How Indian Vikram Punia became the largest Russian supplier of drugs under government orders

How Indian Vikram Punia became the largest Russian supplier of drugs under government orders

• Alexander Levinsky Forbes editorial staff

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Vikram Punia (Photo by Yuri Chichkov for Forbes) Now Vikram Punia has five pharmaceutical plants across the country, from Ussuriysk in the Far East to St. Petersburg, and his fortune, according to Forbes, exceeded $1 billion. How did the Indian manage to bypass the sharks of domestic pharmaceuticals and become the largest supplier of drugs to Russian hospitals?

Early on a January morning in 1995, the phone rang in the room of the best hotel in Yakutsk, “Tygyn Darkhan”. The Government House asked whether to send a car for 22-year-old Irkutsk entrepreneur, Indian Vikram Punia.

He refused: it was not far to go. He put on boots, a light Turkish sheepskin coat, a mink hat, wrapped a scarf around his throat and left the hotel. I suffocated from the frosty air, walked along Kirov Street past the Philharmonic, along Lenin Square with the obligatory monument to the leader, stood at traffic lights twice, and here it is – Government House.

When Punia entered the office of the Republican Minister of Health Prokopiy Yakovlev, he looked at him in surprise. As Punia tells Forbes, the minister decided that the white spot on the nose of the dark-skinned guest was a national feature. And it was frostbite. He was processed, and over tea they discussed a daring deal to supply medicine to Yakutia. The shortage of drugs in the republic was huge, and the guest promised large shipments from India, without real money, to pay off the national debt.

 

The scheme worked, the young entrepreneur earned his first $1 million and immediately began building a pharmaceutical plant in Irkutsk. Now Punia has five factories across the country, from Ussuriysk in the Far East to St. Petersburg, and his fortune, according to Forbes, has exceeded $1 billion. How did an Indian manage to bypass the sharks of the domestic pharmaceutical industry and become the largest supplier of medicines to Russian hospitals?

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Yakut debut

Vikram Singh Punia, from the Kshatriya caste, the class of warriors and rajas, was born in Jaipur, the capital of the largest Indian state of Rajasthan. His father, a wealthy local developer, sent Vikram to one of the best schools for boys in the state – the elite Birla High School. After graduating, the guy entered the medical university in Delhi. However, he studied there for only three months: he learned about the student exchange program between India and Russia, passed the exams, and was assigned to the Irkutsk Medical Institute.

 

In January 1992, a young Indian got off a plane in Irkutsk. The Siberian weather with an average temperature of –180C in winter and +180C in summer did not frighten him. “In India, I had a health problem,” says Punia. “It was hard to bear the heat. When it got to +48 degrees in the summer, I was just physically sick.”

At first, the Indian chose the Faculty of Medicine, he wanted to become a therapist , a general practitioner, but already in his second year he realized that this was not for him and switched to pharmacy. And then he left the university altogether. In his second year, in 1994, Punia married fellow student Irina.

The family had to be fed. He categorically refused his father’s help and, like many then, started a “buy and sell” business. He sold everything he could: tea, leather jackets, women's tights. But at some point, a more promising niche loomed ahead.

 

Punia discovered that the Russian drug market was practically empty. After the collapse of the USSR, developed pharmaceutical production remained in the Baltic countries and Ukraine. Of the existing capacities, half stood idle without imported raw materials. State subsidies were previously allocated for its purchase, but in the 1990s, budget funds for importing drugs melted away. As the general director of the state enterprise Pharmimex, Dmitry Apazov, explained in 1993, the minimum volume of imported medicines coming to Russia in that year should have been at least $1 billion, but his company, which provided 85% of such supplies, received almost four times less funds .

Punia recalls that he contacted the Moscow offices of such Indian companies as Ipca Laboratories, Unique pharmaceutical laboratories, etc., then went to their headquarters. The fact is that Indian companies traded with Central Russia, did not reach Siberia, and centralized supplies were broken in the 1990s. Punia entered into contracts with Irkutsk pharmacy chains and hospitals, purchased goods in India, delivered them and delivered them to customers. The margin, he says, “was close to 100%.” Gradually, large customers began to appear: the medical unit of the East Siberian Railway with management in Irkutsk, the Bratsk Aluminum Plant. But the turning point that turned a recent student into a dollar millionaire was the Yakut deal.

The market does not believe that Punia managed to get promoted without solid support. “It’s unlikely that he will tell you that his father-in-law is a very respected general in the region, now the former deputy head of the Federal Penitentiary Service for the Irkutsk Region,” says Forbes, a top manager of a large distribution company who asked for anonymity. Punia laughs in response: “My father-in-law was the head of the regional Control and Audit Department of the Administration (in charge of internal financial control of the region and control over government procurement for regional needs. — Forbes), and his position could not have been reason to give me a contract or open the door [to the bosses’ offices] for me.” Punia’s relative on his wife’s side, Ruslan Polyakov, exclaims in an interview with Forbes: “Uncle Valera?! He’s just a financier!”

