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Russian drugmakers appeal to Putin over prices

World News | December 01, 2011


Lynne Taylor

Russian drugmakers appeal to Putin over prices

Russian drugmakers have asked the country's Prime Minister, Vladimir Putin, to help find a solution to the pricing problems which they say they are facing over products to be included in the new list of "vital and essential drugs" (ZHMVLP).

The companies, members of the Association of Russian Pharmaceutical Manufacturers (ARPM), say that the Ministry of Health and the Federal Tariff Service will not permit them to increase the prices of medicines included on the ZHMVLP which they say are needed because of the recent rises in costs of labour, raw materials and energy, and in levels of inflation, according to the local business newspaper RBC Daily.

Inflation in Russia is expected to reach 7.2% for full-year 2011 and is forecast at approximately 6% for 2012, while for the industry gas prices are expected to have risen 15% by next July, and heating and electricity costs are forecast to have increased 6% by then, according to the ARPM.

While the ZHNVLP is scheduled to take effect at the start of 2012, it has still not received government approval, and the ARPM says that companies cannot start the process of registering prices until the list gets the official go-ahead. The industry group warns that, with some of its member companies relying on products on the list for as much 90% of their revenues, insufficient price increases will have a negative effect on their plans to invest in modernising their facilities.

Moreover, representatives of the multinational drug industry in Russia point out that prices of their products have already been frozen since second-half 2009, and that any further curbs could harm Russia's potential for foreign investment.

Russian analysts have been reported as saying they expect no price rises for essential medicines will be allowed until after the March elections, and analysts at IHS Global Insight comment that, if this is the case, the chances of Mr Putin acting in the interests of the drugmakers are limited.

However, there is also the argument - which the domestic drugmakers will certainly make - that is in the national interest to support the local industry by allowing them the price increases they need to become profitable and develop their activities, while price rises are also important for the multinationals, given the reduction in profitability which they have recently experienced on the Russian market, says IHS Global Insight.

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