In the recent years there has been a phenomenal growth in the pharmaceutical industry of Commonwealth of Independent States (CIS). In order to tap the vast potential existing in this region, India is chalking out a slew of initiatives to boost its exports to the region.

The main reasons for this growth include rise in income levels of middle class, rise in health consciousness and growing burden of disease among the aged groups which has become common across the globe. All these factors have increased the demand for health care needs in Russia and CIS regions.

The CIS region which once was part of erstwhile USSR (United Soviet Socialist Republic) had disintegrated in to several independent countries in the year 1991. Since then all the CIS nations have been focusing on building trade relations with various countries and India in particular especially in the field of pharmaceuticals and biotechnology.

With the growing salience of India in the field of pharmaceuticals and biotechnology on the global stage, the CIS nations are keenly exploring opportunities for building trade relations with India. The Indian government is also equally interested in building a long-term relation with the CIS nations.

The Pharmaceutical Promotion Council of India (Pharmexcil) is carrying out various activities to improve exports to the CIS region. This year, as part of its promotional activities, the council had organized buyer-seller meets and even led a delegation to the CIS countries of Russia, Belarus, Moldova and Turkmenistan from December 1-15. This event had also coincided with Apteka Exhibition which was held in Moscow during Dec 3 to 6.

“CIS is one region where India has huge potential for growth. At present we are taking part in various forums in CIS countries and conducting exhibitions, networking and touring trade delegations to explore the business opportunities and thereby improving our pharmaceutical and herbal exports to these countries”, said Dr. P.V. Appaji, DG, Pharmexcil.

Among the CIS nations, India’s pharmaceutical exports have been spread across Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine.

Relations between India and the CIS nations have remained close and cordial since the Soviet era. However, bilateral trade and commercial relations have not grown commensurately with these newly formed countries. At present CIS constitutes only 1.2 per cent share in India's total exports. The main reason for this can be attributed to factors like distance, language barrier, inadequate transport facility and lack of information about business opportunities.

Among the major trading partners, Russia, Ukraine, Kazakhstan, Uzbekistan, Kyrgyzstan and Belarus constitute more than 90 per cent of India's total bilateral trade with the CIS countries.

Growth prospects in CIS region
It is estimated that pharmaceutical sector in Russia and other CIS nations will have a double digit growth of around 10 to 11 per cent during the year 2012-2016. At present there is no national drug provision insurance system in Russia and CIS countries. This means that 60-70 per cent of all pharmaceutical sales are paid out of the Individual pockets. Large, locally-owned pharmacy chains account for most of the market, but there are still a substantial number of small, independent pharmacies, particularly in the small and medium-sized cities. A national insurance scheme is under development. The hospital drug provision system, meanwhile, is more advanced and will continue to develop in the future.

A key factor for pharmaceutical companies to succeed in CIS region would be to balance their portfolio of branded generics, branded ethical products and over-the-counter (OTC) drugs that can be sold primarily at the retail level. A solid pipeline of innovative products aimed at the developing reimbursement and insurance schemes is also critical.

Moving in this direction, the world’s leading drug maker Takeda is aiming to capture the CIS markets by enriching their product portfolio with ground-breaking drugs that can compete for state money in the national and regional level hospital tenders.

The future growth within this market depends not only on innovation, but also on an increasing emphasis on localization. Having understood this, Takeda is opening a green?eld production plant at Yaroslavl in Russia, which will start manufacturing in ?sscal 2014.

In order to achieve future growth within these markets, India needs to explore its opportunities not only the low cost quality generics portfolio but also move in with innovative drugs.

The growth in health care demands has been reflected due to growing sales of pharmaceutical and medical products in the country. For instance the sales by legacy Nycomed in CIS region for the six months ended March 2012 were ¥30.9 billion—a year-on-year increase of 10.9 per cent. This was driven by strong sales growth in Russia, which accounts for around 70 per cent of the overall regional market. In 2011 Nycomed was the fastest growing foreign company in Ukraine and ranked among top three companies in the industry in Kazakhstan.

To capture the greater pie in the CIS region, Indian companies needs to move flexibly in meeting market needs and adapting to the changing environment by changing their structure and business model as required and by maintaining a product portfolio tailored to local market needs.

Among the emerging markets in CIS region, Georgia is playing a vital role in the production of pharmaceuticals. Already, pharmaceutical exports from Georgia have grown at an average 47 per cent over the past six years, and Georgia’s own demand for pharmaceuticals has experienced rapid growth, averaging 16 per cent.

Georgia offers a strategic base for production, with easy access to surrounding CIS countries and other major emerging markets such as the Middle East. Georgia is a leader in the CIS and emerging market owing to the congenial business environment it provides. Also making Georgia an attractive strategic base for pharmaceutical production are its low costs of energy and labour (average wages approximately 30 per cent less than in nearby Turkey) and an established pharmaceutical production industry totalling US $ 48 million in 2011.

As the pharmaceutical sector in CIS region is still at a nascent stage the Indian pharma industry can capture the business opportunities in these countries and can form partnerships and collaborations with the local players to build a long- term relationship to boost the future growth of Indian pharma.

Indian focus towards CIS
Though initially India’s focus in the CIS markets was limited, today many Indian pharmaceutical companies have developed trade relations and are exporting herbals, formulations and APIs to the CIS markets. Many of the top companies such as Cipla, Orchid, Dr. Reddy’s, Ranbaxy, Wockhardt, Panacea Biotech, Lupin, Aurobindoa, Pirmal health care, Ankur Drugs and Pharma, Glenmark, Nectar lifesciences, Emcure, Claris Life Sciences, Divi’s, Hetero, Arch Pharmalabs and Matrix have gained substantially by their exports to CIS nations.