Innokenty Rekhlyasov, the former general director of Sakhapharmacia, is also having fun after hearing from Forbes a version about Punia’s relative—the big boss who helped organize the Yakut deal. Rekhlyasov says that he met the Indian in 1995 at a pharmaceutical exhibition in Irkutsk. Punia had a stand, Rekhlyasov became interested in a foreigner selling medicines and invited him to Yakutsk. Small supplies of drugs to the republic began, and then Punia outlined the idea of ​​​​a daring deal to the director of Sakhapharmacy.

The fact is that the new Russia inherited from the USSR the public debt of India, which in 1991 amounted to 370 billion rupees (according to World Bank estimates, then it was $16 billion). Since the debt was in non-convertible rupees, India could only pay with its goods. The debt was recalculated several times, the list of Indian imports to Russia was limited to textile products, tea and coffee, but neither goods nor rupees were popular with Russian importers.

 

On the other hand, Yakutia also had a debtor. Moscow received diamonds and other goods from the republic, but delayed transfers. There was no money. Punia's idea was for Yakutia to achieve the right to use Indian debt obligations for direct purchase of medicines.

Rekhlyasov organized a meeting between Punia and the Minister of Health of the republic, and he with the late President of Sakha (Yakutia) Mikhail Nikolaev. The republic's leaders were convinced that the scheme could work. They turned to Moscow, and the republican foreign trade organization Sakhaopttorg received from the Russian Ministry of Finance a portion of India’s national debt worth approximately $10 million. Punia’s company, he says, became an agent for the implementation of the contract: it was necessary to draw up specifications, work out logistics, deliver and clear the goods through customs. The recipient was the state-owned Sakhapharmacia. As a result, Indian supply companies paid Punia, as he says, “for services,” his first $1 million.

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Punch generics

“After this deal,” recalls Punia, “I realized that for me, trading in medicines is a short-lived story.” In 1996, he went to Tamara Tsarik, the chairman of the private Irkutsk Vostsibkombank, where he served. “I’ve made a deal,” he allegedly told her. “I want to engage in production, but my money, which is all in your bank, is not enough for me.” I need a loan for construction and for the purchase of equipment” (Forbes was unable to contact Tamara Tsarik). As the entrepreneur says, Tsarik offered to fly to India to see local pharmaceuticals and equipment manufacturers, and they flew to Indian factories for three days. After that, Punia says, the banker allowed a loan of $2 million with the understanding that everything built and purchased would remain pledged to the bank (according to the businessman, he repaid the loan within three years). p>

Punia rented one floor in the four-story municipal pharmacy warehouses, approximately 1,500 sq. m. m to install the first production line there. He had even begun to rebuild the premises, but very opportunely, at a “relative’s birthday,” he was introduced to certified builder Ruslan Polyakov, his wife’s second cousin. The Indian called Polyakov to look at the object. “I see that the walls there are being demolished without dismantling them—load-bearing, not load-bearing…,” he says. “He began to ask professional questions, and Vikram suggested: “Since you are so smart, would you like to share in?”< /span>

 

In 1997, Punia registered Pharmasyntez. Polyakov, and later Punia's classmate Anil Rana, became junior partners with shares, according to Polyakov, of 10% each (Forbes could not find Rana, who is abroad). Punia confirms the size of their shares.

Pharmasyntez was offered to buy the four-story building of the Radian plant (10,000 sq. m) that had lost its defense order (10,000 sq. m) with a warehouse complex (30,000 sq. m). The Irkutsk plant of the group of companies began with these buildings. Its first stage began operating in 1999. By that time, the Indian had managed to obtain a higher education without interruption from business, graduating in absentia from the Faculty of Economics of the Far Eastern Academy of Economics and Management.

“I designed the plant, supervised construction, which took from two to five years, and Vikram was in charge of strategy,” says Polyakov (from 2003 to 2008, general director of Irkutsk Pharmasyntez). “Vikram is good because he can implement what seems to me a fantastic idea.”

Punia tells how this business was born: “We started our first production by packaging ready-made tablets, and this lasted for the first five months, and then I invited three knowledgeable Indian technologists and a mechanical engineer to work with us so that they could work on Indian equipment.” Polyakov recalls that the partners did not know how to sell the manufactured products, and eventually decided to “play tenders.” This determined the fate of Pharmasintez.

 

In 1999, Pharmasyntez began producing the anti-tuberculosis generic (a medicine with a different name, similar to the branded original drug) Rifampicin. Later, the Irkutsk plant produced Kalidavir, a generic version of Kaletra from AbbVie, and other AIDS drugs. Punia reasoned that the state will always need medicine in hospitals.

