The author of the article:
Iskaliyev Erkhat Serikovich
MBA, DBA, PHD, IPMA, ID
Chairman of the Subcommittee of Transport Logistics and Transportation NCE "Atameken"
Member of the Presidium of the Union of Transport Workers of Kazakhstan “KAZLOGISTIC”
Chairman of the Board of SK-Pharmacia LLP
Seniority:
Director of the Finance Department of the Ministry of State Revenue of the Republic of Kazakhstan, Astana (2002);
Managing Director of Development Bank of Kazakhstan JSC, Astana (2003-2006);
Chairman of the Board of DBK-Leasing JSC, a subsidiary of the joint stock company Development Bank of Kazakhstan JSC, Astana (2006-2008);
President of Kaztemirtrans JSC, a subsidiary of NC Kazakhstan Temir Zholy JSC, Astana (2008-2009);
Vice Minister of Industry and Trade, Ministry of Industry and Trade of the Republic of Kazakhstan, Astana (2009-2010);
Advisor to the President of JSC National Company Kazakhstan Temir Zholy for logistics and investment, Astana (2010-2011);
Vice President of JSC National Company Kazakhstan Temir Zholy for logistics, Astana (2011-2013);
General Director, member of the Presidium, Member of the Committee of Transport, Logistics and Communications of the National Chamber of the Republic of Kazakhstan, ALE “Union of Transport Workers of Kazakhstan “KAZLOGISTICS”, Astana (2013-2015);
First Vice President of JSC United Transport and Logistics Company, Moscow (2015-2016);
Scientific titles, degrees, activities:
The full implementation of transport and logistics potential is of strategic importance. We are witnessing the formation of a new economic geography of the world. Trade flows from China to Europe, Russia, Central Asia and vice versa are predicted to grow rapidly. Kazakhstan is located at the crossroads of routes connecting the global North and South, West and East.
This is our serious advantage, which opens up broad prospects. The transport and logistics industry should become one of the engines of the country's economic development.
In conditions of active competition, we have to quickly
solve the key problems of this industry.
K.K.Tokayev
This instruction was given by the President, addressing a message to the people of Kazakhstan at a joint meeting of the chambers of the Parliament of the Republic.
Today, Kazakhstan aims to become a trade and logistics hub in Central Asia and the Caspian region. To implement it, transport, logistics and trade hubs are being created around the country, on the borders with China, Kyrgyzstan, Uzbekistan, the Russian Federation and the Caspian Sea.
Taking into account current trends in the development of the logistics services market, it can be argued that the basic elements of managing commodity flows are logistics hubs. They play a coordinating and integrating role in the logistics system for the circulation and transportation of goods.
The introduction of such technologies necessitates the creation of a network of storage and distribution logistics hubs that perform the functions of interaction between modes of transport and organization of material distribution in the economic region.
Thus, interception of commodity flows, consolidation with subsequent production of goods for supply to neighboring markets, development of a full cycle of services, including management of global supply chains and contracts, will consolidate Kazakhstan’s position as the undisputed economic leader in the region.
There is intense competition in the world for control over transport routes and logistics. Currently, a new transport framework of Eurasia is being formed, which, with the proper approach, can bring serious economic and political dividends to participants.
Along with the development of physical infrastructure, it is extremely important to develop substantive solutions to create a common digital system for the transit of goods. It must be reliable and easy to use, based on advanced digital technologies. Kazakhstan will act as a reliable trade and logistics hub, using all its capabilities and resources.
CREATION OF A PHARMACEUTICAL HUB
As part of the development of Kazakhstan as a trade and logistics hub, it is advisable to create a pharmaceutical hub in Central Asia. This is necessary for the rapid and efficient distribution of drugs.
World practice shows that a number of global players in the pharmaceutical market have logistics hubs from where medicines are supplied. The creation of a pharmaceutical hub in Central Asia would significantly reduce the waiting time for supplies to the country and ensure that there is no queue to receive drugs.
Market opportunities and international experience
Unlike most regions, there are no developed international pharmaceutical hubs in the countries adjacent to the Republic of Kazakhstan.
Speaking about the structure of the global pharmaceutical market by region in 2022, according to an analysis by Arthur Consulting, more than half of the share falls on North America. Europe is in second place, followed by Asia and Australia.
Structure of the pharmaceutical market in neighboring countries with the Republic of Kazakhstan countries for 2023 is $27.5 billion. The Russian market is the largest of the countries neighboring Kazakhstan. At the same time, market saturation occurs, including from the territories of Northern Europe and Asia.
According to open sources, a potential production and logistics pharmaceutical hub in the region of countries adjacent to the Republic of Kazakhstan could become a significant player in the market of up to $41 billion by 2030. Taking into account the ambitions to localize production in Russia, Kazakhstan and Uzbekistan, the total share of imported drugs will be about 55% over the next 7 years.
At this time, our neighbors in Uzbekistan are constructing the Tashkent Pharma Park cluster for the development of the domestic pharmaceutical market, which intends to become an innovative research and production pharmaceutical cluster. The total area is 130 hectares, the volume of investments is $130 million.
World cases
Airlines. One of the striking examples of a successful case is the Turkish airline Turkish Airlines, whose hub is located in Istanbul. Istanbul is at the crossroads between Europe and Asia and offers opportunities to connect with new destinations. The hub is designed to serve 200 million passengers per year. Thus, the city strengthens its position as one of the largest international aviation hubs with new facilities and a third independent runway. And Amadeus technologies and a reliable support system contributed to the comprehensive development of the hub.
Another successful case is behind the Russian Aeroflot. The airline has hubs in Moscow, St. Petersburg and Krasnoyarsk. A hub is formed where there is an intersection of traffic flows and it is convenient to connect flights. Operating bases are formed in cities that independently generate large flows of passengers.
