During his working visit to the Penza Region, Prime Minister Dmitry Medvedev holds a meeting on the medical industry
Dmitry Medvedev: Good afternoon. The topic of our current meeting is very specific (and this is a good thing) – it is devoted to the development of the medical industry. Most experts believe that medical technology will become the driver of innovative development in the next few years. Today we have seen some innovative development products in Penza. I must say, they are very impressive. In any event, it is clear that the leaders of the region are focusing due attention on the medical industry, that they are serious about it.
The main goal for us is to continue diversifying the economy and changing its development scenario. Obviously, the life and health of millions of people depend on the quality and provision of medicines. I’m referring to very sophisticated technology, medical instruments (we’ve seen them today), artificial limbs and implants, each of which is a minor miracle of technology. That said, the medical industry also producers simple things, such as dressing materials.
This is a very important subject and it is not the first time we are discussing it. Let me recall that in 2010, the Government adopted a federal targeted programme on developing the pharmaceutical and medical industries. At that time I issued instructions to the Government on this score. Out of almost 190 billion roubles, the bulk will be channeled into upgrading production and R&D. More than 26 billion roubles of federal funds, and a comparable sum from extra-budgetary sources, will be invested into the production of new medical equipment.
Today, we have seen a number of interesting developments at the enterprise that is producing artificial heart valves. I’m pleased to say that these products are already being exported to 17 countries, and that they account for more than half – about 60% – of the domestic markets in Russia and other CIS states. But this country does not have many examples like this one.
Over 45,000 medical products, including about 20,000 that are Russian-made, have been registered for use in medical practice. Importantly, this figure has increased substantially over the last few years – just recently it was fairly modest. Domestic producers account for a mere 23% of the medical products market (you know all that, and we have the best of them represented here); the rest of the products are imported.
Clearly, we must make large investment in research, technical re-equipment and infrastructure. Our companies must integrate into the system of international industrial and scientific cooperation. These and other priorities have become part of the strategy for the development of the medical industry. Based on previous comments and the ones made today, we will need to finalise and adopt it. As I understand, the Ministry of Industry and Trade plans to finalise the strategy by February 1, 2013.
The bill on the control of medical supplies is being drafted. We need it to regulate the lifecycle of these products from manufacture to disposal. We need it to control their quality and determine the responsibility of manufacturers and suppliers for violating the trading regulations for medical products. This bill also needs to be finalised. My notes indicate that it needs to be taken to public hearings and submitted to the Government before May 1, 2013. However, May 1 seems like a long time from now, so I will shorten the deadline. Even with public hearings, it can be done by February 1, 2013. Therefore, Ministry of Industry should submit this document to the Government on or before that date.
We should build a manufacturing capacity that meets the needs of our healthcare system as soon as possible. We should also form a group of commercially viable companies that are motivated to expand. I will share with you a few more major areas of work that we need to focus on. Of course, we need to overcome the disunity in the industry, and consolidate the development and production efforts and possibly the entire research infrastructure. It’s not easy, but it can be done.
Second, we need to expand the production of components and join the global production chain.
Third, it would be unquestionably useful to encourage the inflow of foreign investment and technology into lagging industries. Fourth, we should promote the development of medical equipment servicing companies and train service specialists. This is also one of our downsides, because equipment servicing in Russia is also a problem, unlike in foreign countries where service companies do quality work, although they charge an arm and a leg for their services.
Finally, the industry needs to speed up the adoption of international management and quality standards. Areas of medical industry that are most likely to fall prey to commercialisation of technology warrant the greatest attention. Therefore, the Ministry of Healthcare, along with the Ministry of Industry, should consider drafting a list of medical equipment that should be manufactured in the first place. I believe that people in this audience can make suggestions to this end as well.
The last thing that I would like to mention in my opening remarks is that we will soon get back to discussing innovations in the sphere of medicine. This issue will be addressed during the meeting that I will hold in Skolkovo on September 18. So it’s a single cycle of meetings, if you will, with one flowing into another.
Let's discuss today’s topic. Mr Manturov, over to you.
Denis Manturov (Minister of Industry and Trade): Mr Medvedev, colleagues, I would like to begin with a market overview. The Russian market for medical products is, I dare say, unlike any other in the world. Why? Because, on the one hand, it shows high rates of consumption growth exceeding global ones by three to five times, and, on the other hand, this rate is largely secured by state ...
Because, on one hand, it shows high consumption growth rates exceeding global ones by three to five times, and, on the other hand, this rate is largely the result of state healthcare modernisation programmes on the basis of Russia’s transitions to the standardised provision of healthcare services.
In addition, the Russian Government is seeking to acquire primarily high-tech equipment. Meeting this demand is a very ambitious goal for the industry and also a serious challenge for the healthcare system since it will have to come up with qualified staff to operate it.
We have assessed the long-term needs of the healthcare system and we expect the growth rates to remain unchanged at 16% until 2015 when they should stabilise at 9% a year. However, this situation helps not only develop our own production but also to localise the leading foreign players in Russia. This process is underway. The companies are seeking partners or have already found them, as they did in the pharmaceutical industry, and have started working.
Our ministry and the Ministry of Economic Development and the Ministry of Healthcare believe that we need to come up with transparent and level conditions for all foreign investors as we proceed with localisation.
