Balancing Interests in the Pharmaceutical Market: How Patent Protection Affects Supply and Generics

Balancing Interests in the Pharmaceutical Market: How Patent Protection Affects Supply and Generics | Аргумент Медиа

How the Pharmaceutical Market Works

The pharmaceutical market is traditionally divided into two parts. On one side are original (innovative) drugs developed by major pharmaceutical companies, protected by patents and typically expensive. Their development requires lengthy research and clinical trials. On the other side are generics—reproduced medications with the same active ingredient, manufactured by other companies after patent expiration. Since generic manufacturers don't need to spend decades and billions on research, their drugs are significantly cheaper than the originals. Dmitry Kovalenko, Director of Investor Relations at Ozon Pharmaceuticals, notes:

"The patent model protects innovators' interests, incentivizing the development of new therapies, while generics ensure treatment accessibility for mass consumers. Without this symbiosis, the pharmaceutical market would lose both its innovative potential and its social orientation."

Mechanisms for Circumventing Patent Protection

Russian legislation allows two paths for generic manufacturers when a patent is still in force. The first is a voluntary license: the original manufacturer can enter into an agreement with a local pharmaceutical company. The second is a compulsory license, which is possible in several cases:

First, in emergency situations—for example, when there's a threat to public health or national security—the government can authorize use of a patented invention without the patent holder's consent, with mandatory compensation (Article 1360 of the Civil Code of the Russian Federation). In the pharmaceutical market, this was applied during the pandemic (remdesivir). Second, if the patent holder is not using or insufficiently using their invention (for instance, the drug is effectively absent from the market), leading to product shortages.

Thus, while patents do protect innovation, the law still permits circumventing the situation through compulsory licensing, but only when there's serious necessity. Nevertheless, many experts oppose such practices: in their view, weakening intellectual property protection could lead Western companies to refuse registration of new drugs, reduce investment in the pharmaceutical market, and delay the launch of new medications.

Peculiarities of the Russian Situation

After 2022, Russia's pharmaceutical market changed dramatically: despite the absence of sanctions against Russian pharmaceuticals, many international pharmaceutical companies curtailed research in Russia and minimized investments. Since 2021, their number has declined from 367 to 18 by 2024. At the same time, registering new drugs requires conducting national studies, which means the entry of new medications into the Russian market has effectively been blocked. Representatives of the Infarma association attribute this in part to disruptions in drug and material supplies: companies could not guarantee uninterrupted delivery of medications and work with samples, so they abandoned research in the country.

This situation is causing concern among patients across the country, especially those who need drugs from the list of vital and essential medications (ZHVNLP). The state procures these drugs centrally through the public procurement system to supply benefit recipients and hospitals. And it's precisely here that conflicts over patent protection arise quite frequently. According to experts, in 2024 more than 30% of tenders for procurement of patented drugs were accompanied by complaints and litigation. About 15% of such procedures were blocked by courts, which directly led to disruptions in providing patients with vital medications.

The decline in foreign supplies and the experience of temporary shortages of many important medications pushed Russian manufacturers toward more active development of analogs even before the original patent expires. In particular, the Ministry of Health established a special commission on compulsory licenses (decree No. 122 of 15.02.2024), whose task is to review applications from generic and biosimilar manufacturers for emergency use of patented drug formulas when they are unavailable on the market.

Market examples: Xarelto, Tagrisso, Ozempic

One clear illustration of how major Western pharmaceutical companies maintain their monopoly on the Russian market through patent protection is the drug Xarelto. With the active ingredient rivaroxaban, it is used to prevent stroke and systemic thromboembolism, developed by Bayer and registered in Russia in 2009. Until the end of 2024, Xarelto was under patent protection and remained one of the best-selling drugs: sales volume in Russia in 2023 reached nearly 15 billion rubles.

While previously there were no supply disruptions, since 2022 media outlets have periodically reported shortages of the drug for patients receiving it free of charge at state expense, while the medication remained available commercially, but at a price unaffordable for many citizens—from 4,000 rubles per package. The situation changed dramatically after Bayer's patent expired. The Director of Investor Relations at Ozon Pharmaceutica Dmitry Kovalenko told Argument Media that the company brought the generic drug Cruoxaban to the Russian market the day after the patent expired.

"This immediately reduced the cost of therapy for patients by a factor of three to four," he noted.

Another example is the drug Tagrisso, manufactured by British-Swedish AstraZeneca, used in treating lung cancer and protected by patent until 2032. Despite the absence of an official shortage, patients in certain regions of the country faced interruptions in receiving the medication free of charge through subsidized programs. At the same time, the commercial price remained extremely high—a monthly course cost around 330,000 rubles. To provide Russians with this vital drug, in 2023 the Russian company Axelfarm brought its own osimertinib-based medication to market (the same active ingredient as Tagrisso) and obtained a corresponding Eurasian patent, circumventing AstraZeneca's patent. Attempts to obtain a compulsory license for legal production of the drug have continued for nearly two years: the next court hearing is scheduled for October 23, 2025. But so far, despite supply disruptions, the judicial system remains on AstraZeneca's side: the Intellectual Property Court ruled Axelfarm's patent on the drug invalid in Russia—it continues to be valid only in other EAEU countries.

