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Aydar Ishmukhametov and Maria Denisova - Remedium Group and RMBC subsidiary - Chairman of the Board, Remedium Group and General Director, RMBCMilos Petrovic of Roche expressed the opinion that nobody entered the Russian Federation with a real marketing strategy until about 1996 when some multinational companies entered that new realm here. As one of the Russian entrepreneurs who started service businesses to support to the pharmaceutical industry at about that time, what was your vision?
I disagree that marketing started in the pharmaceutical industry in 1996. I would say that marketing dates back to the creation of the Russian Federation in 1991/92 when the centralized distribution of medication of the former USSR stopped. The first thing that had to be done at that time was the creation of a registry of medications and drugs. Before that, there was no such registry and even top executives in the industry couldn't say for sure how many brands and medications were in circulation in Russia. This registry was the first project carried out by the Remedium Group – it started in 1992. We see our participation as one of our main achievements to date.
So marketing activity in the Russian pharmaceutical industry started earlier and was defined by three moments: when centralized purchasing stopped and a period of systemic transformation began, through privatization, and with the creation and publication of the first drug registry or medication list as an information base for the industry.
Today our software product, CLIFAR (from Clinical Pharmacology), builds on this evolution as a product for the business environment that is based on the drug and medication registry. CLIFAR allows for rapid and accurate preparation of documents for registration or re-registration of drugs; assist in performing a competitive market analysis; ensure correct drawing up of documents for import and export of drugs, quality analysis and quality control; enables you to thoroughly investigate the 'history' of preparation in RF and USSR.
With this type of company background, wouldn't it have made more sense to become more focused or involved in pharmaceutical industry databases, such as an international company like Dendrite, rather than areas like publishing and retail audit?
Not exactly. Now it may seem strange that the same company does marketing, publications, and databases, but at that time services were very badly developed at all. We were the first company in Russia to provide services related to the market. Quite naturally, every activity is developed according to the development of the market.
It's interesting that IMS, the global 'gold standard' for market information in global pharmaceutical markets, is not a significant player in the Russian market for market intelligence. This makes Russia quite unique. How do you suppose that the local Russian industry has managed to stay dominant in most pharmaceutical service areas against the multinational service companies?
It would be more exact to say that this situation is common to all the former USSR or CIS countries.
Firstly, The USSR and Russia had a more powerful information base, one of the good things about having a centralized system of drug distribution. The second point is that the level of education and preparation of physicians and other medical specialists was always very high. So we had a good information system and good healthcare professionals from the time of changes in the political structure. Local marketing companies like us have managed to be involved in this process very quickly.
At the time when our industry started maybe it was not interesting to IMS. I would like to emphasize is that IMS methodology as it is applied in other countries like the USA is not quite applicable to Russia. The reason is that the pharmaceutical industry concentration has achieved such a point in the USA, for example, that it is possible to collect information from various sources like hospitals, insurance companies, and distributors. Even now this is impossible in Russia. Our primary source of information is pharmacies. There are over 4,000 pharmacies in Russia, 1,300 in Ukraine, approximately 800 in Kazakhstan, and about 1,300 in a different configuration in Belarus. There are two important points to IMS: market size and information collection methods. Right now, they are trying to change this scheme of collecting information here.
Your main competitors at Bionika Group/Pharmexpert, said that the biggest challenge today is ensuring the accuracy of the data. Is this a factor of the methodology being used? Is it possible to derive reliable information by relying exclusively on data from drug stores? How can you ensure that RMBC information is of the highest quality in the industry?
We absolutely agree with this statement but would like to add that speed and timeliness are just as important. Today, many companies compare our data to that of IMS and other companies and they tell us that our data is the most reliable. Our margin of error or deviation is approximately 10%-12%.
The Russian pharmaceutical services sector today is showing tremendous diversification. Remedium is getting involved in software and Pharmexpert is now an active participant in staffing. Why is diversification important to the future of a company like yours?
There are two factors in this diversification trend. First, from a historical perspective, due to the fact that such services were not provided in the market we had to give a range of services to our clients. Instead of doing marketing, we had to provide everything. We started with the database, then added marketing, then our publications, then software, then headhunting. All the competitors that entered the market had to provide such a full range of services. At the beginning when there were no such facilities diversification was inevitable, but I believe that in the next few years more specialized structures will be established. Some marketing companies will develop further or will specialize on one particular activity such as publishing. So after diversification, specialization will come. Companies will appear and the holdings will also somehow specialize. In fact, over the last couple of years we have created both financial and legal separation of our marketing and publishing businesses.
