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. Last Updated: 07/27/2016

French JV Brings Health to Moscow Pharmacies

Trapped between the failing state health system and new private drug traders, the typical Russian pharmacy is in a constant struggle to find cheap, regular supplies of drugs.

Seeing the need for a reliable private pharmaceutical distributor to the Russian market, France Sante, a French pharmaceuticals trader, has teamed up with a chain of Moscow chemists and is now part of a growing distribution and retail partnership.

Working closely with the Moscow City Association of Pharmacies, France Sante got permission from the Moscow city government to invite the worker collectives of 50 of Moscow's 500 pharmacies to become part of its joint venture. It also managed to secure cheap rental agreements for the stores.

The cooperative France Sante Moscow which started off in September 1991 as one jointly owned pharmacy has turned into a chain of 42 stores which sell both over-the-counter and prescription drugs, cosmetics and toiletries. The stores all hang distinctive green crosses outside to show they are part of the France Sante Moscow group.

France Sante, with financial backing from companies in Belgium and Luxembourg, agreed to take a 2/3 share in the France Sante Moscow cooperative and invest $5. 5 million into initial pharmaceutical supplies, office repairs and training of the venture's 1, 000 employees, Podgorbunskikh said.

Clearly, many companies are now entering the drug distribution business. Timofey Kozhoka, the director of the state drug importer Farmimex, told the Izvestia newspaper recently that Russia had taken delivery of only $200 million worth of drugs this year, mostly from old orders in 1992 but that private dealers had imported $480 million of drugs.

Natalya Podgorbunskikh, the Moscow city pharmacist's director of the joint venture, said that rather than selling only the pricey Western drugs sold in hard currency drug stores, France Sante offers mainly the cheaper pharmaceutics from India and Eastern Europe that have cured Russians for decades.

Russian doctors are also more likely to prescribe such drugs than the lesser known Western equivalents, Podgorbunskikh said.

Thanks to its connections with the city pharmacy association, the joint venture has good contacts with traditional suppliers in both Russia and abroad. Rather than relying merely on unreliable state distributors, the joint venture signs its own contracts with Russian producers as well, Podgorbunskikh said.

While other Moscow pharmacies only get new supplies once a month, the joint venture stores are restocked once every ten days. Podgorbunskikh said she hopes to increase that rate to once every three days with the aid of four delivery trucks and a computer network that is now being set up to keep track of stock.

But the system still clearly has short-comings and Podgorbunskikh said that the stores still only received about 40 percent of the supplies they needed.

Yury Yegorov, deputy to the Moscow representative of France Sante, said that apart from providing a retail outlet, the Russian partners help France Sante in satisfying the license requirements and detailed health regulations needed to trade in drugs in Russia. "That's why it's best for a Western investor to seek a Russian partner who works in pharmaceutics", Yegorov said.

Podgorbunskikh, who used to run the first pharmacy to join with France Sante, said that pharmacies now in the cooperative used to cost the city one million rubles in monthly losses each. Joining the cooperative helped them escape bankruptcy and the stores should turn a profit once the supply system has been improved, she said.

France Sante's main competitive edge is its ability to obtain cheap supplies of drugs by buying in bulk. The pressure for cheap supplies is all the more acute because Russian law still restricts the mark-up on medical supplies to 50 percent, Podgorbunskikh said.

France Sante also bears the burden of selling half of its medicines free of charge to elderly, veterans and invalids, although like other pharmacies the cooperative is reimbursed by the Moscow city government.