The reform of the healthcare system has spurred market growth but failed to increase domestic production accordingly. Until recently, the number of domestic producers had been gradually declining, and they had lost their competitive edge. In addition, the Russian industry’s level of consolidation is very low and there are no large companies with sufficient capital to develop sustainably on their own and be able to access foreign markets. Only about 150-200 companies are in a relatively stable financial and economic state. They account for about 15%-20% of the total output and, accordingly, 15%-20% of the total number of companies operating in this industry. The majority of domestic manufacturers focus primarily on the production of equipment and products that are not used directly in treating patients, but perform auxiliary or support functions. The role of such products in building added value is small. Conversely, high-tech equipment that is used directly in diagnosis and treatment of patients has the highest added value. Unfortunately, this kind of equipment is mostly imported. Even though the domestic medical industry has somewhat increased its output recently, it will still lose some of its competitiveness over the medium term due to outdated technologies, lagging manufacturing standards, quality management and product promotion system, as well as substandard after-sales service and lack of its own modern designs. Of course, this situation is unacceptable. The Russian Government has taken steps to create conditions for boosting our country’s capacity in both the pharmaceutical and the medical industries. For example, the Pharma 2020 strategy has been adopted and launched and the programme for targeted development of the pharmaceutical and the medical equipment industry to 2020 was also adopted in accordance with your instruction.
In addition, the Ministry of Industry and Trade has proactively drafted a strategy for the development of the medical industry to 2020. It has been partially approved by federal executive authorities, including several public hearings. Mr Medvedev, I would like to present to you the basic features of this strategy for further approval in accordance with established procedure.
I believe that the deadline ... We will do our best to stay within the specified time, even with regard to the strategy development, which I think we will be able to finalise before the end of 2012, because we are already in the final phase of the work. In its time, the Pharma 2020 strategy gave a significant boost to the development of Russian and foreign businesses, since it established clear benchmarks for the industry. The strategy for the development of the medical equipment production is largely similar to it.
The goal of the strategy is to form a competitive, high-tech industry. Measures to be taken under this strategy should secure the industry's transition to innovative production processes whereby products and manufacturing processes will be continuously updated and upgraded and all stages of the product’s lifecycle will become one research and production process. This strategy does not require additional government funding, since all these measures have already been included in the industry’s targeted programme.
Slide four shows the tools to be used to achieve these objectives. We need a decision on the intensive modernisation of existing production facilities, since in most cases, it is precisely production processes provide the decisive advantage in achieving the desired product quality. The availability of new medical goods is growing. Achieving and, most importantly, preserving the competitiveness over a long term wholly depends on the companies’ willingness to engage in a continuous process of updates and upgrades. In this regard, we have set a goal of creating an industry-wide database of designs and technology transfers.
The introduction of modern standards for the provision of medical services in Russia increases the demand for advanced products that are used around the world. It is therefore important for us to use this strategy to line up the benchmarks (see slide five) with the global trends expanding on existing market positions and using government support in addition to the investment capital during the initial phase. In addition, the government should focus on the development of the medical industries that are most likely to go ahead and commercialise Russian designs, such as radiation techniques, cardiac surgery, X-ray equipment and components, surgical tools and neonatal and resuscitation equipment. The project financing is fully in line with the federal targeted programme. This programme serves as the main mechanism for the implementation of this strategy. It consists of several phases and focuses mainly on R&D, with 77% of the funding going to research and design. The programme is designed to create a solid system for design development and subsequent commercialisation in Russia.
The ratio of funding for the pharmaceutical industry to medical goods production stands at about 2 to 1, which is similar to the respective sizes of these two markets. During the first phase, up to 2015, it is planned to modernise the medical industry through R&D and setting up production of import-substituting items, and to create a development centre for designing new medical goods. Last year we launched new production facilities to make innovative medicines, medical goods and key components for high-tech medical equipment. I will report on this issue at the meeting in Skolkovo on September 18.
Slide seven shows the progress in implementing the federal programme with the involvement of a large number of universities and government research centres. I believe that they are the key to our success. We spoke about this today during your visit to the plant. Eight such projects have been launched in Penza alone (it ranks third among the industrial educational clusters). Based on the suggestions coming from the regions and the customers, we identified the investment vehicles of prime importance to ensure the retrofitting of the domestic medical industry and its transition to the best available development model.
Most importantly, the programme provides for capital investment in research, technology and the manufacturing sector through 2020 in the amount of about 3.9 billion roubles. Once this strategy is implemented, we will achieve the industry figures typical of developed economies both in terms of its contribution to GDP and its competitiveness. We will then have our own research and production base allowing us to increase the export potential of the industry and build it into a global production chain, as you have mentioned earlier.
Dmitry Medvedev: I can see that the number of projects on Slide No 7... It appears that they are more or less only actively implemented in Moscow, St Petersburg and the Penza Region, and that the rest of the country lacks this completely. How can this be explained?
Denis Manturov: Mr Medvedev, this is an objective process. We have monitored the situation with the regional higher educational institutions and research agencies that submitted their requests last year, and we approved their list. This does not mean that the number will remain the same until 2020.
Dmitry Medvedev: Do you mean that this situation may change? Fine, I understand.
Denis Manturov: We plan to increase the market share of Russian-made products to 40% by 2020. Consequently, plans include expanding medical-product exports seven-fold. And domestic output is planned to increase about 6.5 times over.
The “Medical Industry 2020” strategy is the final instrument to implement industrial development for the benefit of the healthcare sector. The state programme to develop the national pharmaceutical and medical equipment industry up to 2020 is an integral document that sums up this work. We plan to modify the programme in the near future and to approve it at a Government meeting in line with the established procedure before the year's end. Thank you for your attention.
Dmitry Medvedev: Thank you. It’s settled then.
Ms Skvortsova (Addressing the Minister of Healthcare), would you please take the floor?
