Russian police search Novartis, Teva offices: report (Reuters)

MOSCOW (Reuters) – Russian police searched the offices of four pharmaceutical companies in Moscow on Tuesday, including Swiss drug maker Novartis AG and Israel-based Teva, the business daily Vedomosti reported, quoting a police source.

Vedomosti, in a report on its website, quoted the source as saying the searches were part of an investigation into an alleged carve-up of the market for supplying the state healthcare system with essential drugs.

The government runs a system of subsidized purchases of drugs for low-income citizens. An investigation into the system showed the bulk of state supply contracts worth over $2 billion went to six distribution firms in 2006-08.

A Novartis spokeswoman in Moscow confirmed the search took place and said the company was cooperating with the police. She declined to explain the substance of the investigation.

Teva's spokesman in Israel confirmed police were in the company's Moscow office but said the visit concerned a "matter not related to Teva," adding that "it was only for the purpose of providing testimony."

An industry source said police have been investigating suspicions over a former distributor for several drug firms, including Teva, regarding its pricing policy.

"The police came to Teva's office to examine the possibility that Teva employees who worked with the distributor would testify," the source said.

The two other firms are Russian drugmakers Valenta and Akrikhin, Vedomosti said, quoting the source.

A source close to Akrikhin confirmed the search took place, while Valenta was not available for comment.

Novartis plans to invest $500 million in Russia over the next five years and build a plant in St. Petersburg to strengthen its position in the market, which is expected to exceed $60 billion by 2020.

Teva, the world's largest generic drugmaker, plans to invest up to $100 million in a drug production plant in Russia as it aims to more than triple Russian sales by 2015.

Russian Prime Minister Vladimir Putin has warned international pharmaceutical companies and medical equipment makers that they will face restrictions in Russia if they fail to develop local production and transfer technology.

International pharmaceutical firms currently control about 80 percent of the Russian drugs market. Putin said the situation was threatening Russia's national security.

International drugmakers see Russia as a fast-growing emerging market to offset slowing sales in Western markets.