Federal anti-monopoly service report on Russian pharmaceutical market compretition.

22.06.2010

Legal Update No. 245.

Goltsblat BLP advises that the Federal Anti-monopoly Service (the Russian FAS or the antitrust authority) has issued a Report on Development of Competition on the Russian Pharmaceutical Market.

The report reveals the position taken by the Russian FAS regarding the circumstances preventing development of competition. These include:

  • Inadequate regulation on the pharmaceutical market;
  • Improper relations between medicine manufacturers and distributors and medical staff and officials;
  • Exclusivity agreements between medicine manufacturers and distributors.

I. Inadequate regulation on the pharmaceutical market

1.1 Lack of legally determined criteria for interchangeability between medications.

Unscrupulous market players indicate some minor differences (specifics) in the instructions for using medications that are identical in terms of their international non-proprietary name. These specifics are used to establish very narrow (restrictive) requirements upon government procurement thus entailing an unjustified reduction in the number of tender participants. In order to eliminate these circumstances, the Russian FAS believes it necessary:

  • to bring the instructions for using both original and generic medicines in line with the original instructions registered by the FDA and EMEA;
  • to increase administrative liability and introduce criminal liability for misleading consumers and state (municipal) customers with regard to properties of medications.

The Report also describes other breaches of the legislation commonly committed by state (municipal) customers, such as inclusion in a single auction lot of a long list of medications belonging to different pharmacological groups or combining purchase of medical products and other goods and services within a single lot.

The antitrust authority intends to eliminate these breaches by amending the relevant legislative acts. In particular, it is planned to make each customer liable for announcing separate lots for each international non-proprietary medication if the initial (maximum) price of the lot exceeds RUB 500 thousand. Federal Law No. 61-FZ of 12 April 2010 “On Medicaments Handling” is to be modified to include legal definitions of “interchangeable medications” and “interchangeable immunobiological medications”.

1.2 Statutory approved lists of medications often containing specific names of medications and their manufacturers and specific dosage forms may, in the opinion of the antitrust authority, ultimately result in restriction of competition and discrimination against medication manufacturers not included on the lists.

A draft regulation is currently being developed to establish a procedure for drawing up an EDL (essential drug list) for medical purposes, the purpose being to ensure a transparent process for compiling the list and mitigate the risk of discrimination against specific producers of medications.

II. Improper relations between medicine manufacturers and distributors and medical staff and officials.

Improper relations means both possible material incentives to medical staff to prescribe certain medications produced by a specific manufacturer and establishment of informal ties with medical staff and officials.

With a view to precluding these practices, the antitrust authority suggests that amendments be made to the Federal Law “On Medicaments Handling” and that the Federal Law “On the Fundamentals of Public Health Protection in the Russian Federation” be adopted (the draft law passed the first reading in the State Duma on 31 May 2011) to prohibit medical staff and personnel of medical institutions from receiving representatives of manufacturers during working hours to discuss handling of medications and medical products.

III. Exclusivity agreements between medicine manufacturers and distributors.

The FAS of Russia believes that the following actions by medicine manufacturers and distributors testify to breaches of the anti-monopoly legislation:

  • Conclusion of agreements providing for exclusive rights of the distributor to distribute a medication for which there is no substitute;
  • The medication manufacturer having no commercial policy in place to set out the fundamentals of relations with distributors and distributor selection criteria;
  • The medication manufacturer having no internal regulation in place stipulating the principles for paperwork and correspondence;
  • Inclusion in contracts with distributors of requirements to provide reports and shipment forecasts also indicating customers and delivery regions;
  • Medicine manufacturers’ representatives participating in drafting orders for medications for state (municipal) needs and relevant specifications;

The Report says that the FAS of Russia intends to procure that medicine manufacturers eliminate these breaches, including by initiating anti-monopoly lawsuits on the grounds of concerted economic activities on the part of manufacturers and distributors and/or conclusion of unacceptable agreements.

Please note that, in order to minimise the risk of claims from the antitrust authority, it is advisable to develop the mentioned commercial policies promptly and hold internal audits also taking into account the recent changes in the practical application of the anti-monopoly legislation.

For additional information, please contact:

Nikolay Voznesenskiy,
Head of Competition Practice,
Goltsblat BLP
T: +7 (495) 287 44 44,
E: info@gblplaw.com

Nina Belozertseva,|
Head of Healthcare & Pharmaceuticals,
Goltsblat BLP
T: +7 (495) 287 44 44,
E: info@gblplaw.com

 


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