The effect of the “odd man out” decree on on the Russian pharmaceutical industry

The passing of the decree on “Introduction of limitations of allowance of foreign medicines to participate in state purchases” has a great impact on the Russian pharmaceutical industry. That involves both companies with 100% Russian capital as well as companies with foreign capital that have localized their production in Russia. The products of the companies that localized in Russia also fall under the new legislation, but it opens new opportunities for them to return investments faster.

While analyzing the new legislation it is fair to pay attention to the psychological aspect of the issue. We often use the expression “foreign medicine” while in fact we are talking about a drug that was produced in Russia at a company with a foreign capital. There is a confusion die to the mix of terms. A locally produced medicine, no matter of the origin of the capital, will remain on the market.

A gooв example to the case is the market of insulins. There are 3 world production leaders of insulin. Those are Novo Nordisk, Sanofi, and Eli Lilly and Company and they are successfully localizing their production in Russia. Novo Nordisk built a plant in Kaluga. Sanofi purchased a production facility in the Orel region. Finally, Eli Lilly and Company has a contract production in the Kostroma region. The Government stimulates foreign producers to create their own production facilities in Russia, and therefore prevents lack of medicines in the country. Moreover, the limitations that come with the new legislation will not effect medicines that are under patent protection and have no analogies in Russia.

The Russian pharmaceutical market is very attractive to inverses. It is one of the top 10 world markets and the presents in the market is very profitable for foreign companies. We constantly see a raising level of competition over market share.

Local production provides jobs and taxes. Those taxes are also used for healthcare with allows to have more state programs and increase the number of effected patients. However, the income form import of medial goods goes to foreign countries and has no impact on our healthcare, nor it helps to develop domestic production facilities.

There is no need to be concerned over the move of the deadlines to recognize the companies that do primary and secondary packaging in Russia as foreign companies. We should keep in mind that for some companies it is a way to finalize the process of localization, as well as an additional opportunity to invest into our pharma. 

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