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Energy Boardroom

Russia’s support of domestic production driving pharma development

15.07.2014 / Igor Petrushin, Head of Market Research and Consulting Division, Aston Consulting

PetrushinSince 2012, a 15 percent preferential contract price has been granted to domestic producers bidding in government tenders. Currently, there are plans to increase this preferential pricing by up to 40% of the total contract price.

The process for public procurement is defined by Federal Law and the granting of preferences is determined by order of the Ministry of Economic Development. The mechanism behind the provision of preferential prices is quite simple: in a government tender, if a foreign supplier of pharmaceutical products is declared the winning bidder, then the contract price of the bid is automatically calculated at 15% below the originally proposed price. In case a foreign company offers the same price as any of the domestic drug manufacturers, the winning bid is then awarded to the domestic producer.

Domestic (Russian) drugs are defined in the regulatory documents as those whose country of origin is Russia. According to the regulations of the Customs Code of the Russian Federation, the country of origin is a place where the products have been manufactured or have undergone sufficient processing. This may also imply a group of countries, a customs union, a region or a certain part of the country, if there is a need to treat them as a separate entities for the purposes of determining the origin of goods.

At the moment, the packaging of imported finished pharmaceutical goods within the territory of the Russian Federation is considered sufficient processing. Any medicines packaged in Russia are therefore treated as domestically produced pharmaceuticals.

By introducing such legal provisions, Russian authorities aim to support domestic manufacturers, while at the same time pressuring foreign pharmaceutical producers to invest in Russia. The results have proven successful, as foreign pharmaceutical companies have started to localize their production in Russia by building plants of their own, buying existing facilities or arranging the production of certain drugs using the local production base (pharmaceutical outsourcing).

Some of the foreign companies that have localized manufacturing of their products in Russia

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Aston_Group_Logo_PanAston Consulting today offers state-of-the-art technologies and reliable data for efficient and innovative business solutions. Among our customers are drug manufacturers, pharmacy chains, medical and patient communities, government agencies, and professional associations operating in the health care market.

Please note: this is an excerpt of the full article. To read the article in its entirety, please click the ‘download full article’ button at the bottom of the page.

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