In addition, by 2030 the company will open three new regional bases in addition to existing hubs. The main idea of creating new regional bases is for Aeroflot to master flows from region to region, bypassing Moscow. By 2030, according to the company's long-term strategy, passenger traffic will increase to 65 million people. It is noted that Aeroflot has closed most of its international routes, so their fleet, volume and ambitions are now aimed at the domestic market.
The trick of these two airlines is dumping, this is how air transportation is hubbed. Such a tool is primarily used to stay ahead of competitors and clear the domestic market for oneself.
UAE experience. Today, the UAE is a new international hub for trade and business.
The government launched an economic diversification program to reduce dependence on oil and transform its traditional economy into one based on knowledge and technology. Diversification creates new trading opportunities. The country has made changes to the regulatory framework, among which one of the most notable are amendments to the regulation of foreign direct investment in the UAE. The UAE is today a prosperous, dynamic and fast-growing economy in the world. Here are a few reasons that make the UAE a famous business hub:
- Central location. The country is well connected to emerging markets and is located at a global transit point, making it a convenient trade hub within reach of major global business hubs;
- Exemption of tax rules. The UAE occupies a unique position among countries with zero or negligible taxes.
- Effective business policy. The UAE has an export diversification policy or multilateral trade policy that allows investors to participate in free trade in all forms of companies.
- Effective management policy. The government encourages foreign investment in the UAE by providing numerous incentives for investors looking to start a business.
- Economic diversification that accelerates growth.
The UAE remains an important hub for trade and business development due to its flexibility, strategic location, tax incentives, modern infrastructure and government commitment to technology development. Recent changes in regulations are modernizing the business regulatory system in the UAE as a whole, increasing the efficiency of company management, which, in turn, increases the country's competitiveness at the international level.
In its Economic Vision 2030, Abu Dhabi identified pharmaceuticals, biotechnology and life sciences as key sectors of its transformation. As such, Abu Dhabi is committed to becoming a world-class pharmaceutical hub and Etihad Cargo has become a key partner in this process.
As the country's national carrier, Etihad Cargo is fully aligned with Abu Dhabi's vision and has expanded its specialist pharmaceutical product, PharmaLife, to support the emirate's ambitions.
To strengthen connections between Abu Dhabi and the rest of the world, Etihad Cargo has developed more than 1,330 IATA CEIV Pharma and GDP certified trade routes, which aims to ensure product integrity during transport.
A pharmaceutical certified trade route is covered by insurance when the origin and destination are connected by IATA CEIV/GDP Pharma certified transport companies (such as the airline and ground handler) at every step of the way from origin to destination.
Etihad Cargo's state-of-the-art pharmaceutical business currently serves every continent except South America, with the airline focusing on establishing interline agreements for pharmaceutical companies that will provide connections to countries they do not currently fly directly to.
As the hub grows, Etihad Cargo expects it to include all key stakeholders in the pharmaceutical and healthcare ecosystem in the coming years, from researchers and manufacturers to distributors and shippers.
The ideology of bonded warehouses
Bonded (or free) warehouses are sites where imported goods can be stored for a long time without going through customs procedures and without paying taxes. Moreover, if the product is no longer needed, it is possible to return it without additional fees.
Legally, bonded warehouses belong to customs - while the goods are in the warehouse, they do not cross the borders of the country. It turns out that bonded warehouses are a special economic zone. The potential of the format is enormous.
Bonded warehouses have been developing around the world since 2012, with the leaders being China, the USA, Japan and European countries. Regulatory decisions are similar from country to country; mainly the customs rate changes (from 8% in Japan to 10% in the European Union) and some details.
The leader in format development is China, where bonded warehouses account for 86% of cross-border trade turnover. In Europe - already about 60%. In China, the format has been further developed - the so-called bonded zones, where goods with a zero tax rate are created from components arriving there.
First of all, bonded warehouses are beneficial for online stores importing goods from abroad: for their clients, the delivery time for purchases is critically reduced, from several weeks to 1–2 days. Retailers themselves can respond flexibly to demand and pay taxes and fees only for the goods actually sold, and not for the entire imported batch - and what is not sold can be easily sent back. For such warehouses, separate customs duties are established and applied to the goods individually.
In addition, the infrastructure of bonded warehouses can be used by exporters working with foreign online stores, and the regions in which the sites are located receive additional income - direct (taxes) and indirect (for example, new jobs).
OEM - original equipment manufacturer
OEM is production outsourcing: the customer does not need to invest large resources in setting up his own production: open a factory and register it, buy expensive equipment, look for competent specialists. You can fully concentrate on developing your own brand and advertising promotion.
In the consumer electronics industry, OEM (Original Equipment Manufacturer) often refers to companies that only assemble products based on third-party design documentation, but do not carry out their own design work. At the same time, OEMs are accompanied by the qualifying word “contract,” thereby indicating the form of economic relations between two business entities.
Many Chinese companies are developing and producing a product with the goal of selling it in large quantities for sale to a retailer. OEM companies do not need to organize retail sales, spending fabulous sums on this.
OEM goods are goods supplied in a form intended for industrial manufacturers (OEM itself), but sold in retail chains. Due to smaller dimensions, minimal configuration and reduced manufacturer costs for marketing solutions, OEM products are 10-40% cheaper than regular retail products.
Top 10 Pharmaceutical Supply Chains
Supply chain is a complex industry that typically requires highly skilled engineers to oversee, but pharmaceutical supply chains take complexity to another level.
In addition to the usual list of supply issues, the pharmaceutical industry has strict requirements for handling materials, such as the cold chain element, and also faces product recall risks and compliance issues, as the medical field is perhaps the most regulated sector in the industry. is.
The pharmaceutical industry is also facing massive changes that predate the COVID-19 pandemic. Governments are putting pressure on pharmaceutical suppliers to cut costs, while increased competition has required industry players to move faster.