Veronika Skvortsova (Minister of Healthcare): Thank you very much, Mr Medvedev. Colleagues, as has already been said, medical products are a highly important component of all medical technological services, including diagnostics, treatment and rehabilitation. They are nearly a part of the standard for assessing medical-service quality. This is why medical products have become a part of the two main units for medical aid standardisation, namely, for aid protocols that stipulate equipment standards for medical organisations and their divisions.
No medical agency will be allowed to function unless it obtains this mandatory list. In addition, there are medical-aid standards that include medical products implanted in the human body as part of medical services. Consequently, this includes all kinds of implants, prosthetic appliances and limbs, and other products and expendable materials. Moreover, medical products are included in the price of medical services. We have already drafted the relevant methodology for calculating this price, which varies, depending on clinically related groups.
The unit for medical aid standardisation is updated regularly. The relevant 2011 procedures will be updated throughout 2012. These standards will be updated at least once a year. First of all, this will enable us to provide high-quality, affordable medical aid. In addition, it will be possible to predict domestic-market demand for medical products and to virtually maintain a stable demand. It should be noted that despite the need for extremely tough regulation of the entire medical product life cycle, which is linked with quality, effectiveness and safety, this aspect of the healthcare system was not regulated in any way prior to 2011.
In November 2011, Article 38 was included for the first time in the Law “On the Protection of the Health of Citizens.” Article 38 stipulated the introduction of standard terminology in the sphere of medical-product sales and purchases and brought this terminology in line with international terminology to the greatest possible extent. This was done in line with the global harmonisation concept in the sphere of medical-product sales and purchases.
All of the main requirements concerning the state expert examination and subsequent state registration procedure were postulated. The need to classify medical products and to introduce a state medical product register was stipulated. In addition, concrete definitions of the main processes of a medical product’s life cycle were made.
The law provides a list of regulatory by-laws that have already been drafted. This includes three Government resolutions – on the state registration procedure, on the procedure for keeping a state medical product register, and on state control over the selling and purchasing of medical products. One resolution has already been issued. One resolution is being examined by the Government. And another is about to be issued by the Ministry of Justice. The Ministry of Healthcare has also issued nine orders that virtually cover the entire life cycle of any medical product during its operation. It should be noted that all of these documents were drafted in line with the medical expert community and experts specialising in medical equipment.
I would like to single out the order that stipulates the creation of a list of medical products in line with their categories for the first time. This is important. The list makes it possible to locate basic prototypes and equivalents of all medical products and to ensure clear and transparent medical-equipment purchases. This list is similar to the list of medical preparations and to the current anatomic, therapeutic and chemical classification. It is important to single out the virtual International Non-Proprietary Name regarding medical equipment and the brand name of the equipment. In addition, it is important to clearly demarcate the area of state guarantees regarding the purchase of some medical products, which are needed to implement the relevant standards and to ensure a high quality of medical aid.
I would also like to note that the Council of Europe Convention on Counterfeiting Medical Products and
Similar Crimes Involving Threats to Public Health was signed in Moscow in October 2011. Russia was among the initiators of signing this convention. It was also an active organiser of and participant in this document. After the signing of the convention and Russia’s accession to the World Trade Organisation, Moscow received the opportunity to approximate itself on the international market and to ensure the free expansion of various trade spheres by increasing medical product safety on the domestic market.
We are currently preparing to ratify the convention. The required regulatory documents are being finalised in conjunction with other federal executive bodies. Mr Manturov has already noted that various medical organisations in Russia's regions have been re-equipped rather actively over the past few years in line with the national priority health project and regional modernisation programmes. We are working to align this renovation with the federal targeted programme on pharmaceutical and medical industry development.
First of all, the long-term aspects of cooperation with the Ministry of Industry and Trade include efforts to meet the healthcare system’s requirements and to clarify priorities for import substitutes. First, I would like to single out the most popular medical products and test systems, which are needed daily to pinpoint socially important and effectively treatable diseases and health disorders in their early stages. Second, I would like to mention competitive Russian-made disposable materials, including those we saw in Penza today, such as stents, artificial valves and lots of other materials, which are needed during surgery – including low-invasive surgery – to treat socially important diseases and health disorders. Competitive diagnostic equipment making it possible to visualise any pathology inside the human body is the third category. We are absolutely dependent on the third category, and this is becoming a substantial financial and economic burden for the country.
Naturally, the second aspect of the highly promising opportunities for cooperation concerns the possibility of introducing the unique technological and engineering ideas and experimental prototypes that have accumulated in the past few years, and are being actively developed by the medical science and the healthcare sector. Mr Medvedev, we plan to report on this issue separately on September 18. Thank you.
Dmitry Medvedev: Thank you, Ms Skvortsova. Now, let’s discuss current proposals. I would like to give the floor to top corporate executives who are present here.
Mr Chubais (Addressing Anatoly Chubais), will you please begin the discussion?
Anatoly Chubais (general director of the RUSNANO state corporation): Thank you very much. We have gained modest but real experience in this sphere. We are funding seven approved projects worth a total of 11 billion roubles. By 2015 these projects must result in 12 billion roubles worth of sales of medical products. Since some of these projects are already underway, we have tried to generalise our experience for our own sake and our own understanding of the emerging problems. We have also invited directors that formulated their proposals. We’d like to voice the proposals that I think would be relevant to our current meeting.
Some of the projects are very impressive. Thus, there is a company in Dubna that is already operating and expanding. It accelerates elementary particles with cyclotron to pierce a nano hole in polymer film and creates fantastic filters. Mr Korolev is present here – he is the founder of that company. This is unprecedented, world-class technology. This is not theory but a functioning business that is already selling its products. It is expanding – building a second cyclotron at the Beta complex.
