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Operating in a bear market.

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During the past few years, the Russian pharmaceutical market has demonstrated strong growth (in excess of 20% annually, up to $14 billion in 2008) as a result of a benign global economic environment, high commodity prices, liberal fiscal policies and strong internal consumption. As the market grew in size, it started to attract pharma-biotech companies from the West that were interested in commercializing their products in Russia and the other CIS countries.

The pharmaceutical market structure has also changed significantly, driven by industry dynamics and the introduction of a few government reimbursement programmes. As such, increased OTC sales have been driven by improved social welfare, increased drug availability and improved patient education. Currently, the market is divided into a commercial segment (approximately 70% of the total market), a hospital segment (inpatient treatment, 15% of the market) and a state reimbursement segment or ONLS (outpatient treatment, 15% of the market). The latter two segments are completely government sponsored. The ONLS programme, which was introduced in 2005, allows certain vulnerable categories of citizens (disabled people, the chronically ill, veterans and others) to access high quality pharmaceuticals. Its launch resulted in overall market growth, the expansion of drug imports to Russia and an average drug price increase (Figures 1 and 2). In 2008, the programme was separated into two parts--a special programme for the treatment of seven costly diseases was created, called 7 Nozology (7N), which deals with the following severe pathologies: myeloleukemia; hemophilia; multiple sclerosis; Gaucher's disease; cystic fibrosis; hypophysial nanism; and transplantation-related conditions. The budget for this programme alone reached $1.3 billion in 2008.

The hospital segment also showed strong growth, fueled by the Russian government's "Healthcare Project." This is a federal-funded project that involves the construction of special medical clusters--regional centres that provide high-tech medical care in fields such as cardiosurgery, articulation prosthetics and others. The construction of many well-equipped medical centres resulted in strong market segment growth. It is worth noting that, despite the ongoing global economic downturn, the Russian government has rejected plans to cut social spending, insuring further market growth.

Entering the Market

As the market expanded, it became more attractive to foreign pharmaceutical producers. In the past 2 years, many companies--such as Wyeth, Shire, Celgene, Actelion, Antigenics and others--have entered the Russian market. Operational entry models have varied from opening a representative office and registering a legal entity to finding a partner/distributor that will represent the company in Russia. It should be noted, however, that it is very rare for Russian distributors to provide drug registration and marketing services. A preferable solution would be to partner with a local company that offers the full range of services for pharmaceutical producers. These services should include market assessment, drug registration, strategic and marketing planning and distribution management, as well as due diligence and sales supervision.

Medical product registration is the most important stage of Russian market entry; it's mandatory for all drugs and medical equipment entering the country. The time and effort spent on this task is fully compensated by the subsequent timely product launch. The high wages and unsatisfied demand for professionals who perform this service are testament to its high priority status. Drug registration is another time-and labour-consuming process. It is mandatory for all new pharmaceutical preparations, new combinations of previously registered preparations, novel dosage forms, previously registered drugs with a different supplement composition and/or copies of pharmaceutical preparations. Drugs intended for use in clinical trials do not need to undergo the registration process. It is prohibited to register one drug under different names, or to register different drugs under a single name. As of 15 December 2008, there were 12,990 medical preparations and food additives listed in the Russian registry!

Drug Registration

Roszdravnadzor (an abridged name) is a state agency responsible for the registration of medical products; it is a subsidiary of the Russian Ministry of Health and Social Development. The agency states that drug registration can be completed in approximately 6 months. In reality, this timeframe is not just unrealistic--it's impossible! The process involves multiple steps, committees and individuals, making it very complex and inefficient. Drug manufacturers operating in the Russian market consider, more realistically, registration times to be 24-36 months; for some, however, this process extends for more than 3 years! Prior to 2007, all registered preparations had to undergo a re-registration process every 5 years; now, registration certificates are being issued for an indefinite term with no expiration date.

The drug registration process includes the submission of a full registration dossier, the completion of all the necessary tests and, finally, the issuance of the registration certificate. Our experience shows that a complete and diligently prepared registration dossier accounts for 50% of the success of a timely drug registration. A full list of the necessary documents for a dossier is provided by Roszdravnadzor and can include up to 29 items. There are four major steps in the registration process:

1. Registration dossier submission. Roszdravnadzor then reviews the file and decides on goals and the necessary levels of drug expertise.

2. Preregistration testing, conducted by Scientific Center of Medicines Evaluation (SCME), which is an independent entity comprised of four different scientific institutes. All of them participate in this process.

3. External testing (when necessary), conducted by a designated, independent expert organization and out-of-staff Roszdravnadzor employees.

4. Drug registration issuance. Once again, Roszdravnadzor reviews the medication dossier and all the tests results; a decision on registration issuance is then made.

