Exports of quality pharmaceuticals from European countries and China are causing a decline in India's exports to Russia. The privatization of the Russian economy in the mid-1990s and the subsequent globalization resulted in many Indian players losing the shine to their European counterparts in the pharma sector. According to the officials at the Russia desk of the Confederation of Indian Industry (CII), the Indian pharma exports to Russia have declined by 7 per cent to Rs. 465 crore in 2002-03 compared to Rs. 500 crore in 1999-2000.

India has a debt burden of more than $10 billion to Russia. 1999-2000 is a very significant year in the trade between the two countries. The Russian government was clearing its debt through the Centralized Purchase System (CPS), buying out useful commodities from India, in which pharmaceuticals also formed a major bulk. By 1999-2000 most of the debt owed by India to Russia had extinguished, making room for the end of Rupee-Rouble trade between the countries. As Russian government's main focus also was on clearing the Rupee debt as fast as possible, maximum pharma trade took place to clear the debts, benefiting Indian companies. As CPS was a government instituted system quality and Good Manufacturing Practices (GMP) were not much of a constraint and any Indian company with a reasonably good infrastructure would get the contract. "The tide started turning in 2000, when the debt was extinguished and the lookout for globalization took shape," said the CII official.

Agreed Sujit Kumar Singh, Chairman Shreya Corporation, one of the largest exporters to Russia, "Russian exports market is growing slowly, with only companies like DRL, Ranbaxy, JB Chemicals, and Shreya Life Sciences, and Cadila Healthcare enjoying the fray," he said.

The current size of the Russian pharmaceutical market is around US$ 4 .5 billion (Rs. 21,600 crore) and is growing at 10-15 per cent per annum. It is growing very lowly. Anti-diabetics, CVS, gastroenterology, and cold and cough formulations are exported to Russia in a major way.

Local industry in Russia caters to about 25 to 30 per cent of Russian Market and essentially in the formulations sector. "Some of the major indigenous manufacturers are Akhrekin, Niz Pharma, Bransolov, and ICN Pharma," said Singh.

Russia depends 70 per cent on exports. Maximum exports are from East Europe and Europe. So far no Indian manufacturer so far set up his manufacturing base in Russia.

"It is more viable to do exports currently than to start operation in Russia. In case, it becomes more cumbersome, Indian manufacturers would start manufacturing from there," said D.B. Mody, Director, J.B. Chemicals and Pharmaceuticals, a leading exporter to Russia.

The pricing in Russia is decided by the MNCs, said the experts. "To the best of my knowledge Russia is a signatory to the WTO Regime. The legal base is international in nature in respect of IPR laws. MNCs are active in Russia and enjoy patent rights as in any regulated country," said Singh.

According to him, unlike India, Russians have enjoyed special privileges all along in respect of all social welfare benefits. They continue to do so even today albeit slightly modified to suit the new capitalistic market economy situation. Market force influence pricing and generics as well as branded products compete in the market place. "The burden of treating certain life threatening conditions such as TB, Aids, Cancer, Diabetes, Psychosomatic disorder is with the government and all patients get free treatment for these diseases," he said.

Russian drug authorities are strict about GMP, but not as strict as the US FDA or the UK MCA.

Although the system in Russia has developed so much after the advent of privatization, credit system is still very prevalent in the Russian market. "It may take 30-120 days for the authorities to pay back your bill," said Mody.