Association of International Pharmaceuticals Manufacturers

Objectives
Organization And Membership
Membership
Activities Of The AIPM
Significance Of Member Firms For Russian Healthcare
Legislation
A Policy Agenda For Russian Healthcare
The International Pharmaceutical Industry— Organization, Accomplishments And Outlook

OBJECTIVES
In representing companies which manufacture and sell the majority of the world's pharmaceutical products as well as leading manufacturers of medical equipment, the AIPM's first objective is to cooperate with Russian public health authorities, legislators, and government officials, and others in creating regulatory policies which encourage and permit international manufacturers of pharmaceuticals and medical equipment to sell and/or produce products in the Russian Federation under favorable conditions. The specific purposes of AIPM are:

To ensure that the views and policies of AIPM member companies are made available to Russian decision makers;
To promote and support favorable conditions for commercial activity of AIPM member companies in the Russian Federation;
To establish and maintain relationships with all relevant government and public health authorities and appropriate business associations;
To foster cooperation and exchange information with Russian government, health, manufacturing, distribution, scientific and professional organizations concerned with health matters;
To promote and support the appropriate integration of the Russian pharmaceutical, medical equipment and healthcare markets into international markets;
To organize appropriate support in the defense of the interests and rights of the members of the AIPM in the Russian Federation;
To keep member firms fully informed of all relevant developments affecting the pharmaceutical and medical equipment markets in the Russian Federation.

ORGANIZATION AND MEMBERSHIP
The management and administration of the AIPM is carried out by the General Meeting of all members, the Board of Directors, and the AIPM's Executive Staff, otherwise known as the Secretariat.

The General Meeting is the highest governing body of the AIPM. It meets at least six times a year and appoints the Chairman and Directors which make up the Board of Directors.
The Board of Directors is elected by the General Meeting, coordinates policy for the AIPM, and oversees the Secretariat and the management of the AIPM's assets. Subject to the approval of the General Meeting, the Board of Directors appoints the Executive Director. The Board of Directors is the governing body of the AIPM between General Meetings.
The Secretariat is the Executive Body of the AIPM and represents the interests of the AIPM with other organizations, manages the AIPM's assets under the direction of the Board of Directors, and oversees the daily operations of the association. The Executive Director manages the Secretariat.

MEMBERSHIP

Membership in the AIPM is open to research-based pharmaceutical manufacturers involved in the discovery and development of new chemical entities and pharmaceutical compounds. Membership is also open to manufacturers of medical supplies and equipment which conform to international quality standards.
Members are entitled to participate in regular and extraordinary General Meetings and any other meetings or events of the AIPM. Members are also welcome to use the services and facilities of the AIPM.
Application for membership in the AIPM must be made in written form and submitted to its Board of Directors. Admission to the AIPM is granted if two-thirds of the members vote to approve an application.

ACTIVITIES OF THE AIPM
In order to achieve its objectives, the AIPM supports and organizes both internal and external activities and programs, collects, analyzes and disseminates appropriate information to its members and partner organizations, and initiates and supports cooperation and other programs for its members and for Russian organizations concerned with health care.

Upon becoming a member of the AIPM, companies are entitled to receive a number of publications and services. Publications include:

the AIPM Novosti, the AIPM's newsletter, reports on the activities and views of the AIPM, its member firms, and important events affecting the pharmaceutical and medical equipment markets in Russia;
the AIPM Flash alerts the membership to urgent issues affecting the Russian pharmaceutical and medical equipment markets and internal AIPM news;
AIPM Press Abstracts provides the membership a regular update on important articles in the Russian press in areas such as healthcare, medicine, sales, distribution, marketing and other issues which affect the pharmaceutical and medical equipment markets in Russia.

Member firms also have access to information collected and maintained by the AIPM, and all are invited to participate in membership meetings, seminars, and other events organized by the AIPM throughout the year.

