Indian drug maker Ranbaxy is moving swiftly to capitalize on Russian policies to encourage establishing a local production presence, signing a memorandum of understanding with Russia's Yaroslavl regional authority to help the province build a medical and pharmaceutical center. The "going local, going to regions" move could set a model for international pharma companies eying the Russian market, says a Russia biologics expert.

According to the Jan. 31 agreement, Ranbaxy will help develop the province's healthcare system and bring new medical technologies to the Yaroslavl region, including the expansion of educational programs for the medical and pharmaceutical community, collaboration of clinical trials as well as improvement of drug safety monitoring.

As a first step, Ranbaxy will evaluate collaborations with local academic and research centers in the Yaroslavl region to broaden the scope of medical educational programs for the medical and pharma community.

The Yaroslavl Region is establishing a pharmaceutical zone and encouraging pharma companies to set up manufacturing facilities and conduct clinical research.

Aiming to jumpstart its domestic pharma industry, Russian Prime Minister Vladimir Putin recently announced a plan to invest $3.9 billion in public funding to stimulate the country's drug manufacturing sector. The plan mandates that by 2020, 50 percent of domestic market share will be local production; currently the rate is about 85% (Also see "Russia Pledges $3.9 Billion For Local Pharma Growth, As Big Pharma Scrambles To Set Up Shop" - Scrip, 22 December, 2010.).

"Drug makers could lose significant market shares soon without local production, so they have to find a place in Russia," Alex Ablaev, VP of Russian Technology Platform at the Russia Biotechnology Society, told PharmAsia News. "The Russian government shows a clear policy of preference for the local production of drugs and biopharmaceuticals."

The goal of 50 percent local production means multinational pharmas will have no other options but "to find a home for production and distribution in Russia," he added.

Local Regions Offer Preferential Financing, R&D Cost Savings

As Russia is a vast country with major industrial areas concentrated around capital city Moscow and industrial center St. Petersburg, it is natural to set up manufacturing sites around the big cities.

But Ablaev recommended that companies consider regions with a solid academic base and strong government support, which often offer preferable financing.

Determined to spur academic growth, regional governments are actively lobbying the federal government to help fund support, and the government has responded by starting to provide increased funding for universities, especially regional ones, which could tap into these public-private projects.

Located 155 miles away from Moscow, Yaroslavl is pursuing an ambitious goal of becoming the healthcare center in Russia. The region has strong academic institutions such as the Yaroslavl State Technical University. Yaroslavl authorities hope to draw more multinational companies to the region and are promoting its strong research foundation and qualified talent pool coupled with the government's efforts to jumpstart the medical and pharma sectors.

MNCs such as Ranbaxy that establish a local presence in Russia also benefit from a comparatively low cost of research and development, according to Ablaev.

"Russia is one of the cheapest places to conduct clinical trials with a large population of [treatment-naïve] Caucasian patients for many diseases," Ablaev also noted.

Ranbaxy has been active in the Russian pharma market for about 20 years and has registered 51 drugs in the Russian Federation and commercialized 72 products. Ranbaxy is ranked No. 35 in the Russian retail pharmacy segment and No 19 in the generic market segment.

Other international companies are also heeding the call. Nycomed built a €75 million plant in Yaroslavl. The combined markets of Russia and the Commonwealth of Independent States are Nycomed's largest market with sales of €343.4 million reported in 2009 (Also see "Nycomed CEO Hakan Bjorklund On Emerging Markets As Core Focus For Growth: An Interview With PharmAsia News" - Scrip, 6 October, 2010.).

Last month, GlaxoSmithKline and Russian JSC Binnopharm announced a plan to manufacture a number of GSK vaccines in Russia.

Novartis announced in December 2010 that it would invest $500 million over five years into Russia healthcare initiatives, including construction of a new manufacturing facility in St. Petersburg. Construction begins in 2011, and Novartis expects the plant to eventually produce roughly 1.5 billion units of pharmaceuticals and branded generics for both the Russian market and elsewhere (Also see "Abbott, Eli Lilly, Novartis: Emerging Markets Earnings Round Up (Part 1)" - Scrip, 8 February, 2011.).

Russian And Indian Organizations Facilitate Collaborations

Instead of Russian and Indian governments taking the lead, biotech associations of the two countries - the Russian Biotech Society and Hyderabad-based Federation of Asia Biotech Associations - have worked closely to facilitate collaborations between biotech companies from each side.

The counterpart associations signed an agreement during the EuroAsia Bio conference held in Moscow April 2010 (Also see "India And Russia To Ink First Biotech Collaboration" - Scrip, 15 April, 2010.).

Since then, an agreement kicking off the Russia-India Biotech Network was signed September 2010 ahead of the Bio Asia business forum in Hyderabad in February.

- Brian Yang (pharmasia@elsevier.com)

Russia Attracts More Multinational Pharmas As Emerging Markets Continue To Bloom

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