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Strengthening government control or striving for compliance with international standards?
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The Russian pharmaceutical market has been extensively developing over the past decade, largely influenced by foreign investments in this area of the country’s economy. It is currently one of the top 10 largest pharmaceutical markets in the world. At the same time, the Russian pharma market has witnessed stricter state regulation of pharmaceutical activity, generally defined as a certain restraining measure over uncontrolled pharma market growth. The escalation of state control within the industry has been especially noticeable during the past two years.
A major factor influencing the Russian pharma market is the initiative to bring its regulation to compliance with international standards. Many experts link this initiative to Russia joining the World Trade Organization (WTO) on Aug. 22, 2012. This date has marked yet another stage of Russia’s integration into the world economy and as of that day, Russia has become a full member of WTO. Consequently, there has been extensive changes in legal regulation for the pharmaceutical industry in 2012, namely in the areas of technical regulation, customs law, licensing requirements, relations of pharmaceutical companies with medical officials, competition, and advertising law.
Customs regulations for pharmaceutical drug import will change now that Russia has become part of WTO. In accordance with WTO’s protocol on accession import customs, duty rates for drugs will gradually decrease from the current 10–15% to 5–6.5%; however, the process is long term and will not be completed until 2016. This gradual reduction of import duties for foreign drugs will not likely induce a noticeable price decline for end customers because the final cost will depend on the distributors as well as pharmacy extra charges. However, it is possible that there will be a reduction in price for expensive drugs, and Russian drug manufacturers are afraid that their market position may be weakened as a result of the decrease in price of imported medicines. Also, by joining WTO, Russian drugs can gain access into the international market due to the uniform rules followed by other WTO members in relation to Russian pharmaceutical products.
Russia’s WTO membership is also associated with obligatory implementation of international GMP standards in drugs manufacturing. The legal development in this area has not been extensive in 2012, but because of the necessity to bring drug quality in accordance with international standards, work on amending statutory basis in this field was initiated long before Russia’s accession to WTO. Rules on manufacturing and control of drug quality, made on the basis of EU GMP, were enforced on Jan. 1, 2010. International standards for the manufacture of drugs will be gradually implemented through the transition period of Russia entering WTO. The production of drugs in compliance with international standards has already begun and its completion is planned at the end of 2013.
Escalation of state control
Governmental control (i.e., stricter governmental industry internal regulations) remains a significant trend that relates to the new licensing requirements, more specified regulation of drug manufacturing, registration, relations between medical and pharmaceutical employees, and provisions for advertising of medicines and medical products. Firstly, tightening of licensing requirements should be noted. On Jan. 1, 2012, a new Decree on the licensing of pharmaceutical activity came into effect, which introduced a detailed list of licensable activities as well as new requirements for licensing drug transportation (1, 2).
New rules on information disclosure in the course of clinical studies of medicines have been established as amendments in the federal law on “circulation of drugs” (3). The rule sets forth nondisclosure without prior consent of the results of preclinical and clinical studies provided for medicines registration. It is proclaimed to divulge any of this information within six years since the date of registration. Violation of this regulation incurs administrative and penal liabilities.
Regulating relations of medical officials
The year 2012 has also signalized a strengthening of regulation in the area of medical and pharmaceutical employees’ relations. In particular, from January 2012, new wording of the federal law on “fundamental healthcare principles in the Russian Federation” (Law No. 323-FZ) has been enforced (4). Article 74 of this law sets a number of restrictions on the relations of medical officials with representatives of pharmaceutical organizations.
The policy amendment is that medical officials cannot receive any gifts or money from pharmaceutical organizations apart from consideration for agreements relating to clinical trials or implementation of educational activity. Healthcare professionals and pharmaceutical representatives cannot receive any gifts from the manufacturing company or pass drug samples to patients. In addition, it is prohibited to give out prescriptions on prescription forms containing any kind of advertising information or typed-in names of medicines. Doctors can only admit representatives of pharmaceutical companies, manufacturers or sellers of medicines in connection with the conduct of clinical trials or qualification trainings of medical officers. Any form of agreements that involve proposing certain categories of drugs or medical products to patients must be proclaimed. Further amendments are currently under review to introduce even stricter administrative liability for violations of abovementioned provisions.
New public control procedure
One of the latest developments in the Russian pharma legislation is the adoption of new government control procedures over medicines. On Nov. 12, 2012, Decree No. 1152 of the government of the Russian Federation affirmed regulations on quality and security of public control procedures over medical activity. These regulations provide more details on the means of public control over the industry.Public control is to be conducted by means of scheduled routine inspections and random check-ups and/or on-site audit. A list of control measures has been set out for each kind of inspection taking place within the framework of public control relating to the quality and safety of the medical activity. These regulations provide for extreme forms of state control such as rights for official representatives to have full and unimpeded access to the territory or premises of the organizations under inspection, including the equipment and vehicles used. Representatives will also be able to copy any documents deemed to be necessary, conduct trials and examination, as well as apply precautionary and restrictive measures.
FAS against deemed violation of competition legislation
The Federal Antimonopoly Service (FAS) in association with the Ministry of Health of the Russian Federation developed in October 2012 a new draft of governmental regulations in accordance with provisions of the federal law on “allocation of orders for supply of goods, execution of works, and rendering of services for public and municipal needs” (5). These regulations (6) are designed to combat abuse arising in the course of public procurement of medicines in connection with combining several INN (international nonproprietary names) within one lot, especially for cases where the lot contains a certain drug for which exclusive vertical agreement with distributor was made. For example, the distributor may purchase the whole lot of an innovated drug for a maximum price without having any competition at all.
Advertising and other means of control
Another important issue is the advertising of medicines and medical products. Recently, this subject has been brought up for discussion during parliament hearings of the Committee on protecting the health of State Duma of the Russian Federation. Plans for implementing stringent provisions on advertising medicines have been announced more than once on the level of Russian Government and State Duma.
FAS clarified, in one of its letters issued in the summer of 2012, the current ban for advertising of prescription medicines and the respective exceptions for advertising on the Internet. Discussions are currently underway on how the advertising of medicines and medical products should become more regulated.
In conclusion, there is an escalation of public control and regulation affecting the pharmaceutical industry in Russia. Such escalation highlights the necessity to bring the industry to the highest international standards, regulate uncontrolled market growth, protect competition, and ensure compliance with international practice, so that the Russian market will appear favorable to foreign investors in view of the country’s WTO accession last year. However, there is concern that legislators may have missed the fact that stricter governmental control over the industry could also have a negative effect because market access will become more difficult and perhaps impossible for foreign and domestic SMEs or new market players.
1. Government Regulations on Decree, “On licensing pharmaceutical activity” No. 1081, Dec. 4, 2012.
2. State Duma Federal Law, “On licensing certain types of activities” FL No. 99, July 28 2012 version with amendments valid as of Jan. 1, 2013.
3. State Duma Federal Law, “On circulation of drugs” FL No. 61, June 25, 2012 version, item 6 of Art. 18.
4. State Duma Federal Law, “On fundamental healthcare principles in the Russian Federation” FL No 323, June 6, 2012 version, Art. 74.
5. State Duma Federal Law, “On allocation of orders for supply of goods, execution of works and rendering of services for public and municipal needs” FL No. 94, version of Dec. 30, 2012.
6. Ministry of Healthcare, Draft Regulations “On establishing threshold value of the initial (maximum) contract value (lot value), at the increase of which different drugs bearing INN (or in absence of INN, bearing chemical group names) cannot be subject to one contract (one lot)” as of Oct 12, 2012.