Domestic Pharmaceutical Companies Increase Output MOSCOW
According to Goskomstat, 3Q00 figures for domestic pharmaceutical output show 46.9% growth compared to the same period in 1999, with a total turnover amounting to some USD 637.7m. Last year, domestic producers focused on re-equipping their manufacturing bases, revising marketing strategies and becoming more market-oriented, in a bid to address a post-crisis malaise. This latest increase suggests that their efforts have paid off, although few anticipated such a turnaround in such a relatively short time. Indeed, speculation was rife earlier in the year that the government's proposed imposition of VAT on non-essential pharmaceutical items would lead to price increases and a possible shortage of some pharmaceutical products. Larisa Pavlovskaya, Head of Marketing at Bryntsalov-A, confirmed that, since the middle of last year, the company had been conducting in-depth market research, daily sales monitoring and competitive analysis. Manufacturing equipment has been updated and prices have been cut by 30%. Goskomstat data shows that Bryntsalov-A has doubled its output to USD 27.4m. Another company, Medisorb, has increased its output by almost three thousand-fold, from a tiny base to USD 3.9m. The growth in the sector is mainly derived from keenly priced, domestically produced OTC medicines. Domestic output of vitamins, however, has fallen substantially. Belvitaminy (Belgorod region) has cut its output by 67.14% over the period: indicative of continuing low expectations of health and well-being, as a result of years of Soviet-style medical care. Vitamin sales have also been undermined by regular price hikes, making them unaffordable for all but the most affluent. Growth in this area of self-help regimes would mark a major shift in attitude and interest in health issues per se. It would also be a clear measure of general prosperity. The state has been a major driving force behind the domestic manufacture of prescription medicines. Last year, the federal administration, in an effort to support domestic pharmaceutical companies, introduced a bidding process for state-purchased medicines, restricting participants to domestic producers only, except in cases where there are no domestic equivalents. However, none of the domestic pharmaceutical companies as yet possess a GMP international quality certificate, although the Ministry of Health predicts that Bryntsalvo-A will qualify for one by the end of the year. As such, it seems likely that this recent flush of success may be short lived. Foreign companies are already looking at domestic opportunities in order to cut costs and to counter government plans to impose limits on the import of foreign pharmaceuticals. ICN Pharmaceuticals - to date the sole foreign producer with a strong presence in Russia with five local production plants - claims to have actively participated at some of the major state tenders. The company also boasts the biggest network of pharmaceutical outlets, comprising 50 drugstores and 38 kiosks, with around half of these located in Moscow. The Association of Pharmaceutical Producers has plans to counter this presence by launching its own network of 58 drugstores in Moscow, under the Farmir brand, using SIA International as its sole supplier. Vremya has 16 outlets, trading under the 36.6 brand name.

The Russian state statistics committee announced on October 25 that the chemical-pharmaceutical industry increased output by 46.9%, to $637.7 million, as compared to the same period last year. Last year there was no growth in the sector. Over the first nine months of this year, output was 0.1% below 1998. BRYNTSALOV A was reported by the statistics committee to have doubled its output to R762.2 million ($27.4m). The output of drugs increased significantly at MEDISORG in Perm Region (29.7 times to $3.9m) and USOLYE SIBERIAN CHEMICAL PHARMACEUTICAL COMBINE in Irkutsk Region (6.1 times to $1.5m). The main cause of the dramatic increase in production at Russian pharmaceutical companies is the low price of their products. Over the nine months, sales of analgin and validol made in Russia rose steeply. Sales of vitamins declined, however. BELVITAMINY in Belgorod Region cut production by 67.14% to $6.3m. As for prescription medication, Russian manufactures receive aid from the state. Starting last year, federal authorities and regions began holding official tenders for the purchase of drugs with the aim of supporting Russian manufacturers. Under the federal law On Competitions for the Placement of Orders for the Delivery of Commodities, Fulfilment of Work, and Rendering Services for State Needs, only pharmaceutical companies with production facilities in Russia can take part in those tenders. Foreign companies may take part only if Russia does not have high-quality analogues of the medication in the quantities required by the state.

The Hungarian GEDEON RICHTER pharmaceutical company will retool the plant in Yegoryevsk, a town in Moscow Region, and arrange the output of new drugs at it by the end of 2001, Andras Oros, deputy director of the company's Moscow office, said. The retooling will raise the plant's value to $30 million. The plant is now run by the PHARMOGRAD company, which, in turn, has been owned by GEDEON RICHTER since March of 1999. At present, the enterprise produces 12 varieties of drugs. The product range may be broadened to 30 varieties once the revamp is completed, after which the enterprise will operate at 60 to 70% of capacity. The enterprise will turn out both Hungarian drugs and those from other foreign pharmaceutical firms under their licenses. Oros said that GEDEON RICHTER plans to increase its sales in Russia by 20%, to $50 million, this year by taking advantage of the growing demand for pharmaceutical products in Russia. *NewsBase*

The American ICN PHARMACEUTICALS corporation intends to open eight drugstores in Russia. Each will have a turnover of $2.2 million-$2.5m. The company owns 137 retail outlets in Russia.

The Russian Economic Development Ministry has drafted a government resolution to cut customs duties. Under the draft resolution, basic customs duty rates will be fixed at 20%, 15% and 10%. The exceptional 100% duty rate will apply, for instance, to alcohol imports. Trading companies importing insulin and other medicines that are not manufactured in Russia will most likely be exempted from customs duties. According to Andrei Kushnirenko, head of the Economic Development Ministry's tariff policy department, a 20% duty rate will apply to consumer goods, a 15% duty rate to finished farm produce, a 10% duty rate to semi-finished goods and a 5% duty rate to raw materials. The government will discuss this draft resolution on September 7.

