One of the factors for the availability of drugs for a patient is the price, and generic drugs play a significant role in solving this problem. AKRIKHIN JSC is one of the key manufacturers of generics in Russia. Denis Chetverikov, President of the company, spoke about the prospects for the development of the generic industry, market development factors, digitalization, patents, exports and other pressing issues.
What promising development portfolio does the company have or plan to have in the near future? What is the proportion of generic drugs? Are there any plans for the future?
We have two components of development. The first is generic, and in it we see the future. This year we will produce more than 100 million packages, and a few years ago we produced 70 million. We are increasing production, expanding our generic portfolio, adding new molecules to represent our quality products in most therapeutic areas in accordance with our existing technologies.
We are also improving generics. We make unique combinations of those INNs that are already known in the market. When creating a combination, you can satisfy the unclosed needs of doctors and patients. Another area is improved compositions. For example, if in classical development the effect lasted for a day, then with the addition of an adhesive component it is extended to three or more days. This is to some extent an innovation and one of the directions of development of the generic industry in the world.
The second part of our business is contract manufacturing. We produce under contract for two large international companies, including drugs for the treatment of diabetes and cardiovascular diseases.
In these two directions, we see our confident future. We would like to develop cooperation with international companies. This is interesting both financially and from the point of view of enriching new knowledge, production standards and technologies. Interaction and cooperation enriches all parties. We are ready to engage in the localization of production, up to the construction of buildings in our large territory, on it we can place about a dozen workshops.
What is the opinion of AKRIKHIN JSC regarding the existing labeling system?
Akrikhin was one of the first companies to start labeling when this project was just beginning. We bought the necessary equipment, allocated a budget for this project, and at the moment we evaluate the readiness for labeling as high. By January 1, 2020, we plan that we will be fully prepared. Of course, we are faced with very great difficulties. The biggest of them is the lack of clear technical requirements, documentation for this system. We work out certain moments, exchange information with the MDLP system, and after a while they say that everything will work differently. Lack of understanding of the future creates difficulties both in the implementation of the project and in the appearance of additional cost. And the amounts are growing as requirements change.
The industry also cares about the length of the crypto tail. There are different opinions, but we see in our company that if we leave 88 signs of electronic signatures, then for the production of products without raising the level of rejection, we must reduce the packaging speed by 3 times.
Sooner or later, manufacturers, along with regulators, will bring this issue to mind, and the marking will begin to work. But I have a big fear that the labeling system will not be unified, and it will not be at the level of pharmacies and hospitals. Few people think how this will be integrated, and how clearly we will see all the information that is in the system. I am worried that manufacturers will begin to label, report on tasks, and everything will end there.
What do you think about the initial maximum price and re-registration?
Mandatory re-registration of prices is a big uncertainty. They are trying to calculate it, because of their capabilities, but it seems to me that now you can predict a maximum of 20%. If a certain hard scenario is realized and this leads to a sharp decrease in prices, which means a sharp decrease in profitability, then many companies, including foreign ones, will think about the feasibility of doing business.
It is worth considering that the Russian pharmaceutical market has stopped growing. Until 2014, it was one of the fastest growing in the world, and this stimulated the localization of production of foreign companies and the expansion of Russian ones. It also made it possible to invest in the industry, to grow and develop production and R & amp; D here. Now we see a different situation. The forecast of the market in packings is negative – it certainly will not grow, but may decrease. Such uncertainties hit the market and reduce investment attractiveness for both local and foreign companies.
What are the prospects for the development of AKRIKHIN JSC?
The main prospect is to provide more patients with high-quality and affordable medicines. Now we are doing this, and we see the prospect of continuing. We would like to double the number of packages produced, so further development is associated with the expansion of both the portfolio and production. We achieve the first by investing and developing our own research activities. We have a center for research and development; in the early 2010s, it was completely modernized. Young specialists work for us, the average age of employees is about 30 years, maybe less. These are people who seek to find themselves, including in research, and therefore are able to make innovative developments from the point of view of the generic industry: new forms of delivery, new compositions or compositions. Our R & D is developing our portfolio, we will have more products, some of them of improved quality relative to the original ones.
What is your position regarding exports?
For us and other Russian companies, export is an opportunity for a new stage in the development of our business. Of course, this direction is difficult, because today in the country there is little knowledge and ability to organize an export business. We are at the very beginning of the journey. From the point of view of the generic industry, companies in Eastern Europe, like many Russian companies, existed in Soviet and post-Soviet times. Few of them managed to organize successful export businesses. This suggests that it is difficult to go beyond the boundaries of your market and go to others.
First of all, we are talking about exports outside the CIS. All Russian companies, to one degree or another, export to Belarus, Kazakhstan, and Armenia. We are talking about the European Union, Asian countries, America. We dream that our products will be of such high quality that we can export them to these countries. We are not talking about poorly regulated markets where, theoretically, products can be delivered without registration. We are talking about well-regulated markets where there is a need for quality medicines. Therefore, we need to harmonize our system.