The Supply Chain website has published a list of the top 10 pharmaceutical supply chains in the world for 2023. The honorable first place went to the American pharmaceutical giant Pfizer. Pfizer's supply chain serves the health of approximately 1.2 billion people living in 45 low-income countries around the world. It provides access to treatment for infectious diseases such as Covid and pneumonia, as well as cancer, heart disease and women's diseases.
The next favorite is the Swiss Roche. Roche collaborates with stakeholders globally, nationally and locally to ensure access to innovative healthcare regardless of location.
Over the past 100 years, Roche has grown into one of the largest biotechnology companies. Driving this growth is the Pharmaceutical Technical Development and Clinical Supply Chain team, which operates one of the largest and most complex pharmaceutical pipelines in the industry, typically conducting 600 active clinical studies at any given time. It also plays a critical role in ensuring that 100,000 patients a year receive innovative new investigational medicines reliably and safely in virtually every country in the world.
The top three is completed by the American biopharmaceutical company AbbVie. About its supply chain, the company says: “Our suppliers are an extension of our business. To ensure that suppliers share and maintain our standards for quality, product availability and safety, and ESG management, we have a comprehensive supplier management program.”
In fourth place, Johnson & Johnson, now 135 years old, says its mission has always been “to support people's health at every age and stage of life.” The company is committed to improving access and affordability, creating healthier communities and making a healthy mind, body and environment accessible to everyone, everywhere.
Next on the list is Novartis. Norvartis is committed to working with supply chain suppliers "who act in accordance with our values and ethical principles" and manages this through its third-party risk management system, which it says "contributes to the resilience of our entire supply chain."
The French company Sanofi also succeeded in the ranking. Its supply chain is closely linked to the company's commitment to sustainability. It says: “Sustainability is built into our procurement processes as well as our supplier relationship management strategy to create sustainable businesses across our supply chain.
Another major pharmaceutical supply chain belongs to Bristol Myers Squibb. Strategic sourcing and procurement are at the center of the global enterprise, connecting all business units through a network of world-class suppliers and value-creating partnerships. “We supply hundreds of direct and indirect products and services around the world to our various teams, including research and development, packaging and a variety of professional services.”
The German company Merck did not stand aside either. It ensures compliance with ethical and legal standards by auditing suppliers “to increase supply chain transparency and identify areas for improvement.” To this end, it is a member of the “Together for Sustainable Development” initiative, associated with the rating agency EcoVadis.
Another favorite is the British company GSK. About its supply chain, the company says: “We are serious about delivering billions of packages of medicines that make a positive difference in the health of the world. It is a responsibility that drives us to innovate at every step of the process and helps us achieve better and faster results.”
AstraZeneca closes the leaderboard. In 2017, the company signed a partnership with EcoVadis to expand ESG due diligence. Its third-party risk management assessments include “an initial assessment of activity, geography and cost to assess overall business risk.” It says: “We extend our influence by demanding high standards from our 57,000 suppliers around the world.”
Kazakhstani cases
For years, Kazakhstan has structured and carried out comprehensive work to create a hub in Kazakhstan, modernized airports and the logistics system. There are a number of successful ongoing projects in the country that have already proven themselves in the market. One of such projects is Kazpost JSC.
Kazpost provides a wide range of postal, financial, brokerage, agency and electronic services. Kazpost has the largest branch network in the country, covering almost the entire territory of Kazakhstan, especially at the regional and rural level.
The postal network is an effective tool for promoting e-commerce, transport and logistics services, and financial services for business and the public. The company is actively undergoing a process of modernization and transition to high-quality provision of services, which means not only improving service, but also technical, operational, technological, and information updating of the postal network.
Today, the company intends to establish logistics hubs in the country. Land plots have already been received for the construction of logistics hubs in Aktobe, Turkestan and Almaty regions. In addition, a logistics hub with an area of 10 thousand square meters is being launched in Astana. m with a fulfillment center.
Fulfillment is a set of operations from the moment the buyer places an order until the moment he receives the purchase. This will create an opportunity for the growth of Kazakh companies in the e-commerce market.
Kazpost is developing a strategy to strengthen the logistics infrastructure, including network optimization and construction of trunk logistics hubs.
Through the construction of high-tech multimodal warehouses in Almaty, Turkestan, Aktobe and the Almaty region, as well as an extensive network of Kazpost branches, a base for the operation of various marketplaces will be created. At the same time, Kazpost is considered as a logistics and trade hub.
As part of the official visit of the President of Kazakhstan to China, Kazpost signed a Memorandum of Cooperation with the Chinese logistics company YTO EXPRESS Co. LTD.
Already in 2024, Kazpost JSC, together with YTO Group, plans to begin construction of a warehouse with the ability to process e-commerce goods, including storage, customs clearance, support, and servicing of all processes to ensure the availability of e-commerce goods.
In addition, successful domestic cases also include electronics and flower business.
MAIN AREAS OF WORK TO CREATE A HUB
The main directions of development of the pharmaceutical hub are an international logistics point and a production site for pharmaceutical companies.
The components of the international logistics point are a warehouse infrastructure for medicines, substances and components, as well as cargo hubs in Almaty and Astana.
The main problems are the lack of infrastructure, warehouses and low throughput. To solve these issues, it is necessary to build warehouses and modernize cargo hubs. The amount of investment is $100-200 million.
As for the production site for pharmaceutical companies, the main component in this direction is the site for the production of pharmaceutical drugs. The main problem is the lack of production sites for localizing the production of pharmaceutical companies. To do this, it is necessary to formulate the concept of a pharmaceutical hub and build a sufficient volume of production sites. The investments required for this are $100-300 million.
Development of the country's airports
Dubai's transport infrastructure, with a modern airport, seaport and road network, meets international standards and is capable of handling large volumes of cargo and passengers. The flagship Dubai International Airport is one of the busiest airports in the world, and Jebel Ali Port is one of the largest container ports in the region. The government has invested heavily in the development of these facilities, as well as road and rail infrastructure, to ensure the city has the capacity and capacity to support the growth of the trade transport and logistics industry.
