Russia’s leading pharmaceuticals- distribution company says things are good, despite the problems caused by, among other things, the presence of counterfeits on the market.

In 2002, the Russian pharmaceuticals market grew by approximately 12 percent in monetary terms, with an annual turnover of $3.1 billion.

Since 1996, Protek has been Russia’s leading pharmaceuticals distributor. Combined with two other companies who provide the link between producers, importers and retailers, Shreya Corp. and SIA International, Protek shares about 45 percent of the distribution market.

In 2002, Protek alone enjoyed an 18.5 percent share of the market, a 6 percent increase on the previous year. In 2001, company turnover reached $500,000, "an undoubtedly considerable achievement," according to Protek’s general director, Oleg Astafurov.

The company’s substantial influence is a testament to certain trends that have manifested themselves over recent years on the Russian market, Astafurov said, such as the consolidation of the major players in the distribution market.

"In the past few years, the major distributors have succeeded in creating a Russia-wide chain of representative offices and have significantly widened their territorial scope," he added.

"The Russian medical market is displaying a coherent tendency toward annual growth of about 10 percent," he noted, as well.

It is widely believed, however, that the 12 percent growth recorded in 2002 came not as a result of greater demand but was rather because of the 10 percent value-added tax levied on all medical products at the beginning of the year, explains Nikolai Demidov of Pharmexpert, a pharmaceuticals-market analysis center.

Protek was founded in 1990 and began distribution in 1993. Later in the same year, the company signed its first contract with a powerful Eastern European manufacturer.

In 1994, the first Protek regional office opened in Volgograd, and the company signed its first contracts with Russian manufacturers. Today, Russian-made medicines constitute 40 percent of Protek’s product list.

This balance between imports and domestically produced medicines is analogous to the situation in the whole distribution market. According to Pharmexpert, imports make up about 60 percent of drugs on the Russian market, and domestically made medicines account for 40 percent.

In 1997, the company opened one of the biggest pharmaceuticals-storage complexes in Eastern Europe in Russia in the town of Medvedkovo, which allowed the range of Protek’s products to include some 5,000 different brands.

Protek weathered the turmoil of the economic crisis in 1998 and was voted one of Russia’s Top 20 most successful companies by leading business magazine Kompaniya.

In April 2001, Hungarian pharmaceuticals company Gedeon Richter acquired a 5 percent stake in Protek, and, in 2002, the latter began exporting to other C.I.S. countries.

Today, the company has more than 8,600 different pharmaceuticals products on its books. Thirty-nine Protek branches are spread around Russia’s regions and employ 4,500 employees. The company is supplied by 420 different manufacturing firms, both foreign and Russian.

"Our company is a clear example of how, in Russia, a transparent and honest business based on a good corporate image and long-term perspectives can bring in good profits," Astafurov told The Russia Journal.

However, all is not rosy in the industry, he explained:

"A significant problem for the Russian pharmaceuticals industry is the ‘gray economy’.

"Unscrupulous companies import medicines at lower prices, avoiding taxes. The growth of the gray market considerably increases the threat of fake drugs appearing, encourages unfair competition and criminalizes the market."

According to government data, counterfeit medicines account for up to 12 percent of drugs in Russia. Despite government strategies aimed at curbing this worrying problem, it continues to be a serious headache for the likes of Protek.