In 2005, Russia began to implement its ‘Health 2020’ strategy. Since that time, the Russian government has spent US $19 billion on its healthcare system in order to modernise the sector. In 2014, a pilot reimbursement program will launch in some regions, extend to all regions in 2015, and become fully implemented by 2019. These initiatives and investments have already improved the Russian healthcare system over the past few years: Infant mortality was reduced, and life expectancy was increased by three years.
In addition to the ‘Health 2020’ agenda, President Medvedev approved the ‘Pharma 2020’ plan as a key focus of his modernisation project. The pharmaceutical concept aims to improve the quality and quantity of drugs available in the country by establishing ‘modern, advanced enterprises’ capable of producing modern medicines.
By 2017, the government will substitute 50% of all generic drugs with domestic alternatives; by 2020, it will domestically manufacture 50% of all innovative drugs.
Corresponding to the government’s new guidelines, some key pharmaceutical players have started to build partnerships with foreign companies, and as a result, a variety of joint manufacturing plants have been set up with Russian companies.
However, setting up a joint venture may present challenges, especially when parent companies are based in different countries. Distinct organisational cultures and employees who do not share a common language may cause difficulties for foreign companies. In addition, advancing production in Russia is very expensive, and it demands experienced managerial control.
Nevertheless, to stop selling products in Russia would not be a good idea.
So how should pharmaceutical players adjust their business practices to the changing market in Russia?
Finding a strategy that suits both company needs and new governmental rules is the first step. Studying the past experiences of other players in the pharmaceutical industry and expert analyses may build a good foundation for advancing production in Russia. For example, when several large pharmaceutical companies like Pfizer bought various smaller companies there, they solved common internal communication problems by using a ‘social approach’ and expanding the company’s social media presence in order to intensify publicity efforts. Knowing information like this can help businesses avoid common pitfalls and get ahead.
Companies with less disposable cash have seized the opportunity to enter the Russian market through partnering with domestic companies. The challenge for this route to market is identifying the right domestic partner; after that, the partnership should be carefully managed to keep the joint enterprise productive.
Whatever a business’s approach to the Russian market, success will rely on the company’s ability to accurately predict and react to future market developments. Comprehensive monitoring of the regulatory and competitive environment should be combined with pressure testing the strength of current strategies and assumptions in a variety of market scenarios. In the constantly evolving Russian market, this will allow foreign investors to consider a range of options to protect and maximise returns of both current and future investments.
Chameleon Pharma Consulting experts are specialists in this field and can help you analyse the market and evaluate the best solution for your business. We rely on the very successful ‘systematic partner search process scheme’ to identify your best-fitting local partners and choose the right direction for your investments. For Russia, for example, one of the solutions we could offer is ‘a virtual production strategy’. We have also developed a ‘GLP (Good Legal Practice) partner production service’ for medium-sized healthcare companies. As Reiner Christensen, the general director of Chameleon Pharma Consulting, explains:
‘This allows our clients to fulfil the upcoming drug laws in Russia without having to conduct substantial investments.’