The airports of Almaty, Astana and Karaganda, the Khorgos gate and the ports of Aktau and Kuryk could potentially become hubs for air and multimodal transport in Kazakhstan. The basic infrastructure has already been built, and with some improvements, digitization and integration, these assets can add value to Kazakhstan's trade transport and logistics sector.
The Kazakhstan market is one of the most stable in the Central Asian region. It is fast growing and, in terms of cargo transportation, is attractive to both airlines and foreign investors.
Over the past two years, Kazakhstan has become one of the largest cargo hubs in Central Asia. The Government of the Republic of Kazakhstan program considers the further growth of Kazakhstan’s infrastructure until 2030 to increase the flow of exports from Kazakhstan, because the country is mainly engaged in imports.
According to experts, the three largest airports in Astana, Almaty and Karaganda can become hubs; Aktau airport is also being considered, which, when connected with Kuryk airport, can become one of the largest hubs for the transportation of transit cargo. In the next 3-5 years, Astana Airport may become the next international hub.
Great emphasis is placed on the development of Astana Airport. Very soon it will be transferred to the management of Terminals Holding from the UAE. Almaty Airport is managed by the Turkish company Tav Airports Holding. The airport is currently undergoing active reorganization and reconstruction. Construction of a new terminal is planned. It is also the only airport with a railway line. Given its proximity to China, Almaty Airport is a leader as an international hub. But, given the geographical location of Astana airport in terms of air cargo transportation from China, taking into account the wind rose and routes, Astana is a priority.
The airline industry has fully stabilized since the pandemic and is even showing some growth since 2021. Thus, the majority of global companies achieved excess profits in 2021 and the number of flights continues to increase dynamically.
Since Kazakhstan is now in its fifth and sixth air freedom, many airlines have shown interest to start operating from Kazakhstan, and more airlines will enter the market over the coming year. Many cargo airlines operate through Kazakhstan.
Construction of warehouse infrastructure
The main areas of work to create a logistics point are the construction of warehouse infrastructure and the development of Astana and Almaty airports.
For the construction of warehouse infrastructure, requests were sent to the akimats of six regions regarding the allocation of land plots. Memorandums were signed with KazakhInvest, Baiterek, Qaztrade and the Institute of Economic Research.
The main tasks at the moment are determining the required volume and location of warehouse space, creating a project, including equipment, IT products, personnel training, attracting the necessary public and private investments and contractors to implement the project.
Participants in the process are pharmaceutical companies, the Ministry of Health of the Republic of Kazakhstan, the Ministry of Transport of the Republic of Kazakhstan, consulting companies and construction contractors.
Speaking about the modernization of the airport's cargo hub, options for the location of the hub are proposed to determine the need to modernize the airport's cargo hub.
What needs to be done? Identification of an airport for modernization in accordance with the farm hub concept, development of a cargo hub modernization project, including potential throughput, necessary investments, possible contractor, attraction of public and private investments for the implementation of the project.
Participants in the process are the Ministry of Transport of the Republic of Kazakhstan, the airport, consulting companies and contractors.
According to preliminary calculations, the creation of a pharmaceutical hub will require the training of up to 2,200 highly qualified personnel.
Formation of appropriate infrastructure
To increase the attractiveness of Kazakhstan, an appropriate infrastructure of logistics pharmaceutical clusters is required in the structure of a trade and transport hub.
As part of exploring issues and making proposals regarding the creation of a trade and transport hub, meetings were held with BigPharma and large domestic pharmaceutical distributors.
The conducted market survey also points to the need to build pharmaceutical warehouses that meet international standards of good manufacturing and distribution practices.
At the same time, taking into account the geographical features of the country, namely the area, the existing international logistics flows of pharmaceuticals through Almaty, as well as the potential increase in the throughput flow of the middle TMTM corridor, the location of the warehouse infrastructure must be ensured in the cities of Almaty and Astana, taking into account the presence of a free economic zone and the proximity of the international airport .
At the current stage, it is necessary to work out organizational issues related to determining the location of objects, the pool of potential users of the infrastructure being created (in order to determine the volume), as well as determining the source of financing for estimate work and construction.
The processes carried out by the Ministry on behalf of the Head of State to localize the production of pharmaceutical products and medical equipment correspond to the concept of the project.
These measures, coupled with the task of developing the necessary infrastructure, will ensure the economic growth of the country, subject to the simultaneous solution by the relevant government bodies of the tasks of introducing multimodal logistics, expanding cargo aviation and developing road freight transportation, changing customs legislation, etc.
What needs to be done? Create a design and construction of a hub based on the approved concept (location, area, infrastructure), organize training of personnel to work in the hub and remove barriers to licensing the activities of partner companies. Increase in the number of international transport.
Для увеличения привлекательности Казахстана требуется соответствующая инфраструктура логистических фармкластеров в структуре торгово-транспортного хаба.
Current status of pharmaceutical logistics in Kazakhstan
Today, there are more than 100 enterprises in the industry, and the positioning of Kazakhstan as a trade and transport hub in the Central Asian region will give a certain impetus to the development of pharmaceutical production.
The first initiatives to create the hub have been implemented, but significantly more steps will be required to complete the project.
Creating a pharmaceutical hub is a complex multidimensional task that requires taking into account the interests and involvement of all stakeholders.
The concept of a pharmaceutical cluster was formed, requests were sent to akimats for the allocation of land plots for the construction of warehouses in 6 regions. The concept of a logistics pharmaceutical cluster includes four areas: government support, logistics and warehouse infrastructure, localization of production and group purchasing (GPO).
We still have to conclude agreements with manufacturers to localize a sufficient volume of products, assess the potential effect, risks and investments for each version of the concept: capital investments, personnel training and R&D.
ROLE OF A SINGLE DISTRIBUTOR
As part of the execution of the order of the Head of State on development of a trade and transport hub in Kazakhstan with the industrialization of product groups, a system of warehouse and transport logistics Single distributor became part of this grandiose project. .