This is not the only technology, of course. There are many things that we consider interesting. I listened attentively to what Ms Skvortsova said, and I think that we fit in with the priorities of the Healthcare Ministry. At the same time, there are problems. On slide five you can see what directors of our design companies are saying about the problems that impede their work.
To begin with, there is the regulatory framework, primarily the one for registration. I must say everyone believes that the registration of medical goods in its current form is still better and simpler than that of pharmaceuticals. But this is only natural. That said, we are being told that registration procedures are easier in the European Union than here, despite the competition. So, there is room for improvement in this respect, and we’ll try to formulate our proposal on this now.
Another issue deals with standards of medical services that reflect specific innovative features. These features exist and we think they can and should be taken into account in elaborating such standards.
There is yet another problem that they are unanimously raising – the Government’s strategy for purchases. They need precise information on the types of goods that the state intends to buy not only during this year but at least in the next three or four years. For serious business people, a perspective for two, three or four years is extremely important.
And one more issue that I found surprising but all our producers have spoken about it in one voice. They maintain that apart from usual sales of medical equipment in clinics based on their investment potentialities, it is also necessary to elaborate a mechanism whereby medical institutions pay for this equipment not from the investment, which is always limited, but from the current use of this equipment and the income they receive from compulsory or voluntary medical insurance. This replacement of capital investment with current revenues will considerably expand the market. It will create more risks, but equipment producers are ready to take them and share them with medical workers. They consider this a sensible approach.
To sum up, we have formulated four proposals for the protocol decision. The first proposal is about strategy – in fact, Mr Manturov reported on it. Needless to say, we’d like to see the structure of annual budget expenditures on all types of medical goods. I’m not sure this can be done in fine detail, but the more details the better because this is a major indicator for developing businesses.
Let me emphasise that we are not talking about funding. We want the state to announce its purchasing priorities, notably, what types of goods and how many it wants to buy each year for the next few years. This is an extremely important signal to producers, especially those who make innovative goods, because they run serious risks.
The second proposal is to take into account the specific features of innovative products when elaborating standards for medical services and stipulate their potential use in these standards.
The third proposal is to replace capital investment with current funding. We have looked at this issue and it is not very simple legally because it involves legislation on government purchases, tariff setting procedures and a standard contract for the delivery of medical equipment. Many procedures will be affected, but I think it is possible to resolve this issue. That is, to enable equipment to be supplied against future revenue from its use... This is the point. And the fourth and last proposal has to do with medical goods registration. The minister was actually speaking about it just now. We are working on that at the moment. We believe that the new registration procedure should be harmonised as much as possible with the EU's. There is absolutely nothing there that is overly complicated or harmful for us. Because I think that you are always supportive of the general trend for harmonisation, Mr Medvedev, I think that in this sphere it is absolutely workable and can help producers to generate real demand.
And the final remark. Our impression from dealing with the innovative entrepreneurs working in this sphere. They are ready for a dialogue. They have matured for such a dialogue and they have a fairly adequate, normal grasp of the situation. I think that such a dialogue, including in the process of drawing up these documents, would be extremely useful. Naturally, Rusnano for its part would be pleased to participate.
Dmitry Medvedev: Thank you, Mr Chubais. A question for all of those present – perhaps there are people here who have not registered as speakers in advance? Please be brief. You are welcome. Who is next?
Yegor Lukyanov: With your permission, Mr Medvedev.
Dmitry Medvedev: Yes, please.
Yegor Lukyanov: I am Yegor Lukyanov of the Stentex enterprise, the Renova group. Mr Medvedev, esteemed colleagues. As Denis Manturov said today, one of the primary tasks in the medical industry's development strategy today is to stimulate the localisation of modern medical devices production technologies in Russia.
I would like to cite our experience in this area. Stentex is implementing a project to establish hi-tech medical devices production for treating acute coronary syndrome, namely coronary stents, coronary stents with therapeutic coating, and various types of catheters. Of course, this area was chosen due to the social significance and the priorities indicated by Ms Skvortsova. Cardiovascular diseases remain one of the biggest killers. Unfortunately, so far, no more than 20% of patients with acute myocardial infarction have access to the stenting procedure, primarily because the medical devices for the procedure are 99% imported. Thus, alongside technological targets, our project also addresses social tasks.
The capacity of the enterprise being created under our project – with a floor space of over 20,000 sq m, including 3,000 sq m of actual premises – would be sufficient as of 2015-2016 to provide stents and catheters to over 150,000 patients covered by the healthcare system.
What we are negotiating with our technological partner – in line with the opinion of the Ministry of Industry and Trade and the Ministry of Healthcare, we are eyeing for that role a world leader in this area – is the actual procedure of transferring all of the production cycles and the introduction of unique quality control systems and the creation of a technological team. This is no easy task.
I have to say – this includes over 1,000 people, of whom 400 are highly skilled engineers who will be trained by the technological partner, as well as 600 medical experts. Most importantly, the keynote of this project is the transfer of intellectual property rights from the partner to the Russian company. In line with the Ministry of Healthcare's recommendations, the most modern medical devices – which have already been certified in the United States and the EU and are used in clinical practice, meaning that they have been tested – will be localised. We consider this to be another key condition.
