Ayrat Farrakhov: ‘Shocking and key peak of price growth is behind’

No deficit of medication

Let’s start with the main topic: sanctions have affected all spheres of the economy, they have hit the pharmaceutical market too. What tendencies would you note in the market now?

Sanctions as such haven’t affected medication, medical goods and medical equipment. They aren’t on the sanctions list, which means their sale and promotion isn’t prohibited. At the same time, the problems linked with logistics and a transfer of money have indirectly influenced the pharmaceutical market. However, as a specialist I can say that we aren’t registering a true deficit of medical goods and pharmaceutical products. As for what happened two-three weeks ago: there are so-called shortages of L-Thyiroxin, drugs to treat Parkinson’s when pharmacies lack some trademark. This isn’t related to the sanctions, this isn’t related to the true deficit, only with current processes. This happens in the pharmaceutical market, and it is quite an often occurrence when some trademark disappears. But its substitute always appears. There isn’t a true deficit — when the production of a medication stops and it is absent on the market.

Given that citizens consider this now quite painfully (and it is natural) and expectations of a deficit are high enough, I can calm everybody down: there is no deficit of drugs today and it isn’t forecasted soon for a number of reasons. Firstly, it isn’t the medication that has been imposed sanctions, secondly, no producer has refused to supply them. There are certain logistic problems, they used to be transported in containers, they have been suspended, by plane but air travel isn’t available between all the countries. But processes are organised, and I don’t see problems here.

Our readers are sending questions anyway: they are concerned that prices for drugs

All the absence of drugs during the previous weeks has to do with the feverish demand. Fake information that main drug producers from the so-called unfriendly countries were planning to cease operations in the Russian Federation was spread in the mass media, and this stimulated the feverish demand for drugs. Its scale was so large that a tenfold rise in sales was registered. Of course, warehouses don’t have such volumes, therefore a certain amount of drugs temporarily disappeared from the shelves. But we are analysing this situation in detail and want to confirm again: there will be no deficit.

90% of Russians’ most consumed drugs are made in Russia

What about prices?

Annual inflation across the country in general has been almost 18% by now. I will remind you that our benchmark, the so-called target, is 4%. We see foods have become more expensive as well as products every person needs. Of course, drugs have gone up in price. Many drugs have become more expensive due to logistic difficulties.

Our pharmaceutical market has thousands of names of medicines. 700 of them are on the so-called vital drugs. Their price is regulated by the state, in other words, it is fixed, a pharmacist doesn’t determine it. It can change only if the state in the person of the Russian Ministry of Health Care makes such a decision. And this happens. Why? Because if the price isn’t raised, there can be a true deficit: the manufacturer will refuse to make the medicine because transportation, logistics, the substance have become more expensive for it. And it will be unprofitable for it to do this sooner or later. Therefore the state must keep the balance between the profitability of a pharmaceutical factory and the price of medicines for citizens. This is the reason why the medicines have become more expensive.

Foreign medicines have become much more expensive (related to the rate difference). And as for the medicines from the list of vital drugs, a special commissions works on each drug, it examines the profitability of the manufacturer in detail. This is the procedure if a pharmaceutical factory submits an application and asks to consider the possibility of raising the price for the medicine. Moreover, the commission considers several components. First of all, logistics (a considerable rise in the cost of transportation), secondly, the difference in the rate the cost of the substance directly depends on have the main pressure on the cost of the medicine. Because 80% of substances are imported from India and China nowadays. Due to this, the price has to be corrected.

Nowadays 30-35% of medicines in the Russian market are of foreign origin. We make the rest on the territory of the Russian Federation. But if we are talking about a more consumed group of medicines, more than 90% of it is made in our country. Therefore the sanctions, other states’ unfriendly actions that can be taken aren’t so alarming for us when it comes to providing medicines. Because in the last 10 years, we have created more than 40 large high-tech pharmaceutical factories. Moreover, we have created them together with our foreign colleagues and they continue working with us. This is why we can additionally ramp up our own production. But I will stress once again that no foreign manufacturer has yet announced a reduction in the supply of medicines to the territory of Russia, and they all emphasise the commitment to the work in the pharmaceutical market and the market of medical goods in Russia.

Indeed, manufacturers of medicines haven’t announced the termination of supplies unlike other Western brands. But some large companies have claimed they are suspending investments in Russia. How will this affect the consumer?

They are stopping their investments, firstly from a perspective of clinical trials. Any medicine must go through clinical trials after the invention of a molecule before being authorised and entering the market, on animals first, on volunteers later. Of course, large pharmaceutical holdings and companies use this in Russia too. This allows to always quickly determining a medicine that will be consequently authorised, and this allows a huge number of research companies to earn.

For instance, we can remember a situation when the clinical trials during the novel coronavirus infection were very quick, including the vaccine was tested. These were clinical trials to determine the efficacy of the vaccine. So they announced they considerably reduced the amount of clinical trials in Russia and wouldn’t be investing in pharmaceutical companies. In general this isn’t critical for our country because we need to load all those projects that were underway. I will emphasise once again: in the last 5-8 years, more than 40 large pharmaceutical companies that gradually implement the import substitution programme have been built on the territory of the Russian Federation.

“We don’t set the task of achieving 100% import substitution”

How is Russia’s own production growing now? Can you name the key areas?