A major aim of the AIPM is to remain an active partner in the Russian medical community and to work with Russian public health authorities in promoting a constructive dialogue on modern health care and pharmaceutical industry issues and practices. The AIPM uses the significant experience of its members and various programs and formats to support this dialogue. Such programs and services include:

Professional Services. AIPM representatives meet regularly with Russian government, parliamentary, manufacturing, media, research and public health representatives to share information on issues such as health care regulations and legislation, registration, import licenses, tariffs, quality control, manufacturing, clinical research, and other related topics. The AIPM uses resources available to itself and its members to render support to its members, as appropriate.
Cooperation. The AIPM recognizes that the pharmaceutical and medical equipment industries are integral parts of a modern healthcare delivery system and essential components of a healthy, modern society. Therefore, as an association representing the international research-based pharmaceutical industry and internationally recognized manufacturers of medical equipment operating in Russia, the AIPM seeks to participate in discussions and information exchanges with healthcare specialists, leading hospitals and clinics, federal and regional health administrators, and with other appropriate organizations involved with healthcare and the pharmaceutical market in Russia. The AIPM also participates in major international conferences. Such activities as a rule lead to specific programs of cooperation.
Information Services. Through the development of close relations with professional associations and medical institutions in the United States, the European Community, Switzerland, Japan and other countries and international organizations, the AIPM is able to channel important healthcare and regulatory information to public health authorities in Russia.
Seminars and Conferences. The AIPM supports, sponsors and organizes professional gatherings, conferences, symposiums and other events on topics important to the pharmaceutical and medical equipment industries in Russia.
Speakers Bureau. The AIPM invites prominent Russian healthcare, insurance, manufacturing, media and government representatives to speak at AIPM General Meetings and events. This program helps the AIPM and its member companies have direct exchanges of information on important issues with leading members of the Russian healthcare community.
Policy Guidance. Using the experience and resources of its members and its good working relations with various international organizations, the AIPM develops and promotes positions and information on policies of importance to its members.

SIGNIFICANCE OF MEMBER FIRMS FOR RUSSIAN HEALTHCARE

AIPM member companies represent approximately 80 per cent of the world's production and sales of pharmaceuticals. Through their medical and scientific experience and know-how they play an important role in supplying Russia with needed products and know-how and contribute toward building a renewed scientific and local manufacturing capability.
By supplying leading innovative medicines to the Russian market, AIPM's member firms provide the Russian medical community access to and knowledge of the most advanced pharmaceuticals, medical devices and treatments available on the international market today
AIPM member firms have supported the development of new distribution channels throughout the Russian Federation which have contributed toward the fast and equitable supply of drugs to Russia's regions.
As a result of their sales and marketing activities, AIPM member firms disseminate pharmaceutical products and technology to the regions of Russia. AIPM member firms have branch offices throughout Russia, including St. Petersburg, Nizhniy Novgorod, Yekaterinburg, Novosibirsk and Vladivostok.
All AIPM members invest actively in the development of know-how and expertise in the pharmaceutical and medical equipment industries in Russia as well as in new plants, technology and clinical research. The value of these investments is in the hundreds of millions of US dollars. In direct support for Russian science, AIPM members collectively invest approximately USD 20 million annually in clinical trials, and if education and training of staff and Russian physicians is included, that figure exceeds USD over 60 million annually.
More importantly, AIPM member firms are research-based pharmaceutical companies and as such are cooperating with and prepared to seek new cooperation with Russian partners in the development and sale of new pharmaceutical products and medical devices in Russia.
In 1997 AIPM member companies employed more than 1,500 Russians as medical specialists, managers or service personnel, and the companies invested millions of US dollars in their training in Russia and abroad.
As a sign of their commitment to the improvement of healthcare in Russia, AIPM member companies donated more than $50 million worth of pharmaceutical products and related equipment to various healthcare groups in the Russian Federation between 1991-1997. This included a single gift to the City of Moscow in honor of its 850th Anniversary of over USD 500,000 of medicines.

LEGISLATION — A KEY FACTOR IN THE PHARMACEUTICAL INDUSTRY
International manufacturers operating in different national markets are more able to succeed and make valuable contributions to the local economy and society if the civil and commercial legislation is well developed and creates a "level playing field" for all manufacturers which protects and supports their legitimate business activities and seeks to support free, fair and open competition.

Positive and enlightened legislation for the international and domestic pharmaceutical and medical equipment industries benefits the Russian medical community and patients who are the ultimate consumers of pharmaceuticals and medical devices. This means regulatory legislation should be clear and simple and thereby accelerate the specific procedures involved in registration, importation, quality control, manufacturing, marketing, distribution and pricing.
Just as important are laws that encourage the development of other aspects of the pharmaceutical and medical devices industries. These laws should protect patented products from imitation, create favorable tax and customs policies for imports, wages, local manufacturing, and others issues -- all of which, if unfavorable, tend to steer business toward other more open competitive markets in other countries around the world. For the pharmaceutical and medical devices industries to grow and thrive in Russia, legislation is needed which not only attracts capital investment in plant and technology, but supports investment in medical and clinical research. Such legislation typically grants special long-term tax holidays, provides specific funds for training personnel, and guarantees repatriation of profits and the tariff-free import of necessary equipment and raw materials.