We do not enter PIC / S. Now the Ministry of Industry and Trade has finally raised this topic, and we are moving in this direction. This is one of those elements that impede export for us. The rules of the Russian GMP are not harmonized with international standards, and this creates difficulties.
Another area of concern is the pharmacopeia. We continue to create our own pharmacopeia, we are expecting another review, although there are standard pharmacopeias. This suggests that we want to build our system, but we are creating something that does not quite fit in with world practice. This is also true for clinical research. We create something of our own that inhibits this process. Maybe this is the protection of the Russian market from competition, but on the other hand, this is no longer necessary, because the Russian pharmaceutical industry has developed so much in recent years that it does not require protection.
As a result, our regulatory framework, which is not quite harmonized with the rest of the world in the field of GMP, impedes Russia’s integration into the global pharmaceutical system and directly export.
Another issue is subsidizing clinical trials. For example, most of the products of AKRIKHIN JSC are soft medicines (creams, ointments, gels). There are clear requirements for clinical trials for tablets. You can check the bioequivalence, and on its basis, register the drug in other countries. The requirements for mild dosage forms are more complex. When exporting to European countries, it is necessary to conduct full-scale studies comparable to phase III of CI for the original drug. This is a big waste of time and money. It would be great if the state would support clinical trials of not only innovative drugs, but also generics that Russian pharmaceuticals want to register abroad.
In terms of expensive orphan drugs, what is the company’s position?
For us, the main focus is the retail segment, the pharmacy market. Part of our portfolio is focused on public procurement, for example, drugs for diabetes and anti-TB drugs. But we do not see this as a strategic future, because orphan drugs can be developed, but they have their own specifics – small production volumes associated with a small number of patients. We are an enterprise that is focused on scale in order to produce a lot, efficiently, inexpensively. This is what we are imprisoned for, so we are not ready to go to other areas for one or two drugs.
In terms of completeness of production, the possibility of using your own scientific developments, how are things going with the full cycle?
Firstly, we are working with the Active Component company, which is part of the Association of Pharmaceutical Manufacturers of the Eurasian Economic Union (EAEU). We entered into a strategic agreement with them several years ago. Our main specialization is the development of finished medicines, and some of them with improved qualities. The production of substances is a separate business. Factories are fundamentally different: the production of substances is a large chemical plant, and a pharmaceutical factory is a small enterprise.
On the one hand, the state supports the production of substances so that it develops further, in terms of preferences in public procurement. But our main limitation is that we are a small market, at best 3% of the global market. The production of substances is larger, it is difficult to make it efficient, competitive in price, focusing only on the Russian market. We cooperate with local manufacturers of substances. But on the other hand, we are faced with the fact that we can buy a Russian substance of good quality, but it will be more expensive at a price than a substance of the same quality in India or China. The fact that we are limited by this market greatly inhibits the development of the production of substances in Russia. Our company in 1991 produced 25% of the substances that were consumed in the USSR. In the early 90s, it was destroyed, destroyed. This is an industry that we must create from scratch.
What about intellectual property?
We monitor intellectual property, we patent all of our developments. But from the point of view of the generic industry, intellectual property issues are not developing very positively. A few years ago, when the patent for the original drug was ending, the generic company could put it in the pharmacy the next day after the “fall” of the patent. Now innovative companies have lobbied for a situation where we cannot produce a drug during the validity of a patent. This gives a delay in entering the market in the region of 1-2 months, but on the other hand gives an advantage to companies producing the drug outside the Russian Federation, because they do not have these restrictions. I am concerned that innovative companies are successfully moving the topic of intellectual property in Russia, arguing that there is little protection in Russia in this area. I do not agree with this. I think, although there are differences in regulation, in general, patent law in Russia is at a good level.
By generics – what are the drugs now made in Russia and their difference / similarity with the “familiar” Western or Indian?
This is a question of the quality of production: for someone it is up to standard, and this is confirmed by Russian and international audits. We like to work with international companies: we go through MSD, Johnson & Johnson audits, and they confirm the high quality standard that we have.
It is important to say about the coverage of this issue. We try to inform consumers about which molecule the drug contains. In order not to mislead the consumer, we have a line of drugs that are registered by INN. So it is easier for the doctor and the patient to find a replacement for the drug that he is taking.
How do you rate the digitalization of the pharmaceutical industry and healthcare in Russia today?
From the point of view of digitalization, pharma is an outsider among all industries not only in Russia but also in the world. The leader is the banking industry, where digitalization is about 80%, and the pharmaceutical industry is less than 20%. This is largely due to the conservative and regulated industry. In many countries of Eastern Europe there is a well-functioning system of electronic prescriptions: the patient goes to the doctor, he gets a prescription, then he comes to the pharmacy, and they are waiting for him there with medicine. This helps make healthcare more sustainable. We are talking about this system as something in the future. Another example is telemedicine. At a conference, companies involved in telemedicine talked about their business, and it struck me that this technology is interesting, but not in demand in Russia. In the UK, any patient can connect to a doctor who works in the healthcare system from their telephone. They have it integrated into the state. Therefore, we have where to develop.
