With doubled generation – Newspaper Kommersant No. 207 (7408) dated 11/09/2022

The policy of Indian pharmaceutical companies and the low cost of their generics allow them to claim the status of the main beneficiaries of the reduction in the activity of Western drug manufacturers in the Russian Federation, DRT analysts say. According to them, a number of players from India are already interested in expanding their business in the Russian market. Other experts expect an increase in the share of Chinese suppliers and rely on domestic producers, although it will be difficult for local players to achieve full import substitution.

The main beneficiaries of the redistribution of the Russian pharmaceutical market due to the reduction in the activity of Western players may be Asian manufacturers of generics, primarily from India, according to a study by DRT (formerly Deloitte).

According to analysts, Asian suppliers can not only take the share of Western competitors, but also squeeze out local manufacturers due to the low cost of medicines.

According to DRT partner Oleg Berezin, DRT clients among Indian pharmaceutical companies have already shown interest in expanding their presence in Russia, but he did not name specific companies. India has long developed not only the production of finished dosage forms, but also substances, the analyst points out. In addition, he adds, Indian generic drug manufacturers obtain licenses from Western companies on better terms than Russian ones, which allows them to sell drugs at lower prices.

Major Indian pharmaceutical companies Sun Pharmaceutical and Dr. Reddy`s Laboratories, as well as the Russian R-Pharm, Pharmasyntez, Generium, Ozone Pharmaceuticals and Valenta Pharm, did not provide comments. The Ministry of Industry and Trade did not comment on the findings of the DRT, citing the lack of information about the research methodology and full results. The Ministry of Health did not respond to questions.

Global pharmaceutical companies, including Roche, Novartis, Pfizer, MSD, AbbVie, Sanofi, due to the military actions of the Russian Federation in Ukraine, announced the suspension of the recruitment of participants in ongoing clinical trials and the launch of new ones.

According to the director of the Association of Independent Pharmacies, Victoria Presnyakova, today 15 companies have refused marketing campaigns and organizing new trials, and three manufacturers are removing certain drugs from the market.

In August, the share of global companies in obtaining approvals from the Ministry of Health for testing new drugs fell to about 17.5% from more than 50% a year earlier.

According to the DRT study, in 2021 the share of local drugs in the Russian market decreased from 68.6% to 67.3% in real terms, and in money terms it increased from 43.7% to 45%. The latter indicator began to increase actively in 2020 due to the surge in demand for COVID-19 drugs. But now the need for such drugs is declining, according to the DSM Group. Ms. Presnyakova estimates the share of Asian companies in the Russian market at 6.8% in rubles and 6.6% in units.

The Association of Independent Pharmacies says that the supply of drugs and substances to the Russian market this year has not changed significantly and there is no shortage of imported drugs. According to Victoria Presnyakova, sometimes there are local interruptions due to the restructuring of logistics. Although RNC Pharma noted a 50% year-on-year decrease in the supply of antibiotics based on amoxicillin and clavulanic acid in the Russian Federation in January-September 2022, which could have affected on the availability of such drugs in pharmacies. Sber Eapteka says that so far the shares of Asian and local manufacturers in the number of packages sold have not changed. “Bringing new drugs to the market takes time, perhaps the picture will change in 2023,” the company says.

RNC Pharma Development Director Nikolai Bespalov recalls that Indian pharmaceutical companies occupied a large share of the Russian market in the 1990-2000s, but over time they lost ground to European and local manufacturers.

But now Indian suppliers are not in the best position, because against the backdrop of sanctions they are forced to deliver products to Russia through third countries, which leads to its rise in price, he points out. According to Mr. Bespalov, the share of Asian drug suppliers in Russia will grow, but primarily at the expense of China and South Korea.

Victoria Presnyakova points out that the Russian pharmaceutical market is on the path of import substitution, increasing production capacity and developing the production of full-cycle drugs. But, according to RNC Pharma, about 80-85% of Russian drugs are made from imported substances. Oleg Berezin notes that some substances and drugs have limited domestic demand, which increases the payback period for their localization.

Alexandra Mertsalova, Anatoly Kostyrev