A POLICY AGENDA FOR RUSSIAN HEALTHCARE
In a market undergoing rapid transformation and growth, the formulation and implementation of the right policies is essential. Decisions made today regarding legislation, regulations, and other guidelines for the pharmaceutical market will have long-term consequenses not only for the health of the Russian people, but for the domestic and international pharmaceutical and medical equipment industries, medical research and the medical profession.

The AIPM is actively engaged in discussing and promoting policies to support the development of open and organized pharmaceutical and medical equipment markets in Russia. While there are many issues of importance to the development of these markets, a number of issues currently stand out as priorities.
Healthcare Objectives: AIPM welcomes the fact that Russia has adopted a clear set of healthcare priorities. It is essential that the Government of Russia work hard to carry out the objectives and targets set out in those objectives as soon as possible.
Transparency and non-discrimination: In support of an open, fair and more efficient market, regulatory policies must be as open and transparent as possible, and there should be no discrimination against foreign or domestic manufacturers, nor dual treatment of foreign versus domestic manufacturers;
Quality Assurance: Ensuring that quality and safe drugs are on the market is one of the most effective means of providing quality healthcare at reasonable costs. Reliable systems must be implemented to ensure that all drugs on the market are safe and effective. Quality assurance not only directly benefits the health needs of the population, it also can reduce waste and irrational use of limited financial resources.
Intellectual Property: The protection of intellectual property (IP) is a fundamental issue for Russia's economic and scientific development as well as for its integration into the world economy. All research-based industries, including the pharmaceutical industry, are highly dependent on intellectual property (IP), and in particular patent protection. The AIPM and its members are working actively in support of Russian efforts to enforce international standards of patent protection.
Pricing: Free, market competition and competitive pricing for pharmaceuticals not only lead to reduced healthcare costs, but to the provision of better and more accessible healthcare. Unfortunately, government regulators throughout the world often mistakenly resort to various forms of price controls of medicines in an effort to limit growth in healthcare costs. Experience has shown that price controls on pharmaceuticals do not result in real healthcare savings, rarely result in the effect desired by administrators, often result in substantial increases in long-term costs, and directly undermine the process essential to the provision of quality healthcare, i.e. the development of new, effective and innovative medicines.
Reimbursement Systems: The development of effective systems for the reimbursement of pharmaceuticals is one of the most important challenges facing Russian healthcare authorities as they seek to provide quality care through the rational use of their budgeted resources. The following are fundamental principles which should be used when developing and implementing reimbursement lists: (1) lists should be developed to meet and be measured against clearly defined healthcare objectives; (2) pharmaceutical provision must be fair, rational and effective; (3) transparency must be ensured throughout the entire reimbursement process; (4) objective standards for the proven efficacy, quality and safety of all reimbursable drugs must be established and enforced; (5) cost, quality and access to pharmaceuticals must be balanced.
Investment: Attracting investment is an important objective of every government. However, it is important to realize that investment in the pharmaceutical sector is much more complicated than building factories to produce chemical substances. While this is very important, there would be no pharmaceutical industry whatsoever without significant investment in the research, development and marketing of new drugs and medicines. The AIPM, representing 50 of the world's leading research-based pharmaceutical manufacturers, believes that national investment policies should recognize the importance of material investment in research, development and "know-how" and that appropriate incentives and recognition should be given to that important area, and not only to the construction of factories for the packaging and production of medicines.
Marketing Standards: Appropriate promotion and advertising of pharmaceuticals is of critical importance to the development of the Russian healthcare system. However, the promotion of and adherence to strict ethical standards for the marketing of pharmaceutical products are essential. Ethical marketing practices for pharmaceutical products are essential for the development of an open and fair pharmaceutical market in the Russian Federation. However, recognizing its great obligation and responsibility to provide accurate information and education about its products, the AIPM maintains that self-discipline and self-regulation by pharmaceutical associations and leading pharmaceutical manufacturers serves the public interest than excessively strict government regulation. Toward this end, the AIPM has adopted and implemented a Code of Marketing Practices which corresponds to the highest international standards for the marketing of pharmaceutical products and has established specific procedures to examine and, if necessary, act upon allegations of unethical marketing practices.
Registration of Medicines and Medical Devices: The pharmaceutical and medical equipment industries are the most highly regulated of all industries and, as such, recognise the need for competent, independent assessment of all products before they are authorized for marketing. In this regard, the AIPM supports the establishment of well founded regulatory systems which provide a stable and equitable environment in which to operate and that the assessment and authorisation of new products should be based on the three criteria of safety, quality and efficacy. Guidelines for technical requirements for product registration should be clearly established and fully transparent, but there must be sufficient flexibility to allow alternative standards and methods, when these are scientifically justified. The AIPM strongly supports the conclusions of the International Conference on Harmonisation (ICH). All regulatory agencies, whether recently established or with a long history of respected service, should recognise the scientific evaluation carried out by other experienced and well-established regulatory bodies; scarce resources should not be used on duplicative re-evaluation of data, and companies should not be required to carry out duplicative tests to satisfy local requirements, unless there is clear justification. Standards and procedures, where possible, should correspond to international norms.
Self-Medication: The AIPM welcomes and supports the increased recognition by public officials and the general population in Russia of the importance of self-medication. However, appropriate official support for responsible self-medication and the implementation of clear laws and procedures regulating the provision of pharmaceuticals for self-medication are essential if self-medication is to support the provision of more accessible, quality, and cost-effective healthcare to the Russian population. Experience shows that the broad education of the medical community and the general population on the practice of self-medication and the implementation of proper regulations for non-prescription drugs can result in a reduction of healthcare costs and the improvement of the general health of the population.