The registration procedures for various substances have different numbers of procedures involved. For example, the registration of a pharmaceutical preparation involves a total of five steps:

1. Administration documentation expertise

2. Product monograph (normative documentation) expertise

3. Quality laboratory testing of samples

4. Efficacy and safety data expertise

5. Instructions for Medical Use expertise.

At the same time, the registration of a pharmaceutical substance only requires four steps and does not include item five from the above list. Drug document alteration registration depends on the nature and extent of the changes made. Finally, in exceptional circumstances, Roszdravnadzor may ask to organize a visit to an applicant's manufacturing facility to check the quality of the drug production process.

Commonly Made Mistakes

Let's take a look at some of the mistakes that pharmaceutical companies make at different stages of the drug registration process.

1. Pharmaceutical preparation trade name approval: A good rule of thumb is to always perform preliminary market research, to prevent potential trade name infringements. There are many similar sounding names on the market and they can put your registration process on hold until the issue is resolved. Also, we suggest that you check the name of your product for its euphony in Russian to avoid any unwanted associations in the future. Rospatent registers trade names, which is a federal service for IP, patents and trademark protection. Rospatent application review is completed in two steps. The first step is a formal review, which usually takes about a month. The second step is an examination of the claimed name. This step can take up to a year ... or even longer! Trademark registration is valid for 10 years; then, at the end of the decade, it can be extended by another 10 years. There is no limit to the number of permitted extensions. It is recommended that, to complete trademark registration in advance, a Cyrillic inscription should be considered as well. It may be convenient to combine this process with product patenting in 8 other countries (besides Russia) under the Eurasian patent convention.

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2. Taxes and various official service payments: It may appear to be simple and routine, but this apparently straightforward task can result in weeks of delays in the registration process, leading to launch postponement and lost sales. Most large pharmaceutical companies have very strict procedures and regulations for bill payments. Official state drug examinations can be costly enough, generating large bills for a pharmaceutical company. It can take weeks for these bills to be cleared and paid through corporate accounting systems. To avoid unwanted delays, many producers hire Russian companies to expedite official state payments. If a specialized Russian company does a drug registration, then a bill-payment service is often included in its service offering, making this process fast, simple and convenient.

3. Proper preparation of dossier materials: Proper preparation of all the necessary registration materials is a very important and frequently overlooked step. As a list of all the required documents is known beforehand, it is essential to perform initial dossier analysis to identify and eliminate any weaknesses. Almost 90% of dossiers submitted do not satisfy Roszdravnadzor requirements in terms of completeness, sufficiency or document preparation. Strict guideline adherence is mandatory for timely registration approval. Everything must be submitted in a specified order and, ideally, at the same time. Mistakes in document submissions can lead to major time losses and additional work on dossier repreparation. All documents related to clinical trial results must be as complete and valid as possible; this is especially true for drug safety profiles and adverse reaction reports. Any last-minute changes to previously submitted documents should be avoided at all costs. The correct and proper translation of all submitted materials is also crucial for registration success, as authorities pay close attention to translation mistakes. There are many instances when a lack of co-operation between the Russian and foreign departments of a manufacturer have led to changes in submitted documents, causing massive time delays.

4. Orphan drug status/high price: Unfortunately, FDA-or EMEA-assigned orphan drug status does not provide any special advantages during the registration process in Russia. Only in rare or exceptional circumstances can a manufacturer ask Roszdravnadzor to perform its tests on the company's production facility (such as an abnormally high price or complex production techniques). This is not the most desirable option for a manufacturer, as it can lead to potential discrepancies with future drug control tests in Russia, delays in drug commercialization and, in extreme examples, to the refusal of a drug compliance certificate.

Conclusion

Unfortunately, the registration process can be a major obstacle for Western companies entering the Russian market. Often, market newcomers spend too much time and effort trying to understand the intricacies of local legislature. Russian laws, although clearly not ideal, have improved immeasurably during the past two decades. The massive influx of Western players has brought positive international experience; and, with luck, it will continue to have a benign effect on Russian regulators. Being cognizant of local laws and diligently following them will allow foreign manufacturers to register their products quickly ... and enable them to start enjoying the enormous opportunities offered by the Russian pharmaceutical market.

For more information

Dmitry Dmitriev

Chief Operating Officer

Raifarm LLC

4 Malaya Dmitrovka, 4th Floor

127006, Moscow, Russia

Tel. +7 495 937 5608

info@raifarm.com

www.raifarm.com
Figure 1: Price Segment of Drug Import.

                2006     2007

<5EUR           22.4     17.0
5-10EUR         13.5      9.1
10-10EUR        25.6     26.7
100-100EUR      23.2     26.4
>1000EUR        15.3     20.8

Note: Table made from bar graph.
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Title Annotation:russian overview
Publication:Pharma
Geographic Code:4EXRU
Date:Sep 1, 2009
Words:1842
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