Russian Government Introduces Important Amendments into the Rules on Pricing of Medicines
On August 8, 2009 Decree of the Russian Government No. 654 On Enhancement of State Regulation of Prices of Essential Medicines (the “Decree”) was adopted. The draft, on which this decree is based, was published in spring of 2009 and was widely discussed thereafter both due to the social importance of the pricing regulations in the current economic conditions and due to the impact it may have on the Russian pharmaceutical market in Russia. The Decree itself is already in force, however, the addendum to it, which contains the new and amended sets of rules (the “Amendments”), will come into force on January 1, 2010.
Pricing regulations have existed on the Russian pharmaceutical market for almost 15 years. They set the rules limiting the selling price and mark-ups applied to it with respect to certain medicines (most importantly, the medicines Included into the essential drugs list or “EDL”). The Decree does not significantly alter the principal mechanics of the current pricing regulations, nonetheless the amendments introduced by it are very important.
First of all, the Amendments make registration of prices for all EDL medicines and compliance with the pricing regulations expressly mandatory. Noncompliance with pricing regulations will lead to, most importantly, the risk of losing your license to sell medicines (due to the fact that the Amendments expressly include compliance with pricing rules into the terms and conditions for the licensing of wholesale and retail sale of medicines).
Secondly, the price registration process of foreign medicines has been modified. According to the Amendments, an applicant for registration of a maximum price for an EDL medicine will have to submit data on the sales price of this medicine on foreign markets where this medicine is also registered. The details of this procedure and its influence on the final decision as to the registration of the maximum price of the relevant medicine in Russia are not yet certain. Unfortunately, no criteria for such reference pricing, e.g., comparability of markets requirement or the like are yet established.
Lastly, the Amendments confirm the rule of Decree of the Russian Government No. 239 On Measures for Arranging of State Regulation of Prices (Tariffs) dated March 7, 1995 that the regional authorities in Russia may establish the maximum mark-ups with respect to any medicines, whether or not they are included into the EDL. We are unaware of any further federal regulations, which would develop this rule.
The overall interaction and amount of information exchange between the Russian state bodies involved was heightened by the Amendments. For example, the customs authorities will now share various information on the importation of the EDL medicines with responsibility for enforcement of the authorities vested with price regulations.
Adoption of the Decree mentioned above does not complete the amendments to the pricing regulations in Russia. As we are aware, certain Russian state bodies are now working on the methodologies which are necessary to implement the Amendments, namely the methodology for determination of the maximum sale prices for EDL manufacturers for Russia and the methodology for determination by the regional authorities of the maximum mark-ups applicable to the registered prices of the manufacturers.
Work on revision of the EDL is also currently underway. However, we are not yet aware of the results of this work. The revision of the EDL is an ongoing process. There have been several revisions to the EDL over the last decade (in particular, it was updated on an annual basis from 2002 to 2005). Such regular revisions are likely to continue going forward due to the fact that the current Russian rules and regulations provide for an annual review of the EDL.