The President also instructed to increase the share of domestically produced medicines and medical products to 50% already in 2025. To achieve the stated goals, the Single Distributor, in turn, carries out comprehensive work in all priority areas.
The single distributor has proven its managerial effectiveness as a coordinator of a government project to improve the efficiency of procurement of medicines and medical products, as well as medical equipment.
The single distributor purchases 42% of the total volume of medicines in the Republic of Kazakhstan. Centralization of procurement in the hospital segment through a single distribution system has allowed saving a total of 215 billion tenge since 2010.
The single distributor takes an active position in introducing a system of prequalification of potential suppliers by analogy with the WHO methodology, reducing the time frame for reviewing tender applications, quick auctions, and using new procurement tools (fixing volumes and prices for the long term, cost-sharing and risk-sharing contracts).
The single distributor is the anchor client of the pharmaceutical hub.
Organization of logistics flows
The country has begun work to attract cargo transportation operators to Astana airport. The distribution of flows is formed depending on the chosen strategy: uniform regulation (for example, FDA in the USA or EMA in Europe), geographical zones (CIS, Africa), by type of product (oncology, hematology, etc.). Pharmaceutical products are usually expensive, but at the same time they are small in size and weight.
The storage mode during transportation requires controlled temperature and humidity, and therefore delivery must be carried out as quickly as possible. Taking these factors into account, pharmaceutical manufacturers identify air as a priority direction for international transportation.
However, long-distance refrigerated trucks are also used for bulk pharmaceutical products used in large volumes, since air delivery for such cargo is not cost-effective.
Global pharmaceutical hubs Bigpharma coordinate the logistics flows of their own products. For example, Novartis's hub in Switzerland, Pfizer's hub in the Netherlands, AstraZeneca's hub in Sweden, Roche's hub in Switzerland. Such hubs are usually located near major transport hubs.
The single distributor sent official letters to the logistics departments of BigPharma companies regarding bilateral negotiations on cooperation issues.
Inquiries were sent to companies such as Pfizer, Astellas, Stada, Bayer, Johnson & Johnson, Roche, Novartis, Novo Nordisk and Takeda. As a result, online negotiations were held with Novo Nordisk, Stada and Novartis. It was possible to conclude long-term agreements with pharmaceutical giants Pfizer and Roche to localize the production of innovative original drugs in Kazakhstan.
Quality.
This is what will be the main focus.
1) Mandatory registration of the product in the importing country; the registration dossier, among other requirements, includes approval of individual labeling for the country.
2) Post-registration control, certification for compliance of each imported batch with the registration dossier.
3) Manufacturer contracts with distributors provide for quality agreements.
4) The supply chain is ensured by “Good Distribution Practice” (GDP), which establishes a unified approach to the organizational process of wholesale distribution of medicines and is aimed at ensuring the quality of medicines all the way from the manufacturer to the retail chain and medical organizations. This standard applies to organizations involved in distribution, including the distribution of drug manufacturing organizations (the standard is based on the principles of good distribution practice of the European Community and recommendations of the World Health Organization and is mandatory for execution in the Republic of Kazakhstan at the legislative level).
Thus, a feature of the promotion of a pharmaceutical product is the presence of the manufacturer at all stages to the final consumer, which presupposes the presence of a company representative in the country, or an authorized distributor responsible for pharmacovigilance (monitoring of unwanted side effects) and post-registration control of the drug.
A number of global pharmaceutical manufacturers have business entities in the Republic of Kazakhstan (subsidiaries), thereby extending their own logistics chain for their products as far as possible (the contract with ED provides for a DDP supply basis); others carry out logistics to the destination on their own (on a CIP basis), involving trusted international carriers.
Logistics. An equally important part of the whole process.
GDP provides for the availability of approved routes with managed processes for abnormal deviations.
Multimodal delivery involving air: air routes are most popular for expensive and bulky pharmaceutical cargo, since they have a short delivery time of 1-4 days (depending on the complexity of the route, there may be direct connections with Almaty international airport, or with reloading at air hubs in the Middle East/ Turkey).
Route:
sender's hub – airport in Europe – airport in the Republic of Kazakhstan – ED hub in Almaty.
Transportation from the pharmaceutical hub to the airport by refrigerated truck no more than 24 hours, including cargo handling and customs clearance at the airport of departure; then the flight takes 6-12 hours, in case of transshipment it takes longer; cargo handling at the airport of arrival and customs clearance of imports - within 1-2 business days.
Air delivery problems: insufficient number of direct flights from Europe to the Republic of Kazakhstan; flights may be at night or fall on weekends when the customs services of the Republic of Kazakhstan are not available. Also, cargo flights are underdeveloped, which does not allow for the shipment of larger volumes of pharmaceutical products for mass consumption.
Delivery by refrigerated truck: due to the insufficient development of alternative routes (in rare cases the middle corridor is used), the northern route is used, the transportation period is ⁓14-20 days, however, given the geopolitical difficulties when crossing the borders of the northern route, transportation times and logistics costs increase.
What needs to be done? In the future, it is still necessary to organize the processes of planning, delivery and storage of large volumes of pharmaceuticals with the help of a Single Distributor, the development of logistics flows (air, rail) for more regular deliveries and the creation of infrastructure for receiving cargo products at the airports of Astana and Almaty.
Improving legal regulations
To date, issues of changing the regulatory framework to support the development of the pharmaceutical industry have been worked out. The single distributor has carried out work to introduce changes and additions to regulations in the field of medicines circulation:
- the evaluation criteria for the application of potential suppliers intending to create and (or) modernize the production of medicines have been revised;
- the mechanism for concluding long-term contracts with contract manufacturing customers has been improved, taking into account requests from BigPharma;
- measures have been developed to promote the development of domestic manufacturers and increase the level of localization of production in Kazakhstan, as well as the creation of a value chain in the pharmaceutical industry.
