Russia. Regulatory developments in the pharmaceutical industry

[May 31st, 2013] During the first few months of 2013, the Russian government has proposed, and in some cases adopted, new legislation that introduces a number of significant changes to the regulation of (1) the procurement of pharmaceuticals1 by Russian state-owned clinics, the Ministry of Health and other Russian federal, regional and local governmental authorities and financed from the federal, regional or municipal budgets (“Government Procurement”) and (2) the advertisement of biologically active substances and pharmaceuticals in Russia.

The new legislation is aimed at:

• counteracting corruption in Government Procurement by increasing transparency and improving the monitoring, auditing and public oversight over the Government Procurement process;
• protecting competition by providing access to Government Procurement tenders for a greater number of participants and preventing discrimination in selecting suppliers of pharmaceuticals;
• supporting Russian and Belarusian manufacturers of pharmaceuticals by providing them with certain price and selection preferences in Government Procurement; and
• protecting patients by establishing stricter rules for the advertisement of bioactive supplements (and possibly imposing a complete ban on all advertising of pharmaceuticals in the mass media).

The new legislation impacts or, in the case of pending legislation, would impact pharmaceutical companies (including foreign companies) doing business in Russia in a number of different ways.

First, the new legislation should improve access to Government Procurement for manufacturers and distributors of pharmaceutical products operating in Russia, which is one of their most important sources of revenue due to the dominance of state-owned clinics on Russia’s medical services market.2

Second, because pharmaceuticals qualifying as products of Russian or Belarusian origin will continue to have preferential access to Government Procurement under the new rules, foreign pharmaceutical companies should consider whether their business strategy in Russia should be adjusted to meet the qualification requirements (e.g., by moving manufacturing operations into Russia).

Third, the new legislation would impose additional restrictions on (or even ban outright) the advertisement of pharmaceuticals, which would require manufacturers and distributors of pharmaceuticals to adjust their strategies for the promotion of their products in the Russian market.

Source: Debevoise & Plimpton LLP