I would like to say that the project is being implemented under a partnership agreement between Vneshekonombank and the Renova group. Joint financing will amount to 6 billion roubles. Considering the trends in industrial development, we will not confine ourselves to the current product line. In parallel, in the framework of the Skolkovo Fund, as we have a subsidiary company, a project has been launched to develop bio-absorbable coronary stents. In addition, we are discussing four more projects with our technological partners, which will fit into the framework of the federal targeted programme and the development institutions that we have. The investment technological project's final implementation at such a level is impossible without state support because the enterprise is practically reliant on growing demand from the state healthcare system at the initial stage. State support may consist of providing a mechanism for procuring products before we reach the breakeven point. All of the rest will be found by our investors and the partners investing in the technologies. On the other hand, this is a critical moment not only in terms of investment, but also in terms of the transfer of key production technologies by foreign partners. All the more so, as such measures can be developed because the foundation for these state support measures was laid earlier in 2011. Legislation on state procurement was adopted. I am referring to establishing specific features for placing orders for certain types of products by the Government.
As for the project in hand, we are meeting with a fantastic degree of support on the part of all of the agencies concerned. Pursuant to your instructions, Mr Medvedev, the Ministry of Industry and Trade has come up with criteria for technology localisation for the project and a number of requirements for us as the initiators.
The Ministry of Healthcare has provided a forecast of the demand for coronary stents and catheters up to 2020. I would like to make a special mention of the Ministry of Economic Development's efforts, as it has a working group that is developing a concept to implement such projects.
I would like to draw your attention to this because in my opinion our key task is to work out and put in place a mechanism for obtaining a state order for the enterprise under construction, which is transparent for all the players. The reason is that medical technologies involve huge investments and technological risks, and also reputational risks for foreign partners. So, in conclusion, I would like to ask you, Mr Medvedev, to include in the draft resolution instructions for the Ministry of Economic Development and other relevant agencies. The instructions would ask them to work out and submit to the Government a draft regulatory act, which would specify the procedure for placing orders with enterprises created via a technology transfer until the break-even point has been reached. This would especially work as the process of defraying investments is fairly transparent.
In our case, it is monitored by Vneshekonombank's economic experts, and I believe that the creation of an understandable and transparent mechanism for all – and the fine-tuning of that mechanism, which would initially be used under our project on a pilot basis – may be instrumental in stimulating the transfer of technologies. It may also pave the way for foreign corporations and their Russian partners in localising hi-tech medical goods production on Russian territory. Thank you.
Dmitry Medvedev: Thank you very much. Next please.
Alexander Elinson (General Director of Elektron): Good afternoon, Mr Medvedev. Good afternoon, colleagues. I am Alexander Elinson of the company Elektron. Today I would like to speak about the development of the component base, and how the component base may boost our export potential, and to cite a few examples of what is already happening.
Next slide, please. Our company has about 600 employees and a quarter of them are research workers. So, supplying our products to more than 50 regions in the Russian Federation, we service them and we export them to over 30 countries. In fact, our experience of exporting our products dates back to 1998 and the bulk of our exports are components.
If we look at the medical technology structure, our concept of several years ago is essentially the same as the one now adopted by the Ministry of Industry and Trade. We have divided the structure into three levels. The lower level, which we call the basic level, is essentially X-ray equipment and a wide range of equipment already produced in Russia. We include in the category of basic technologies precisely this 20% – the share that Russian producers provide. The middle level concerns the overcoming of technological gap. That is the share that we must increase and where we have to develop our technologies in the mass segment. This includes several products that we are developing independently, such as X-ray surgery technology, roentgenography equipment and a whole range of products created in partnership – such as computer tomographs produced in partnership with Philips, which were introduced in 2010. Isotope diagnosis complexes, which are at the final stage of the registration process and will go into serial production in December, will be followed by magnetic resonance tomography and ultrasonic technology. However, we consider the top level to be the most important, as we see an opportunity to gain technological leadership.
We have identified two segments for ourselves. These are visualisation systems, because when we speak about diagnosis the main thing is that a doctor can see something with his/her own eyes... There are various types of visualisation systems. The second part is IT, where we have traditionally been strong irrespective of whether we are referring now to systems for managing certain complexes or systems for making comprehensive decisions as part of the healthcare system's informatisation.
We have singled out these two segments where we seek to occupy top positions not only on the Russian market, but also on world markets.
I would like to cite several examples of how the state is interacting with businesses. We all remember the Health national project adopted in 2006-2007. Under that project, our company was unsure as to which lots we should go for because the quantities of the products that the state was procuring were large and eventually we decided that we would only do digital technologies and only those digital apparatuses that were being procured at the time. These were digital fluorographs.
Let us look at what fantastic results we achieved. We provided over 700 digital machines by the end of 2007, and this enabled us to supply a new technology to produce digital detectors. As a result, our technology for producing these detectors put us at second place in the world in 2010. In other words, the fact that the state bought a certain amount of products enabled us to supply the technology. That was understandable demand, with the quantity and the timeframe clearly determined. One can place an order without worrying about whether the products will sell tomorrow. For example, today nobody knows what will sell in 2013, but on that occasion the picture was absolutely clear.
Next step. While working on this issue, we received requests from our worldwide customers and found out that a new generation of detectors was needed.
As a result, a new generation of detectors appeared in 2011 and we presented a complete line of X-ray diagnostic technology meeting the highest world standards to the market in 2012.
Today, the equipment that we put on the market meets the latest standards. In other words, we see how a well-considered purchase made in 2006-2007 led, on the one hand, to the development of component production, and, on the other hand, to the development of new products.