The ongoing changes in the regulatory legal acts, in terms of improving procurement procedures for the contract production of drugs, medical devices and medical equipment, as well as in terms of simplifying the procedures for concluding long-term contracts and reducing the procedures for entering the market of original drugs, contributed to the signing of agreements on the localization of drug production with Bigpharma - Roche Holding , Novo Nordisk, Pfizer, Astra Zeneca; agreements on localization of assembly of medical equipment with Genoray, JW Holdings, Samsung Medison, JW Medical, Drtech, Sinovision, Ibis; an agreement of mutual understanding was concluded with Philips.
At the discussion stage, changes are underway in the regulatory legal acts in terms of ensuring compliance with patent rights for localized medicines and the possibility of obtaining a certificate of origin of goods in the “ST-KZ” form, starting with the secondary packaging of original medicines localized within the framework of contract manufacturing. The signing of an investment agreement with General Electric and memorandums with pharmaceutical companies Bayer, Novartis, Takeda, and Janssen are being worked out.
Support for domestic producers
The single distributor provides a support measure in the pharmaceutical industry in the form of concluding long-term contracts. At the moment, there are 100 long-term contracts concluded with 36 domestic producers for the supply of 4,672 types of medicines.
Thus, manufacturers of medicines and medical devices in Kazakhstan have the opportunity to launch new or modernize existing production thanks to a guaranteed ten-year government order for medical pharmaceutical products.
Another important issue is the export of domestic pharmaceutical products to foreign markets. Promotion of export products is an important element of supporting entrepreneurship for the Government of the Republic of Kazakhstan. The task is to develop current initiatives of entrepreneurs and search for new markets for domestic products.
Pharmaceutical companies in Kazakhstan produce injection and infusion solutions, antibiotics and antiseptics, oral medications, syrups, creams and gels, hypoglycemic, anti-tuberculosis, gastroenterological, hepatoprotective, antihistamine, anticonvulsant drugs, drugs for the treatment of HIV infections, diabetes mellitus, heart attack, stroke, multiple sclerosis and other rare diseases, oncology drugs, disposable medical products, professional consumables and more.
Group purchasing
Taking into account the emerging window of opportunity to realize the country’s trade potential as a regional trade hub, the Ministry, together with the Single Distributor, studied a model for providing cross-country group purchasing services.
The single distributor is actively working on implementing a group purchasing format for the countries of Central Asia and Mongolia. This will primarily ensure an increase in population coverage by saving budget funds when consolidating the purchase of medicines.
At the initial stage, meetings were held with colleagues from the Kyrgyz Republic, mechanisms and processes were studied, and the effectiveness of group procurement through the consolidation of volumes, provision of price discounts and the formation of stock was preliminary assessed.
The initiative was officially formalized in the form of a Memorandum of Cooperation and Mutual Understanding concluded between SK-Pharmacia LLP and Kyrgyzpharmacy State Enterprise under the Ministry of Health of the Kyrgyz Republic.
It is planned to carry out the first pilot purchases for the two countries in 2024. In the future, it is planned to carry out group purchases on the basis of a Single Distributor with other Central Asian republics.
Joint procurement is a global practice that helps increase the availability of medicines. Its main goal is to ensure fair access to specific medical countermeasures and improve security of supply, as well as more balanced prices.
Often the lack of interest among suppliers is due to the small market within the country. By teaming up with Kyrgyzstan, there is an opportunity to significantly increase volumes, reach a new level of procurement and increase the availability of medicines for patients.
In addition, such a mechanism allows for priority supplies to countries in greatest need to be prepared for the emergence of a serious cross-border health threat. A striking example of this is the global pandemic. The joint procurement procedure is successfully practiced around the world. For example, during the pandemic, the European Union carried out a number of procurements using joint procurement mechanisms, in which 25 European states participated. Thus, this has become the basis for confronting cross-border health challenges.
Attracting investments from BigPharma and global vendors
Over the past 2 years, a number of projects with BigPharma companies for the production of innovative drugs with the possibility of export have been worked through to practical implementation. The Ministry has already concluded framework cooperation agreements with global pharmaceutical companies - F.Hoffmann-La Roche Ltd., Novo Nordisk and AstraZeneca UK LTD.
Continuing the work to attract BigPharma to the Kazakh market, today we are working on an agreement on localization and cooperation with such companies as Bayer AG, Stada Group, Johnson & Johnson.
Much work has been done to develop the domestic pharmaceutical industry in Asian countries. Thus, following the visit of SK-Pharmacia in 2022 to South Korea, 6 agreements were signed between Kazakh manufacturers and the largest Korean companies (Samsung, Genoray, JW Holdings, BioNet, DRTECH, SinoVision) for the localization and transfer of production technologies in Kazakhstan medical equipment and today the practical implementation of these projects has already begun.
In August of this year, the Single Distributor visited the People's Republic of China, held meetings there with the largest pharmaceutical companies and medical equipment vendors, as well as a round table with leading pharmaceutical associations. As a result of this trip, a return visit of the Chinese delegation to Kazakhstan took place in September, within the framework of which a Kazakh-Chinese forum was held.
As a result of this work, it is planned to sign agreements with Mindray on the localization of the production of medical equipment, and with Sinovac and Sinopharm on the transfer of drug production technologies in Kazakhstan. On our initiative, a memorandum of cooperation was signed between the Chinese Chamber of Commerce for the import and export of medicines and medical supplies and the PharmMedIndustry Association of Kazakhstan.
Also, based on the results of the work done, Mindray has already opened its official representative offices in Almaty and plans to open a similar office in Astana.
In addition, the Single Distributor held negotiations with foreign manufacturers of medical equipment on the issues of localization of production and life cycle: Philips, Canon, GE Healthcare, Mindray, Lowenstein, Roche Diagnostic using the mechanisms of long-term contracts, offtake contracts, leasing mechanisms and life cycle. As a result of this work, an investment agreement between GE Healthcare and Kazakh Invest JSC was signed in New York at the end of September.
