Chambers Europe. Life Science

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Contributed by Pepeliaev Group

With its population of more than 140 million people, Russia is currently among the world’s largest markets for pharmaceuticals and medical devices. Recent years have been marked by a rapid growth in these sectors that has given rise to new opportunities for domestic and international businesses.

At the moment the main priority of Russian Government is to develop the local pharmaceutical industry as well as the medical devices sector and form a transparent competitive market. A key plank in the strategy is to implement world GxP practices. The Russian Ministry of Industry and Trade has approved the Strategy for Developing Russia’s Medical Industry up to 2020. This strategy provides for a number of incentive measures to develop both the medical industry and the medical product market in general.

One of the main objectives stipulated in this Strategy is to enhance local manufacturing of medicines and medical devices, as well as to create a better investment climate. Currently a number of projects are being implemented by international businesses in Russia, including local production, step-by-step transfer of technologies, research and production cluster development. Moreover, foreign investors are actively involved in M&A transactions: there is a growing interest in the acquisition of production, distribution and logistics assets. In addition, regulations to deal with public private partnerships are being widely discussed with a view to encouraging private investors to become involved in the construction and management of hospitals.

In 2013 there were many legislative initiatives proposed in the area of the medical industry, for both the pharmaceuticals and medical devices sectors. However, only a few legislative acts and draft acts were adopted to formalize these initiatives.

Pharmaceuticals sector

Some significant amendments to the law “On the circulation of pharmaceuticals” were drafted and discussed in 2013. These included developing the terminology (for example, definitions of biological products and biosimilars are to be included in the law), eliminating the discrepancies in the procedures described in the law as well as plugging gaps in the regulations in certain areas.

One of the most important developments is that GMP standards were made mandatory for companies starting from 2014. This was done in line with the trend to modernize the healthcare industry and to ensure that the pharmaceuticals circulating in Russia are of high quality. However, it is worth noting that certain issues in this area still remain unresolved. In particular, the state inspectorate charged with the duty of controlling the quality of all pharmaceuticals circulating on Russian market needs to develop the standards for an expert examination of compliance with GMP among other things.

Medical devices sector

At present the regulations for medical devices in Russia are not unified. There are numerous individual legislative acts covering various stages of the circulation process for medical devices in Russia, but there is no law that consolidates all the provisions. In the past few years there has been wide discussion of a draft law on the circulation of medical devices with the aim of consolidating the regulations in this area; however, this has still not been completed or adopted.

Meanwhile, in 2013 new rules on the registration of medical devices were introduced. Starting from 1 January 2013 all companies which wish their new products to be allowed to circulate within Russia must have those products registered in accordance with the new rules. These rules seem more complicated in comparison to the previous ones, most notably in that from now on it is necessary to conduct local clinical studies of medical devices in Russia before they can be registered. In addition, the rules provide that registration certificates need to be reissued if they were obtained before these regulations came into force. The deadline for them to be reissued was initially stated as January 2014, but at the end of the last year this was extended to January 2017.

Ethics issues

Recently Russian legislation was supplemented with certain regulations relating to ethics / compliance issues. Starting from the end of 2013 it is directly prohibited for pharmaceutical companies and their representatives to make gifts and other payments to healthcare professionals that do not relate to their educational or scientific activities. However, liability for making such payments has still not been introduced in Russian legislation. In addition, from now on pharmaceutical companies must, when they organize any scientific or other events in which healthcare professionals are to be involved, make details of these events available on their websites and must notify the regulatory authorities (Roszdravnadzor). These new regulations are aimed at increasing the level of transparency in the area of pharmaceutical companies’ dealings with healthcare professionals. It is worth noting that for the companies involved in manufacturing medical devices, such regulations have not yet been introduced.

Public procurement

Most of the pharmaceuticals and medical devices in Russia are purchased by state healthcare facilities and thus, are subject to regulations covering the system of public procurement. In January 2014 the new law in this area came into force (the Law "On the contractual system”), bringing in major new regulations. The main objective behind adopting this new law was to increase transparency and to improve planning and scheduling, as well as to ensure that high-quality goods and services are purchased via the state procurement system. Although the new law came into effect several months ago, the legislation in the public procurement area is still in transition, and different parts of the new law will enter into legal force on a step-by-step basis. Only in 2017 will all provisions be in effect.

The new law stipulates a number of new procurement procedures, for example, bidding with limited participation and two-stage bidding. However, pharmaceuticals and medical devices are purchased mostly by means of electronic auctions, which means that the price of the products is the sole criterion for defining the supplier. The new law also enacts anti-dumping measures, a new departure for Russian legislation: from now on, if the winning bidder proposes a contract price that is more than 25 percent less than the initial price, the winner must provide security in an amount 1.5 times greater than was required initially.

Moreover, the new law pays more attention to security measures: public customers should now require all bidders to provide cash security or a bank guarantee to secure their obligations that may arise during tenders, as well as their future contractual obligations.

The trend for localizing manufacturing processes and protecting Russian manufacturers has resulted in the Russian Government pursuing initiatives to limit access for certain foreign products to participate in state procurement. At present there are several drafts of regulations that aim to limit the possibility for foreign medical devices to be purchased via the public procurement system. These regulations provide for different approaches to the way of defining which medical devices may be deemed to be of Russian origin. Although such regulations have not been adopted yet, they are being actively discussed in Russia and there is a chance that they may be introduced in 2014.

Violations in the life science sector

At the end of 2013 a new set of rules was adopted and included in the Russian Code of Administrative Offences. Certain new types of violations were introduced, in particular, in relation to violations of the rules for the circulation of medical devices, and for the sale of pharmaceuticals, including the sale of fake medicines. Furthermore, the Code provides for liability for violations in the area of state-guaranteed free medical treatment and regulations on healthcare professionals’ conflicts of interest.

As a result, Roszdravnadzor has obtained broader powers in the area of drafting protocols and investigating certain violations relating to pharmaceuticals and the medical devices markets.

To sum up, Russian legislation in the area of the medical industry is still in transition. Because Russia is a member of a Customs Union along with Belarus and Kazakhstan, some regulations have to be coordinated within all 3 member states. At present Russian legislation is influenced by international legislation and tends to look to adopt the best international practices.

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