CHALLENGES:
- Business and government disagreements on industry regulation
“Inspections have become an impediment to business and manufacturing. Not to mention the new sales and marketing regulations that compound the problem. <…> As a result, despite our standing and reputation in the global pharmaceutical industry, last year we submitted just six primary registration applications, after filing hundreds of them every year over about a quarter of a century”. “In 2015, European regulators performed 3,500 inspection tours of mature market players in Europe and beyond its borders. The non-compliance rate was 0.44% in Europe and slightly over 2% elsewhere. Our rates for established markets are incredibly high, as much as 24–25%,” said Vladimir Shipkov, Executive Director, Association of International Pharmaceutical Manufacturers (AIPM).
“Current trends in such areas as controlling prices, benchmarking local and global margins, and basing decisions on reference pricing may deal a serious blow to revenues and margins, first of all, of domestic companies. This will deeply undermine trust to any talks about investments in and funding for innovations,” said Dmitry Morozov, President of BIOCAD.
“In the last couple of years, we have revamped the regulatory framework, all the way from manufacturing to pharmacy operations. I wouldn't get too exсited or upset over these changes; they are largely, maybe as much as 90%, in line with global practices,” said Mikhail Murashko, Head of the Federal Service for Surveillance in Healthcare.
“We believe that the Government's policy is quite reasonable. <…> Pricing rules are not always what business would like them to be, but we strive for a balanced approach. Remember that we also listen to the public,” said Elena Maksimkina, Director of Medicine Assistance and Medical Products Revision Regulation Department, Ministry of Healthcare of the Russian Federation.
- No tax incentives for privately-funded R&D
“Companies are forced to refer to clinical studies as consulting or information services, but never clinical studies proper. The sponsors have to take on an extra 18%. The Russian Tax Code has a special article providing for a host of incentives for government-funded R&D, but very few are available for privately funded efforts,” said Dmitry Khalilov, Partner, Head of the Group for the Provision of Services to Enterprises of the Consumer Goods Sector, CIS, EY.
- Insufficient IP rights protection in Russia
“A lot has already happened in Russia in the last years in terms of IP rights protection. For instance, they set up a specialised court in IP rights protection, but there are still some gaps in current legislation. Even if the original has a valid patent, generic products can execute clinical tries and get produced, they can get regulatory approved, they can get their price approved. Generic products can participate in state purchases. That is an unhealthy situation,” said Niels Hessmann, General Director, Bayer.
- Talent shortages in the pharmaceutical industry
“Why do we never come and say in Russia, ‘Please, do this for us’? Just because there is no one to come to. I am not saying there is absolutely no one, but clearly not enough. Sadly, there is neither good education, nor practices. Or not enough,” said Elena Bushberg, General Director, Veropharm.
SOLUTIONS:
- Creating better conditions for investors
“We have obtained funding to set up an engineering centre that now operates successfully, with pharmaceutical researchers making use of all the opportunities it provides. <…> We have always taken sides with the manufacturer trying to protect them as much as we can…. If there is a company out there that is still looking for the safest and the most reliable place to set up production, you are welcome,” said Anatoly Artamonov, Governor of Kaluga Region.
“A few years ago we launched our own biopharmaceutical R&D centre in China. Why did we do it? Because China created the right conditions in terms of tax preferences where in provinces R&D expenses are tax deductible. This paved the way to substantial investment.” “In Russia, there is a number of interesting tools to attract investment. One of them is the special investment contract which has been widely discussed, but it has not yet been piloted in the pharmaceutical industry,” said Irina Panarina, General Manager, Russia and Eurasia, AstraZeneca.
“I would like to suggest that lawmakers consider making clinical research fully exempt from VAT,” said Dmitry Khalilov.
“We have to protect innovation, it is very important. If today we produce everything in generics, there will be no money for innovation,” said Nikolaos Tripodis, Managing Director, Novartis Pharmaceuticals in Russia.