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PHARMACEUTICAL INVESTMENT IN RUSSIA

Russia has for a long time been a major investment centre for a whole host of varied industries. But the past few months have seen a number of large pharmaceutical firms making their mark on the country. Could this be the start of a growing trend for international drug manufacturing? Most recently, in February 2011, drug maker AstraZeneca (AZ) revealed its plans to invest over $150 million (£93 million) in new Russian production facilities.

The company announced that building work on the site – based in the Kaluga region's Vorsino industrial park, to the south west of Moscow – would commence in the spring. Early indications suggest that construction could be complete by the end of 2012. If all goes to plan, the factory could be producing up to 16 million units by early 2013. Its output will include innovative medicines for cardiology, gastroenterology, neuroscience and respiratory purposes.

Nenad Pavletic, president of AstraZeneca Russia, told Pharma Times that the company's move towards long-term Russian investment projects had come about for a number of different reasons, but primarily because AZ is "confident in [its] prospects in Russia under the conditions of the economy's stable development". In addition to its attractive market potential, Pavletic said the firm will "invest in R&D to support Russian innovative developments in fundamental science".

The decision by AZ to sink millions into Russia's emerging economy is unlikely to shock those who have observed global pharmaceutical activity over recent months. Other top-performing drug giants – including GlaxoSmithKline and Novartis – have already detailed their plans to start producing medicines in Russia. Such organisations have devised strategies through which they intend to cash in on government plans to limit drug imports and encourage domestic growth.

Russia's 2020 Pharmaceutical Development Program is based around the objective of having at least half the country's drug sales originating at home. Prime minister Vladimir Putin is though to have pledged around $4 billion to support the burgeoning domestic pharma industry. Not surprisingly, this has prompted a long line of overseas manufacturers to try and get in there before the competition.

The country's leader has set an initial target for local industry to be making at least 90 per cent of Russia's vital medicines, with a view to increasing exports eightfold by the year 2020. In doing so, he warned that multinational pharma companies would face tough restrictions in the country should they fail to roll out manufacturing facilities and transfer technology there.

It is abundantly clear why so many international organisations have been drawn to Russia's pharmaceutical market. Countless analysts have predicted exceptionally-high growth over the coming months and years, largely driven by government schemes, including a renewed focus on the modernisation of Russia's healthcare system.

There are, of course, other factors involved, such as the widely-reported prediction for increased infectious and chronic disease, which poses a unique opportunity for drug makers.

Elsewhere, relations between the Kremlin and Novartis – which unveiled plans for a full-scale pharma manufacturing plant in St Petersburg last December – are reportedly looking healthy. The Basel-based group is currently the only drug firm in Russia's Foreign Investment Advisory Council and is establishing public health partnerships with federal and regional health authorities.