There have also been precedents of complete cessation of original drug supplies. In such cases, Russian companies often use the compulsory licensing mechanism. A striking example is Novo Nordisk's drug Ozempic, used to treat type 2 diabetes and included on the Essential Drugs List. In 2023, the manufacturer stopped supplying the medication to Russia.

Type 2 diabetes is a very widespread disease: according to data as of July 1, 2025, Russia has registered more than 5 million people with this diagnosis. Pavel Ryzhkov, Head of Intellectual Property Protection at GEROPHARM, told Argument Media that Ozempic is used as a long-term course of treatment, making any shortage of necessary therapy unacceptable. To prevent a deficit of vital medications, GEROPHARM created the first Russian analog of Ozempic—the drug Semavik. Before applying for a compulsory license, the company sent the original drug manufacturer a partnership proposal to produce the medication at its facility in Russia. Novo Nordisk did not respond, and only after that was the process of obtaining a compulsory license initiated.

These cases vividly demonstrate a systemic problem: the existing patent regime, designed to stimulate innovation, in practice often creates multi-year Big Pharma monopolies that restrict patient access to vital medications. Russian pharmaceutical companies resort to producing generics and using the compulsory licensing mechanism, but court practice does not always side with them when international manufacturers hold valid patents.

Evergreen Patents: An Obstacle for Generics

Another problem relates to so-called "evergreen patents." This term refers to extended patent protection on original drugs achieved by registering insignificant modifications—new release forms or compositions without meaningful therapeutic effect. Pavel Ryzhkov (GEROPHARM) emphasizes:

"Such patents don't stimulate innovation—they reduce competition and therapy accessibility for patients. In this situation, the company is forced to challenge evergreen patents, which takes considerable time and resources."

Dmitry Kovalenko (Ozon Pharmaceuticals) adds:

"Original manufacturers actively use strategies to delay patent protection expiration. However, these measures only temporarily slow the process. After exclusivity expires, generics inevitably enter the market, leading to lower prices and greater treatment accessibility."

The Russian legal system provides pharmaceutical companies with tools to combat "evergreen" patents. The primary mechanism is challenging patents through the Patent Disputes Chamber or Intellectual Property Courts. The procedure includes verification of patentability, compliance of claims with the invention description, and so on. However, this is a fairly labor-intensive and costly process that slows the development of cheaper analogs and improved medication accessibility.

Russian Companies' Approaches

For Russian pharmaceutical companies, compliance with patent law remains an essential condition for doing business. As Binnofarm Group stated, creating a substitute drug while violating a patent is fundamentally wrong and harmful to market development.

"Our partnership model is different," the company explained. "We organize partnerships with full technology transfer to Russia with leading Asian manufacturers. For example, with Mabwell, we're not just localizing—we've fully mastered the production cycle, conducted the necessary clinical trials, and are already preparing to launch the drugs."

Ozon Pharmaceuticals' main focus is producing generics after the patent protection period for original drugs expires. Dmitry Kovalenko clarifies that launching any generic requires years of preparation: development, conducting bioequivalence studies, completing registration procedures, and negotiating prices with regulators. All of this takes time. And such actions are legal even while a patent is in force—thanks to the "Bolar provision."

"It allows preparation for generic registration as long as the drug doesn't go on sale before patent protection expires. That's why generic companies track the expiration dates of patents on original drugs, 'timing' the commercial launch of their products accordingly," Dmitry noted.

Pavel Ryzhkov (GEROPHARM) emphasizes that the company respects intellectual property rights while also ensuring therapy accessibility.

"Tightening legislation regarding patents for minimal changes to already-known therapeutic substances without changing their efficacy could improve the situation," he adds.

Promomed takes a more categorical position: the company's chairman of the board of directors, Pyotr Bely, proposed introduce liability for abuse of patent rights. In his view, if a generic manufacturer is fined for patent infringement, then the unjustified monopoly of an originator whose patent is subsequently invalidated as groundless should bear symmetrical liability.

Patent protection in Russia's pharmaceutical market remains an important tool for stimulating innovation, but its excessive expansion—through monopolies and evergreening patents—limits patients' access to vital medicines. The government and pharmaceutical industry now face a challenge: to strike a balance between protecting intellectual property, developing the generics market, and ensuring continuous access to essential drugs for the population. After all, the lives and health of Russians are at stake.