We had colossal problems in such segments as our own insulin, high-tech production of chemo medicines for patients with cancer, vaccines before 2010 — we used to bring a lot of foreign vaccines. In the last 10 years, thanks to the federal programme Pharma 2020 and Pharma 2030, which is being created now, the amount of so-called localisation of medicines, their production on the territory of the Russian Federation has significantly increased. I have already said that about 30-35% of all the medicines are foreign. But they used to be 80%.

Many medicines are now made in Russia, moreover, large holdings own the factories built here. We cannot say these are completely Russian drugs because the founders of these plants, their investors are including the world’s biggest pharmaceutical companies, the so-called big pharma. Therefore high-quality, cutting-edge medicines are made on the Russian territory today.

When did we have these 80%

A huge leap was made approximately in 2010, both in Russian pharmaceutical production and at legislative level. The law on circulation of medicines was adopted in April 2010, and this law introduced very strict criteria on their production. After that, the quality of Russian medicines started to dramatically change. The latest pharmaceutical enterprises started to appear. All this led to a situation in which today we not only substitute a lot of foreign medicines but also export them — to Latin America, African countries, Asian states and Near East.

How fast do you think the complete import substitution can occur?

We haven’t set the task of achieving 100% import substitution. At least because the production of a series of medicines is linked with a serious environmental impact. At the same time, the range of application of these medicines can be very limited, for instance, rare diseases. I think it isn’t feasible to create a factory in Russia after every molecule and modern medicine appears. This is why first of all we should develop import substitution in the mass segment, meet the need for 75% of purchases. I will repeat that there is no task of meeting it 100%.

And what segment can be chose for import substitution nowadays?

The segment of mass consumption in import substitution has been more than 80% covered. I think further development will take place in this area. Of course, it is important for the country to have high-tech production because a combination of production and science, constant research, the opportunity of being aware of scientific research is crucial.

But we have already discussed that foreign companies stop investing in Russia. Does it mean that research will stall? Because firstly investments in research are suspended.

Globally, scientific research cannot stall. It is possible to significantly cut investments in research, the amount of grants on them. And this will be a sensitive measure for some labs. Perhaps, the delivery of some reagents will get worse because of logistics, it means here one can fall out of some research. The authorities of unfriendly state actively influence pharmaceutical companies, research labs trying to put political pressure on them. Of course, these factors exist. And perhaps, for some research groups they become an insurmountable obstacle, but I think these are exceptional cases.

What alternative markets those 30-35% of imports you talked about can be purchased in besides unfriendly countries?

We can buy them everywhere. I will stress once again that they aren’t subject to restrictions and aren’t imposed sanctions, therefore they were, they are and they will be in our market. I don’t see any obstacles to it.

The shocking peak of growth of prices for medicines is behind

What will happen to the prices then? Will they keep growing? What’s your outlook?

In my opinion, the shocking and major peak of price growth is behind. The market has already registered inflation expectations. This is why I don’t think there will be a big price growth. The forecast of the Bank of Russia and government for annual inflation isn’t ready yet. I don’t think it will grow by more than 20%. Also, the state is now taking as many steps as possible to compensate for the price growth for citizens because we should compensate for the adaptation of these prices to the market. We have instruments to do this. Most importantly, by the way, the president correctly said that we should readjust our mechanisms so that there is a true deficit because we can prohibit a rise in prices, but this ban will influence the manufacturer so that it will be unprofitable for it to make medicines and it will stop doing this. So we should clearly keep an eye on these issues. Especially where prices are regulated by the state.

Let’s talk about high-tech medical equipment many medical centres have today. This commodity hasn’t been sanctions, but isn’t there an influence of sanctions when buying consumables, servicing them? What is the situation like here?

Again, in the last 10 years, a big percentage of equipment has started to be made in Russia. This is what we have never done, for instance, tomographers. But of course, we shouldn’t boast and say we depend on nobody. I have always considered that our citizens should have access to the latest medical discoveries, technologies and I am sure it will be this way in the future too because medical equipment as well as medical goods aren’t under sanctions. Also, Asian markets — China, India — also present the cutting edge line of equipment today. So I think we won’t have any problems.

When it comes to both their maintenance and components too?

We shouldn’t have problems.

Anyway, is there anything that concerns you?

I won’t say concerns but disappointment. Do you remember the scene when our athletes who had been preparing for the competition for nearly four years arrived at the Paralympics? It was a milestone for them. And they weren’t allowed upon arrival: “Go home!” What about Wimbledon where athletes from Russia and Belarus were banned from competing? Such events, of course, cause disappointment. So the same thing happens when the international scientific community — for instance, a community of oncologists or podiatrists — makes a decision to restrict the access for Russian specialists. While the latest discovers are discussed, modern treatment standards are created, joint decisions are made there. Such politicised decisions, which are made under political pressure, are disappointing, of course. On the other hand, they also hit those who make these decisions. But in general I don’t think we will be seriously limited to some research. I am sure that we will continue actively introducing modern technologies, use them in the future development.

Nevertheless, are professional contacts cut off on the international stage?

I think the links with European countries, with the USA in science that have been traditionally created in the last years will feel pressure. I believe we should actively move to the East, to China and India. These are very developing markets where there is a balance between production and scientific technologies. Here we can achieve synergy.