St. Petersburg International Economic Forum. How to increase the role of the Russian pharmaceutical industry in the world market?

Print 24 June 2013

Panel “How to increase the role of the Russian pharmaceutical industry in the world market?”

Leonid Melamed, Chairman of the Board of Directors, Team Drive; Member of the Board of Directors, RosnanoMedInvest an NovaMedica:

"The State policy shall be focused on having as much elements in the pharmaceutical value creation chain concentrated in the hands of as many Russia-based companies paying taxes in Russia as possible."

Within the scope of this SPIEF 2013 panel key players of the pharmaceutical market have shared their views on prospects of development of the Russian pharmaceutical and medical industry, its competitive growth in the world market. The experts estimated measures taken by the government directed to ensure a favorable platform for the development of new domestic pharmaceutical products and discussed stories of success of local pharmaceutical and medical devices manufacturers.

The discussion initiates a cycle of actions under the auspices of the Ministry of Industry and Trade of the Russian Federation aimed at strengthening of cooperation among major sector players, advancing and increasing competitive capacity of the Russian pharmaceutical sector in the world market. The dialogue will be continued between the KOLs, the representatives to state authority bodies and the business community at the Forum “Open innovations”  to take place in Moscow, in October 31 – November 2, 2013. 

Taken from comments

Leonid Melamed: "There is no need to reinvent the wheel to see that the role and the position on the global market will depend on the Russian share versus the share of other countries following the below criteria: number of persons employed in the industry, number of top-paying jobs, taxable quotas of pharmaceutical companies to be paid in Russia, rate of return of the Russian companies in the global pharmaceutical industry subject to taxation in Russia. To increase the role in the global market means regaining the share from other countries based on this economic criteria.

Furthermore, there is an obvious sector chain: from the development of new drugs (including R&D and VC) where, at the same time, 80% profit can be made on products, registration procedures and introduction, manufacturing, marketing and distribution.

In my opinion, the State policy shall be as many as possible Russia-based companies, those capable of paying taxes in Russia with a maximum length of the value creation chain. The chain of elements shall be large enough within the country. Therefore, the country shall have benchmarks on labor to operate in this sector.

For the country itself the industry is very attractive. Let’s have a look at the figures: in 2008 655k employees in the U.S., where each working place in the pharma industry creates 3.7 working places in concurrent sectors, i.e. – 1.5 Mio working places. This is to say nothing of the science. All these persons pay taxes including the payroll taxes. Other examples – China, in 2006 – 1.3 Mio employees to work in the sector, in India - 4,2 Mio.

What is the situation in Russia? In 2007 – about 85k employees. Even considering allowances in different record keeping systems or margins of error – it is a far cry.

Let’s consider the situation with production volumes in this sector: U.S. in 2006 - $178.5 bln, and about $40 bln in R&D, Japan - $62.6 bln in production and $9.4 bln in R&D. In Russia, following the results of 2012 production volumes have been estimated approx.. $6.6 bln.

Therefore, when we consider increasing the role of the Russian pharma in the global market, the first question we can ask ourselves is – what’s this in aid of?

If I were a government authority I would have set a task to make more top-paying jobs available in the sector to concentrate profits in the country by putting all the strings in the value creation of the pharma industry together. Provided that this is applicable to both the Russian and the global markets."

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