Why pharma companies aren’t exiting Russia

Even as the war in Ukraine has prompted an exodus of international companies — from fast-food chains and oil producers to luxury retailers — from Russia, U.S. and global drug companies said they would continue manufacturing and selling their products there.

Airlines, automakers, banks, and technology giants — at least 320 companies by one count — are among the businesses curtailing operations or making high-profile exits from Russia as its invasion of Ukraine intensifies. McDonald’s, Starbucks, and Coca-Cola announced a pause in sales this week.

But drugmakers, medical device manufacturers, and health care companies, which are exempted from U.S. and European sanctions, said Russians need access to medicines and medical equipment and contend that international humanitarian law requires they keep supply chains open.

“As a health care company, we have an important purpose, which is why at this time we continue to serve people in all countries in which we operate who depend on us for essential products, some life-sustaining,” said Scott Stoffel, divisional vice president for Illinois-based Abbott Laboratories, which manufactures and sells medicines in Russia for oncology, women’s health, pancreatic insufficiency, and liver health.

Johnson & Johnson — which has corporate offices in Moscow, Novosibirsk, St. Petersburg, and Yekaterinburg — said in a statement, “We remain committed to providing essential health products to those in need in Ukraine, Russia, and the region, in compliance with current sanctions and while adapting to the rapidly changing situation on the ground.”

The reluctance of drugmakers to pause operations in Russia is being met with a growing chorus of criticism.

Pharmaceutical companies that say they must continue to manufacture drugs in Russia for humanitarian reasons are “being misguided at best, cynical in the medium case, and outright deplorably misleading and deceptive,” said Jeffrey Sonnenfeld, a professor at the Yale School of Management who is tracking which companies have curtailed operations in Russia. He noted that banks and technology companies also provide essential services.

“Russians are put in a tragic position of unearned suffering. If we continue to make life palatable for them, then we are continuing to support the regime,” Sonnenfeld said. “These drug companies will be seen as complicit with the most vicious operation on the planet. Instead of protecting life, they are going to be seen as destroying life. The goal here is to show that Putin is not in control of all sectors of the economy.”

U.S. pharmaceutical and medical companies have operated in Russia for decades, and many ramped up operations after Russia invaded and annexed Crimea in 2014, navigating the fraught relationship between the U.S. and Russia amid sanctions. In 2010, Vladimir Putin, then Russian prime minister, announced an ambitious national plan for the Russian pharmaceutical industry that would be a pillar in his efforts to reestablish his country as an influential superpower and wean the country off Western pharmaceutical imports. Under the plan, called “Pharma-2020” and “Pharma-2030,” the government required Western pharmaceutical companies eager to sell to Russia’s growing middle class to locate production inside the country.

Pfizer, Johnson & Johnson, Novartis, and Abbott are among the drugmakers that manufacture pharmaceutical drugs at facilities in St. Petersburg and elsewhere in the country and typically sell those drugs as branded generics or under Russian brands.

Pfizer’s CEO, Albert Bourla, said on CBS that the giant drugmaker is not going to make further investments in Russia, but that it will not cut ties with Russia, as multinational companies in other industries are doing.

Pharmaceutical manufacturing plants in Kaluga, a major manufacturing center for Volkswagen and Volvo southwest of Moscow, have been funded through a partnership between Rusnano, a state-owned venture that promotes the development of high-tech enterprises, and U.S. venture capital firms.

Russia also has sought to position itself as an attractive research market, offering an inexpensive and lax regulatory environment for clinical drug trials. Last year, Pfizer conducted in Russia clinical trials of Paxlovid, its experimental antiviral pill to treat covid-19. Before the invasion began in late February, 3,072 trials were underway in Russia and 503 were underway in Ukraine, according to BioWorld, a reporting hub focused on drug development that features data from Cortellis.

AstraZeneca is the top sponsor of clinical trials in Russia, with 49 trials, followed by a subsidiary of Merck, with 48 trials.

So far, drugmakers’ response to the Ukraine invasion has largely centered on public pledges to donate essential medicines and vaccines to Ukrainian patients and refugees. They’ve also made general comments about the need to keep open the supply of medicines flowing within Russia.

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