What are pharmaceutical companies investing in digital technology today?
Investments are growing. Digital costs are among the fastest growing for all pharmaceutical companies. In the first quarter of this year, costs for digital as a whole were greater than for TV. This also reflects the trend in the farm, as our companies are one of the largest advertisers. Probably in the future there will be a race not only of budgets, but also of those who are able to implement this most efficiently and intelligently.
What is the level of localization of foreign companies in Russia, and what inhibits more active localization?
The level is quite high, companies continue to engage in localization. There has been a major breakthrough in the PHARMA 2020 program over the past 10 years. It seems to me that localization is hindered by the dynamics of market development. They were localized in Russia, because the market was growing and was interesting, attractive for investment. Now the market is slowing down in its development, and its participants do not understand what growth drivers will be. This slows down the process.
Will universal drug coverage, if introduced, become a driver for further growth?
I think yes. Our drug supply per capita is on average lower than that in Eastern Europe. If this leads to lower prices, then the market will win back to a large extent by increasing consumption. We have a certain percentage of the population that, due to its income, has low access to medicines, and this can correct the situation.
What other drivers of market growth could be?
Marking. It is difficult for the same western companies to think about localization and labeling at the same time. There must be some predictability and reasonableness. No need to load the industry with superheavy things. Everyone loves stability, predictability and growth. If this is the case, localization will continue to go forward.
What is the main difference between the original product and the generic?
The fact that the original drug is the first molecule in its class for which all studies, phases have been done, proven effectiveness. This is like the first rocket that flew into space, and the rest flew behind it.
How do generics cost much less than original drugs? What are the further development trends of generics?
They are cheaper because generic companies do not invest in this investment research, and this is the main element of cost reduction.
There are two directions in the generic industry. The first is biological products. In the world, more and more innovative biological drugs are being registered, in my opinion, more than traditional chemicals.
The second direction is associated with the improvement of generic drugs. This is either a combination of existing molecules, which gives new unique qualities, or additional qualities, for example, the creation of new delivery systems. Suppose, before, the drug was injectable, but now it can be sprayed into the nose in the form of a spray and have the same effect. This is the future development of the generic industry – to go into complication.
Do you have digitalization methods in place in your company and, if so, describe more about how this happens.
We use digitalization methods when interacting with the consumer, with the doctor. This channel is growing, and more efforts and resources are being applied there. Another direction is related to data. Now we have a large amount of data that needs to be processed. This is necessary in order to draw the right conclusions when working with arrays of information in all areas, from production, quality, R & D; and ending with promotion.
What tools do you use to promote your products and how much does it increase sales as a percentage?
In one of the companies in which I worked before, was CEO. He said: “I know that 50% of my promotion costs work, and 50% do not. But I don’t know which one works and which doesn’t.”
The pharmaceutical industry is quite conservative. What are the main factors slowing down the digitalization of production?
This is an industry that works in the health industry, and therefore, the industry’s regulatability is slowing down digitalization. If there was more desire inside the farm, then everything would develop.
And if you look 5-10 years ahead, what trends in the digitalization of the industry will be?
We will see that TV is transforming strongly, and the main channel of communication with consumers, with doctors, will be digital. This will develop over the next 5 years. We will see another direction – online. Now online sales are growing, they will grow, there will be a different quality of working with information. There will be telemedicine, but it depends on how much the state will support it, as a private project. In 10 years, the digital health trend will develop, which is already appearing: the FDA is registering in America software, wearable devices, and mobile applications that improve disease monitoring, thereby influencing the patient’s treatment process.
How can the digitalization process affect drug quality?
This is, first of all, data processing. In recent years, it has become more difficult to develop and register innovative drugs because data requirements have changed. If 30 years ago for the registration of an innovative drug it was enough to show the effectiveness in 100 patients, now it needs to be done in 3000. The amount of data is becoming more and more. Processing a growing volume will open up opportunities for existing molecules in new areas by virtue of the fact that good analytics will appear.
How costly is the digitalization process and can it affect the cost of drugs?
When you communicate with marketers, large agencies, and want to create an Internet site, they call the price of 500-1500 thousand. If you go to IP, you can see examples when people create sites much more interesting, functional and attractive for 50 thousand. There is no single standard, everything is variable, so it is difficult to say something specific.
Will the task of developing innovation in Russia affect the production of generics? If so, how?
The CEO, whom I already mentioned, liked to say: “I wake up every morning and pray that innovative companies will be fine. Because if they do well, then after 10 years I can make a generic, and also earn it. “
If you imagine that the regulatory system worked well and supports everything, is our industry ready for export, orphan developments? How mature are we?
We have become very mature over the past 10 years, in which Russian pharmacy has made a big leap, I am sincerely talking about this. In our country, some of the best people with a chemical, engineering background work. This is the basis for any industry in the field of development, innovation and generics. We have brains, people who know how production should be organized, and the commercial part in accordance with international standards. I think we have a good level of preparedness.