Let us take the next example. We created a new complex, it is actually very heavy machinery. Only 7-8 companies in the world produce this kind of equipment. In 2006, we took the tough decision to move in this direction. In 2010, we made an angiography machine, and in 2011, when a Ministry of Industry programme was announced, we bid in one of the tenders to develop modern imaging detectors for angiography units. As a result, the production of entirely new detectors will begin in 2014. Systems of this type are not produced today except by two or three companies in the world. What’s more, there have been merger talks which is likely to leave only two.
The third example I would like to give is an isotopic diagnostics partnership with a German company which specialises in nuclear medicine. Here we see a very interesting picture: on one hand, there is a host of developments at such research centres as Dubna, Tomsk, St Petersburg, Leningrad Region and so on, which are engaged in developing new detection techniques for nuclear medicine. On the other hand, after talking with all the parties in this process, we see that none of them understand how to commercialise their products and how the end product should look. That is to say we may hit upon a technological solution based on scientific findings and bring it to the point of commercialisation, but this will only raise more questions. We see our role here as properly formulating what’s required to make these products viable on the world market so that they can be used to: (a) be incorporated in our own products and (b) be sold to companies around the world because demand for this kind of equipment is fairly high. But the bottom line is that this sector is at a sort of technological watershed now, because in all other fields detection systems have long since been revamped; nuclear medicine is the last industry using these kinds of detectors that operated several dozen years ago. So Russia now has a great opportunity. We assure you that this will be a very interesting project. We want to discuss it with the Ministry of Industry and a number of research agencies. I’m certain that a lot of things can come from it. In fact, if we take a look at business and government cooperation, we will see three things … First, there will be understandable and predicted domestic demand, as was mentioned today. As soon as it appears, everything will be clear to everyone and it will be possible to move on. The second point concerns research and development co-funding within a federal targeted programme. This will give a big push to economic activity because when a state shares the risk with business, it is very good for everyone. The third thing is that when the scientific community joins in some advanced national projects, the results can end up being commercialised and see global distribution. I think that’s great. If we continue to move in this direction, we will arrive at results which are now being set as objectives – to corner over 40% of the market by 2020 and also to increase our export potential.
If you will allow me, I will take only 30 seconds more to add something to what has already been heard and what has been missed in the report. If we take a look at the industry’s current problems, five will stand out. They are greatly hampering rather than promoting development. One is the lack of balance between the Tax and Customs codes. According to the Tax Code, when we import components we don’t pay VAT. Yet customs was instructed otherwise … And even when there is a separate letter signed by the Federal Customs Service and saying VAT is not to be charged, customs go their own way and challenge us in court if we don’t pay. And we have to pay VAT on a range of products because if you fail to get components on schedule, you miss the contractual dates. But obtaining such a letter from the FCS is an overwhelming task for a vast number of companies, and so today you either pay VAT at customs or issue banking guarantees, which brings to nought all the government’s efforts to provide preferential treatment for domestic manufacturers.
The second thing is international standards. Here, we must be very particular because we understand that registration standards for medical equipment are right, but we should be aware of the regulations that exist and are applied in practice. Medical equipment producers in Russia versus those abroad bear different degrees of responsibility by far. We, for example, have a plant in Germany where we turn out equipment for the European market. But if you produce something out of line in Germany, you’ll be hit with such big penalties and fines by court injunction that it would be cheaper not to sell these products. So a vast number of companies do not sell their equipment to Germany because it has legislation that regulates quality and supplier liability. In Russia we have nothing of the kind, which generates unfair competition to a great extent. Unfair competition in the medical equipment market is bane number one for every producer. This subject could be discussed at length, but I will not take your time.
The next one is: what does a Russian product look like? Today there is no one in the country who knows which document to cite to understand what a domestic product is and how to define one – is it just re-packaging, or a percent of domestic content. This issue was raised at the modernisation commission. It was even reviewed and decided upon, but no concrete steps have been taken.
And the last: When we say that the government wants to develop the domestic industry, we should pause and think of an even load distribution. When we talk about how the state wants to develop the domestic industry, we should make sure that the load is evenly distributed. Because of the fact that 90% of demand is currently presented by the budget, the typical situation is that in the first half of the year everybody sits and thinks about what will be procured in the second half, and nobody has the answer. In the second half of the year there emerges some clarity on what will be procured, but you do not know who will win which tender, because orders are distributed by tender, and then in the last two or three months there's a race against the clock to produce an immense amount of products, deliver them to all parts of our vast country, assemble them and sign the documents. In short, it is a period of frenetic activity. So when we speak about competition, we certainly cannot be in a competitive environment if we have such unevenness compared with Western demand. Therefore under these conditions, I understand that it is difficult to do anything, but we pin great hopes on the Federal Contract System, and quite possibly it can do something to put matters right. These are the main problems facing us. Thank you.
Dmitry Medvedev: Thank you. Next.
Dmitry Pushkar (Merited Doctor of the RF, Doctor of Medical Sciences, Professor, Head of the Urology Chair at Moscow State Medical-Stomatological University, MGMSU): Mr Medvedev, colleagues. I have a somewhat different task, but it still fits into the overall format of this meeting. I am going to present robotic surgery and a project that, on the one hand, has already been accomplished in some parts of the world… If you simply look it up on Google, you will see that there are very many robots, and they are all different, but for some reason the most important and unique robot does not pop out – this is the da Vinci Surgical System, which exists in America. And of course there is Rene Magritte’s famous painting of a man eating with four hands – this is the four-handed robot.
Next slide. The main robot that one might recall here was invented many years ago. It is a robotic hand, the famous Mona, which was invented in the early 1980s and became the prototype of the surgical hand that was invented a few years ago. In short, this set of surgical instruments was invented in 1997 in the USA.
