On 19 January 2019, certain amendments to the country's laws governing the pharmaceutical industry (the Amendments) came into effect. The Amendments are part of a bigger package of legislative changes announced at the end of 2018.1
This legal alert describes the most important changes introduced by the Amendments.
1. Price Regulation
With effect from 9 April 2019, price regulation will apply to all medicinal products registered and marketed in Kazakhstan.2
This did not come as an unexpected move for the local industry. Price control exists in the neighboring Russia for quite some time now and the local Government has been long saying that it will soon switch to the same regime in an effort to address pharmaceuticals' price volatility in different regions of the country.
While the Government is yet to adopt the specific price registration procedure to reflect the changes introduced by the Amendments, pharmaceutical companies should need to expedite revisions to their pricing strategies for doing business in Kazakhstan.
2. Ethical standards applicable to promotion of medicines
The Code on Public Health and Healthcare System was supplemented by provisions purporting to establish minimum standards for ethical business practices with regard to promotion activities. By way of background, up until now, local healthcare rules contained no specific restrictions for pharma companies' interactions with the healthcare professionals.
The relevant rules and restrictions can be summarized as follows:
- Pharmaceutical companies are now banned from visiting healthcare professionals for the purposes of promoting their products. Certain exceptions may apply but, in our view, their application requires clarification from the industry regulator.
- Healthcare professionals are now banned from prescribing medicines under their trade names. Instead, they are now required to always use international nonproprietary names.
- Pharmacies are now liable to offer patients all prescription-related products that are available with them and always advise patients on the special characteristics of their products.
As of today, the scope of the newly introduced restrictions is not entirely clear. In the absence of detailed regulations, pharmaceutical companies may face certain difficulties in amending their rules and practices on interaction with local healthcare professionals. A conservative approach is recommended (although we note that no specific sanction has yet been introduced for breaching the new restrictions).
3. New definition of the "long-term supply agreement"
The Amendments introduce a new definition of the term "long-term supply agreement" to the Code on Public Health and the Healthcare System. The new definition suggests that supply agreements of up to 10 years will now be available to foreign pharmaceutical companies that have agreed manufacturing arrangements with local plants (контрактное производство).3 However, as of today, it is not clear what level of localization will be sufficient under the Amendments to make a foreign entity eligible for a long-term supply contract with the state. Similarly, the contract award process has not been established yet.
1 The Law of the Republic of Kazakhstan "On Making Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan Relating to Circulation of Medicines and Medical Devices" No. 211-VI dated 28 December 2018
2 Currently, price regulation applies only to the products procured within the framework of the so-called Guaranteed Scope of Free Medical Care.
3 To date, long-term (up to 10 years) tender contracts were generally granted only to local manufactures by the state.