Rohan Shah, Yury Gloumakov, Yury Shprygov & Sabina Shukyurova

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1 Rohan Shah, Yury Gloumakov, Yury Shprygov & Sabina Shukyurova

2 OUTLINE Overview of Russian Pharma Financing through FDI Cluster Theory and Application Policy Recommendations

3 OVERVIEW OF RUSSIAN PHARMA Size 818 billion RUB (26 billion dollars) Productivity 80% of products are imported Russian Pharmaceutical Industry Use of Generics 70-80% of all drugs are generic R&D Invests only 1-2% of its profit in R&D

4 INDUSTRY GROWTH

5 MAJOR PROBLEMS OF RUSSIAN PHARMA Major Problems Miniscule Investment in R&D Imperfect Pricing System Lack of International Presence Lack of GMP Standards Changing Regulatory Legislation

6 PHARMA 2020 GOALS 1. The share of Russian-manufactured medicines in the list of strategic medicines and vitally important medicines must reach 90% 1. The share of local medical drugs in the pharmaceutical market in monetary terms must be 50% 1. The share of local medical products and medical equipment in monetary terms must be 40% 1. 75% of pharmaceutical and 85% of medical companies should be modernized

7 IMPETUS FOR US COMPANIES Significant growth in Russian pharmaceutical industry US pharmaceutical industry growth is slowing Price reductions from Affordable Care Act US bench-to-bedside costs estimated at $1.3 billion per year for all drugs Patent Cliff Effect

8 OUTLINE Overview of Russian Pharma Financing through FDI Cluster Theory and Application Policy Recommendations

9 FDI BENEFITS Most widely used channel for investment (60%) Gives access to products and services of higher quality Enriches the public treasury Potential spillovers or externalities

10 SPILLOVERS AND EXTERNALITIES Familiarity with Technology Knowledge Dissemination Increase in Human Resources Increased Industry Efficiency and Growth

11 FAVORABLE FDI CONDITIONS FOR INVESTORS Temporary tax exemption Reduction of Tariffs Subsidies for Infrastructure

12 CASE FOR FDI IN RUSSIA 2010-s 1990s: Not Promising 2000s: Increased inflow of Investments 2010s: Continued Growth

13 FDI DYNAMICS

14 FDI IN RUSSIA (+)

15 FDI IN RUSSIA (+)

16 FDI IN RUSSIA (-) Poor Infrastructure Personnel Macroeconomic Risks

17 OUTLINE Overview of Russian Pharma Financing through FDI Cluster Theory and Application Policy Recommendations

18 CLUSTER DEFINITION A geographic concentration of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions that compete but also collaborate Promote the creation of public policy to offset potential shortcomings in macroeconomic growth.

19 CLUSTERS IN RUSSIA Russia is Behind Other BRIC Countries in Developing Economic Clusters.

20 CLUSTER BENEFITS Economical Technological

21 BIG DATA 3/8 = 27.5% 8/ %

22 DATA SHARING Lower Risk Yield Findings at Lower Cost Greater Understanding

23 TECHNOLOGICAL INNOVATION Big Data Handle Process Analyze Data Sharing Novel Methods i.e. Cloud Computing Security Threats Breaches Surveillance

24 ECONOMIC BENEFITS Consolidated Benefits Efficacy and Drug Safety

25 ECONOMIC BENEFITS Accountable Care Organizations (ACOs)

26 OUTLINE Overview of Russian Pharma Financing through FDI Cluster Theory and Application Policy Recommendations

27 CURRENT STATE

28 RECOMMENDATION #1 Change Align budget Funding Priorities with Competitiveness priorities Change Budget Priorities Promote Culture of Innovation Actionable Pharma 2020

29 RECOMMENDATION #2 Enhance Framework Conditions Standardize Drug Approval Process Protect Drug Patents Invest in Digital Infrastructure Propose Risk Minimization Initiatives

30 RECOMMENDATION #3 Enhance Investability Develop Investable Options Assess Profiles Leverage Strengths Help Struggling Companies

31 RECOMMENDATION #4 Enhance Investability US & Russia Should Form Clusters Together US provides expertise Russia provides policy Both create Best Practices committee

32 RECOMMENDATION #5 Enhance Opportunities for Intra- and Inter- Cluster Collaboration University Global Allies Industry

33 CONCLUSION Forming the collaboration between Russian pharmaceutical market and US private sector gives clear benefits for both sides. Partnership between the Russian pharmaceutical industry and US private sector should be explored with sincerity Enacting proper policy to govern this relationship will provide mutual benefits for both parties involved.