The pharmaceutical industry in Russia has come out of stagnation

A pill of optimism

Galina Kostina, "Expert" No. 45-2014

Back in the early 2000s, the Russian pharmaceutical industry was considered hopelessly lagging behind. It seemed that even a small piece was not provided for us in the world's multibillion-dollar pie. The dynamics of the industry's development were given both by government measures, in particular, the Pharma 2020 pharmaceutical industry development strategy (adopted in 2009) and the federal target program "Development of the Pharmaceutical and Medical Industry" (approved in 2011), as well as the efforts of many Russian manufacturers. It is important that business also took an active part in the formation of these programs. Several tasks were set for the industry. The nearest one is import substitution, which domestic and foreign companies that have built their factories in Russia are successfully coping with. The volume of investments in the industry, according to the Ministry of Industry and Trade, has exceeded $ 1.5 billion over the past few years.

Having trained on generics and having built up financial muscles, our companies went into innovations: by October 2014, 310 state contracts were concluded within the framework of the Federal Target Program. Of these, 60 were at the stage of clinical trials, and this year permits were obtained to start clinical trials in more than two dozen projects.

The task – to produce 90% of medicines from the vital category in Russia by 2018 – is being solved ahead of schedule: already now we produce more than 65% of them. Sergey Tsyb, Deputy Head of the Ministry of Industry and Trade of the Russian Federation, told the Expert about why everything works out in pharma and about the new tasks of the industry.

– You have taken on a difficult task – the restoration of the pharmaceutical industry at a time when domestic producers occupied a very small share in the market. At the same time, it was necessary to pursue a policy in such a way as not to scare off importers and not to leave people without medicines. How did you manage it?

– We understood that our main task is not protectionism, but the creation of a developed industry. And it is formed at the expense of strong players. Seven years ago, when the pharmaceutical industry development strategy was being created, they were mainly foreign companies and our large distributors. It was necessary to come up with a mechanism that would stimulate not the import of medicines, but their creation in Russia, and the mechanism should be the same for all, both for Russian players and for foreign ones. And when such tasks were just declared, our distributors were the first to respond. Almost all of them in a short time, since 2009, have invested very decent funds in the creation of production facilities. And this also spurred foreigners to either build factories here or enter into partnerships with Russian companies to place their products. Many foreign companies have built their factories or bought them – these are Takeda, Sanofi, Novo Nordisk and others. And Roche, Merck, Eli Lilly use the capacities that our manufacturers have created in the country, such as Pharmstandard or R-Pharm. In general, Western companies have invested more than one and a half billion dollars in localization.

– Even five years ago, representatives of many foreign companies doubted the feasibility of building production facilities in Russia: they say they do not need so much capacity. What made them do it?

– We didn't force anyone. Each company made a decision based on the importance and attractiveness of the Russian market, taking into account the tasks that the state sets for both the pharmaceutical industry and healthcare. Indeed, ten years ago our market was unattractive, and now it is among the so-called rapidly developing pharmaceutical markets, whose growth is about 10 percent per year against the background of stagnation of developed markets. The volume of drug production in Russia increased by 13.6 percent last year.

– Mainly due to the localization of foreign companies?

– Just not – most of them are still completing their capacities or just launching them. Our manufacturers have tried their best. They have invested tens of billions of rubles in development. I will give just a few examples. Generium has invested about two billion rubles in the creation of a modern biotech center, and Biocad has invested one billion rubles in the pilot production of substances and medicines based on monoclonal antibodies. Nanolek has invested over four billion rubles in the construction of a plant in the Kirov region that will produce vaccines and other drugs. The Fort company has invested about five billion rubles in production in the Ryazan region. Its new plant will become the largest pharmaceutical production not only in Russia, but also in Europe. In particular, it will produce vaccines and many biotechnological drugs that we are currently importing. Naturally, all new production facilities are built according to GMP standards.

– How has the share of domestic producers changed over the years?

– We have increased our share from 22 percent in 2009 to 26.8 percent in 2013.

– Not so much....

– It should be borne in mind that many production facilities are still being completed. In addition, during this time, the market has almost doubled in volume. And if Russian manufacturers had not made efforts, their share would now barely exceed 10 percent.

– What did we want from foreigners dominating the market, except that they put factories here and pack or produce their drugs?