Localization of production of global pharmaceutical market players
During the visit of the Head of State to the USA, based on the results of the development of a Single Distributor, Pfizer and KazakhInvest managed to conclude an agreement on the localization of the production of an innovative vaccine in Kazakhstan, as well as an investment agreement that was concluded as part of the Head of State’s visit to the USA to the UN General Assembly in September this year.
As a result of work within the framework of the Kazakhstan round table on global investment, a historic long-term agreement on the localization of vaccine production in Kazakhstan was concluded between the Single Distributor and the American pharmaceutical giant Pfizer.
As part of this agreement, the American pharmaceutical giant Pfizer undertakes to supply a 20-valent pneumococcal conjugate vaccine to Kazakhstan for 10 years from the date of organizing contract production of the innovative vaccine in the Republic of Kazakhstan.
Kazakhstan became the first country in the Eurasian region and Central Asian countries where this vaccine passed the state registration procedure. The Republic is also the first region in the world where Pfizer plans to establish contract production of this vaccine.
In addition, a long-term agreement was signed between the Swiss company F. Hoffmann-La Roche Ltd, the Single Distributor, Nobel Almaty Pharmaceutical Factory JSC (Nobel AFF) and the Kazakhstan Research Institute of Oncology and Radiology (KazNIIOiR).
The signing of a long-term agreement opens the door to the local production of three biotechnological drugs developed by Roche, which are intended for the treatment of oncological diseases, namely breast cancer.
Roche has committed to the transfer of advanced technology and know-how for the local production of three biotech medicines through contract manufacturing and subsequent supply of the original patented medicines by a local partner under a long-term agreement.
This important step will help reduce the cost and increase the availability of high-quality medicines for all patients with breast cancer in Kazakhstan.
Single Distributor Logistics System
The logistics system of the Single Distributor is represented by four distribution centers (HUBs) in Astana, Almaty, Shymkent and Aktobe, which provide their service region through transit operational warehouses, which, as a rule, are located in the administrative centers of the regions of Kazakhstan.
The operational warehouses of the Single Distributor are focused on storing a two-month supply of medicines, and the HUBs, in turn, accommodate a six-month and a year's supply of medicines for prompt movement to all 20 regions.
The logistics system switched to a new delivery algorithm; the format was changed from static to dynamic. Distances for transporting medicines were reduced significantly, efficiency and timeliness of deliveries were increased. A single distributor ensures the delivery of medicines even to the most remote settlements without increasing the cost of medicines.
The Single Distributor hubs will definitely have a key role in creating a pharmaceutical hub in the structure of a trade and logistics hub.
Labeling and traceability of medicines
Drug labeling is the most important tool for controlling the movement of drugs through all supply chains from the manufacturer, distribution structure, pharmacies and medical organizations to the end point - the patient, and an important step towards the digital economy.
Kazakhstan has approved a comprehensive plan for the development of the pharmaceutical and medical industry for 2020–2025, which includes issues of drug labeling.
A pilot labeling project was launched in 2021. According to the Kazakhstan Pharmaceutical Bulletin, 23 representatives of the pharmaceutical industry took part in the pilot, including manufacturers, distributors, pharmacies and medical organizations. Based on the results of the pilot, recommendations were sent to improve the labeling and traceability information system.
JSC Kazakhtelecom, being a single labeling operator, is working to build a traceability system for medicines into the existing infrastructure of the pharmaceutical market.
The single distributor is showing an active interest in finding opportunities to implement an automated drug supply system, adapted in its functionality for the sale of free prescription medications within the framework of the Statewide Volume of Medical Care and in the compulsory medical insurance system.
Thus, in 2020, a Memorandum was concluded between the Single Distributor and Kazakhtelecom JSC to conduct a pilot project on labeling and traceability of medicines. As part of the pilot, labeled medicines were delivered to the warehouses of the Single Distributor and subsequently shipped to medical organizations.
During the launch of the process, a number of comments were identified, which were sent to Kazakhtelecom JSC for improvement. In addition, the parties studied the experience of introducing mandatory labeling of medicines in foreign countries.
Based on the results of the pilot project, the Single Distributor agreed on improvements to the information system for monitoring the movement of medicines from the manufacturer to the end consumer using labeling and identification of packages in accordance with the business processes of the movement of medicines.
Thus, having updated the business process diagrams, Kazakhtelecom JSC, taking into account the specifics of the activities of the Single Distributor, prepared and presented a prototype of the information system at the beginning of this year. The prototype is currently being tested at the warehouses of the Single Distributor.
Positive changes to the system have been made in the area of maintaining the power of attorney functionality using the example of rented warehouses of the Single Distributor, namely the improvement of procedures for the acceptance, movement and shipment of medicines.
The changes will allow the Single Distributor to log in to the system independently. In addition, lists of roles for warehouses of the Single Distributor have been defined. Also, it is possible to maintain geographically distributed units for warehouses and create a transfer and acceptance certificate at the warehouse level, distribution among medical organizations.
Centralized procurement of medical equipment
In accordance with the instructions of the President, a vector was set for the transition to centralized procurement of medical equipment based on a Single Distributor. An important step dictated by the economic interests of the country, as well as maintaining a high-quality healthcare and social security system.
Centralization of the purchase of medical equipment is carried out in two stages. Currently, the need for medical equipment in the regions has been updated in accordance with the current program documents of the Ministry of Health of the Republic of Kazakhstan.
At the first stage of procurement centralization, as part of changes to the regulations governing the organization of the purchase of medical equipment, appropriate requirements were introduced into standard forms for the purchase of medical equipment, in particular on the training of not only medical, but also technical personnel of healthcare organizations with the issuance of an appropriate certificate.
This change will allow basic maintenance of the supplied equipment to be carried out directly by specialists from medical organizations, which will save budget funds to a certain extent.