THE INTERNATIONAL PHARMACEUTICAL INDUSTRY — ORGANIZATION, ACCOMPLISHMENTS AND OUTLOOK
The world pharmaceutical market had an estimated value in ex factory prices of almost USD 260 billion in 1996. The United States is the single largest market with 32 per cent. The combined European Union market is second with 28 per cent. Japan is third with a 21 per cent market share. The Russian share of the international market remains small, but is growing at a significant rate. The AIPM is prepared to use its resources and the international experience of its members to support Russia's efforts to integrate fully into the international market.

The industry includes both the ethical drug manufacturers, who provide prescription products to the medical profession, and the proprietary producers who sell their non-prescription drugs directly to the public.

The contribution of the pharmaceutical industry to the improvement of peoples' health and longevity in the past 70 years ranks as one of the greatest achievements of the 20th century. To appreciate the progress made it is only necessary to look back 70 years. At that time, there were no antibiotics, corticoids, few sulfa drugs or vitamins, no tranquilizers, no antihypertensives, no antihistamines, no oral contraceptives, no effective oral diabetic drugs, no prophylactic drugs for gout, no drugs to lower the level of blood lipids and cholesterol, and no drugs against polio, measles, mumps and many other diseases.

Although the battle against disease involves a number of different factors affecting an individual's life, such as local ecology exercise, diet, hygiene, and life style, pharmaceuticals have proven to be the most effective weapon in curing, treating or preventing disease. Antibiotics have cured most forms of pneumonia, syphilis and tuberculosis and vaccines have substantially reduced the number of patients suffering from influenza, diphtheria, whooping cough and measles -- diseases all of which led to significant rates of mortality in the 1920's.

Pharmaceuticals have also played a central role in treating arteriosclerosis, infant diseases, rheumatic fever, hypertensive heart disease, peptic ulcer and emphysema. Moreover, the outlook for finding cures for diseases of the 1990's, such as AIDS, Alzheimer's and autoimmune diseases, is quite good based on recent breakthroughs in biotechnology. In fact, opportunities for developing new and more effective drugs are better than ever before. In a short period of time most genes in the human body will be sequenced. Once the molecular basis of diseases can be identified treatment of these troubling diseases can begin.

Because the expense of developing a new drug is so high (now estimated at over USD 350 million) and the time required for development is so long (about 10-12 years), companies must discover, rapidly develop and rush products to market on a global basis as quickly as possible. Internationally, the research-based pharmaceutical industry invests over 20% of its gross sales revenues in the research and development of new medicines. In light of the enormous resources invested into new medicines and the amount of time necessary to develop and gain approval for a new product, the marketing of new products is especially important in view of the rather short life of the patent during which the company can sell the product on an exclusive basis and recoup its investment.

As the standard of living and life expectancy increase both in Russia and throughout the world, the demand for pharmaceutical products will also increase significantly. To meet this demand the international pharmaceutical industry has already started to consolidate its scientific and capital resources. Through this restructuring the industry will acquire new resources to discover and market products to prevent disease and to treat and cure the ill.