– The tasks that the Pharma 2020 program sets for the industry are divided into two stages. The first is the modernization and construction of industrial and technological potential, with the help of which it is possible to produce medicines of any complexity. The second is research and development of fundamentally new products and a smooth transition into the innovation sphere. It is clear that for many years Russia has been a country that could not afford to treat only with innovative means. Even now we can't afford it, so we had to first of all establish the production of generics, with which there were no special problems. However, we have never been engaged in biosimilars, and it took some effort. But we are also developing this niche. At the same time, we want Western companies to integrate into our innovative trend. To do this, we need to develop infrastructure here, create comfortable taxation, and train professional personnel. No one will create an innovation center in Russia if the conditions here are worse than in China or in another country. But it's not enough to create conditions, you need to talk about them. We have been actively participating in the largest pharmaceutical forums for several years, where all the leaders of the world pharma flock, and we are trying to convey to them what universities we have, what centers for drug development are being created, investment funds like RVC, and zones like Skolkovo with attractive taxation conditions. And foreign companies are gradually coming to the conclusion that our offers are attractive to them.

– It would be nice if such attractive conditions were not only in Skolkovo.

– Who would argue… This is a huge amount of work, so we cooperate with several ministries at once, including the Ministry of Economic Development and the Ministry of Health. A lot is being done, although not as fast as we would like. We have been reproached for many years that we have a bad intellectual property protection. I want to say that now Russian legislation complies with all international standards. In recent years, we have tried to improve the legislative framework. The federal program "Development of the pharmaceutical and medical industry..." was approved in 2011. Both before and after that, the Government took many measures to promote and develop this program. In particular, in 2010 the law "On circulation of medicines" was adopted, in 2011 - "On the basics of protecting the health of citizens", lists of strategically important medicines and vital medicines were approved.

– But manufacturers say that these laws and acts are still imperfect. In addition, you can often hear from representatives of companies that the Ministry of Industry is doing well, and other departments, in particular the Ministry of Health, are slowing down the process.

– Almost any of our actions involves interference in someone else's area of responsibility and must go through a chain of approvals. This requires remarkable attention and patience. But we are systematically working to improve the conditions for our producers. In particular, a framework is being developed for concluding long-term contracts for the supply of products and services for federal needs. As part of the adjustment of the Pharma 2020 strategy, measures are being developed to support innovative nuclear medicine technologies, biomedicine technologies using cellular and tissue products, and the development of genomic technologies. We expect the adoption of the law on cellular technologies in the near future. As for other departments, in particular the Ministry of Health, I will allow myself to disagree with the above opinion. The Ministry of Health is also facing new challenges. This applies to the quality of expertise, standards, and the introduction of the latest technologies. They are also pioneers in this, so they try to weigh everything once again and not make hasty decisions. We understand this and are trying to find a reasonable balance between industrial policy and state policy in the field of healthcare.

Another thing is that when we go down to the middle level, where, in fact, all the main work takes place, sometimes we are faced with the fact that work really stops there. For example, we drew attention to the fact that a large number of refusals to register a new drug or permit for clinical trials occur due to the fact that people have issued something incorrectly or for some other formal reasons. And this knocks our innovators out of the development deadlines, entails financial losses. Now we are working on a large block of amendments that should help manufacturers overcome these problems. For example, we recommend consulting before starting registration procedures, the same as those adopted by the FDA (Food and Drug Administration: the Agency for the Sanitary Supervision of Food and Drug Quality under the U.S. Department of Health and Human Services. – "Expert").

– What is the situation with the production of substances in Russia, because we practically did not make them?

– Yes, we must admit that over the past twenty years we have missed this question. And most of the substances market has been mastered by Chinese and Indian manufacturers. However, we initiated the introduction of a separate block into the state program, which details the acceptable forms of support for manufacturers of substances in Russia. The industry needs new guidelines. There was a guideline – vital medicines, and enterprises adjusted to its implementation. Now immunobiology may become a new goal. You also need to configure the necessary tools for it, so that the necessary medicines with the right quality are produced here. Moreover, this should be done carefully: without limiting competition and without creating monopolists.

– The second and main stage of the program is the development of innovations in our pharma. We see that the sprouts have already appeared. How is this area developing, how can we help it?

– The main thing we are doing now is to understand in detail the legislation in general on the development of innovations and their support. At one time, the Ministry of Education and Science and I worked out and amended a number of regulations governing the establishment of small enterprises at universities, the transfer of intellectual property to the share capital of these enterprises and the attraction of investors.

There is a positive experience – this is the already mentioned Skolkovo project, where comfortable conditions were created to attract investors. Now the main thing is to transfer this experience to other segments of the Russian industry. It is necessary to develop new tools that would attract investors as much as possible in terms of the economic feasibility of conducting research in Russia. For example, we have proposed to exempt new production facilities from taxes, that is, to give some time for companies to get back on their feet. We reasoned as follows: if there is no such production in the end, the state, of course, will not lose anything, but if it is possible to create so-called reference points of growth, then this should greatly stimulate the investor.