At the second stage of centralization of the procurement of medical equipment, it is planned, together with domestic and foreign manufacturers of medical equipment, to develop localization/contract manufacturing mechanisms, develop mechanisms for long-term contracts, introduce life cycle contract mechanisms into procurement practice, purchase medical equipment for complex equipment in priority areas on a turnkey basis. , as well as the creation of service and training centers, warehouses for spare parts and consumables.
The main effects are equipment in accordance with the level of medical care, updating the fleet of medical equipment, ensuring the achievement of indicators of National projects, improving service, equal access to medical care for the population of all regions of the country.
EFFECTS
Creating a pharmaceutical hub is an ambitious goal and Kazakhstan has the key to achieving it. This is supported not only by the country’s internal production potential, but also by objective indicators of the global pharmaceutical market with positive development dynamics.
Today, many projects are being implemented to develop the transit potential and trade conditions of Kazakhstan, and transport and logistics centers are being formed. To attract investors, working trips are conducted to leading developed countries, during which Kazakhstan is presented as a major hub between the Central Asian and Eurasian regions.
Kazakhstan is carrying out structural work in all priority areas to become a hub of Eurasia: introducing leading experience, technology transfer, improving the management system and increasing the level of investments. Continuing in the intended direction, there are all the prerequisites to intercept the logistics flows of Central Asia and the southern part of Russia, having an advantageous location.
The pharmaceutical hub will definitely have a positive effect on Kazakhstan in all key indicators. Most importantly, this will facilitate the rapid and efficient distribution of drugs. By increasing the competitiveness of domestic products, reducing delivery time, reducing costs, and diversifying destinations, the logistics system of Kazakhstan will make a significant contribution to the development of the overall industry infrastructure.
Drug safety
The presence of a pharmaceutical hub will ensure national drug safety in the country. The pandemic has shown the importance of own enterprises and the availability of the necessary supply of medicines. The single distributor, in turn, prioritizes the quality and safety of medicines provided to Kazakhstani medical institutions by increasing requirements for suppliers.
Warehouse flows
Being strategically located between the markets of Eurasia, we need to intensify trade flows, which, in turn, will give impetus to investment processes.
Thus, logistics will become attractive to foreign investors in order to localize production on the territory of the Republic of Kazakhstan. In addition, the warehouse flows of the pharmaceutical hub will become a good source of income, which will have a positive impact on the market and the economy of the country as a whole.
Loading transport assets
The creation of a pharmaceutical hub will open the door to the loading of all transport assets of the country. Previously, Kazakhstan acquired transport assets in Europe to create terminals in strategically important areas of Europe and China. This was necessary to remove infrastructure restrictions on transportation.
Export potential
Cross-border hubs contribute to the development of the export potential of enterprises in the regions of Kazakhstan. The development of infrastructure complexes in border areas will create conditions for the implementation of industrial cooperation projects, which will reduce the number of participants in the supply chain, reduce the cost of the product for the end consumer and increase the speed of deliveries.
A range of medications within walking distance
The pandemic has shown how important it is to have a reserve of medicines in the country in case of unforeseen situations. The pharmaceutical hub will allow you to have a full range of medicines and medical products, both domestic and foreign, at your fingertips.
Development of domestic production
A pharmaceutical hub is an effective springboard for domestic manufacturers to develop their own production, an opportunity to promote export potential and enter international markets.
Attracting BigPharma
The pharmaceutical hub will be a powerful incentive to attract global BigPharma players to the domestic market. The single distributor, initiating bilateral meetings, held negotiations with a number of global pharmaceutical companies. Today there are already results of such an initiative.
Thus, for the first time, long-term contracts were concluded with Pfizer and Roche and an agreement was reached on localizing the production of innovative drugs in the territory of the Republic of Kazakhstan.
Increase in trade turnover.
The creation of large trade and logistics centers will have a positive impact on the development of trade and economic relations, will activate business ties between manufacturers and entrepreneurs of neighboring countries, and will stimulate an increase in mutual trade turnover between them.
Geopolitical situation
Against the backdrop of the geopolitical situation, there is an outflow of clinical trials from neighboring countries, which gives Kazakhstan a good chance to occupy this niche. Having enormous potential, our state adheres to a clear position of redeploying some of them to our country. To develop this area, work is underway to reduce regulatory barriers.
Scientific and human resources potential
Taking into account the tasks set by the Head of State for the development of the domestic pharmaceutical industry, an instruction was given to increase the share of production of our own medical devices to 50% by 2025, to begin technological re-equipment of the industry, to create centers for our own developments, increasing the scientific and human resources potential of the pharmaceutical industry in Kazakhstan.
Measures have been outlined to develop the pharmaceutical market, localize the production of innovative drugs to increase the added value of the product portfolio of our manufacturers. And in general, the task is to change approaches to the formation of nomenclature, the development of the clinical research market and medical and pharmaceutical clusters.
Contract manufacturing
The implementation of investment projects under long-term contracts between the Single Distributor and domestic manufacturers provides the Kazakh pharmaceutical industry with unprecedented preferences. A number of measures are being taken to improve procurement procedures, planning, and logistics. In particular, when concluding long-term contracts, the criteria in terms of the presence of scientific and technological initiative and export potential have been strengthened.
Attracting investments
The mechanism for concluding long-term contracts with customers for the contract production of original drugs by the Single Distributor allows us to attract foreign investment and the best foreign experience in the production of pharmaceutical products, new technologies and developments. This is especially true for clinical research, as one of the drivers for the development of the healthcare system and attracting investment in innovative technologies.
State support measures
Thanks to effective government support measures, the pharmaceutical industry of our country has significant potential for profitable investments in all key indicators of past years, showing positive dynamics. Due to the proximity of transport hubs, the availability of raw materials and labor resources, our pharmaceutical enterprises are concentrated mostly in the Almaty and Karaganda regions, the cities of Shymkent and Almaty.
Quality
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