Pharmaceutical market: Will prices surge five times?

Representatives of government and business have discussed the situation in the Russian pharmaceutical industry at an online session of the Innoprom international industrial exhibition. Has the industry stood up to the challenges posed by the COVID-19 pandemic? How can Russia break its dependence on pharmaceutical substances from India and China? And most importantly, will state policies be able to contain prices, or most Russians will soon become unable to afford the required pills and injections?

Drugs as prone to panic buying as buckwheat

Shopping centers are closed; airplanes are grounded, and tourists are admiring sights via virtual tours; publishers have reduced book runs. But pharmacies are places that customers are storming anyway. Manufacturers are not slowing down; if anything, they are boosting production, and most would say they are lucky. In reality though, the pharmaceutical industry is also having a tough time during the pandemic.

According to First Deputy Minister of Industry and Trade Sergei Tsyb, the pharmaceutical industry had to transition to round-the-clock operation during the pandemic.

“Manufacturers, distributors, and pharmacy chains have been working extremely harmoniously to meet the rush demand for many drugs. They have seen no critical supply disruptions, even with the drugs based on imported substances. The pandemic has actually improved communications – government and business representatives have become engaged in a round-the-clock dialogue,” Sergei Tsyb said.

CEO of Farm Center company Sergei Klykov confirmed these words adding that without a dialogue with the state and its financial support, the company would have had it much harder.

“We faced the shortage of components. First, China restricted exports of pharmaceutical substances and eventually, the borders were closed completely. Moreover, the cost of substances shot up three to five times. With the demand for medication increasing, we had to stock up on some raw materials for a year ahead and involve additional production capacities. All this required a fair amount of money. We would not have been able to work it out ourselves. We cooperated with government agencies,” Klykov said.

He added that since the lockdown, the demand for many drugs has grown multiple times – people were sweeping drugs off the shelves just like buckwheat. For example, antibiotics and vein tonics sales doubled. People were also panic-buying anything with paracetamol.

The demand for drugs is now dying down and the second wave of the coronavirus is probably around the corner. Foreign currency exchange rates are unstable. Pharmaceutical substances that are used in production are mainly imported from India and China and suppliers continue to jack up prices. Does it mean that, along with prices on raw materials, prices on the drugs that are not listed as regulated essential and vital medication will also increase five times? Will antibiotics cost like a helicopter? Will we have to treat illnesses with herbs from our country gardens? What solution do experts propose?

Collapsed globalization

The majority of the session participants agreed that it is crucial to develop domestic production of pharmaceutical substances as soon as possible. It is the only way for the pharmaceutical industry to contain the prices on drugs and ensure national drug security and independence.

According to Roskhimreaktiv General Director Irina Vendilo, deglobalization is one of the key trends of today. She believes that European countries have learnt the lesson from the pandemic during which the supply chains were disrupted, and will focus on the development of local pharmaceutical enterprises. Russia also needs to consider the improvement of its own chemical and pharmaceutical production.

“The pandemic showed that the Russian industry can work fast and efficiently and is able to speed up when needed. Overall, it takes 1.5-2 years to develop a new product. But it is also possible to be faster than that. For instance, Roskhimreaktiv has promptly launched several new products, including sanitizers and their ingredients,” Irina Vendilo said.

Vladimir Shcherbakov, board member at Velpharm and General Director of Bright Way, agreed with Vendilo and said that the idea of globalization is a total failure, and it is clear today more than ever that the production of new drugs and pharmaceutical substances must be localized promptly because many people need them every day.

How to avoid Venezuela’s fate?

“The Russian pharmaceuticals sector currently depends a lot on Chinese suppliers. Prices for foreign raw materials have grown up by 3, 5 or even 10 times. It is necessary to establish the production of at least some main drug components in Russia. There are almost no substances that Russia can’t produce,” said Geropharm General Director Pyotr Rodionov.

According to him, the government could provide subsidies to companies that are planning to build pharmaceutical plants on Russia’s territory. Otherwise we may follow the path of Venezuela, which faced a critical situation amid the COVID-19 pandemic as the country was cut off from insulin supplies.

“Over 400,000 Venezuelan residents need their daily injections of insulin. We offered a helping hand by organizing prompt supplies of Russian-produced insulin despite all obstacles. Yet, other countries may find themselves in such situation as well. We need to develop our own production facilities; we offer competitive prices and we can enter international markets in Asia, the USA and Europe,” Pyotr Rodionov said.

Sergei Tsyb assured the discussion participants that the government is seeking to develop the national pharmaceutical industry; the principal task today is to create predictable conditions for further investments in the sector as well as to provide assistance to developers and manufacturers of medications. For instance, scientific institutions can receive grants for developing new drugs. In accordance with the Pharma 2030 strategy implemented by Russia’s Ministry of Industry and Trade, half of medications sold in the Russian pharmaceutical market should be domestically manufactured, while medical product exports should grow by 8-10 times and medication exports by 5-6 times.  

Hopefully, this strategy will have a positive effect on raging prices to stop scaring customers away.

By Natalia Sysoyeva

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