Region/Countries: Europe, Russia Industry: Biosciences / Medical Devices Date: August 2016

Why this is important to Wisconsin businesses: The Russian government offers subsidies to makers of medications on the essential drugs list, and Pfizer and Abbott Laboratories have already launched agreements with Russian partners to allow them to enter the market.

In July 2016, the U.S. pharmaceutical giant Pfizer became the first foreign company in its sector to localize its business in Russia with a Russian partner. Pfizer and the Russian-American company NovaMedica, whose shareholders include the Russian state-owned company Rusnano, moved to invest jointly in the construction of a plant in the Kaluga region, 125 miles southwest of Moscow.

By constructing a production facility in Russia, Pfizer is eligible to take advantage of Pharma 2020, a large-scale program of the Russian government offering subsidies to local manufacturers that produce medicines from the essential drugs list, which all state hospitals and clinics are required to use first for medicines for their patients. In addition to supporting local producers, the state program aims to increase the share of Russian drugs to 50 percent of the domestic market by 2020.

According to Pfizer’s press release, the portfolio of high-tech medicinal products planned for the new plant in the Kaluga region includes essential drugs for the treatment of severe bacterial and fungal infections, inflammatory diseases and cancer and for use in anesthesiology – more than 30 international nonproprietary names, or INNs, for active pharmaceutical ingredients. In an interview earlier this year with the Russian business daily Vedomosti, Leonid Melamid, a member of NovaMedica's board of directors, estimated the cost of the project at $60 million to $100 million.

One of the goals of the new plant is to increase exports to post-Soviet countries and beyond. Sanofi in Russia has already announced its plans to export insulin to Europe, while Germany's Stada is already sending a number of drugs it produces in Russia to Germany.

Another U.S. company – Abbott, which produces medicines for cancer and chronic diseases at its Veropharm plant in Russia – is also considering the possibility of export. "Our program aims at transforming Veropharm into a world-class manufacturer that could at some point export to other countries" besides former Soviet ones, said Irina Gushchina, public affairs director for Abbott Russia. “Veropharm’s medicines have a great potential for growth due to the growing prevalence of oncology and chronic diseases both in Russia and globally.” The company already exports medicines within the post-Soviet bloc.