Ognian Donev, PhD, is the chairman of the board of directors and executive director of Sopharma AD. In 2012, he was reelected as president of the Confederation of the Employers and Industrialists in Bulgaria.
Sopharma, established 80 years ago, is the oldest Bulgarian pharmaceutical company. Its products are sold in over 32 countries. The company focuses on generic medicines and also offers original plant-based therapies.
In June, Sopharma opened a new solid forms facility, an investment of about 75 million levs. What are your short-term investment plans?
With the completion of the new factory we are finished renovating the production facilities of Sopharma and we have now completely changed the face of the company. In the future our efforts and resources will be focused on the expansion of our product portfolio.
Will the focus be on generic medicines or on original drugs?
Some 75% of the company’s portfolio is comprised of generics and the remainder is original products, mainly products with plant origin. Efforts will be focused predominantly on generic therapies. As you know, Sopharma’s original portfolio consists of phyto products which were developed before the privatisation of the company.
A number of countries across the globe have stepped up reimbursement of generics. Do you think that Bulgaria is following their example?
Generics can improve the efficiency of the National Health Insurance Fund’s reimbursement policy, but this resource has not been tapped so far. Original products remain dominant, including some whose patent protection has expired. I believe that this issue will be on the agenda of both the Ministry of Health and the National Health Insurance Fund, as it will give them the opportunity to better address the needs of citizens with otherwise insufficient financial resources.
Some recession-hit countries made great efforts to quickly introduce generics to cut healthcare costs.
Bulgaria has done little about the problem. The Ministry of Health should use the generics industry as one of its main tools in its cost-trimming mission. Sopharma was even accused of selling the most expensive medicines, which is a paradox. Indeed, we are proud of the fact that the company operates on the free market. Sopharma received only 1.82% of public funds spent on medicines in 2011. The company generates the remainder of its sales on the free market, so we are definitely not relying on the government. Foreign experts refer to the Bulgarian healthcare system as a “boutique” one – it reimburses mainly therapies for rare conditions, which require very expensive drugs. Sopharma, though, is not present in this segment. We are focused on the “everyday” needs of people and that is Sopharma’s strongest point and the guarantee of its good positions.
Does the Bulgarian Generic Pharmaceutical Association collaborate with the government on the approval for reimbursement of generic medicines?
The role of the association is more that of a teacher – to raise awareness about the advantages of generic drugs. However, we should not go to extremes as there are innovative drugs, which are also necessary. The process of replacing original drugs with generic ones, where possible, will free financial resource, which can be allocated for expensive and unique original therapies.
Various blockbuster medicines have lost their patent protection lately. How many new products do you plan to launch?
It is hard to specify a number. Now that we’ve completed our major investment initiatives we will earmark more financial resources for new product launches.
At the opening of your latest production facility you said that you plan to expand into new markets, including Austria, Finland.
We are pursuing our strategy but entering new markets is a lengthy and difficult proc ess. To overcome barriers to some totally new markets we look for good local partnerships. The company is also seeking to broaden its footprint in Asia, some countries in Africa and other new markets.
The majority of your manufacturing capacities are in regions with lower labor costs such as Bulgaria and Ukraine. Do you think that this gives your advantages over your rivals?
In the generics business this can give you certain advantages but at the same time labor costs in countries like India and China are not higher than those in Bulgaria. I believe that Sopharma has found a good balance.
Which Southeast European countries have the highest growth potential for you?
As you probably know, recently a Romanian pharmaceutical company Rompharm became a big shareholder in Sopharma, after it bought a stake of 9% in Sopharma it now has
an over 13% ownership in the company. They have a strong footprint in their home country and we hope for productive cooperation with them, we will definitely look for synergies. Sopharma will also continue its expansion in our neighbouring Serbia where we also have a production base. We operate there under the name of our subsidiary Ivancic & Sons. We hope to further strengthen our presence on those markets and make the next step which may include the new EU member, Croatia, as well as Hungary.
Do you outsource manufacturing processes?
Yes, historically Sopharma has helped various Bulgarian third-party production facilities fill up their existing capacities. There are a lot of small companies working for Sopharma, giving rise to criticism among our competitors. However, I consider this a plus.
Do you expect any market shifts now that Israel’s Teva vowed to boost its presence in Bulgaria and after Watson’s acquisition of Actavis?
I do not expect major changes. For a company accused of monopoly, Sopharma is relatively small compared to such big generic players. You can’t expect us to overtake them in the near future but one should never say never.
Are we going to witness any price changes due to increased competition?
Sopharma offers some of the most competitive prices in the country and we do not see a reason to worry.
Do you think that the unstable political situation in Bulgaria will have an effect on sales?
All industries take a hit when a country’s macroeconomic framework is in a bad state. This also applies to pharmaceuticals. The absence of reforms in the healthcare sector and the inadequate budget allocated for healthcare are somewhat impeding our development in Bulgaria. That is why, while stable, the share of sales recorded for Bulgaria is decreasing; by comparison, our sales abroad are rising.
In your capacity as president of the Confederation of the Employers and Industrialists in Bulgaria, do you think that the continuing political turmoil will affect the economy or scare away investors?
Every investor looks for a stable political situation. The Confederation’s opinion about the events from June 14 and 19, which was previously disclosed in a statement, is still unchanged. The lack of alternatives will not make us approve certain behaviour. At the same time, nothing is ever black and white. There is a sufficient number of professionals in this government, who are good at their jobs. The thing that troubles the Bulgarian business is the non-transparent management and allocation of funds. The latest budget update, for example, is not major enough to prompt a discussion. However, the secretive voting without disclosing any arguments is not welcomed by the Confederation.