Next slide. Speaking about robotic surgery, here we see the company Intuitive Surgical, which produces the da Vinci robot, essentially a surgical instrument. To make it clear to those present… we all know about laparoscopy. Laparoscopy transformed surgery. Believe me, 25 years ago when we started doing laparoscopy, all the surgeons were fiercely opposed to it and said that laparoscopy would never become part of general surgery. General surgeons said that they could not work without large incisions when they can’t touch or look at the defected organ… today we cannot imagine surgery without laparoscopy, and ten years ago the first robotic operation was carried out with a floor stand where the robotic surgeon sits. It was first done with the participation of NASA, when they thought that the robot would be where the patient is, and the surgeon would be in another place. The first operation was carried out in New York and was controlled from Los Angeles. Today of course this practice has been abandoned, today the surgeon is next to the patient and is performing the operation sitting in front of the floor stand and looking at 3D and 4D images.
Next slide please. This is the movement, these are the robotic hands, which have 12 degrees of freedom. You see that we are able to do with two hands what would take the hands and feet and two more hands of an assistant. In Russia, we have the most extensive experience in such operations, but unfortunately we have to use the American system. You can see how a blood vessel can be punctured without causing any bleeding. The patient will be back home the next day with restored urinary function and all the other functions preserved, whereas in the case of an open operation this is impossible, just as with a laparoscopic one.
Next slide. Regarding heart surgery. I happened today to be sitting next to a colleague, and I was happy to be able to discuss with him the advantages of robots in surgery, in cardio surgery… You see the kind of cut: open surgery, coronary bypass surgery and ordinary robotic surgery, where the patient is back home within 48 hours.
Next slide. This is what we have today. Take a look – by early 2012 in America there were a little over 2,000 of these da Vinci robots. Russia has nine, of which six are working; three, unfortunately are idle. We discussed the issue with the specialists here, and I am glad that our concerns have been brought to the attention of the Healthcare Ministry.
Today 82% of prostate cancer operations in America are carried out by robots. And such operations are used not only in urology, but also in gynecology, in cardio surgery and today even in otolaryngology. The robot just has to be modernised a little bit. And that is a serious task.
Next slide. We tried to launch this work a year ago together with the Russian Academy of Sciences’ Institute of Design and Technological Information (IKTI). This is our robot, it is very small. It is held by a large robot, the size of three Helga cupboards, if anyone remembers the years when they were popular. And here is our robot, it is a little different, it is secured to the operating table and can be quickly dismantled and carried in a suitcase to any part of the country.
Next slide. Here is a development made jointly with the Industry Ministry and the Healthcare Ministry.
Next slide. Just one image. This is IKTI, our own invention, the working prototype of a robot that moves the robot’s hands in an entirely different way that we consider to be far more effective. What is the challenge facing us today? It is a very important challenge that has to do with optics. We will tackle the issues of optics with Sergei Maksin, who is present here and who is the head of the leading enterprise in our country. Instruments are a very complicated issue. Why? These are disposable instruments, but they can be reusable instruments and they can be still more accurate. These special mechanisms involve an entirely different principle than da Vinci robots – they can activate them.
Next slide. We have obtained a positive status at Skolkovo, and of course, we are ready to present the whole project when we get such an assignment. And today in the lobby there was the question of how many robots our country needs if America has a little over 2,000?
I think we probably do not need 2,000 robots today, but since we have 85 regions, perhaps the market in Russia could absorb 200, 250 or 300 robots, machines manufactured in this country by our specialists jointly with our scientists from Moscow (and not only from Moscow, but from other regions as well).
Why do we believe that this is a global project of the future? Do you remember how CT (computer tomography) and NMR (nuclear magnetic resonance tomography) and laparoscopy revolutionised surgery? Surgery today is disappearing in many areas, of course, but it will remain for all the years ahead, transforming itself into a method of minimum invasiveness. Today a patient in our clinic (everybody is invited to watch a robotic operation, we have them every day) leaves the clinic within 48 hours and in about 72 hours or four days he or she is ready to drive a car. This is an entirely different quality of life – our patients would demand it. Unfortunately, there are many doctors today among young people who have no opportunity to be trained. Considering that we have just nine machines in the whole country, and our experience is minimal, at 1,500 operations throughout the country – they can hardly be trained. So what do we want? Of course, Mr Medvedev, we would like you to think about a federal robotic surgery centre in Moscow and a federal robotic technology development programme. If such an assignment is given, we are ready to demonstrate an experimental operation on an animal using our domestically produced robot in the summer of next year to all those present and anyone you care to invite.
Dmitry Medvedev: Thank you very much. Interesting. Next please.
Sergei Maksin (Director-General of the Urals Optical-Mechanical Plant and the Optical Systems and Technologies Holding Company): My name is Maksin, I am director-general of the Urals Optical-Mechanical Plant and the Optical Systems and Technologies Holding. Mr Medvedev, thanks to the support we received during the previous period, I would like to report to you that we have saved almost 2 million lives in the field of neonatology (we make incubators for newborns). We supply our products to 600 clinical institutions in the Russian Federation, and I am glad to report that we are increasing our export potential. This slide shows that we supply our products to 52 countries, including such difficult markets as Switzerland, Germany, Italy and Asia, where we supply our medical technology. Thanks to your support, and that of Mr Manturov, we have ambitious plans under the federal targeted programme The Development of the Defence Industry Complex and state programmes in the defence industry field. We have been thinking of the most rational ways to use the allocations, and we in our holding have developed a programme of medical instrument production. We have tried to build on the achievements of these programmes and spread them to the design of medical instruments. We have this potential today and we believe that it should be used properly.