And we have already started with what can be done quickly: we consolidated the efforts of almost all our advanced groups in various fields, involved in clinical research science that could claim a certain segment in the applied future, as well as medical institutes, institutes of the Russian Academy of Sciences, small and medium-sized businesses that began to appear on the basis of RVC,"Rusnano", Skolkovo, Bortnik Foundation. And now we are implementing a large number of joint projects with them. Bortnik, for example, financed one startup at the first stage, then we picked it up, and there was an investor there. It turned out to be sufficient to provide tools that allowed market participants to be involved in the process and cooperate with them.

– So, for example, how did they cooperate at MIPT?

– Yes, within the framework of the biopharmaceutical cluster "Severny" there is a center for science and training – MIPT, a Center for preclinical and Clinical Research, the Institute of Chemical Diversity and companies that are engaged in production. Within the framework of the Federal Target Program, we have planned the creation of such centers for the development of innovative medicines, which will include all competencies from the search for biomishens to the pilot production of new medicines. In the future, the state provides for the reconstruction and technical re-equipment of research and production facilities, as well as the construction and equipping of new innovation centers on the basis of universities. By 2020, it is planned to create ten such research centers for the development of innovative world-class drugs and seven centers for the development of innovative medical products. This year, the first of them will open – at MIPT, Moscow State University, Ural, Kazan and Yaroslavl Universities, as well as at the St. Petersburg State Chemical and Pharmaceutical Academy.

– Why are the centers being created there? How did you organize an examination to determine exactly these growth points?

– Why, for example, the Chemical and Pharmaceutical Academy of St. Petersburg appeared on the list - thanks to the clever rector. It was the only academy that trained technologists for the pharmaceutical industry. Now many pharmaceutical companies are building their production facilities in this region with the most powerful potential, where science, education and business are concentrated. Tatarstan, for example, is generally one of the most dynamically developing regions of the country. I once arrived there and was amazed that the officials' desks were not littered with papers. E-government has been introduced there for a long time, functionaries began to work faster and more efficiently for business. Including in the field of research. In the Urals, we supported the Boris Yeltsin Federal University. There was originally a strong school of organic chemistry there. From the very beginning, we could not finance this institute due to legislative nuances. And then the three institutes agreed among themselves, created a center on the basis of the university, concentrating their capabilities there, now a cluster with intensively working pharmaceutical companies is being created in the Urals with our active support. In Nizhny Novgorod, where there was originally a strong school, a center for the development of medical instrumentation is being created. We have done really great preparatory work by the time of the release of the federal program. We have attracted a lot of experts to understand where and what opportunities we have. It is important that both academic institutes and pharmaceutical companies helped us.

– Were the funds allocated not only for capital construction and infrastructure, but also for specific projects for the creation of innovative drugs?

– First of all, we financed the creation of vital funds – 131 projects with budget funding of over four billion rubles and extra-budgetary funding of about eight billion. The market volume of these drugs is about 50 billion rubles, and 30 billion is public procurement. The state buys only insulins, generics of which are currently being developed under five projects under the Federal Target Program, for five billion rubles a year. 53 drugs are already at the registration stage. 310 projects have been launched on innovative drugs in 173 organizations. Budget financing for them exceeds 14 billion rubles, extra-budgetary funding is about 11 billion. Now these projects are at different stages of implementation.

– We occupy a very small place in the global biotech. Does it make sense to look for a certain niche where we would be strong, or is science so global now that we need to tune in to single breakthroughs?

– Science is really becoming more and more global. In our country, it has long been a kind of local science for science. In my opinion, now our country is in a transition period, when researchers are learning to be entrepreneurs, learning to look for partners, and all over the world. And it seems to me that it is probably impractical to look for your specific niche. Our companies are already aiming for leadership in the global industry, not local niches.

– What makes you sad during the implementation of the program, and what makes you happy?

– I am pleased with the movement. The industry is developing largely due to the fact that this development was well planned. The volume of investments from private investors over the past three years has exceeded 60 billion rubles – is this not a reason for satisfaction! It seems to me that Pharma 2020 has greatly stirred up the industry, the business has become much more active. I am generally pleased when some initiative causes a chain reaction. As in MIPT, for example, where new laboratories, new departments are being created, and businessmen, even those not involved in pharma, are involved in creating infrastructure and financing startups. Students going to work in these projects feel in demand not only in these small companies, but also in a dynamically developing industry. I am proud that we have these successes. At one of the recent conferences, I heard again that we Russians do everything wrong, we are weak, stupid, lazy, everything is bad with us. To be honest, I was angry. We have made significant progress. Perhaps this is not always interesting for the layman, who is used to other "sensational" news. But isn't it interesting to the layman that we have learned to make not only simple, but also very complex and new medicines?

Portal "Eternal youth" http://vechnayamolodost.ru05.11.2014