The growth of Russia's gross domestic product may amount to over 7% in the first six months of this year, said Vladimir Sokolin, chairman of the state statistics committee. According to Sokolin, GDP growth in the first quarter amounted to 8.4 %. Commenting on the results of the first six months of 2000, Sokolin noted that "they inspiro optimism." There was growth of 5-8 percent on all macroeconomic indices. According to Sokolin, the inflation rate in July may reach 2%, as compared to 2.6% in June.

A project to build a pharmaceutical plant in the town of Kstovo in Nizhny Novgorod Region has been sent back to Russia's VNESHEKONOMBANK for additional appraisal. It is necessary to work out parameters for future production, proceeding from current conditions on the Russian medicine market. The project was devised in 1997. To finance the project, the Japanese EXIMBANK will issue a $127-million 13-year preferential credit at 2.89% interest under guarantees from the Russian Finance Ministry and the regional administration. The project is assessed at a total of $150m. The $23m that is still missing will be provided by the Russian Finance Ministry. According to sources, the ministry is already issuing funds to set up infrastructure for the future construction site in the industrial area of Kstovo. The project will involve BIOFARM-AVTOMATIKA, NIZHFARM, VILAR and the Kstovo city administration. The plant is projected to make a pre-tax profit of around R540m in the first year of operation and a R1-billion pre-tax profit the following year. The enterprise is expected to sell R200m worth of goods monthly. Its output will consist of about 1,000 drugs made to the GMP standard. *NewsBase*

The medicine plant in Borisov in Belarus is arranging the output of new types of drugs. The enterprise is already producing preparations based on polycapran, a modified cellulose, which is used in surgery and other fields of medicine. The plant has also mastered the production of estifan, which is made from medicinal herbs and is intended to remove radionuclides from the human body. The plant's new products include drugs in gelatin capsules. In 2000, the Borisov plant plans to process 20 tonnes of medicinal herbs into phytopreparations in the shape of liquid or tablets. *NewsBase*

The European Bank for Reconstruction and Development (EBRD) has revised its outlook for GDP growth in Russia in 2000 and assessed it at 4%, up from the previously expected 1%. On the whole, the EBRD cited the economic upswing in Russia in 1999 and early 2000 as one of the most significant among Central and Eastern European countries. Economic growth of 3.2%, reached by Russia in 1999, was prompted by the steep growth of industrial output, including import-substituting production, in conjunction with the sharp devaluation of the ruble and a considerable price hike for oil and other raw materials, says the EBRD report. *NewsBase*

ICN MARBIOFARM, a subsidiary of the ICN international company in the Russian republic of Mari El, has set up production of the Atenolol and Glumevit medications. The first drug is used to treat cardiovascular diseases, while the latter is a comprehensive medicine that contains ten vitamins and minerals to stimulate oxidation-reduction processes, regulate metabolism and enhance tone and fitness for work. *NewsBase*

The IMMUNOPREPARAT enterprise in Ufa in Bashkortostan has developed wide-scale production of the new generation of the Grippol anti-flu vaccine. A present, the enterprise has already taken orders for three million doses of Grippol. IMMUNOPREPARAT plans to produce a total of five million doses this year. *NewsBase*

Nizhfarm pharmaceutical enterprise announced its sales increased by 37.3% year-on-year in 1999. The company sold products worth $17.4m during the year.

The Nizhny Novgorod -based NIZHFARM pharmaceutical enterprise will pay R10 as dividends per ordinary share for 1999. The decision was made at the meeting of the board of directors. Last year the company increased sales by 37.3% comparing with the 1998 results. It sold products worth $17.438m. Plans for 2000 are to increase sales to $25.531 (146% of the 1999 results). The company is to produce 71,537 thousand packs of medications in 2000. *NewsBase*

Omsk regional governor Leonid Polezhayev has approved the Omsk Medicine regional development programme for local drug makers through 2003. As part of the programme, the region intends to expand and retool its current pharmaceutical enterprises. The plan will be fulfilled by tapping regional budget funds. *NewsBase*

The Russian AKRIKHIN chemical and pharmaceutical combine plans to commission a new division to produce 300 million pellets per year, reported Ivan Tyulyayev, director general of the enterprise. The value of the project is $8 million. AKRIKHIN intends to be at the forefront of all Russian pharmaceutical companies in two years. The enterprise stakes on generics to beat its competitors. At present, AKRIKHIN turns out 26 of 40 generic brands produced in Russia and plans to increase their number to 40 this year. An equal number are in the design phase. According to the Russian State Statistics Committee, AKRIKHIN ranks third in terms of production volume ($48.1 million), giving way only to ICN PHARMACEUTICALS ($93.1m) and the Moscow Semashko Pharmaceutical Factory ($49.1m). A new division may help the company move up to second place and step on the leader's toes. Last year, AKRIKHIN hit the top three companies and showed 31% production growth in terms of rubles compared with 1998. Simultaneously, the ICN PHARMACEUTICALS group, which includes five major Russian pharmaceutical companies, decreased its production volume by 30%. *NewsBase*

• KRKA DD Novo Mesto pharmaceutical company (Slovenia) is to establish a $20m drug production facility in Moscow Region by mid-2001. (66 words)