From Targeted Localization to Full-Cycle Production: Can Russia Achieve Pharmaceutical Self-Sufficiency?

Balance of Power

The Russian pharmaceutical market reached a volume of more than 2.8 trillion rubles in 2024, posting year-on-year growth of 10.5%. At first glance, the sales structure appears to reflect an imbalance working against domestic pharma: roughly 55% of the market in value terms comes from imported drugs. At the same time, if you measure the market not in rubles but in package units, the picture changes fundamentally. As Viktor Dmitriev, CEO of the Association of Russian Pharmaceutical Manufacturers (ARFP) and chairman of the public council at Roszdravnadzor, noted in conversation with Argument Media, in physical terms around 75-80% of Russia's medicines are produced within the country or in EAEU member states. This gap between value and volume metrics is explained by the significantly lower prices of domestic drugs compared to their foreign counterparts.

The sustainability of local production development is confirmed by trends in recent years. In 2019, the share of Russian drugs in physical terms stood at 61.3%, while in monetary terms it was around 31%. Over six years, the market has demonstrated not only quantitative growth in local production, but also proportional strengthening in the value segment. This indicates a steady consolidation of domestic manufacturers' positions.

That said, it would be incorrect to view localization as a uniform phenomenon: in pharmaceuticals it has several levels, each requiring separate analysis.

Generics — The Pharma Market's Engine

The logistical difficulties that emerged after 2022 largely became a driver of growth in the generics market. What increased was not only sales volumes of Russian analogs, but also the share of bioequivalence studies, which are necessary to confirm their therapeutic equivalence to original drugs. By 2024, this share reached 71%, whereas back in 2021 the figure stood at 41%.

Despite the fact that Western countries imposed no sanctions directly prohibiting drug supplies to Russia, certain companies voluntarily ceased exports. This led to temporary shortages of certain medications. Viktor Dmitriev recalled that one such manufacturer was the Finnish company Orion Pharma, which produced Metipred, a drug included on the list of vital and essential medicines. Over time, Russian pharmaceutical companies ramped up production of an analog, and doctors adjusted dosages to achieve the necessary therapeutic effect. Meanwhile, Orion's plant, which was located near Helsinki and worked primarily for the Russian and other CIS markets, was shut down due to the loss of sales markets.

The situation has now changed substantially: beyond resolving the logistical problems that were mainly relevant in 2022, domestic companies have managed to meet demand for a number of key drugs by establishing production of generics and other analogs of departed brands. Dmitry Kovalenko, Director of Investor Relations at Ozon Pharmaceuticals Group (one of the leaders in the Russian pharma market and the largest generics producer), emphasized that in developed countries the share of generics and biosimilars in physical terms reaches 90%, and saturation of the pharma market with reproduced drugs is a marker of its maturity. Russia, meanwhile, is "confidently moving in the same direction": by the end of 2025, the share of domestic drugs in the localized generics segment could exceed 60%.

Weak Points

However, in knowledge-intensive segments, the share of imports remains significant. Dmitry Kovalenko (Ozon Pharmaceuticals) told Argument Media that highly toxic drugs for cancer treatment and biotechnological medicines continue to be imported primarily from abroad. The share of foreign drugs is particularly high in the government procurement segment.

Beyond reducing dependence on imports of finished drugs, the Russian pharmaceutical industry still faces the challenge of dependence on supplies of active pharmaceutical ingredients (APIs). More than 75% of substances used to manufacture drugs are imported by Russia, predominantly from China and India. This situation makes the country vulnerable not only to sanctions pressure but also to any disruptions in international logistics. Even the largest market players—R-Pharm, Pharmstandard, and Biocad—currently cover only part of the needs. As a result, medicines often remain "domestic" only formally: production of the final form is localized in Russia, but the substance is purchased abroad.

Nevertheless, according to ARFP head Viktor Dmitriev, this is not a critical problem: a similar situation with substances (APIs) is typical for other countries with large economies. Key factors here include: cheap labor in India and China, which determines the low cost of production, as well as the environmentally "dirty" process of substance manufacturing. So given the current capacity of the Russian market, launching mass production of APIs domestically is economically impractical.

Bright Future

Chairman of the State Duma Health Committee Sergey Leonov, responding to questions from Argument Media, recalled that under the Pharma 2030 strategy, by 2030 the share of full-cycle Russian drugs on the market should grow to nearly 70%. The program places special emphasis on strategically important medicines: a law taking effect September 1 enshrines this concept and provides for ensuring our country's supply of those drugs most needed for treating various diseases, thereby guaranteeing their availability even during economic crises or international sanctions.

ARFP General Director Viktor Dmitriev emphasized that production facilities for drugs from this list are already sufficient to ensure the country's basic level of pharmaceutical security: converting all enterprises to full-cycle production is economically impractical—including due to limited access to foreign markets and the high final cost of such products in the absence of sufficient demand.

At the same time, the "second is superfluous" rule will take effect in government procurement: foreign drugs will be excluded from tenders if there is at least one domestic alternative on the market. This measure is aimed at expanding the presence of Russian manufacturers in the government supply system, which is heavily dependent on imports. Against this backdrop, Ozon Pharmaceuticals, one of the largest purchasers of pharmaceutical substances, is actively collaborating with Russian manufacturers. The company is developing two new production facilities in the Tolyatti Special Economic Zone: Ozon Medica (oncology drugs) and Mabscale (100% localized production of biotechnological drugs).

The bottom line: Russia's pharmaceutical market has already taken a significant step toward reducing import dependence, but the key challenge remains in the segment of active pharmaceutical ingredients and high-tech drugs. As Pharma 2030 is implemented and new production facilities come online, the share of localized medicines can be expected to grow, but complete independence from external supplies is unlikely in the coming years and is not economically justified.