Manufacturing pharmaceuticals in Russia: the silver bullet India is looking for?

Over the last two years, several Indian pharmaceutical companies have unveiled plans to build major production facilities in Russia. Indian businesses will reap the benefits from investing in Russia’s pharmaceutical industry, but production development is hampered by massive market competition and insufficient human resources.

A tiger’s leap

According to Ernst & Young (EY) and the Organisation of Pharmaceutical Producers of India (OPPI), India’s pharmaceutical industry may be worth $130 billion by 2030, representing a threefold increase from 2022. By 2047, this figure could hit $450 billion. Today, India accounts for around 20% and 60% of the world's generic medicine and vaccine supply respectively and ranks third in the world for drug production.

In 2015, this sector accounted for 1.3% of India’s GDP. By 2025, its share may double to reach 2.5%, and collaboration with Russia will be a major contributing factor. In 2023, India became the largest foreign drug supplier to the Russian market, which accepted 293.9 million packages of Indian pharmaceuticals, almost 3% more than the year before.

Some Indian pharmaceutical companies have been working in Russia for years. Dr. Reddy’s Laboratories, Jodas Expoim, and Hetero Labs all have representative offices in the country, but only Sun Pharma can boast of owning production facilities in Russia, having bought the Biosintez plant in Penza from Russian group Bioteq. At the same time, Indian pharmaceutical companies have been increasingly successful in Russia. According to SPARK-Interfax, Dr. Reddy's increased its revenue by 10.9% to 25.9 billion roubles in 2023, while Sun Pharma’s Biosintez brought in 3.3 billion roubles, an increase of 14.8%. 

Indian entrepreneurs have launched several pharmaceutical companies in Russia. Major pharmaceutical manufacturer Pharmasyntez was founded by Vikram Punia, while the Rus BioPharm Group that includes PSK Pharma was started by Satya Karm Punia. Advanced Pharmaceuticals, owned by Rajesh Sharma, opened a production facility in Belgorod in 2018 to manufacture drugs for HIV, TB, and cancer. In 2021, it bought an enterprise in Perm Region and launched the production of infusion solutions, and later pharmaceutical substances. Indian suppliers are among the key players in the Russian pharmaceutical market, says Nikolay Bespalov, Development Director at RNC Pharma. The company’s analysts claim that at the end of the January–May 2024 period, Indian pharmaceutical companies were being outperformed only by their Russian and German counterparts.

According to RNC Pharma, by the end of the January–May 2024 period Indian pharmaceutical supplies to Russia had grown by 0.5% in volume and 18.5% in value. This significant difference is due to a fall in the value of the rouble and an increased share in the supply of more expensive drugs.

Top 10 manufacturing countries by value

Source: DSM Group

Examples of cooperation

In 2022–2023, several Indian companies announced plans to launch pharmaceutical projects in Russia worth a total investment of as much as 10 billion roubles. For example, Pharm Aid Ltd. is building a production facility in Kaluga Region to the south-west of Moscow. Back in 2017, the company agreed on technology licensing with Serum Institute of India, an Indian vaccine manufacturer, and Indian pharmaceutical company Zydus. According to Azamat Metov, Director General at Pharm Aid, Serum Institute of India was chosen as a “large, reliable, and trusted partner with experience working in Russia and ranking first in the world in terms of the number and quality of vaccines they produce.”

Finding room for growth

In Nikolay Bespalov’s view, despite claims of success, there has been no major expansion by Indian companies into Russia so far. This is first and foremost because none of the Western pharmaceutical manufacturers have really left the Russian market. Moreover, he says, those niches that could be occupied by Indian companies are well catered for by local players. However, this does not mean that India isn’t fully capable of expanding their activities in certain areas, such as vaccine prevention and high-tech products.

Satya Karm Punia also highlights the potential for Indian companies to manufacture technology-intensive medicines, vaccines, and insulins. He believes the Russian market also presents an opportunity to companies that are not directly involved in pharmaceutical production, such as those developing reference samples for pharmaceutical production laboratories. Reference samples are used by pharmaceutical manufacturers as a standard in pharmaceutical production and, with American and European manufacturers no longer supplying these to Russia, they are largely imported via third countries. Many reference samples are bought by Russian pharmaceutical companies from overseas suppliers, mainly from India and China, and Karm Punia believes that Indian companies could successfully invest in this business in Russia. He also sees the potential for Indian companies that manufacture substances and intermediates, as well as spare parts for pharmaceutical production equipment.

Shashi Shanker Parsad Singh points out that it was “Russia’s steady shift towards pharmaceutical import substitution” that encouraged Jodas to move forwards with the construction of production facilities in the country. He says the drugs the company is planning to manufacture are on the list of critical pharmaceutical products drawn up by Russia’s Ministry of Industry and Trade. At the same time, Satya Karm Punia cites Russia’s human resource deficit as a major obstacle. According to him, a possible solution might be to attract Indian specialists to work in the Russian market, since “Indian employees can carry out certain familiar tasks much more efficiently.”