Deadlines and risks: will Russian pharmaceuticals replace imported drugs

The shortage of medicines arising in connection with the sanctions imposed against RUSSIA and delays in deliveries, as well as the recall of drugs by a number of foreign companies “due to economic inexpediency”, makes the authorities count on accelerated import substitution in the pharmaceutical industry. At the end of March, Prime Minister Mikhail Mishustin announced a package of measures to support the Russian pharmaceutical industry. Similar measures are being prepared by the regions.

Are Russian enterprises able to replace foreign drugs, RBC Petersburg asked the CEO of the St. Petersburg pharmaceutical company Solopharm Oleg Zherebtsov. He answered several topical questions arising in connection with the hope for accelerated import substitution of medicines.

Oleg Zherebtsov, CEO of the pharmaceutical company Solopharm:

“Now 60-65% of medicines sold in Russia come from abroad. Whether this share can become substantially smaller if we, as a country, make vigorous efforts is a question that breaks down into several important parts.

Why Russian pharmaceuticals did not replace imports earlier

The growth rate of domestic pharmaceutical companies in recent years has twice outpaced the growth rate of foreign companies, if you count in monetary terms. That is, import substitution was not a slogan - it was going on. But Russian companies generally adhered to a simpler method of production than their foreign counterparts - they took up the production of drugs that were relatively simple in terms of technology. The development of domestic pharmaceuticals from simple to complex and very complex is a slow process. Some of the technologies used by the world pharmaceuticals are, in principle, difficult to adapt in Russia. I believe that the growth of the industry can still accelerate, but this will not solve the problem of complete import substitution. The localization of the production of complex drugs, at best, will take many years, at worst, many molecules will never be created in our country.

“The growth rate of domestic pharmaceutical companies in recent years has been twice the growth rate of foreign companies, if you count in monetary terms.”

What is difficult to replace

Pharma is surrounded by a huge number of peripheral industries - the production of primary packaging, logistics, warehouses with special storage conditions. Some elements of this infrastructure were created long ago, but some never existed in Russia. For example, we use aerosol actuators, cartridges, glass syringes that have never been produced in our country. In 2-3 years, a significant part of them can begin to be produced, but it is difficult for me to guarantee that all high-tech production of primary packaging will appear within this period.

Read on RBC Pro Pro You won't be able to wait:how Russian business will change in two or three years Forecasts Pro Logistics under sanctions:what development paths do Russian companies have?Pro How developing surgical instruments made an immigrant a billionaire Articles Pro How Chinese brands will fill the vacuum in the Russian market ArticlesPro The world is waiting for a decade-long commodity supercycle.And here's why Articles Pro The planning horizon is one day:logistics plunged into a new crisisThese Seven Habits Leaders Need to Take Control ofThese Seven Habits Leaders Need to Take Control of

Will there be money for import substitution

I think that additional investments will come to Russian pharma. Now the devaluation, which weakens the market positions of foreign drugs, and the desire of the state to subsidize the producers of substances and primary packaging, and benefits from the state, will, I think, cause a huge interest of a large number of investors in the construction of new facilities. Entrepreneurs who have never been involved in pharmaceuticals will now pay attention to it.

To what extent can the release of new drugs in Russia be accelerated?

I would not be too optimistic in forecasting the speed of expanding production and bringing new products to the market. The pharmaceutical industry is regulated by the state - it is conservative in itself, and the methods of regulation are quite conservative. The subject of our activity is the safety of people and the therapeutic value of the drug; Ultimately, it is important that the patient recovers. This means that it is necessary to license production and control their technological processes; it is necessary to look at each specific drug through the prism of clinical trials and tests in specialized laboratories at the stage of registration of these drugs. Our industry is controlled by four departments - the Ministry of Industry and Trade, the Ministry of HEALTH, Roszdravnadzor, and partly the Federal Antimonopoly Service. Each department in some sense limits the speed of substitution of imported drugs by Russian ones.

"The pharmaceutical industry is regulated by the state - it is conservative in itself, and the methods of regulation are quite conservative."

What depends on the state

I see the desire of the state to reduce all these terms, to make them more aggressive - for example, instead of 9 months, to allocate 3 months for drug registration. Concrete decisions have yet to be made, but there is vigorous discussion of such changes. But I want to emphasize that in order to achieve the goals of accelerated licensing or accelerated registration, the heads of the Ministry of Health, the Ministry of Industry and Trade and other named departments need to seriously increase the number of employees who work with requests from the industry. I don't see it yet. It seems to me that new decrees or deadlines will stumble over a limited resource of employees - it is impossible to simply say that the deadlines should be changed. The staff of these departments should be doubled or tripled!

I believe that Russian pharmaceutical manufacturers will be able to replace about half of the drugs imported into the country in 3-5 years. That is, we can get 70% of Russian drugs on the market, and this will be just an excellent result. But this result will be achieved by a range of solutions, very different - support for business investment activity, direct government subsidies, and changes in regulation. All these decisions must go in unison, among them there are no optional ones.

“I believe that Russian pharmaceutical manufacturers will be able to replace about half of the drugs imported into the country in 3-5 years. That is, we can get 70% of Russian drugs on the market, and this will be just an excellent result.”

Are manufacturers planning to accelerate

Our company is among those who plan to increase the production of medicines in Russia. The management and the board of directors believe that it is necessary to redouble efforts in the design of new production facilities - in our opinion, they need to start building faster. Therefore, those design decisions that we postponed for 2023-2024, we decided to intensively prepare this year. We want to build new factories in St. Petersburg, because our office is here, engineers, development department, marketing work here. Although the financial situation in the country has changed, we plan to reinvest all the profits received, as in previous years. Of course, we will also take out loans that do not worsen the financial position of the company - we can do this even with the new bank rates.

Will the equipment for new factories come

You cannot start production without understanding where the machines and lines will come from. We see that a number of European countries are now complicating exports for their equipment manufacturers, but a number of countries continue to work. It is clear that there will be a slight reorientation towards Asian countries, in particular CHINA . Perhaps we will compromise on the efficiency of these machines. We saw that the equipment from Stuttgart was very productive - I'll be honest, the equipment that is made in Asian countries probably will not be as productive or reliable. Now we are testing it, and we will choose the options that are acceptable to us.

In general, we have 521 suppliers (substances, raw materials, packaging, equipment, consumables, etc.). And among them, approximately 7% are companies that, for one reason or another, have stopped working with us. Either they don't like our bank, or they don't like the way products are delivered to Russia, or they have shareholders in the US who simply insist on suspending deliveries to Russia. For example, a Romanian company with American shareholders may stop supplying us with something. We continue to work with the remaining 93% of suppliers.

“We have 521 suppliers. And among them, about 7% are companies that, for one reason or another, have stopped working with us.”

Is it possible to achieve full import substitution?

Pharma is very globalized, each company operates in a huge chain of international cooperation. This is not a feature of Russia - the whole world works this way. Creating a large localized pharmaceutical industry is a realistic and very important task for the country. However, we must understand that we will still need cooperation! If we are deprived of cooperation with the West, then we will have to actively cooperate with Asian countries.”