Pharmasyntez became especially noticeable in the 2015–2016 tenders with 13 AIDS drugs registered in 2014. Judging by Vademecum’s calculations, in 2015 the distributor Kosmofarm rose to second place due to the Pharmasynthesis drugs put up at tenders. A serious bet was made on generics.

The top manager of the distribution company approves of the strategy of entering the market through the supply of generics. “Generics are necessarily government purchases, because they don’t have a special share in retail, and Pharmasyntez still has the main sales of generics,” he says. “Public purchases are consistently focused on the minimum price, so in this segment, the lion's share of consumption, if you count in packages, of course, is generics.”

In 2008, according to the annual report of Pharmasyntez, the group’s revenue amounted to 409 million rubles (from the sale of its own medicines – 161 million rubles, from the resale of medicines – another 248 million rubles). Net profit reached 1 million rubles.

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Operation “Consolidation”

In 2003, Punia opened a branch in Moscow. “After the launch of Pharmasyntez [in Irkutsk], I stopped importing altogether,” he recalls. “We no longer purchased medicines from India, China, or anywhere else, and the Moscow office should was to work with the federal licensing system and be engaged in the main sales, since the main sales channel was federal.” The branch, according to him, employed about 30–40 people, and he appointed Rana to lead them.

Pharmasyntez gradually developed new drugs for different segments (tuberculosis, oncology, AIDS). They had to be registered with the Ministry of Health, obtain permission for clinical trials there, and have maximum prices approved by the Federal Antimonopoly Service. Punia says sales went all over Russia. For example, in the early 2000s, at the Vladivostok Economic Forum, he met the governor of the Primorsky Territory, Sergei Darkin, who promised him support and benefits if Pharmasyntez created an enterprise there. Punia registered the East-Pharm company in Ussuriysk, purchasing Swiss Rommelag automatic bottling equipment. Two years later, in 2005, the company put the first four types of solutions on the market.

But the work of the Moscow office began to suit Punia less and less. “I was not satisfied with their work in any direction,” he says. “I felt that our paths diverged.” In 2008–2009, the conflict was aggravated by the outbreak of the economic crisis. The first half of 2009 was especially noticeable for the industry, when, according to DSM Group estimates, the volume of the commercial drug market in consumer prices (that is, without government purchases for hospitals) increased by 30% compared to the same period of the previous year, and consumption fell by 6 %.

Indian businessman assures: no matter what , the shareholders (Polyakov and Rana) demanded to pay dividends, and he offered to buy out their shares. They agreed amicably on the valuation of the company, which Punia does not disclose (at that time the authorized capital was 100 million rubles).

 

Polyakov says he had his own reason for leaving the founders. In 2008, he “seriously damaged his spine and could have ended up in a wheelchair for the rest of his life.” He also left the position of CEO. For his share, he received part of the premises of the Irkutsk Pharmasintez, which he leased to the company, and warehouses that he had previously bought with Punia as a parallel development business. Instead, Polyakov built the Meridian shopping and entertainment center, which he has managed since then.

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Indian citizen

Punia moved to Moscow and took Russian citizenship. He fired the entire branch staff and hired new ones. Judging by the annual reports of Pharmasyntez, in 2009 almost 2 million rubles were paid in the form of dividends (85% of net profit), and in 2010 – 76 million rubles (90%). Having become the sole shareholder, Punia stopped paying dividends and reinvested all profits, he assures Forbes.

Punia offers high-quality generics at a lower price, which increases the supply of medicines to patients with the same budget (Photo by Yuri Chichkov for Forbes)

The investments were large-scale. In December 2010, the businessman signed a memorandum with the Governor of St. Petersburg Valentina Matvienko on the construction of a research and production complex for the production of antitumor drugs in the Novoorlovskoye free economic zone. Five years later, in 2015, Punia bought the bankrupt Yugrapharm plant in Tyumen for 500 million rubles, which began producing infusion solutions and sugar-lowering drugs for type II diabetes, as well as hormonal drugs: contraceptives and drugs for changing hormonal levels. background. Two years later, in 2017, he opened the St. Petersburg “Pharmasyntez-Nord” – the production of antitumor drugs (cytostatics), and in the 2020 – “BratskHimSintez” in Bratsk for the production of 100 tons per year of substances from which medicines are manufactured.

By 2020, as Deputy Chairman of the Board of Sberbank Anatoly Popov said, the bank lent to Pharmasyntez for 15 billion rubles.

