Published on 12 May 2020 by Anna Andriyanova
Adam Smith Conferences: What changes can we expect in the coming months? What challenges are pharmaceutical companies facing and what is being done to mitigate the risks?
Vladimir Khristenko: The situation that the Russian pharmaceutical industry is currently facing has become radically more complicated. On the one hand, the coronavirus pandemic is something that we (and most countries) were not prepared for. On the other hand, there is the drop in the oil price and corresponding depreciation of the rouble.
I will give specific examples. One of the obvious problems we are currently facing are the restrictions on the supply of active pharmaceutical substances and intermediates (for some ranges – total) from India and China, as these countries seek to ensure fulfilment of their own demand first.
The cost of active substances and excipient materials is predicted to rise due to an increase in foreign currency exchange rates. As a result, there will be further profit margin reductions for essential drugs, as the prices for these are fixed in roubles. Due to possible budget cuts, there are risks for the implementation of new State procurement programmes. Some investment projects will suffer, some will be postponed indefinitely, and some will have to be cancelled entirely as they will be unprofitable given the current exchange rate.
As for releasing new coronavirus treatments, it is extremely difficult to do this quickly because of the length of regulatory procedures. We are also seeing difficulties now due to the limitations on movement of people, goods, etc., which will also increase the length of time needed to coordinate and implement new projects.
But for every problem, of course, there is a solution. We see a way out of this situation via an accelerated transition to domestic substances with full synthesis. For this reason, long before these current events had begun, we started actively collaborating with leaders on the Russian market for active substances. We see the strategic development of the pharmaceutical industry as a whole - in partnerships like these.
Still, some of our investment plans will have to be adjusted and some development projects will be delayed, but we will prioritise projects for the treatment of coronavirus infection and its consequences. Nanolek’s Research and Development Department is actively working on a number of ideas, starting with the possible use of antiviral drugs that are already part of our portfolio, partnerships with leading Russian research institutes on the development of a vaccine, as well as expanding our portfolio with medical products that can be used to treat the coronavirus.
Adam Smith Conferences: What measures is your organisation undertaking to secure uninterrupted supply of medicines to patients and hospitals during the crisis?
Vladimir Khristenko: Nanolek has a system of operational planning for product sales with a temporary leverage of 18 months. This allows us to respond promptly to any changes in the market situation in the event of an increase or decrease in demand for a particular product. Thanks to this system, we evaluate and adapt production and distribution plans on a monthly basis, which ensures an uninterrupted supply of products to our customers. An overstock system and supply chain protocols eliminate any problems with product shipping and guarantee uninterrupted supply.
Adam Smith Conferences: What kind of state support and what strategic decisions do companies operating in Russia need to respond to the current circumstances?
Vladimir Khristenko: The coronavirus, like an unwelcome guest, has caused a lot of trouble, but it has also opened our eyes to deficiencies in the healthcare systems in most countries. Standards of medical care, the speed of drug development and testing, the uncontrolled dissemination of information – these and many other issues need rethinking and possible revision.
This will be a great lesson for all of us. It is time to realise that things won’t be how they used to be – we need to come together and calculate the risks many steps ahead of us. The following points could be included in a priority list of measures to support domestic manufacturing in today’s circumstances, with a worsening situation due to the spread of coronavirus infection (some might be implemented by the time the interview is published).
For registration of potential coronavirus treatments:
- Accelerate the registration process, including the cancellation of bioequivalence testing for approved generic drugs
- Annul customs import duties on substances and drugs
- Suspend the serialisation tracking rules for immunobiological drugs included in the Vital and Essential Drugs list until the epidemiological situation and the global supply chain disruptions for related reagents and ingredients have normalised
- In exceptional cases, if the production of drugs is unprofitable and there are no analogues on the Russian market, allow a one-off re-registration of increased prices for the drugs
- Subsidise clinical and pre-clinical trial costs
- Postpone inspections and planned checks until the epidemiological situation normalises
- Simplify the GMP audit procedure – conduct based on documentation and remote communication
- Postpone mandatory labelling until the epidemiological situation normalises
- Provide preferential loans for working capital and investment activities
Adam Smith Conferences: The situation with the new coronavirus threatens standard business models of organisations around the world. Are there any opportunities for growth and development in the current crisis for the pharmaceutical industry?
Vladimir Khristenko: A crisis is always a time of opportunity; this principle has been proved innumerable times. The business life cycle theory states that if companies go through similar stages and demonstrate predictable patterns of behaviour, then success is determined by their ability to manage the challenges and difficulties that await the business at each stage of the cycle. Most companies face similar challenges, but the end result depends on competent management and an effective response to changing circumstances.
As for the pharmaceutical industry, this crisis might become a turning point for strong growth. We are witnessing a global mobilisation of forces: never before has so much research and development taken place simultaneously in different countries, so many hypotheses proposed (and sometimes immediately refuted). And crucially, despite strong competition, experts are willing to share their best practices and exchange technologies, because right now the lives and health of people around the world depend on this. And the faster we act, the faster we can return to normal life.