Novartis makes $500m investment in Russia
pharmafile | December 21, 2010 | News story | Manufacturing and Production, Research and Development | Novartis, Russia, pharma manufacturing
Novartis is planning to invest $500 million in Russia over the next five years, in a programme which will include the construction of a large-scale pharmaceutical manufacturing plant in St Petersburg.
The Swiss drugmaker recently outlined plans to strengthen its commercial position in fast growing emerging markets, particularly the BRIC market countries – Brazil, Russia, India and China. The Russian initiative comes after a $1 billion, five-year commitment to invest in China which was announced in 2009.
Novartis’ decision comes at a time when Russia’s economy is staging a recovery, with the growth forecast of 4.3% in 2011 helped by increasing government spending ahead of parliamentary and presidential elections in the next two years, according to analysts at Business Monitor International (BMI).
Novartis’ manufacturing plant will make both generic and branded medicines and is due to start construction in 2011. At full capacity the facility will be able to produce around 1.5 billion units of medicine every year.
Novartis will also pursue R&D collaborations and public health initiatives in Russia. Having made a commitment to double its spending on clinical trials in Russia, the company expects to enrol approximately 4,000 individuals into studies by 2013.
Having a facility on the ground in Russia will help Novartis sidestep the country’s increasingly stringent regulations concerning imported medicines.
In Russia’s Pharma2020 strategy compiled in 2008, President Vladimir Putin announced plans to implement measures to boost domestic production of pharmaceuticals to around 50% of demand, and reduce the country’s reliance on imports from its current level of around 81%.
Moreover, Putin recently indicated that in addition to stimulating local investment in production, the government is planning healthcare reforms to give preference to domestically-produced drugs. Specifically, it has been suggested that only Russian-made drugs will be eligible for reimbursement under the country’s federal drug supply system (DLO), although no timeframe for the reforms has yet been set.
Big pharma seems to be taking the Russian government at its word, however, and pressing ahead with investing in local production.
Ahead of the Novartis announcement, the Russian Association of International Pharmaceutical Manufacturers (AIPM) said it believes global drugmakers are ready to spend $1 billion on establishing production capacity in Russia.
Meanwhile, Novartis’ announcement comes on the heels of an announcement by GlaxoSmithKline that it would partner with domestic company JSC Binnopharm for the secondary manufacture of GSK vaccine products in Russia. Other companies deciding to build facilities in Russia in recent months include Novo Nordisk and Sanofi-Aventis.
“The import reliance projections indicate that in order to maximise sales in the Russian pharmaceutical market, drugmakers must shift drug production into the country,” said BMI in a recent report on the market.
“The size and growth potential of this market make it an indispensable venture for any truly global pharmaceutical company.”
Phil Taylor
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