 

In 2023, Pharmasyntez signed an agreement with the Kaluga Region at the St. Petersburg International Economic Forum on an investment project for the construction of the largest complex for the production of active pharmaceutical ingredients and finished drugs in the Vorotynsk industrial park by 2032. If in 2023 BratskKhimSintez produced about 120 tons of substances per year, then the plant in Kaluga will produce up to 1000 tons per year. The volume of investment in the new plant should be 20 billion rubles.

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Gambling Pharmacist

“Punia’s strength as a person and entrepreneur is passion,” says Viktor Dmitriev, General Director of the Association of Russian Pharmaceutical Manufacturers. —Maybe unnecessary.”

In February 2016, at a meeting of the Leaders Club, which unites medium and small entrepreneurs from various industries, the head of Pharmasyntez, which produces drugs for hepatitis, among other things, told President Vladimir Putin that in Russia more than two million patients with hepatitis need urgent treatment, and each course of drugs costs about 3 million rubles. The entrepreneur proposed legalizing compulsory licensing so that Russian pharmaceutical companies could produce generics of Western drugs, and “this would reduce the cost of drugs tenfold, especially since the BRICS countries are already using such a mechanism.”

Vladimir Putin promised to analyze the legal side of the matter and think , so as not to “expose yourself anywhere… but this is, of course, a possible way to solve the problem.”

 

Four years passed, and in June 2020, the Ministry of Health approved Pharmasyntez to conduct the third phase of a clinical trial of the drug Remdeform (international nonproprietary name, INN – remdesivir). This anti-coronavirus drug, under the Veklury brand, was produced by Gilead, headquartered in California. It allowed the release of generics in India and Pakistan, as well as sales in many countries—but not in Russia. Punia says he approached Gilead for a voluntary license, but did not receive a response.

And at the end of the year his company, the first in country, were allowed to produce and sell the medicine without the consent of the patent holder. By November 2021, out of 4.9 billion rubles allocated for the purchase of remdesivir by budgets of various levels, 4.6 billion rubles went to Pharmasynthesis.

Punia admits the move was audacious. “Not having a license and starting production, we, of course, took a risk,” he says. “Thank God that because of the current situation, the government decided to issue us a compulsory license, because it was necessary to save the health and lives of people, and this drug saved at least tens of thousands of lives.”

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On the way to Big Pharma

From 77% to 80% of the group’s revenue “ Pharmasyntez” in 2023 will account for systemic antiviral drugs (including drugs for the treatment of HIV), antineoplastics and cytostatics, immunosuppressants, systemic antibacterial drugs and drugs for the treatment of diabetes mellitus, calculated in RNC Pharma.

 

“Pharmasyntez is among the top 20 largest pharmaceutical companies in Russia,” says Sergey Shulyak from DSM Group. “In the last three years, they have been the largest supplier of medicines for hospitals in terms of the number of packages, and the same picture is observed in in the public sector as a whole.”

How did it happen? According to Shulyak, Punia was able to come out on top in the supply of medicines to the public sector due to the fact that “he offers high-quality generics at a lower price, which affects the provision of medicines to patients with the same budget.”

< p itemprop="articleBody" data-index="70" data-type="paragraph" class="ywx5e Q0w8z" style="text-align:left;">A former official of the Ministry of Industry and Trade, who requested anonymity, tells how, in his opinion, Punia became popular at the highest level of the state apparatus. “Look, he’s on the board of trustees of the Business School of the Russian Union of Industrialists and Entrepreneurs, he’s on the Leaders’ Club for Promoting Business Initiatives at the Agency for Strategic Initiatives, he’s co-chairman of the Business Council for Cooperation with India at the Chamber of Commerce and Industry, he says,” says official. — On the other hand, the Presidential Administration receives a certificate from the ASI—“Punia opens a plant”, from the RSPP a certificate —“Punia opens a plant”, lists of events come from the Ministry of Industry and Trade, and there “Punia opens a plant” “, and all this will be presented to Vladimir Vladimirovich.”

In 2021, the consolidated revenue of Pharmasyntez amounted to a record 40.4 billion rubles for the company. But when the COVID-19 pandemic ended, the group’s income, like other manufacturers of anti-coronavirus drugs, fell to 38.5 billion rubles in 2022 and 33.4 billion rubles in 2023. Headway head of strategic development Lyudmila Balandina explains that “during Covid there was great demand for antimicrobial drugs, but now this group in purchases has greatly decreased.”

 

Punia believes that the time of decline for Pharmasynthesis is coming to an end. “The first stage of our evolution was when we decided not to trade, but to produce,” he says. “The second began in 2008–2010, when I decided to take everything into my own hands, moved to Moscow and 10 years increased trade turnover by more than 50 times. The third stage, which will begin in 2025, is emerging now: we are beginning a complete transition from generics to our own innovative developments, from which we can make big money. It will already be similar to Big Pharma.”

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• Alexander Levinsky

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