By IPS Correspondents
MOSCOW, Feb 22 1999 (IPS)

The good news is that medicines are becoming more readily available in Russia as the worst effects of last year’s financial crisis begin to recede. The bad news is few people have the money to buy them.

The larger pharmacies in Moscow can now supply most drugs, including foreign brands, at a reasonable price but working people whose pay arrives only sporadically, and for pensioners minding their roubles, traditional remedies are still preferred.

Elena Mikhailova, who lives in a crowded community flat in a Moscow suburb has a selection of different teas she can brew for colds, coughs, aches and pains. Her neighbour, Olga, grows aloe vera plants on the windowsill. The juice of the succulent leaves can be used to make soothing drinks or as a liniment for cuts and bruises.

Russian medical supplies faced problems even before last August’s cash crunch. Parliamentary deputy Nikolai Gerasimenko, the head of the Duma’s Health and Pharmacological Committee, labelled the situation “disastrous.”

The crisis abruptly reduced the list of imported medicines to a third and doubled prices. It revealed the extent of Russia’s dependence on imported medicines, with foreign-made preparations accounting for 60 per cent of the stocks on pharmacy shelves.

Local pharmaceuticals companies remain concerned that, although the peak of the economic and financial crisis seems to be over, difficulties of distribution continue.

The problem is not the overall supply of pharmaceuticals, but the fact that suppliers face difficulties in receiving payments for deliveries because of the failure of the banking system and overall lack of funds.

When the crisis first erupted, rouble instability led suppliers to insist on up-front payment from local dealers, preferably in cash. However, most local pharmacies could not comply and many Western companies suspended distribution of their products.

This in turn caused the price for imported drugs to increase 3-5 times and the range of available drugs to be reduced from 3,500 to 1,000 items.

Local manufacturers also increased prices to the point where some of their products were no longer competitive and, because most Russian-made drugs depend on imported ingredients, the collapse of the banking system meant companies were unable to pay for vital raw materials.

As a result production decreased supply problems are expected to continue for some time.

When it formed part of the Soviet Union, Russia never fully developed its pharmaceuticals industry, although there were a number of large concerns making basic medicines and drug components for export to the rest of the Soviet bloc.

The collapse of Communism in the late 1980s and fragmentation of the Soviet Union in 1991 cut off Russia’s drug manufacturers from their customers and deprived the health services of their main drug suppliers.

Since then, most of Russia’s pharmaceuticals industry has been privatised. Between 1992 and 1994 responsibility for the weak and inexperienced privatised companies passed from one government ministry to another and they were unable to compete with foreign manufacturers.

Six years ago some 70 per cent of medicines were produced locally and one third imported. Today imports have swollen to two-thirds of the total market with East European companies accounting for about one-third.

Before last year’s crisis, Russian companies, led by a core of 50 strong domestic manufacturers, began to fight back. They managed to increase sales and profits by 20 per cent and 46 per cent respectively by the end of 1996 and boosted output by another 15 per cent in 1997, outperforming most of the rest of Russian industry.

Although a range of pharmaceuticals is now available, on average only just over half the population’s requirements are being met – far less in many outlying regions.

This is not just due to low incomes. A report by the Russian investment bank Alfa Capital shows that in 1996 per capita pharmaceutical consumption was only one-third that of Germany and a fifth that of the United States.

The government is now trying to reassert control over the pharmaceutical industry, firstly by controlling prices.

A decree signed late last year, limiting profit margins applied by distributors, goes into effect in May and limits mark ups on pharmaceutical products to 25 per cent in Moscow.

Health Ministry official Ramil Khabriyev explains that manufacturers will have to register the price on the medicine and every Russian region will establish the maximum mark-up on it. The prices will be made public and will change in line with inflation.

This may ease the situation for people like Elena and Olga but for the moment they are reserving judgement. “The old remedies are the best says Olga, “especially when they are free and always to hand.”

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