Russian
Pharmaceutical Substances Market
By Ludmila Maksimova February 2005
The report discusses recent trends in the Russian pharmaceutical substances market, indluding local production and imports. It also contains information regarding opportunities for U.S. companies in the market.
INTERNATIONAL COPYRIGHT, U.S. & FOREIGN
COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2004. ALL RIGHTS RESERVED
OUTSIDE OF THE UNITED STATES.
The Russian pharmaceutical market has been rapidly expanding over the last several years and in 2003 its total volume reached $3.45 billion. This has been the result of a steady increase in the importation of finished pharmaceuticals and domestic production which has grown at a much slower pace. Over the last twelve years Russia drastically cut local production of pharmaceutical substances and other ingredients used to make finished drugs and switched to imported raw materials. According to the December 2004 edition of “Remedium”, a leading pharmaceutical industry magazine, in 1992 locally made substances covered 70 percent of the production needs for synthetic drugs, 85 percent of antibiotics, 90 percent of vitamins, and 100 percent of immunobiological preparations. In that year, Russia exported a significant portion of its substances.
In the subsequent years, the local substances production radically deteriorated and currently domestic production of pharmaceuticals is practically dependent on imported substances, which cover 85-90 percent of the total market. Today, the local drug research and development industry is underdeveloped and weak. Most of the local manufacturers specialize in packaging and tableting drugs from substances imported in bulk. End summary.
The period from 1992 to 2002 was marked by drastic slowdown in production of practically all types of substances, including those used in the manufacturing of synthetic drugs (15 times), vitamins (10 times), and antibiotics (9 times). This was mainly due to the low profitability of the industry, high production costs, including growing prices of raw materials to make substances, high energy prices, an underdeveloped drug research and development sector, and outdated equipment and technologies. In addition, an increase in the successful competition from foreign competitors, especially Chinese and Indian companies, has practically pushed local and Western European competitors out of the market. This can be attributed to the low price of their substances.
The situation with local production of substances has started to slowly improve since 2003. On the one hand, the production of a number of substances at such pharmaceutical plants as Polisyntez (Belgorod), Tschelkovsky Vitaminniy Zavod (Moscow region), and Farmakon (Moscow) ceased as a result of low profitability. On the other hand, new larger manufacturing facilities to produce substances were launched at Pharmstandart-Marbiopharm (Ioshkar-Ola), Pharmstandart-Leksredstva (Kursk), Syntez (Kurgan) and ZAO Bryntsalov (Moscow). The increase in substance production at a number of plants compensated its reduction at other factories and resulted in slight overall growth. According to various estimates, the total volume of the Russian pharmaceutical substances market is now approximately $120 million.
According to “Pharmatsevticheskiy Vestnik”, a leading pharmaceutical industry periodical, the total imports of substances to Russia in 2003 reached $95 million, a 56 percent increase from 2002. Russia currently imports substances from 42 countries. The geographical structure of the imports in 2003 was as follows: 47 percent from Western Europe (mostly Germany), 12 percent from China, 10 percent from India, and 9 percent form Eastern Europe.
The leading Russian importers of pharmaceutical substances are Masterlek (10.4 percent of total imports), Syntez, Velaz, Otechestvennye Lekarstva, Bristol Myers Squibb (Russian), Pharm-proekt M, Severnaya Zvezda, Protek TsV, Nordmedservice, Plice FK, BASF, ICN Pharmaceuticals, ECOlab, Pollo, Ferein, Nizhpharm, Sodruzhestvo-Kargo, Moskovskiy Endokrinniy Zavod, Uralbiopharm, Rusichi, Biosyntez, Rossiyskiy Kardiologicheskiy Tsentr, Olympia Pharm, Fita line, Akrikhin. As can be seen from the aforementioned list, a diverse group of companies, including distributors specializing in substances, distributors of finished pharmaceuticals and pharmaceutical plants, currently operate in Russia. The most popular imported substances are cefazolin and arbidol which are used for antibacterial and anti-influenza medications, respectively.
Generally, Western manufacturers of substances and ingredients are confronted with serious competition from Chinese and Indian suppliers of pharmaceutical substances. Chinese and Indian companies open their own representative offices through which they directly control the importation and distribution processes and are able to work directly with end-users. However, many U.S.-made advanced and sophisticated ingredients, coating and other materials used in pharmaceutical manufacturing have strong market potential in Russia.
Substances like finished pharmaceuticals must be registered with the Russian Ministry of Health before they can be imported and utilized in local pharmaceutical production. Because registration is a complicated and time-consuming procedure and requires a permanent presence of the manufacturer or its authorized representative in Moscow, U.S. companies are recommended to carry out registration through one of the following entities: the manufacturers’ representative office or registered Russian company, a consultant or a distributor based in Moscow.
U.S. Commercial Service offices in Russia offer U.S. exporters a number of services aimed at generating export sales, including identifying distributors and arranging meetings with prospective buyers during business visits to Russia. For more information on our services, please visit our web site at www.buyusa.gov/russia/en or contact us directly:
Ludmila Maksimova, Commercial Specialist
U.S. Commercial Service – Embassy Moscow
Tel: 7-095-737-5037 Fax: 7-095-737-5033
E-mail: Ludmila.Maksimova@mail.doc.gov
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