Our holding has 20,000 employees, of whom 5,000 are research workers. We are conducting about 2000 R&D projects, and we possess 79 key technologies: microelectronic production, the production of plastics, mechanical processing and so on. Proceeding from this programme, we already have an opportunity (and we are availing ourselves of this opportunity) to transfer technologies to the civilian sector – 64% of the technologies are transferred. Within the framework of that programme, we have examined all the areas (the requirements set by the Healthcare Ministry, export, and we have looked at all the markets), and determined that we need to develop 10 key areas, carry out about 160 R&D projects and launch serial production of 105 new types of equipment, sophisticated types such as neonatal and cardiologic equipment, and so on.
We expect to invest about 7 billion roubles in research and development, and by 2020, to produce about 70 billion roubles worth of medical equipment which will be sold in and outside the country, and we set the target of exporting about 40% of the products. And of course, we take into account the market demand and try to make sure that we are competitive. On the whole (as the next slide indicates), as a result there will be an economy of budget money and the customers’ money of an average of 40% compared with the best products of our competitors that are on the market today. All the major areas will be covered, including cardiologic equipment, clinical equipment, optical instruments and laparoscopy. My colleague has outlined the tasks in the field of robotics, and of course, we will address these tasks as well.
I would like to say that you, Mr Medvedev, are paying great attention to the country’s defence industry. And we have always welcomed that, because if we put a stake on such well-established industrial enterprises, we will meet all the challenges. I agree with what my colleagues have said, because the programme documents and the formation of the market will enable us to feel more confident and be more active in the area of sales and marketing research. Thank you.
Dmitry Medvedev: Thank you very much. Next.
Alexander Korolyov (Co-chairman of the board of directors of Trekpor Technology): Good afternoon, Mr Medvedev, colleagues. My name is Alexander Korolyov, from the company Trekpor Technology. I represent medium-sized business.
You visited our first plant in Dubna – science and production complex Alfa – in 2008 in connection with the meeting of the State Council and the launching of the strategy of innovative development of Russia until 2020. We will complete the construction of the second plant for the production of the cascade blood filtration technology by 2013, jointly with our giant partner, Rusnano. Anatoly Chubais mentioned this today. We have laid the foundation for a third plant, also in the Dubna economic zone, together with Fresenius concern, a major producer of hemodialysis equipment, in July this year. Production will start in 2015. It will produce the “artificial kidney” and disposable sets for hemodialysis.
In the context of today’s topic, I would like to focus on the issue of localisation of production, i.e. what we are going to do together with major foreign producers of equipment. The advent of foreign producers throws up some problems, as we have found out to our own cost, when we put together the deal with Fresenius. When we speak about localisation of production, that implies the building of a new enterprise. Problems arise because of the flaws and discrepancies between our standards and European norms, the difference between these norms and our Sanitary Norms and Rules and Construction Norms and Rules (SNIPs), when one has to harmonise them… The Germans seem to have a design of the plant, but we cannot build it right here because our norms do not fit in, one has to bring them in line. That is the first point.
The second point is that unfortunately, corporate culture in Western companies has a fairly long historical tradition, while our corporate legislation lags somewhat behind. When we were building up a joint company and designing a deal with the foreign company Fresenius, we had to poach provisions from different regulations and make references to applicable legislation because foreigners make calculations on the deal from input to output.
The third position. When we speak about localisation of production with foreigners, that of course must stimulate them. My colleague today advocated the inclusion of state procurement in the medium-term plans. For our part, together with Fresenius, in accordance with Law 94 and considering that a federal contract system is being developed (but all the same it boils down to auctions and tenders), we chose a different path. We have put in place and are implementing a second project on Russian territory involving the construction of 150 dialysis centres over ten years until 2020, so that the plant’s products would be delivered to these dialysis centres without any tenders, and hemodialysis services are then rendered. Incidentally, Fresenius is the world leader in this area, it has about 2,800 centres across the world with a corresponding standard of quality and services, management and comprehensive service.
Many proposals echo what Mr Manturov and Ms Skvortsova have said, and you have issued instructions to submit a draft law on the sale of medical products to the State Duma within a short span of time. The draft law, in my opinion, has two very important concepts that must ultimately find their way into the Federal Contract System. These are the concept of “safety of a medical product” and the concept of “effectiveness of medical products.” Unfortunately, under Law 94, price is the main priority. If these two concepts are included in the law and in the Federal Contract System, our purchases will be based not only on the concept of price, but also on such an important criterion as the quality of the medical product.
Like my colleague, I have a request for you, Mr Medvedev, and for the chairman of the VEB supervisory board, because the project to build 150 dialysis centres is currently pending before VEB. I think that it will be presented to the supervisory board in December because we are looking at joint financing, financing by VEB and from our own money. Thank you.
Dmitry Medvedev: Thank you. Next. Please be brief.
Yury Kalinin (President of the Rosmedprom Association, Chairman of the Board of Directors of the Research and Production Association “Biotechnology-21st Century”): Yes, I’ll try to be brief. My name is Yury Kalinin. First, on behalf of the professional non-governmental associations, I would like to express my appreciation to you, Mr Medvedev, for the attention the Government and you personally are paying to our industry. The presentations by the Healthcare Minister and the Industry Minister today highlighted the fact that we have created a basis on which to build a competitive domestic medical industry. And of course, the challenge ahead is even greater than what has been accomplished to date. Although I repeat, the foundation has been laid.
More to be posted soon...