep their child in sterile conditions. they will not have the strong immune system necessary for further growth and adult life. The same can be said of any enterprise.

You cannot cover the entire Russian market with preferential conditions, and then ride onto the markets of other countries on the shoulders of the state. Local grants, regulatory measures, diplomatic or any other form of support inside just one country will not help, either. Those companies that are globally more competitive win on the global scale; this Is the law of economics. So, if you ask me: 'Is it okay to provide these preferences?’ my answer would be: ‘Yes, but they must be very precisely defined in terms of conditions, numbers, and deadlines.'

Overall, I would like to see the Pharma-2030 program in its final version as a roadmap for our entire industry. It should reflect the future trends, and each manufacturer must be able to define its place in the system and understand precisely how to change and where to proceed, because this document will define clearly how the entire environment will change, and in which direction the entire industry must proceed.

This is why I believe that this document is of crucial importance and much needed by every pharmaceutical company in our country."

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