If India’s drugs, pharmaceuticals and fine chemicals exports are analysed region- wise for the year 2010-2011, North America holds the major chunk of 25 per cent with Rs. 11717 crores of exports while Europe and African markets hold the next position with 19 and 17 per cent respectively. The share of Middle East countries is of Rs. 3693 cores and LAC countries is Rs. 3183 crores which accounts to eight and seven per cent share respectively.

The CIS countries accounted for export revenue of Rs. 3017 crores during 2010-2011 which is about six per cent share when compared to the other regions. On the whole, total exports for the year 2010-2011 constituted 58 per cent of formulations, 41 per cent bulk drugs and one per cent herbals. Since most of the CIS nations lack the right kind of technical infrastructure and expertise required to set up and develop quality pharmaceutical products, they rely on India to manufacture a large bulk of products needed by healthcare or pharmaceutical companies.

From Table-1, it can be seen that among all the CIS countries, Russia with a value of Rs.1301.64 core is the leading importer of pharmaceutical drugs and fine chemicals from India. Following it, Ukraine is the largest importer of pharmaceuticals from India with more than Rs 550 crores while Kazakhstan and Uzbekistan stand as third and fourth leading importers with Rs. 227 crores and Rs 142 cores worth imports from India during the fiscal 2009-10.

“We are witnessing a robust growth in Russia and have considerable presence in the country. We are also in the process of tapping the markets in other CIS countries. We are slowly planning to acquire small to mid-sized brands to boost our business there. We are also looking aggressively at in-licensing products from multinationals and other companies. Of course, our organic pipeline is also playing out. There is good opportunity in the Russian market and we are doing our best to address the opportunity,” said Satish Reddy, MD Dr. Reddy’s, while sharing his view on their business plans in Russia and CIS region. The export figures for five important CIS nations viz., Kazakhstan, Kyrgyzstan, Uzbekistan and Ukraine during the past three years since 2007-08 to 2009-10 is given in Table 2.

The Table-2 shows that Kazakhstan has steadily increased their imports of formulations from India from Rs 110.79 crores in 2007-08 to Rs. 169.85 crores in 2008-08 and Rs. 223.40 crores in the year 2009-10. Similarly is the case with Uzbekistan, the import figures from India have increased from Rs. 88.79 crores in 2007-08 to Rs. 109.00 crores in 2008-09 to Rs. 141.00 crores in the year 2009-10.

The bulk drug and herbal markets have been at low with slightly dwindling figure. The other two countries Kyrgyzstan and Ukraine have accounted a slight slowdown in the import of formulations from India.

From the Table-3, it can be seen that Indian exports to Russia have shown an increase of $85.35 million from $333.11 in 2008-09 to $ 418.5 million in 2010-11. Of all the pharmaceutical components, formulations are the major exports to Russia accounting for $ 402 million during the year 2010-11. Apart from Russia, other nations are also slowly catching up in all the three segments of bulk drugs, formulations and herbals.

Trade boosters between India and Russia
In order to give a push to the pharmaceutical trade between Indian and Russia, during the year 2010, two countries had agreed to exchange of technical know-how for production of pharma products including bulk drugs, serums, biosimilars, vaccines etc and have agreed to participate in setting up of enterprises for scientific and production capacity.

According to official sources, the visiting Russian delegation led by Russian minister for Industry and Trade, Victor B Khristenko and the senior officials of the Department of Pharmaceuticals led by secretary, Mukul Joshi have also agreed on a draft MoU to encourage collaborations in the areas of trade, industry, joint ventures and R&D in the pharma and bio-pharma sectors. They have also agreed to exchange of information on the issues of regulation in the export/import of pharmaceuticals products including Active Pharmaceuticals Ingredients etc.

In 2010, an agreement on Russia-India Biotech Network (RIBN) was also signed in Andhra Pradesh in the presence of Chief Minister K Rosaria. RIBN is a dedicated on-line platform to effectively facilitate collaboration between the Russian and Indian biotech communities.

Challenges faced by Indian firms
Though the Indian pharmaceutical industry is catering to the demands of the CIS nations by understanding their requirements and accordingly developing drugs under contractual manufacturing, in the recent times the Indian firms are increasingly facing challenges and hurdles at the CIS countries. It is high time for the Indian firms and the government to change policies accordingly and adapt to the international standards and explore all possibilities to tap the highly potential CIS markets.

Enumerating the challenges for expanding trade to CIS nations, Dr. P.V. Appaji, executive director, Phamexcil said, “Though the pharmaceutical trade with CIS nations looks quite bright at present, there have been some hurdles that are hindering our exports to the region. Recently the Russian government had brought in a new drug policy which intends to bar all the pharma and biotechnological imports from India. They want to reach the target of at least 70 per cent of self sustainability by the end of 2016.”

He said that the recent changes in the Russian policy are discouraging the Indian exports to that country. They are also seeking very high standards and imposing huge fees for registration of products.

In Azerbaijan, due to political reasons, the government has stopped giving permission for approvals to the Indian companies. Kazakhstan is also becoming rigid and it is expecting USFDA level documentations for approvals. Countries like Ukraine have so far depended on Indian companies but it is also slowly moving towards regulated markets.

“We are planning to improve our trade with CIS countries. We have sent a 24 member team of delegates from India to visit three counties Kazakhstan, Kyrgyzstan and Uzbekistan and to understand the CIS markets, their needs and requirements. We had also organized APTEKA a pharmaceutical exhibition in Russia with the help of Indian Embassy in Russia to boost the Indian pharmaceutical trade in the CIS region,” said Appaji.