Leading pharmaceutical company looking toward Lithuania

Adele Johanson
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Photo: Sander Ilvest

Estonia's largest pharmaceuticals manufacturer, generic veterinary drug maker Interchemie, has been fighting the State Agency of Medicines over sales permits for a long time and has now turned its gaze toward Lithuania.

The company started in 1999 and had secured 74 sales permits in Estonia by 2002. Interchemie lost most of its permits after veterinary medicines sales permits were moved into the administrative area of the pharmaceutical watchdog.

Majority of products exported

The agency decided not to renew 19 of the company's sales permits and to revoke another 23 previously suspended permits due to inadequate application data in the middle of the 2000s. Interchemie achieved the return of its permits in court only to lose them again in the years that followed.

The agency says it is merely complying with requirements, while Interchemie believes it to be a case of bureaucratic ill will and the state's inability to decide what it wants.

“For example, 30 years ago the government of Taiwan decided it needs factories that can manufacture microchips. Today Taiwan is the leading manufacturer in the world. Estonia should also decide what it is we want. Do we need a pharmaceutical factory or other things that require people with a high IQ. Or are we prepared to admit it is not something we're interested in, just like maritime shipping,” said manager and owner of 49 percent of Interchemie Veiko Saluste.

The company currently has permits to sell 14 products in Estonia eight of which have been re-registered from another manufacturer. The company claims that restoring all of its permits would take a lot of time, which is why it is losing interest to invest in Estonia.

“Considering the fact that it took 32 months to process the previous permit instead of the promised seven months, it would take us nearly 200 years to restore all our permits. Attitudes of state officials and general uncertainty play a far greater role in the decisions of foreign investors than a new national trademark,” said head of the company's registration department Sander Murumets.

The Estonian market is tiny, and Interchemie can meet the country's annual demand in half a working day, which is why the company exports the lion 's share of its production through its Dutch sister Interchemie werken “De Adelaar” B.V.

“We sell directly to Russia and members of the Commonwealth of Independent States. However, our products finally reach 105 countries in which we have a total of more than 200 sales permits with our Dutch partners,” Saluste said. However, third countries are not impressed by a company that does not have sales permits in its home country.

Interchemie is currently considering opening a new factory that would cost €10-15 million and create 150-200 jobs. The factory will be built either in Estonia or Lithuania, whereas Saluste says things move quite a lot faster in the latter. The company has 23 sales permits in Lithuania and can secure one in six to nine months.

“Were it up to me, I would build the new plant in Estonia. We are in no hurry; however, I said five years ago that I'm having trouble in Estonia, and that it is more than I would find in Latvia or Lithuania. We are currently short on space, and I have to decide where to build the new plant. In the end, I can take my things and go,” Saluste said.

Officials cite requirements

Deputy Chancellor of the Ministry of Social Affairs in charge of health care Maris Jesse said that rules and deadlines are the same everywhere in the EU, including Lithuania. “Sales permits are given to drugs that are effective, safe, and of high quality, and that is something the manufacturer has to prove,” she said.

“Of course we are interested in continued pharmaceutical manufacturing in Estonia; however, we cannot make exceptions regarding requirements – they are the same for everyone,” Jesse said.

Deputy Director of the State Agency of Medicines Katrin Kiisk said that the agency has always cooperated with Interchemie in terms of explaining requirements for production, laboratory conditions, and sales permits; held meetings, consulted specialists over the phone and via email.

“The State Agency of Medicines has participated in the European Union's common sales permit evaluation procedures since 2006; our assessments suggest more than one hundred drugs have been granted permits in Member States. We always try to help manufacturers in the process of securing permits, explain requirements and how to put together documentation so Estonian producers could compete with their European counterparts once they secure permits,” Kiisk said.

Ministry: state shouldn't give up

Interchemie's current plant that employed more than a hundred people last year is located in Viimsi. The company's 2015 annual report lists sales revenue of €18.5 million and profits of €2.4 million. “If we are not needed, it is quite probable we will also move the existing plant out of Estonia in the next five to seven years,” Saluste said.

The Ministry of Economic Affairs and Communications is convinced Estonia should not surrender to Lithuania that easily.

„International competition is important for Estonia, and if the market sends a signal that it is much easier to do things in Lithuania because of red tape, it is something that needs to be taken seriously!” said head of the ministry's economic development department Kaupo Reede. “We have achieved the image of a capable digital country; however, it must be supported by expeditious and light bureaucracy,” he said.