Russian-Ukraine is one of the biggest military conflicts since the end of the cold war. It had a polarizing effect on the world. However, this conflict has abruptly changed the business environment in the region. It would have a significant impact on how the pharma business is done in the ex-Soviet region.
Here, it is vital to understand that although impact of this conflict on the region involved would be largely negative, it may also offer specific opportunities.
In the short term, its impact is relatively easy to guess. It means a significant decline in the GDP of Ukraine, Russia, Belarus, and some other ex-soviet countries (and thus a decline in the pharma market). Moreover, it is likely to lead to prolonged stagnation in the business in the region.
Impact of economic and other sanctions on Russia on pharma business
The severe economic sanctions would significantly impact Russia, Belarus, and perhaps certain regions of Ukraine (separated territories). Some are already describing these sanctions carried out by the US and EU as one of the harshest ever.
However, it would have a broader negative impact on the regions. Countries that are significantly aligned with Russia, like Central Asian nations, may also experience economic hardships.
Although these sanctions do not include the pharmaceutical industry of healthcare products, at least at the time of writing of this article, but the industry would be affected due to other economic sanctions.
Although Russia produces 70% of drugs locally by volume, value-wise, it is just the opposite. It means Russia imports 70% of drugs in terms of value.
In 2021, EU and US pharma companies (Russia and neighboring states) dominated the market in value terms. Some of the leading companies were Johnson & Johnson, Bayer Healthcare, Sanofi-Aventis, Roche, Novartis, Pfizer, Merck, GlaxoSmithKline, Sevier, Takeda, and so on.
As one can see, the EU and US dominated the pharma sector, and most of the top 10 companies in Russia are from the nations that have implemented the most stringent economic sanctions.
As already mentioned, these sanctions do not cover the pharma sector. Thus, these companies are expected to continue operating in the country. However, they would inevitably be affected by sanctions like those on the banking sector, transfer of technology, and others. This may have a considerable negative impact on their business.
It is worth understanding that most Russian banks have been sanctioned by the west, removed from Swift, and their assets were frozen. Thus, Russian banks are not likely to deal with many banks in the west. Of course, there are exceptions. Nevertheless, it is clear that EU and US-based pharma multinationals that traditionally dominated the market would see their turnovers and profits shrinking.
Moreover, they would also be influenced by changing public attitudes towards some of these companies in the region.
This impact would be significantly felt in Russia and Belarus. However, these companies may experience a decline in their business in Ukraine and Central Asia.
On the other hand, it may mean low competition for small to midcap companies. This may also pose a business opportunity for some.
Changes in patent laws and future regulatory changes, and their impact on pharma business
The Pharma industry is one of the most regulated industries. One of the ways in which big pharma multinationals from the EU and the US would be hit hard is due to changes in the Russian intellectual property laws.
Russia has already created a list of so-called non-friendly nations in response to Western sanctions, covering mainly the US and EU. As per this law, Russia may not respect any patent filings for companies from these nations. This means that suddenly, numerous drugs may become off-patent in Russia.
It may significantly open opportunities for some API sellers, traders, small pharmaceutical companies. Moreover, it means that Russian pharma companies may start manufacturing generic versions of patent-protected drugs in the coming months.
Some countries that have not ratified these treaties regarding patent protection like Bangladesh or Pakistan may start exploring the Russian pharma market. Of course, any such business comes with risk, as any business with Russia risks being sanctioned. However, for some smaller manufacturers, or those without any signifi...
(All Rights Reserved)