Want to know more about localization in Russian Pharma? Read on! Prepared in association with Lidings, a leading global law firm, this is an extract from The Pharma Legal Handbook: Russia, available to purchase here for USD 99.
1. Are there any rules or regulations requiring and/or encouraging localization in your country? What is the legal framework defining these localization rules and policies?
The Strategy of the pharmaceutical industry development until 2020 (“Pharma-2020”) defines localization as one of the main tendencies of pharmaceutical business development in Russia. Pursuant to Pharma-2020 some laws and regulations were adopted to encourage drug manufacturing in the territory of the Russian Federation as well as to set several limits for drugs manufactured outside of Russia or the EAEU.
2. Have there been any recent significant changes involving localization rules? If yes, when did they take place and what did they involve?
The last significant amendments in the legislation were connected with the conclusion procedure of Special Investing Contracts (“SPIC”) and updating the procedure of price registration/deregistration on drugs that are included in the List of vital essential and necessary drugs (“EDL”).
The changes in the procedure of the SPIC conclusion took place in August 2019. These changes, inter alia, stipulated the following:
- increase of a time period for SPIC conclusion from 10 years up to 15-20 years depending on the amount of the investment;
- cancellation of the minimum amount of the investments.
The changes in the procedure of price registration/deregistration on EDL drugs took place in November 2019, and, inter alia, set the price defining the process on foreign drugs in reference states on the basis of the average rate of exchange to the ruble as specified by the Central Bank of Russia in 2018.
3. Is the process of obtaining a marketing authorization impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?
4. Is the pricing process for pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?
The pricing process for pharmaceutical products is impacted by localization policies for EDL drugs only. Drugs that are included in the EDL and produced in Russia have several privileges, including their annual price indexation depending on the inflation level. At the same time, prices of drugs manufactured abroad can be updated annually, including their decreasing, depending on the currency exchange rate to Russian ruble as defined by the Central Bank of Russia in 2018 and depending on the price changes at the reference markets. It should be noted, that the Russian Federal Antimonopoly Service does not reveal its sources of information about prices on imported drugs that are to be used during the process of approval of the new price suggested by the manufacturer.
5. Is the reimbursement of pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?
There is no reimbursement of pharmaceutical products in the framework of medical insurance. Certain categories of citizens are entitled to the preferential provision of drugs. Drug procurement for these purposes is carried out in the framework of tenders and auctions held by medical organizations that manage the preferential provision of citizens with drugs.
6. Is the access to public or public tenders of pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?
There are a number of restrictions for foreign-made drugs to gain access to tenders and auctions for the purchase of drugs. Foreign drugs are not allowed for tenders and auctions, provided that applications for participation are submitted in relation to 2 or more drugs of Russian production or the EAEU countries production.
To obtain the appropriate status, sufficient processing of goods on the territory is necessary. Sufficiency criteria are defined in the Resolution of the Russian Government of 02.08.2016 No. 744, where “sufficient processing” for drugs, serums and vaccines is defined as the production of the finished dosage form. Confirmation of the drug’s local status is made by issuing an ST-1 certificate.
7. Are import tariffs, importation and/or exportation permits, trade and/or taxation of pharmaceutical products impacted by localization policies in your country? If yes, how so?
No. Requirements for quality certification are the same both for drugs produced in Russia and for foreign ones. The procedure for taxation of drugs is the same. Import customs duties are applicable only for drugs of foreign production.
However, there are a number of tax preferences for localization of drug production in the territory of the Russian Federation.
8. Are there any other incentives or advantages offered by the current local localization rules in your country? If yes, what are they?
If the production of drugs involves the use of modern technologies, manufacturers have the opportunity to conclude a Special investment contract (SPIC). Among the features of this contract is to allocate investment from the state, tax incentives, the possibility of obtaining subsidies, and establishing the state’s obligation on the preservation conditions in relation to conditions in force at the date of SPIC conclusion.
9. Are there discussions about the possibility of implementing localization policies in your country? If yes, what are the proposed reforms and when should they come into place?
At the moment, there is a public discussion of the draft strategy for the development of the pharmaceutical industry until 2030 (“Pharma-2030”). The main priority of Pharma-2030 (as opposed to Pharma-2020) is to stimulate the full cycle of new drug development, their production and further exports. To implement these priorities, Pharma-2030 requires special funds to finance the phases of development and research of new drugs, the establishment of special export duties, the possible compensation of import duties in other countries when exporting, as well as the further modernization of the EDL drugs pricing and introduction of differentiated trade allowances to them. However, as Pharma-2030 is under discussion, specific regulations governing the proposed changes are not currently available. Pharma-2030 is expected to be approved in 2020.