DSM Group and Bionika Group/Pharmexpert provide statistics on the market reality of today but also strive to be a source of insight on what might happen tomorrow. One of their mutual predictions is that while companies seem to be most interested in getting their fair share of DLO business today, their focus will shift back to the commercial market in the years to come. As a result, they forecast that marketing will become more important, private insurance will become more of a consideration in making business decisions, and the market will in essence be very different five years from now. What is your belief?
It took Europe dozens of years to undergo the changes that we are experiencing today. If we consider that in the past ten or fifteen years we've come from a centralized administration to a capitalist system our transition is quite amazing. I absolutely agree with the view of DSM Group and Pharmexpert regarding market changes we will experience in the next few years. Consequently, this will lead to changes in consulting businesses as well.
Which activities will serve as your primary growth drivers as the industry changes?
Our main activity will remain marketing but the instruments and tools that we use will change. The main focus has shifted from the practitioner to pharmacist. The focus may continue to shift on to the final user. With that in mind, there will be a lot of mass publications intended for the end user of pharmaceuticals and less specialized publications. I believe there will be a couple of strategic publications in the market and REMEDIUM will play this role in the CIS area.
Going forward, are you saying that Remedium will take on a sort of specialized and highly focused approach to secure regional leadership in niche segments of pharmaceutical services?
Most holdings are still alive today despite the imprudence of most founders and owners in still trying to control all aspects of activities which are of much greater scope today than in the past. That's how it was historically but it is not correct for the strategic development of a company.
New players will emerge and as in manufacturing and distribution, it will be the same capital that just operates in different sectors. DSM Group is an example of such an approach as the company belongs to the shareholders of Protek. We can say that it is a subsidiary of Protek but since DSM's line of business is different it is hard to say to what extent if any Protek shareholders influence the company. This is an example of how the capital allows other managers to work in the same sector. It would not be the correct structure if Protek were also to manage DSM. This specialization will come when shareholders move aside.
Could such structural changes result in a more productive and/or transparent services offering to pharmaceutical companies? Will this also result in an enhanced capability of Russian companies to gain the trust of multinational companies that can be your most profitable clients but often choose to operate in Russia on their global marketing consulting service contracts?
Global pharmaceutical companies often prefer to have just one or two information providers in the world. This advantage for global marketing service providers is not related to transparency or market structure. Multinational pharma companies receive a package of standard corporate services but in addition they seek out local information about Russia and CIS markets. But the local office of a multinational in a specific country knows that the reliability of global information as it applies to their specific situation is quite low. That is why they buy additional services from local companies like us.
There are two things that define the future of local service companies. First, there is the question of when IMS will be able to provide accurate data on the market. As a global company they need to apply a single standard in all countries. The second factor is the evolution of local companies, which from the segment of standard global products, quiet possibly can shift to customized marketing research studies (as has RMBC) and to carry out specific tasks applying to a certain region or local office, all based specifically on the pharma market here. This segment will also always remain because there is always a need for individualized market research that multinational companies are unable to produce.
With regard to individualized market research, what are the types of research that are now most critical for decision makers in Russia today?
Currently, the most demanded research has to do with market entry into Russia. The Russian market grew 37% in 2006 and is therefore one of the Top Four growth markets worldwide. As a result, there is a huge interest in the Russian market, especially from international biotechnology companies. The second most important customized research category is portfolio optimization for local companies. Finally, foreign companies are interested in the evaluation of their medical sales and marketing activities.
Why is RMBC the best partner to take on such projects?
While due to issues of confidentiality I cannot give out project specifics, I can say that in 2006 we did 40-50 projects in these areas with practically all of the top market players; really, most of the members of the Association of International Pharmaceutical Manufacturers (AIPM).
We co-produce monthly bulletins with our clients AIPM Russia, AIPM Belarus, AIPM Kazakhstan, and the European Business Association in Ukraine. These are the main groups of international manufacturers in our main markets. I think this shows our goodwill.
What will be the face of Remedium five years from now? Will it have split into several specialized entities or possibly merged with a competitor such as Bionika Group/Pharmexpert?
Last year we were going to attempt to create a joint venture with Pharmexpert in which we were going to hold the control; however, it was not the right time to merge. Today, we are no longer considering the possibility of a merger in the local market. I foresee a division into specialized entities rather than a holding structure for us. This evolution may involve strategic foreign partners in some of our areas of activity. This may lead to the future creation of joint ventures or joint capital structures with these companies that will enable us to combine the advantages of a global standard product with our knowledge of the local market and ability to carry out individualized market research. I think this will be the future.
Source: Russian Pharmaceuticals